Ladies and gentlemen, good day, and welcome to the Q3 FY 2022 earnings conference call of Tata Power. As a reminder, all participant 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. We have with us today Dr. Praveer Sinha, CEO and MD, Tata Power, and Mr. Sanjeev Churiwala, CFO, Tata Power, along with other key members of the management. I now hand the conference over to Dr. Praveer Sinha from Tata Power. Thank you, and over to you, sir.
Thank you, Margaret, and good evening, everyone, and thanks for joining for the Q3 analyst call. We hope all of you are doing well and safe, and it's good to see so many participants on the call, and we hope that the results and presentations provided sets of information as required by you. I'll give you a brief summary of the results and cover some of the key aspects of the business, and then we will take your questions. Before that, please let me take the opportunity to introduce my colleague, Mr. Sanjeev Churiwala, who has taken over as CFO with effect from January 1st, 2022. My earlier colleague, the CFO, Mr. Ramesh Subramanyam, has moved to a Group role in Tata Sons.
Along with me are Mr. Anand Agarwal, Financial Controller, Mr. Kasturi and Mr. Rajesh Lachhani from investor relations, and a few of my other colleagues from the management. Tata Power has delivered a very strong third quarter as both the underlying EBITDA and the profits saw double-digit growth compared to last year. This was despite pressure from rising commodity prices faced in CGPL, Tata Power Solar, and Tata Projects. The company has taken several bold and strategic steps, be it either working on the pass-through arrangement with procurers in CGPL or focusing on sustaining margin in utility scale and rooftop EPC through robust bidding and contractual agreements.
The impact of these steps is evident and visible in the results of this quarter. Similarly, we have ramped up our efforts in Odisha Discoms with a focus on growing the consumer base, especially in the high load commercial and industrial segment, and improving the billing and collections through various initiatives.
You will see that all four Discoms in this quarter have delivered very strong performance compared to the previous quarter and are now profitable. All our other assets have also operated at benchmark levels and have delivered another quarter of strong performance. Despite the provisions of Tata Projects and one-off order impact in Mundra Power, we have delivered a 42% growth in revenue on year-on-year basis from INR 7,756 crores to INR 11,015 crores, and a 74% growth in PAT on year-on-year basis from INR 388 crores to INR 552 crores. Our Renewable business delivered another quarter of strong performance, with both RE generation portfolio and EPC portfolio delivering healthy operations. The company achieved almost 50% growth in revenue and doubling of profits from Renewable business on year-on-year basis this quarter.
We have also been awarded letter of intent for a 300 MW hybrid wind project along with solar from MSEDCL. We also completed commissioning of two projects of 100 MW capacity in UP in January. Our Solar EPC business, namely Tata Power Solar, has registered strong performance in large-scale EPC business and rooftop solar business this quarter, registering almost 70% growth in quarterly revenue from INR 923 crore last year to INR 1,561 crore this year. With several initiatives to improve margins, Tata Power Solar delivered a strong operating profit of INR 150 crore and PAT of INR 8 crore in this quarter. The large-scale utility EPC order book continues to grow with orders worth around INR 1,800 crore won in Q3, taking the total order book above INR 10,000 crore.
Amongst utilities, utility scale projects, we won 320 MW in this quarter and were also awarded the EPC contract for India's largest solar and battery storage project of 100 MW solar and 120 MW battery storage for INR 945 crore at various sites in Chhattisgarh. Margins have continued to improve, and we have prepared for higher module imports in this quarter before the Basic Customs Duty kicks in from 1 April 2023. To prepare ourselves in both our Renewable, Generation as well as EPC business. As higher levels of duties on cells and modules gets imposed from April 1st, 2022, the company has decided to set up a 4 GW solar cell and module manufacturing capacity using state-of-the-art technology with an investment of approximately INR 3,400 crore. This capacity is expected to be fully commissioned in next 15-18 months' time.
We have also participated in the solar PLI scheme, which has been enhanced by Government of India from earlier INR 4,500 crores to now INR 24,000 crores in this budget. With a strong three-decade experience of manufacturing of cells and modules, we believe that this expansion in capacity with PLI benefits from Government of India and the other state incentives will make us very competitive and help us to pursue growth in our utility scale, EPC, and rooftop and solar pump business. The rooftop solar business saw another successful quarter, winning orders worth more than INR 375 crores in Q3, with a strong growth from commercial and industrial customers. Our rooftop order book is now 370 MW of total value more than INR 1,000 crore.
