TATAPOWER — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
OFFICER – TATA POWER · MR. JINENDRA PATIL – FINANCIAL CONTROLLER –
MR. JINENDRA PATIL – FINANCIAL CONTROLLER –
TATA POWER · Management
MR. SOUNDARARAJAN KASTURI – INVESTOR
RELATIONS – TATA POWER · MR. RAJESH LACHHANI – INVESTOR RELATIONS –
MR. RAJESH LACHHANI – INVESTOR RELATIONS –
TATA POWER · Management
Tata Power Limited October 28, 2022
Moderator · Conference Operator
Ladies and gentlemen, good day, and welcome to the Tata Power Q2 FY '23 Earnings Conference Call.
As a reminder all participants’ lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is being recorded.
Today, we have Tata Power management team on the call with us.
I now hand the conference over to Dr. Praveer Sinha, CEO and MD of Tata Power.
Thank you, and over to you, Dr. Sinha.
Praveer Sinha
Thank you very much, and good evening to everyone, and thanks for joining for the Q2 Analyst Call.
On behalf of Tata Power, I would like to wish all of you a very happy Diwali and also my best wishes for the festive season.
Today in the call, I am joined by my colleagues, Sanjeev Churiwala, CFO; Jinendra Patil, Financial Controller; Kasturi and Rajesh Lachhani from the Investor Relations and a few other colleagues from my finance team.
Let me, first of all, start with giving you some background about the consumption of power in the country.
What we have seen in the last six months is that there has been a huge increase in the requirement of power.
The peak power went and touched something like 207 to 209 gigawatts and also in terms of energy, the increase has been nearly 12% in the last six months.
Of course, in the last quarter, the demand was a little subdued because of extended monsoon, which actually went right up through September and even in October.
This also was a period when we saw that during the month of especially April and May, there was a shortage of coal and during that period, the peak prices of power went up in the exchange.
Since then, there have been much lower peak prices.
And also, there is a capping of peak price that has been done by the regulator.
During this period, Tata Power has done exceedingly well.
In the last quarter, our PAT has grown and also our revenue has grown and EBITDA has grown.
In this quarter, our PAT has grown by nearly by 85% from INR 506 crores last year to INR 935 crores.
Revenue has grown by 49% from INR 9,502 crores to INR 14,163 crores.
EBITDA has grown by 18% from INR 1,732 crores to INR 2,043.
If we look at the H1 data also, we find that in H1 also, like the quarter, the PAT has grown by 87% from INR 971 crores to INR 1,890 crores.
The revenue has grown by 49% from INR 19,076 crores to INR 28,939 crores and the EBITDA has grown by 1% from INR 4,097 crores to INR 4,150 crores.
This growth has been on back of excellent performance by all our businesses, our existing generation business, hydro business, coal business, all of them have done very well.
Our coal mines have also done exceedingly well on back of high prices, of course.
Mundra, we have been able to operate the plant under Section 11.
And the interim order of the regulator has ensured that we get the full fixed cost and also states, who were not scheduling the power have to pay the fixed cost as we had shown the availability of the plant.
And now we are, of course, expecting the order on the full pass-through of coal coast, which will give us a further Tata Power Limited October 28, 2022 improvement in our performance in the subsequent quarters.
We have also seen all our other businesses are doing very well.
Our renewable capacity is today, the utility scale is something like 5,660 megawatts on back of the 850 megawatts of projects that we won in the last quarter.
This includes 3,870 megawatt of operating plants and another 1,790 megawatts of projects, which are under different stages of implementation.
We expect that in the coming years, with the type of increases improvements that we have seen in our hit rate in winning projects.
We will be able to add a large quantity of such big projects in different parts of the country and these will not only be just pure solar or pure wind, but will be hybrid projects also.
We also won projects under the EPC route, where we won projects of 125 megawatts from NHPC and 100 megawatt from SJVN and we implemented during this period, 625 megawatts of third-party EPC projects also.
We have a very healthy order book of nearly 3,800 megawatts with a value of nearly INR 15,000 crores.
Our 4 gigawatt manufacturing facility is going well.
The work has started at site and ordering of main equipment’s have taken place and we expect the rollout of the first of the module from the plan by next year, July-August and the first of the cell by next year December.
So that will help us in meeting our future requirement of cells and modules for our projects and also for the EPC projects and rooftop projects.
In the rooftop business, we commissioned 138 megawatts of capacity in this period and we also won 330 megawatt of orders, totalling to INR 1,233 crores.
We are present in more than 265 districts of the country have happened and more than 100 cities.
And we expect that with our present order book of nearly 400 megawatts with a value of maybe INR 1,500 crores we'll be able to grow this business many more times than what we have done in the previous year and quarters.
We already have a cumulative rooftop portfolio of about 1,150 megawatts and this keeps on increasing every month and every quarter.
In the solar pump business, we installed nearly 6,000 pumps in Q2, taking our total installation to 17,000 pumps.
And we expect that with more than 80,000 pumps across India, we will have a major presence in most of the states in the country.
On the e-mobility, we added 722 public chargers and we now have more than 3,000 public chargers in different parts of the country including highways.
