Nomura Financial Advisory and Securities has maintained 'Neutral' on Reliance Power (RPower) with revised target price of Rs 67 in its report.

Reliance Power (RPower) has stated that it has terminated discussions with Jaiprakash Power Ventures for acquisition of the latter's three hydropower projects on account of prevailing regulatory uncertainties, tariff issued, which impact valuations. Interestingly, in its filing with the stock exchanges on this development, JPVL has stated that the discussions were called off due to the difference in commercial aspects and not attributable to any regulatory uncertainties

Commenting on the investment rationale, Nomura, said, ''JPVL's three hydropower projects and the prowess of the operational team are fairly well regarded, RPWR's move to buy these assets and absorb the operational team would have made strategic sense, access to the expertise/experience of JPVL's hydropower team would aid in the build-out of RPWR's own substantial hydro project pipeline, and FCF augmentation ahead of RPWR kick-starting capex for building the next phase of its thermal/hydro project capacity.''

''While JPVL has ruled out regulatory uncertainty having any role in RPWR terminating the asset buyout discussions, we note as per recent reports, a committee with representatives from the Central Electricity Authority (CEA) and Central Water Commission has submitted a report stating that the company increased the capacity of its Karcham Wangtoo project to 1200MW vs the approved capacity of 1000MW, and the final tariff order from the Central Electricity Regulatory Commission (CERC) for this project is awaited,'' it added.

''We have not built-in the acquisition of JPVL's 1791MW portfolio in our earnings forecast for RPWR. At CMP, the stock trades at 1.0x P/B and 20.2x P/E on our FY16F forecast,'' said Nomura.

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