We executed 118 MW of rooftop solar in this quarter, which was higher, much higher than execution in Q2. We have started seeing meaningful traction under various financing schemes launched in partnership with various financial institutions, and close to INR 370 crores of orders were financed through these schemes. We have recently entered into an agreement with State Bank of India for a centralized and dedicated processing office for the solar projects through their Surya Shakti Cell, which will promote faster execution of loans for solar projects sourced from anywhere in the country. With a slew of attractive features such as smaller down payment, longer tenures, this partnership will help us in ensuring hassle-free financing for the rooftop projects for our customers. The solar pump business has been a key development with EESL tender now moving forward.
EESL has now sent the list of empanelled bidders to all the states, and the states have started the process of signing the agreements with the empanelled bidders, and we are at different stages in this process with 14 states. The first set of orders have started coming in, and we have already booked orders for more than 3,000 pumps. With the launch of Tata Power branded solar pumps and our existing strong presence in many states, we expect our pump business not only to capitalize on the EESL tender, but also direct sale opportunities that will come. Coming to our integrated CGPL and coal portfolio, as I mentioned, international coal prices remain high. We were forced to reduce the supply of power from our units under the PPA terms to contain the losses.
During this period, we entered into a short-term pass-through arrangement with Gujarat from October 13th, 2021 to December 31st, 2021 and for very short periods with Rajasthan and Punjab. As a result, our availability in this quarter was 40%. Adjusting to the various charges under the PPA, we have been able to reduce the losses in CGPL in this quarter to INR 458 crore from INR 863 crore in the previous quarter. We are now working very closely with Government of Gujarat to finalize a long-term arrangement which will ensure full pass-through of the coal prices. As a result of higher coal prices, the profits from the coal company have improved, providing a hedge against the losses in CGPL. CGPL and coal integrated portfolio have generated a profit of INR 143 crore in this quarter compared to INR 16 crore in the third quarter last year.
As we had mentioned last quarter, the teams in the four Odisha Discoms have been working continuously to reduce the AT&C losses in spite of being impacted due to the double blow of both Cyclone Yaas and COVID-related lockdowns. This quarter, we have seen meaningful reduction in the AT&C losses across the board. This has helped us to register profits of INR 125 crore from all these four Discoms compared to INR 21 crore in previous quarter. The focus in these Discoms are on following factors. Improvement of reliability through state-of-the-art operations with increased use of technology in various areas of operation. Improvement in customer service, including offering various digital avenues for customer services. Reaching out to potential customers, especially commercial and industrial customers, to supply them quality power including better billing and collection solutions.
The focus on operations and profits in all these business has helped us now to deliver nine consecutive quarters of year-on-year profit. Consolidated revenue for YTD FY 2022 increased by 33% from INR 22,860 crores to INR 30,491 crores. Whereas PAT increased by 59% from INR 957 crores to INR 1,527 crores. I will now move to the topic of leverage or deleverage. Despite CapEx of around INR 1,200 crores during this quarter, net debt has largely remained the same as that in Q2, with healthy operational cash and income from JVs. Healthy growth in underlying EBITDA from business continues to improve the debt metrics.
The company is working on initiatives that will help the company in maintaining a very healthy net debt to equity, which stands at 1.58 times, and the net debt to underlying EBITDA of 4.12 x. These have improved compared to Q2 also. S&P Global Ratings have upgraded the company's credit rating by two notches to BB/Stable, and Moody's has upgraded the credit rating by a notch to Ba2 rating from Ba3 rating. Our renewable monetization process has progressed very well in the last quarter, and the same is in line with our internal timeline. We had mentioned earlier that we are working on a renewable structure that will take care of the capital needs to meet our growth aspiration. We expect to close this shortly, and once done, we will share further details with all of you.
We have also started working on our Transmission business opportunity. As a part of this, we have started bidding in both M&A opportunities as well as fresh bids under the government TBCB opportunities. We have recently been awarded the LOI for the acquisition of 100% stake in the NRSS XXXVI through Resurgent Power, where we have 26% investment. Resurgent has also submitted a bid for Isolux Transmission in Uttar Pradesh under the IBC process. This process is also likely to be concluded in next one month or so, and we will share more details once we get information from the resolution professionals. Our EV charging business also continues to expand with nearly 1,300 public charging and 158 bus charging points installed till December 31st, 2021.
Our network is now spread across more than 250 cities, making us one of the most widely present EV charging company. More importantly, we have entered into a MoU with TVS Motor Company to set up two-wheeler charging points across India, which will further bolster our charging infrastructure and mark our entry into two-wheeler charging space, where the offtake has already picked up significantly. We have also entered into partnerships with many large players such as Apollo Tyres, Nayara Energy, BEST, Hyderabad Metro, and we will work together with them to build the charging ecosystem. Our journey towards a cleaner and greener company gets further bolstered by the motivation and recognition that we keep on getting from all of you.
