Adani Power Ltd. (ADANI), controlled by Indian billionaire Gautam Adani, surged in Mumbai trading after the national electricity regulator decided to compensate the utility following an unexpected increase in coal costs.
The shares rose as much as 15 percent to 50.25 rupees, the most since their Aug. 20, 2009 debut, and traded at 49.40 rupees as of 1:28 p.m. local time. The gain helped the stock pare this year’s loss to 20 percent.
A shortage of local coal supplies and Indonesia’s move to link its coal prices to international benchmark rates have led to cost increases for Indian power companies and rendered their contract tariffs unviable. Utilities including Adani and Tata Power (TPWR) Co. have little choice, as bringing coal from other supplying nations would mean higher shipping charges.
“Any kind of compensation will boost the stock as it will help cut Adani Power’s losses,” said Chinmay S. Gandre, an analyst at KR Choksey Shares and Securities Pvt. in Mumbai. “We’ll watch out for what the actual compensation is.”
The Central Electricity Regulatory Commission said yesterday Adani Power deserves compensation over the agreed tariff for its 4,620 megawatts Mundra plant in the western coastal state of Gujarat. The regulator ordered the formation of a panel comprising officials of the company, the customer states, a financial analyst and a banker, to assess the impact of the higher cost of imported coal.
Tata Power, which is also seeking a tariff revision for its Mundra plant that runs on Indonesian coal, gained as much as 6.4 percent to 101.40 rupees and traded at 98.25 rupees. The regulator has yet to grant Tata’s request.
Adani Power reported a 5.07 billion rupee loss for the quarter ended Dec. 31, the fifth consecutive quarterly loss, after expenses surpassed sales.
While considering Adani’s demand for compensation and a tariff renegotiation, the regulator rejected the claim that Indonesia’s change of coal prices can be brought under force majeure or a change in law. The clause about a change in law in bidding documents doesn’t refer to foreign laws, the regulator said in its order yesterday.
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