The Allahabad high court ruled that procedures followed by Uttar Pradesh state government to acquire land of 2,500 acres for Reliance Power (RPWR) Dadri project were improper. The land was acquired for setting up of 7.4GW power project at Dadri based on gas from Reliance Industries.
While the dispute relating to gas supplies to RPWR’s gas-based plants from RIL-operated KG D-6 block is still under judgment, we believe the uncertainty on land for Dadri project will further delay it. We now estimate the Dadri project will come on stream in FY13E vs. FY12E before, assuming availability of gas supplies from KG D-6 block over medium term.
Delay in Dadri project commissioning would further strain future cash flows of RPWR, as 1) we forecast no meaningful cash inflow from projects under construction; for instance, we do not expect Sasan to generate positive cash flows till FY14E.
SOTP valuation is Rs 119 for Reliance Power for FY12. Expensive!!!!