In the S&P Global Corporate Sustainability Assessment for 2021, we received a total score of 67 and a percentile rank of 80, which is the highest score for any power utility in the country. The score is also significantly higher than the average world utility sector score of 38. The company is working towards its transformation into Tata Power 2.0. We have started seeing significant traction in many of the identified strategic areas, and some of these initiatives will start showing results in very near future. As we always stress, our transformation will be founded on the pillars of strong balance sheet and healthy return metrics. With this, I hand over the call back to Margaret for the Q&A session. Thank you.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. The first question is from the line of Swarnim Maheshwari from Edelweiss Securities. Please go ahead.
Yeah, thanks for the opportunity and good evening to the top management, and congratulations for a good set of numbers. Sir, I have two questions over here. The first one is if you look at the EPC margins, they are at almost about all-time high at about 10%. What has led to the margin, strong margin profile and also about the sustainability of the same, if you can give some sort of color over there.
This depends on how many projects and what type of projects are executed. You know, there is a cycle of execution of projects. In the last quarter, we could execute many of the projects for which the material was sourced during the previous quarter. We could get better margins in them because the way the material sourcing and the optimization in engineering was done. I think it demonstrates that over a period of time the supply chain management has improved, as also our project execution capabilities and engineering capabilities. All the learnings that we are now getting we are implementing in the various projects. You would see that these type of margins will sustain in future.
Right. Basically, this was better than expected cost realization. Is that right?
This was little more than the normal. As I mentioned to you, this is dependent on the sourcing. It's not only just the sourcing of the cells and modules, but also the sourcing for the structures and the balance of plants. We do a better sourcing and better planning. We are always in a good position to get better margins.
Sir, my second question is, now you have announced about this setting up a 4-GW integrated cell and module manufacturing capacity. Have we already identified the land, equipment supplier, since you have given a timeline of about 15-18 months from now?
Yes, we have identified the land, and the land has all the necessary infrastructure available, and including water and electricity. We are in the process of finalizing the equipment. Since we have been running a plant with cell and modules, we know exactly where the equipment have to be sourced. The consultants are working on it to finalize the orders next two months time.
Fair enough, sir. Thank you so much, sir. I'll get back in queue for more questions. Thank you.
Thank you. The next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.
Very good evening to the management, and thanks for the opportunity. My first question is, again, on the cell and module manufacturing capacity. Could you help us understand the breakup of the INR 34 billion CapEx into cells and modules? You know, what technology are you going for at this point? And what could be the phasing of this capacity expansion? You know, in phase I, will it come up in less than a year, for instance? Also with the PLI benefits and the duty implementation starting first of April, broadly, what is your expectation on the EBITDA margin profile of the solar equipment manufacturing?
The cell and module factory of 4 GW will come in one phase only. We expect to commission the module line in about 13-14 months, while the cell line will take another four months. In 18 months total, we should be having both the cell and the module lines. The cell equipment, most of them comes from Europe. It's a high-end technology and the latest technology, which is the P-type cells, and also the monocrystal are the ones that we will be using. The module equipment, many of them come from China and other places. We are zeroed down on where we will be sourcing these equipment. We expect that whatever we will be producing, majorly it will get consumed internally.
We have large plans for setting up our own utility scale, plus the EPC models that we will have, plus the rooftop and the solar pumps. Virtually everything that we will produce will get internally consumed for the various solar and renewable works that we will be carrying out.
Okay. My second question is, you know, regarding the state of progress on monetization of strategic stake in your RE portfolio. I mean, there have been various news articles coming up. So, you know, what is the state of progress? On the Mundra merger, where are we? Is it going to happen before end of this fiscal?
We are in discussions with various strategic investors in our Renewable business. We should be in a position to finalize that soon. The discussions are in very advanced stage. Secondly, as far as the Mundra merger is concerned, the process is on. The last phase of hearing in NCLT should happen. We do expect that within this financial year we'll get the order.
Thank you. I'll join the queue.
Thank you. The next question is from the line of Mohit Kumar from DAM Capital Advisors. Please go ahead.
Good evening, sir. Congratulations on a very, very good quarter and reaching the milestone of 1,000 EV charging points. The first question is that, have you finalized the way to monetize the Renewables portfolio? Does it include your Solar EPC, solar manufacturing and charging, solar rooftop? Is it everything under one umbrella, or are we? Can you please share some insight?
Our Renewable portfolio consists of all the renewable businesses that we have. Starting from Manufacturing to EPC to our own utility scale renewable projects that we run, to rooftop solar to solar pumps and EV charging. All this, which is the so-called clean and green business that we are doing, will get covered under the renewable platform, and that is the area that we are discussing with some of the investors.