And we have nearly 23,000 home chargers.
Apart from this, we have about 240 bus chargers in different cities in the country.
Our transmission and distribution continues to be very steady and has been growing at a very fast pace.
During the quarter, we took over the South-East UP Power Transmission Company, through the the resurgent platform.
And also the work on the NRSS transmission project has Tata Power Limited October 28, 2022 started.
And we expect that we will be able to complete all these projects in the next 6 months to 12 months progressively in these locations.
Also, we have been able to push our smart meter initiative and we have nearly 4 lakh smart meters installed in Delhi, Mumbai and in different parts of Odisha and we expect that soon we'll be able to cover in next three years virtually all our customers in these places.
Our distribution business in Odisha, which we took over progressively in the last two years, have done exceedingly well.
We have been able to not only reduce the AT&C losses to a very large extent, but have been able to also improve the reliability and customer connect and excellent service being provided to our customers.
Many of the legacy issues over there have been sorted out.
There were nearly 20 lakh meters that we replaced, which were not working and all were the legacy meters, the electromechanical meter.
And that has helped us in improving the billing efficiency and also given the current consumption that is being done by the consumers.
And the result of that will start coming in the subsequent quarters.
Moving to our balance sheet.
We have been able to ensure that our net debt continues to be less than INR 40,000 crore.
It's about INR 39,000 odd crores.
And this is in spite of the fact that we have done more than INR 3,000 crores of capital investment in this year.
Our working capital also has improved because of better collections in all our businesses including our renewal business, and we have started getting the money from some of the states, which earlier where delaying the payment.
And we do expect that all the old outstanding will get liquidated in the next few quarters.
Our net debt to underlying EBITDA has improved from 3.6 in last quarter to 3.5 in this quarter.
Similarly, our net debt to equity has also improved from 1.55 to 1.32.
And we expect that going forward, we'll be able to maintain at these levels, notwithstanding the fact that there's a large amount of CapEx that has been planned in our renewable transmission and distribution business.
As I had been mentioning earlier, Tata Power has been continuously moving towards a long- term aspiration and the 12th consecutive quarter of good performance shows that a huge amount of foundational changes have happened, which is ensuring that the sustained performance and results are being provided.
And I think that the direction of change that we have seen will help us to further improve in the coming quarters.
So we have, of course, shared with you the detailed data of our quarterly results.
And I now look forward to have your questions and the floor is now open for Q&A.
Moderator · Conference Operator
Thank you.
Participants if you wish to ask a question kindly press star one.
The next question is from the line of Dhruv Muchhal from HDFC.
Kindly proceed.
Dhruv Muchhal
Sir, you mentioned that there is a gap between the interim tariff and the final tariff based on the fuel cost pass-through mechanism under Section 11.
Possible to share what the gap is, to help us understand the potential benefit that is likely to accrue?
Praveer Sinha
Right now, it is premature.
We'll share with you because till such time the final order of CERC comes.
We do not know exactly what we ultimately get approved by them.
So let's wait for their orders.
We expect that order to come in November, and then we'll be able to work out the exact quantum and shares.
Moderator · Conference Operator
The next question is from the line of Abhineet Anand from Emkay Global.
Kindly proceed.
Abhineet Anand
On the solar EPC side, the order book is quite healthy.
I just wanted to understand in the last few months or maybe in the last two quarters, have you seen an increased competition?
We saw a major number of contracts that Tata Power won earlier was from state PSUs like NTPC, SJVN and all.
Recently, we saw one of your competitors seeking a large project in excess of INR 2,000 crores.
And they have now a backing of large corporates.
So any increased competition that you see in the space?
Moderator · Conference Operator
Thank you.
The next question is from the line of Sumit Kishore from Axis Capital.
Kindly proceed.
Sumit Kishore
My first question is that net cash flow from operating activities at consolidated level has reduced from INR 2,412 crores in H1 FY '22 to INR 2,148 crores in H1 FY '23, if I look at the BSE filing.
What qualitatively explains the decline in the net cash flow from operating activities given that there has been strong P&L performance?
Moderator · Conference Operator
Thank you.
The next question is from the line of Koundinya N from JPMorgan.
Kindly proceed.
Koundinya N
A couple of questions.
Firstly, on Mundra plant.
So just trying to understand, you were referring to a bit of slowdown on the part of Gujarat Government.
Is it got something to do with subdued demand in government in the second quarter?
Or how should we look at it?
Moderator · Conference Operator
Thank you.
The next question is from the line of Aniket Mittal from SBI Mutual Fund.
Kindly proceed.
Tata Power Limited October 28, 2022
Aniket Mittal
A few questions, basically on the EPC front, in Slide 9 of the presentation, you've mentioned that there has been some planned rescheduling of large projects on the EPC.
So if you could elaborate on that, and which are these large projects that have gotten rescheduled?
Moderator · Conference Operator
Thank you.
The next question is from the line of Apoorva Bahadur from Investec.
Kindly proceed.
Tata Power Limited October 28, 2022
Apoorva Bahadur
Congratulations on the good set of numbers.
