In our quest for value, we look at stocks with varying risk-reward profiles, from the high-risk, high-return startup to the low-risk Govt bond. Power generation from natural sources (where the fuel does not cost) and power transmission fall on the latter end of this scale. Jai Prakash Hydro-Power Ltd (JPHYDRO) is one of the best assets in this sector, both in terms of asset demarkation (the most prominent asset in the company is a 300 MW commissioned hydro plant) and in terms of leadership (its the only private company with commissioned hydro assets of this scale).
THE BUSINESS: The company commissioned BASPA-II, a 300 MW hydro plant in Himachal Pradesh in the year 2003. 88% of the generated power is sold to HP State Electricity Board (HPSEB) at Rs. 2.74 per unit till 2043 as per PPA (Power Purchase Agreement). 12% is provided to the state for free.
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