Secondly, sir, has the PPA for CGPL, which was short-term, has it been extended for fourth quarter? What is the way forward of, for CGPL over the next, 6-12 months? Of course we are talking to Gujarat, but are the other, you know, the other, procurers on board?
As you know, Gujarat is the major procurer, and it was felt that we should first finalize with Gujarat and use the same template with the other procurers. Right now our discussions are in very advanced stage with Gujarat to see to it that it is finalized with the overall boundary condition that the cost of coal should be reimbursed so that it becomes sustainable in the long run. That is the objective and structure within which we are discussing with Gujarat government. We hope to finalize that very soon.
Lastly, sir, the coal mine production was slightly lower in the quarter. What is the status of the concession agreement that was supposed to be extended? I think the concession agreement was about to expire, right, for KPC?
I think the coal mine production was about 15 million tons in the quarter, which is the average production in the coal mines every quarter, give or take some small quantity depending upon if there are very heavy rains during a quarter. Otherwise, the coal mining operations was very, very sustainable. Secondly, the coal mine license is under again finalization by Government of Indonesia. They have so the license expired on December 31st, 2021. They are in the interim informed that you can continue with the mining till such time the new license, and the new terms of the license are finalized. We expect in next one month, the decision on this will be taken.
Understood, sir. Thank you and all the best, sir. Thank you.
Thank you.
Thank you. The next question is from the line of Deepika Mundra from JPMorgan. Please go ahead.
Hi, sir. Thank you for taking my question. Just on the initiative that you had started on selling non-core assets, could you kindly give an update on that as to, you know, some of the overseas plants, et cetera? Any update on their monetization?
The monetization process got slowed during the COVID period. We are very much in the market for monetizing the Georgia plant as also the Zambia plant. On the Zambia plant, there has been a feud also with the government over there in ZESCO, in regards to the payment that is to be received from us, by us from the supply of power from the ITPC plant. We are trying to get that resolved, but the parallel action of divestment continues to be there. Similarly, in Georgia, there were certain issues about the operation of the plant, especially the water availability was little reduced.
That has been taken care of to a large extent with better rain this year, and also better snowfall leading to a lot of water that is coming during the winter months. We do expect that once the plant operation fully stabilizes, we'll get better value when we do the divestment of this plant.
Thank you, sir. If you could just add about Tata Projects to that, I think you were planning to sell off your stake as well over there.
At Tata Projects, about three years back, we had kept it for sale, but since they did not do the IPO and there was a lot of restructuring that was being done by Tata Projects, wherein they wanted to focus on certain types of orders and certain areas, that was withdrawn. That proposal was withdrawn. Right now there is a huge amount of consolidation that is taking place, especially considering that in last few years they have got very good orders.
These are marquee orders that they have received for various works in the country. We see lot of future for that company, and we do hope that as and when the divestment takes place and they go for an IPO or a pre-IPO, we will be able to get better value for us as shareholders.
Thank you. One last question, sir. How are you seeing the bid environment change for renewable projects with interest rates rising? Are you seeing funding costs for renewables going up and is it impacting? Your thoughts on just yours and your peers' activity in this space?
I think the renewable prices, which had gone up to INR 2 are now back in the INR 2.50-INR 2.30 range. Primarily because the cost of cells and modules have gone up. Secondly, the funding costs have also risen a little bit. The impact of higher cost of import of cells and modules is directly felt in a higher tariff at which people are bidding. I think this will stabilize around that range considering that from April 1st, 2022 we'll have the BCD. We do expect the direct impact of it will be by way of higher costs for Renewable projects.
Okay. Thank you, sir.
Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah. Thank you so much for the opportunity. My first question is a clarification. When you're bundling your renewable entity, the upcoming solar manufacturing will also be a part of that entity. Is that understanding right?
Absolutely right.
Okay. Second is on your solar rooftop model where you have 370 MW of orders worth INR 1,050 crore. Are these all CapEx orders or is there some OpEx orders on it? Will you earn any annuity income or you will just do it and get over with it?
It's a mix of three types of orders. One is pure orders where it is sale orders that we have. The second one is under RESCO supply, whereby supply them at a cost. The third is the Group captive orders. All the three are there. If you want the breakup, that can be provided to you separately.
Okay. That's fine. You also talked about the SBI loan scheme, which is collateral-free. Would you be taking the risk or will the risk be on the end user?
These are loans which are taken by the end users. We are not party providing any collateral in this. It's a relationship between the bank and the consumer.
Okay. You don't have to guarantee anything, right?
No. No, no guarantee from our side.
Understood. On the EV charging business, you talked about this, you know, new tie-up with TVS. In your current 1,200 or 1,300 EV charging stations, what would be the mix between four-wheeler and two-wheeler?