And thank you for the opportunity.
So you spoke on this provision write-back for the solar EPC business.
Can you please share the quantum how much did we write back into solar?
Moderator · Conference Operator
Thank you.
The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.
Kindly proceed.
Dhruv Muchhal
Sorry, I got disconnected earlier.
Some of the questions have been answered since.
So just one question on the Odisha Discoms.
We see the performance is improving.
We understand the circle developing but we also notice that the regulatory assets are increasing.
So should we understand this primarily because of the fuel cost?
Or is there some other element to this?
Moderator · Conference Operator
Thank you.
The next question is from the line of Ajay Mehta from Wipro Limited.
Kindly proceed.
Ajay Mehta
So my first question, sir, to you is that considering the environment when interest rates are rising, so what is Tata Power's plan on reducing the debt because that is still at an elevated level, right?
Even though Y-o-Y we have come down, but still the average debt cost has risen from 6%-odd to 7%-odd, right?
So what is the plan to reduce the debt going forward?
Moderator · Conference Operator
Thank you.
Participants if you wish to ask a question, kindly press star one.
The next question is from the line of Subarni from Spark Capital.
Kindly proceed.
Subarni
This is Bharani from Spark Capital.
Sir, what is your view on the international coal prices over the next, say, two quarters?
And what would be your rationale for that?
Moderator · Conference Operator
Thank you.
As there are no further questions, I would now like to hand the conference over to Dr. Praveer Sinha for closing comments.
Praveer Sinha
Thank you, Vivian and thank you to everyone for joining in the call.
And in case you have any further queries, any other details that you would require, please connect with Kasturi and Rajesh Lachhani and we will be more than happy to furnish you with it.
Once again, season's greetings and all the best.
Moderator · Conference Operator
Thank you.
On behalf of Tata Power that concludes this conference.
Thank you for joining us.
You may now disconnect your lines.
Questions and answers
Moderator · Conference Operator
The first question is from the line of Mohit Kumar from DAM Capital.
Kindly proceed.
Mohit Kumar
Congratulations on a good set of numbers.
So my first question is on the Mundra short-term arrangement.
Is it being extended post 31st October 2022?
Have you heard anything from the Tata Power Limited October 28, 2022 government?
And secondly, are you booking the tariff completely on cost plus for the quarter, or is there something which will still be pursued at CRC?
Praveer Sinha
So thank you, Mohit.
First of all, the existing arrangement has been extended up to 31st of December.
And it is not sure that anything gets further extended, but the supply under Section 11 continues, and continues up to 31st of December.
Secondly, right now, we have booked the Mundra tariff based on what the Ministry of Power has given as an interim tariff.
The difference between the interim and the actual tariff, that is to be decided by CERC.
As we had shared with you earlier, under Section 11, any generation has to be on a cost-plus basis.
That means actual costs that you have incurred will be paid to you.
And that was the principle on which even the interim order of CERC came whereby they gave us the full charge for capacity, which is INR 0.90 and no reduction was allowed.
And also states which were not scheduling power, they had to pay because we were showing the availability.
So the Section 11 principle is very well laid out.
And we expect that once the final order comes, full pass-through of coal will be given to us.
Mohit Kumar
Secondly, sir, what is the status of Mundra long-term draft supplementary power purchase agreement, where are we right now?
And when do you think we will resolve this entire thing?
Praveer Sinha
So, since the existing arrangement is going on, Gujarat government has been going a little slow on finalizing the Mundra arrangement.
So let's wait and watch if the existing arrangement continues then this provides us the opportunity to do the supply of power on cost-plus basis, or if that does not get extended, then of course the Gujarat government would come forward and finalize an arrangement which is acceptable to both sides.
So I think for the present, we will continue with the existing arrangement.
And if there is something that is required, we will discuss and mutually sort it out.
Moderator · Conference Operator
Thank you.
The next question is from the line of Swarnim Maheshwari with Edelweiss.
Kindly proceed.
Swarnim Maheshwari
Sir, my first question is, during the quarter, in Mundra, was there any reversal of excessive provision, because posted tariff orders which got effected from 5th of May, before that for about 30 days, 35 days, you were outside the Section 11.
So, post this tariff order, is there any excess provision that has been reversed during the quarter?
Praveer Sinha
What had happened when the 5th May, notification came, it talked about that the fixed cost of the capacity charge will be paid as per the PPO or if there's any agreement.
Since there was no agreement but notwithstanding that, Gujarat was only paying access INR 0.70 paisa not the full amount, because they were considering that the interim arrangement that we were trying to sort it out with them, the rebate will be given.
But the interim order of CERC mentioned that full fixed cost or capacity charges would be given.
So that reversal has happened in the quarter.
But other than that, we have not done any other.
Tata Power Limited October 28, 2022
Swarnim Maheshwari
Yes.
Sir, what is that amount, sir?
If you can quantify, please?
Praveer Sinha
So it's a INR 0.20 paisa per unit.
So whatever we had supplied to Gujarat and Maharashtra and that has been.
And to the other states, they have to pay the full fixed cost even if they are not scheduling the power.