Constellation Energy has become the latest USA Utility to cancel its proposed new nuclear energy plant to be built in Maryland.Despite a Loan Guarantee from Department of Energy (DOE) as part of the US Green Stimulus,Constellation has found the economics of the Nuclear Reactors as unworkable.In fact this is keeping with the trend of other utilities in the Developed World who have found New Nuclear to be too expensive.While a number of cyclical factors are at play (Wind Energy has also been affected) in hindering the development of these plants,it seems a secular shift has occured.Finland has become the poster boy of a Nuclear Project Disaster with the main developer Areva bleeding from losses as time and cost overruns have almost doubled.The increaseing costs of environment and safety regulations has increase manifold since the last spurt of nuclear energy construction in the 1980s.The Nuclear Renaissance has proven to be a complete failure in the Western Countries.While China continues with its aggressive Nuclear Expansion plans,construction in the US has come to a virtual halt.Exelon which is the largest Nuclear Energy Operator in the USA has also halted developed of 2 new reactors in Texas.These Utilities have said that they need much higher energy prices and a carbon tax before going ahead with reaction construction.Note Exelon recently bought a Wind Energy Operator as Solar/Wind become the favored Green Energy choices.

Coal India is coming out with India’s biggest IPO offering in the Stock Market History.The company seems fundamentally strong on almost all aspects and is also pricing itself at a significant discount to its global peers.Both superficially and deep down,the analysis points CIL to be a very safe investment at a cheap valuation.Other analysts are also coming to the same conclusion,as Rating Agency has given CIL a 5/5 Rating which is probably the first in the history of IPO Grading .In order to give a more balanced perspective and avoid herd tendencies,I am listing out what the risks and negatives are with this company.Note this does not make me negative on the stock on which I am very positively biased.It is just to give investors the other side of the debate which I think general analysis will lack.

Despite the above Risks , I think that Coal India is one of the best quality stocks to come out in India’s Primary Markets.However investors should be wary of the risks which will be glossed over by the mainstream media and brokerages . As with every investment however safe it might look,there are risks.This does not mean that investors should be fearful of every investment.It is by being aware of the risks,that prudent risk management can be done which is essential to successful investing.

Coal India Limited (CIL) is the biggest IPO in the history of the Indian markets.The Company has generated a lot of investor interest because of a number of firsts.It is the largest coal producer in the world in one of the biggest demand growth regions.The company has excellent fundamentals being rated 5/5 by the rating agency.The government has disallowed anchor investors for the IPO as it finds that allocation could be construed as biased.Note Anchor Investors in Indian IPOs are favored investor who are preallocated a fixed amount of shares by investment bankers.This is similar to the US practice where all of the IPO is offered to institutional investors by investment bankers solely on their discretion.India is much more egalitarian in its approach to IPO regulation with a fixed amount 35% reserved for retail investors .The pricing of the issue has been a hot topic of speculation with the expected price range to give it a multiple of around 15x which is around 20-30% cheaper than comparable large US and China coal companies like Massey,Shenhua and others.

The Government of India has formed a high powered panel to look into replacing the usage of diesel powered gensets by Renewable Energy in Telecom Towers.India has around 300,000 Telecom Towers most of which are powered by expensive diesel generators.The reason is that a lot of the telecom towers are situated in far flung areas where the grid does not exist.Also the power supply in India is erratic and not reliable with 10 hour electricity blackouts not an infrequent occurrence.In these cases a backup supply of electricity supply is badly needed.Diesel Generators are the most popular form with Diesel heavily subsidized by the government in comparison to normal petroleum.Also Diesel Generators are widely available without huge capital costs.

However Tecpro Systems differs from the other 2 IPOs in the sense that it is primarily focused on the Power Sector Space.It is a leader in the ash handling and material handling systems and is currently diversifying into becoming a turnkey provider in this segment.Like other infrastructure players it has seen amazing growth in the last 3 years at around 70%+.Its margins have come down and stabilized at around 7%.Cash Flow have been negative due the breakneck growth and the high WC requirements of the Construction Sector.The valuation does not seem expensive with the promoters diluting around 15% of the company.

Summary

This EPC company seems a good investment to me though not as good as VA Tech Wabag.The valuation at around 17x P/E is not very expensive though the sector concentration increase the risk for the company.However given the management quality,this company seems a better investment that other construction companies.The growth prospects of the Power Sector in India is huge and Tecpro seems well positioned in this space with partnerships with other major companies like Va Tech Wabag.Though there is some concentration risk,I think Tecpro seems a subscribe.

Electrosteel Integrated is coming out with an IPO to raise around $50mm to fund its 2.2 million ton plant in Jharkand,India.The company is promoted by its listed parent Electrosteel Castings which has been running for the past 30 years and is leader in the Ductile Pipe Category.This company will have ECL holding of 34% post IPO with the other major shareholders being a bunch of PE firms and Stemcor.The plant construction will require around $1.5 billion capex out of which around 40% has been already been spent.Debt will be around $1.1 billion mostly at 12.25% interest rate.
Summary

The company has pluses as well as risks,however the plant should start operating in Oct 2010.While the investment is risky,the valuation being offered is cheap with good promoters.For people looking at lesser risk,ECL the parent company also makes a lot of sense.It is trading at 8x trailing P/E and around 1 P/Bx which is again cheap.It has a 34% share in the new company so will gain from any upside as well.Its investment in the company is Rs 700 crore with a total market cap of around Rs 1600 crore.Not expensive and a safer way to invest in