Right now there's no two-wheeler. This is a very new arrangement that we have tied up. These are all four-wheelers public chargers.
Right.
This also excludes the bus chargers, which is separate.
Understood. In the 1.95 GW of solar project pipeline, how many is already signed for PPA and what is still awaited?
Beg your pardon?
Sir, in the 1.95 GW of solar project pipeline.
Everything, the PPA has been signed.
Okay.
We do not consider any project, take it on our books until we have a firm PPA and an approval from the regulator also.
Even the NSE-BSE hybrid also PPA signed, the last one?
Yeah. PPA is signed and the regulatory approval is there.
Okay, understood. That's very helpful. Lastly, if you can talk a bit on the KUSUM scheme. This quarter was slightly slow. What is changing and how do you think it'll help?
KUSUM scheme, under the KUSUM scheme, whether it be KUSUM A, B or C, it is run through a bidding process by EESL, whereby they select bidders based on the bidding process. Over here, once they are selected, they inform the states of the various shortlisted bidders. Unfortunately, for a certain period of time, the bidding process was delayed, and also there was a court case, due to which they could not finalize that order. The order was finalized in the month of October, and thereafter they have started informing all the concerned states. We expect again in November, December because of COVID many of the states had impacted by that. Now we, the orders have started flowing in.
Okay. Understood. Thank you very much. This is very useful.
Thank you. The next question is from the line of Atul Tiwari from Citigroup. Please go ahead.
Yes, sir. Thank you a lot. Just one clarification on CGPL. As of now, how many units are operational pending this finalization of agreements which are promised?
During the month of January, there were 2-3 units which were operating. Right now, of course, 1 unit is operating. You would have been aware, in the month of January, the export of coal was banned by Indonesia. Whatever coal we had, we ran 3 units and then 2 units. Now that the coal supply has recommenced from the January 20th, 2022 we expect that we will ramp up to all 3 units in next few days.
Okay. The current generation is happening as per the earlier long-term PPA, not the new short-term PPA, right? Whatever generation
No, it is going to happen as per the new arrangement, which is under finalization.
Okay. As of now, the power that you are supplying, how are you billing for that power? Does it have a pass-through for the full cost or?
Yeah, it's a pass-through for the full cost, and it's an interim arrangement, but it will get regularized once the final agreement is signed.
Okay. Okay, great. Sir, just one question on this Manufacturing unit. What about the backward integration, polysilicon and wafers? You know, some of the other players who have entered the industry in India, they're talking about, you know, Manufacturing that as well. Are you looking at that or is it a part of your plans or you think it doesn't make sense to have that capacity?
We are looking at that, but it has a different technology requirement. We are looking for some global players who have the experience in this type of technology. It's a very complicated, very difficult technology on polysilicon. Once we finalize that, secondly, at this stage, the BCD is only for the cell and modules. There is no BCD on the polysilicon ingots or on wafers. At this stage, we are going to import them without any duties. At some stage we will definitely be looking at upstream manufacturers.
Okay. In the interim, the import will mostly, most likely be from China only, right? I mean, is there any other
Yeah. They have added a huge capacity, and so also some of the other places, but majority of the supply will happen from China.
Okay, sir. Thanks. Thanks a lot.
Thank you. The next question is from the line of Apoorva Bahadur from Investec. Please go ahead.
Hey. Hi, sir. Thank you so much for the opportunity. Continuing on this 4 GW module, cell and module plan. Wanted to know on this PLI extension, will this be the further subsidy on the bids which were earlier placed? Or do you expect any change in terms and conditions over there? And accordingly, what percentage of our capital cost would be offset by the incentive if we are eligible for it?
Based on the earlier bids, they had through a bucket filling arrangement given to three people who had come up with proposals for integrated manufacturing facility right from polysilicon to modules. There were a large number of other bids which could not be covered in that because the amount was just INR 4,500 crore, which was utilized in the bucket. Now that the new scheme has come with a 19,500 crore of additional amount, this will cover all the others also, including those who are only in cell and module. Based on our initial analysis, we find that we will be entitled for something like INR 1,500 crore of PLI over a period of five years.
This is based on every year how much we produce, and the incentive will be linked to that.
Okay. Very useful, sir. Secondly, my question is on the transmission opportunity, which, I believe now you have become very keen on. I think from the last two or three quarters it's being repeatedly featuring in your commentary. Sir, how large do you see this opportunity or and how long do you think will it take to start justifying?
The opportunity is very large in the country, especially considering that government plans is to add 350 GW in next nine years. The evacuation arrangement has to be made for that 350 GW. Some calculations which we have seen from the government side and some of the consultants are talking about something like INR 30 lakh crores will be required in the Renewable as well as in the power evacuation and distribution space. That gives nearly INR 3 lakh crores every year that will be required. There's a huge opportunity if one has to implement and meet the 2030 obligation of clean energy.
Fair enough. Sir, also, on our module or on the EPC business, like you said, that we have been benefiting from the positive side of the execution cycle, right? Now, given that the module prices have gone up, so the orders which we have won, almost like just prior to the price increase, do you foresee provisioning or requirement of provisioning over there? And if yes, how large will that be? And lastly, on the battery orders or solar orders which we are winning, will we also be supplying or procuring the battery or, that's completely the cost of that will be a pass-through? Just wanted to understand if there's, I mean, if you are open on that end as well.
The price of cells and modules started going up more than a year back. All the orders that we have got in last one year, we have accounted for the higher prices of modules. In fact, what we are now seeing is that the prices are coming down, and possibly we may get an upside on that, if some of those equipment comes in this quarter. We have accounted for all the cells and modules which have to be imported. Whatever we had received in the last two, three quarters, those were on the earlier price, and there we were hedged because of our long-term order placement that we had done. As far as the batteries are concerned, batteries will be procured like any other equipment.
We get it. Because of the scale at which we operate, we are able to do a much better negotiation and a long-term supply arrangement with many of them. In the last quarter, I had mentioned to you that we had won 50 MWh battery for Ladakh Leh, along with the 50 MW solar facility. This is a 100 MW solar with 120 MWh of storage. Considering large number of orders that we will be placing, we are able to leverage that and get much better terms and conditions.
Sure, sir. Sir, just one last bookkeeping question from my side, and this is on the INR 60 crore provisioning in coal business. Can you highlight what is that regarding? And also for Mundra, have we accounted for all the fixed costs under recoveries in this quarter? Or there's something, I mean, there's a possibility of some more in the following quarter as well.
I couldn't get it.
Your voice was not clear. Can you repeat that question?
Sir, wanted to know the INR 60 crore provisioning in coal business which we have done this quarter, what was this about? Also on the fixed cost under recovery, which we have provided for at CGPL in this quarter, INR 233 crore, is that for the entire FY 2022 or should we expect something more in Q4 as well?
This was basically for last year when there was a one-time write-off for our Far East investment, the mines in Russia which were exploring, and the other was additional taxes in our Indonesian mines.
Okay. Sir, for the CGPL under recovery?
Right. That we are accounting for every quarter.
Okay. Fair enough, sir. Thank you very much.
Yeah.
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants, we would request you to please limit your question to two at a time. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Rajesh Nair from IIFL Long Short Equity Fund. Please go ahead.
Hello.
Mr. Nair, may I request you to come on the handset mode and ask your question?
Yeah, I am on the handset mode. Am I audible?
Yes.
Yeah. Most of my questions have been answered. Just one thing on, you know, the medium and longer term targets for us for carbon neutrality because we are operating in two segments. One is where, you know, the carbon is actually used in our Power Generation business as well as coal mining which we operate. The other one is, you know, the RE and the new energy businesses where basically we can get sort of an offset. Is there any sort of timeline when we will turn carbon neutral and, you know, what are our plans internally for reducing the carbon footprint?
I mean, will it be a gross reduction or will it be, you know, like we'll have more and more RE, so anyway the carbon heavy part at the net level will get reduced?
I think in our earlier presentations also we have shared that right now 52% of our Generation by capacity is renewable or non-carbon, and 68% is carbon generation. We had said that by 2025 it will become 40% and by 2030 it will become 60%. We had also said that we will become net zero carbon by 2050, which subsequently we had improved and said by 2045. As we have existing PPAs and these PPAs will have a certain time period to which we are committed to supply power, those PPAs have to be exercised. Only after those PPAs expire, we can come out of the supply of the baseload power. We are working on these lines.
Our new investments are only going to be renewable. We are not making any fresh investments. In fact, we were the only company in the power sector two years back who took a stand in the country that no more new investment, and only capacity additions will be renewable. We're committed to that.
Okay. Sir, just one question, you know. Do we have any assessment of what is our current carbon footprint of, you know, that 65%+ business which is in-
Yeah, that I think Rahul and his team will be able to share that. We will share it separately.
Okay. Sure.
Thank you. The next question is from the line of Rajesh Majumdar from B&K Securities. Please go ahead.
Good evening, sir. Thank you. Thank you for taking my call. Some of my questions already answered. I had a couple of questions. One is on equity IRR you are getting on the RE projects now. What is your current cost of debt for the RE projects, and what is the equity IRR you are realizing on the new tenders you are bidding on the PVCV side?
We normally don't share the equity IRR number, but it's a very healthy teen number that we have, and that's where we do. Like in our regulated business, there are certain returns. Similarly in Renewable business, we don't do anything which is less than what we do in the regulated. Secondly, the second question was the?
Interest rate.
Huh?
Cost.
Interest cost of interest.
The average cost of debt for the RE business, yeah.
7.5.
Can I just confirm?
It keeps on changing, but it's in the range of 7%-7.5%, depending upon when we go and get the disbursements.
This is including foreign currency debt and hedging cost, et cetera, right?
Yeah, yeah. Everything put together.
My next question was, we have a return on equity on the fixed regulated equity business, and depending on what we are able to get from the solar side, should we see our overall return on equity profile actually coming down until unless we get a sharp jump in the regulated equity depending on the projects that we have talked about on the Mumbai side and mostly the Mumbai side, et cetera. How do we look at the return on equity of the firm going forward so three, four years down the line, given the fact that the solar business is much more competitive than the regulated business?
See, return on equity is a good metric for regulated business. For renewable projects, it's differently structured. Where the return on equity is not the correct metric because it's a much longer period, because of the tax reasons that in the initial years you have a very strong depreciation benefit. Return on equity for the renewable project will not be a correct metric to look at.
Right.
Yeah, yeah.
What I mean to say is that, sir, basically we see a lot of profits now coming from the coal business, which is something which may not be sustainable in the long run. Without these profits, if you look at the standalone business, it is not showing any major increase on a YoY basis. How do we see the overall business profile going forward?
There is nothing like coal business is going away immediately. We have PPAs which are going to be there for next 20 years. It's not that the coal business will not give returns for next few years. I don't think that that's a correct statement.
I think coal prices are lower, our CGPL losses will be lower, yeah. It's more of a hedge for us. Right. Would you just kindly tell me as to the status of the investments we have planned on the regulated business side in Mumbai? What is the status of those T&D projects?
Every year we do about INR 500 crores-INR 600 crores of investment in our transmission project, and about INR 150 crores in our distribution business in Mumbai. Similarly, we do our investments in Delhi distribution as well as in the Odisha distribution. These investments are based on the requirement of improving the network, customer service, technology upgradation. These are all approved by the regulator before carrying out any of such investment. These all carry a regulated rate of return.
You are planning to have a significant CapEx on the Mumbai side, of I think around INR 6,000 crore on one particular project. What is the status of that?
No, not on one particular. They are a large number. Every year we are doing about INR 600 crores. We have a plan that in next 7-8 years we'll do about INR 5,000 crores-INR 6,000 crores of investment.
The moderate CapEx every year, is that the assumption?
Yeah.
Okay. No one-time jump in terms of CapEx, either on the T&D side or from the HV side or from any such project can happen.
It depends if we get more distribution locations or if we go and get more of transmission projects where we are assured of a good return, we can look at those investments. Otherwise in routine, we will have about INR 1,500 crores of investment in Odisha Discoms every year, about INR 600 crore-INR 700 crores in T&D also. That sort of investment will continue to get us a return on the 30% equity that we put in those projects.
Thank you, sir. Thank you for taking the question.
Thank you. Ladies and gentlemen, please restrict your question to two at a time. The next question is from the line of Aniket Mittal from SBI Mutual Fund. Please go ahead.
Yes, thank you for the opportunity. Just a couple of questions on the Renewable front. Firstly, if I were to go back to your targets that you've set for renewable, we've set a target of almost 15 GW of renewables by FY 2025. As things stand, and the competitive intensity that there is within the market, are you still confident of reaching those targets? If so, could you throw some light on how you plan to reach that?
See, ma'am, I had shared with you earlier also that the potential of adding 300 GW in next nine years to meet the 500 GW commitment that India has made in COP26. Now, that means that next nine years we'll have more than 30 GW coming every year. Now, there are not many players who have the capability and resources to execute this sort of quantity. Our 2 GW is a very small percentage of the total 30 GW every year. We are very confident of meeting that. We had also shared with you that we are not just doing pure solar projects. We do solar and wind. We do solar, wind and hydro. We do solar, wind and storage.
There are a large number of solutions that we are coming, and that gives us much more edge compared to the competitors and the value-added services that we can provide. We are very confident of that number. Incidentally, we are looking at something like 1,200 MW-1,500 MW of rooftop solar every year, about 400 MW-600 MW of solar pumps every year. There is a huge quantum of capacity addition that will happen apart from the utility scale that we will be setting up.
Because the number looks fairly steep from here on. Another question was put on the execution front. If I go back to the start of the year, I think you were guiding for almost 1 GW of your portfolio to be executed during the year. As things stand, we've commissioned only 300 MW-350 MW. Just to understand, are there any issues that we are facing on the execution front? Why is there a pushback in the commissioning of our renewable projects? For the balance 1.9 GW, if you could help us, how would that phase out over the next few years?
Yeah. This year has been a very peculiar year, starting from April when we had the COVID second wave. For nearly three months, work could not be carried out at any of the sites. It was only in the month of July that we could start the work. There were also issues about the high cost of modules and also shipping constraints which was there from China. All this put together with, again, the third wave coming in December, January, has impacted the project. We are trying to catch up and many of the projects are lined up for execution in this quarter, and hopefully in this quarter we'll be able to add huge amount of capacity which got delayed.
In fact, in January first week itself, we commissioned 100 MW, and we are confident that more capacity will get added in this quarter.
Could you throw us just how that 1.9 GW would phase out? Let's say how much are you targeting in FY 2023?
The details, Rahul will give you separately.
Okay. Just one last bookkeeping question that I have. Could you tell me what are the total receivables for your Odisha Discoms, all four Discoms combined?
Total receivables of
Total receivables at
Odisha discounts.
Odisha.
Rahul will give you. I think that's part of the tech presentation that has been shared with you. He'll give you the exact number.
All right. Thank you so much for taking the question.
Thank you. The next question is from the line of Subhadip Mitra from JM Financial. Please go ahead.
Good evening, and thank you for the opportunity. My first question was with regard to your renewable addition targets. You mentioned 2 GW per annum. If I understand this correctly
You're sticking to your target of 1 gigawatt of addition on your own through your own utility scale, and the balance 1 GW being EPC mode. Am I right in understanding that?
No, no. 2 GW is utility scale, which we will develop ourselves. 1 GW will be the outside EPC. That is the number that we have.
Understood. Sir, on this run rate of this 2 GW utility scale, how have you fared so far in FY 2022? Have you more or less met that target number in terms of incremental order wins? Do you see power sale agreement signing in this basket?
We have right now something like 1,900 MW of order, which is under execution. This year we have got 900 MW. This year the run rate has been low because many of the projects which were supposed to be bid out have got delayed. Now we expect that these projects will get bid out, especially considering the COP26 commitment that the government has made. The government is now coming up with a large number of projects which have to be executed, not just plain renewable, but along with storage. Also the RPO obligation, which was earlier just 20%, it is expected to be increased to something like 40%-45%, on a graded basis over next nine years.
We are finding that there will be large amount of push on rooftop and open access supply. We do expect that if we have to meet the 300 GW target, there will be large number of bids which will be coming in next 1 year. We should be in a position to bid and win many of them. Incidentally, our win percentage is about 20%. Wherever we bid, we of course don't bid in all the states. Some of the states we don't bid because of their track record in payment and all. But wherever we bid, our success rate is 20%-25%.
Understood. Just with regard to the issue on PSAs, because I think there are some numbers that we were looking at, and it at least appeared to us that, you know, 40%-50% of solar tenders which have happened, let's say from 2019 till date, probably don't still have PSAs, including the domestic manufacturing ones and others. Any sense on that? Do you see that as a challenge?
Yes. No, all our PPAs are with state Discoms. There is no agreement through SECI. There's no bid that we have done through SECI. All of them are through state Discoms, and we have the PPAs there.
Okay, that is an interesting point. Sir, secondly, on the coal business, just wanted to get some clarity that, you know, optically it appears that the coal profit numbers, if I go as per the deck that you have sent, the QoQ number is quite flattish despite the realizations being higher. Would these largely be because of the penalties on the ban of imports, et cetera, that came in? If you can just throw some light on that.
This penalty in import is only come in the month of January. This is for the last quarter. The prices in the last quarter were very high. They were in the range of $160-$200. Now also the prices are very high, it's again in the range of $160-$190. So I don't think we have any issue as far as the export is concerned. They had a requirement of domestic supply, which has always been there, and they supplied. KPC has been supplying 25% of their production locally to PLN. So they meet their local obligations otherwise also. Generally they meet in the last quarter, whatever the shortfall is there. Hence, you know, there is no jump up on the profit. Yeah.
That would impact fourth quarter, right? That, you know, the domestic obligation would be met in fourth quarter.
No, no. For them it is December.
Oh, I see. Okay. I understand. That's FY based. Okay. Hopefully the benefit of the higher coal price should be now visible in the fourth quarter of the fiscal for us?
Yeah.
Okay, understood. Sir, last question is on Odisha. Naturally, the current quarter's profit numbers are, you know, very healthy and there's great YoY growth. Just wanted to understand what can be the normalized, you know, quarterly trend that we can see?
I mentioned the performance will improve every quarter because our billing efficiency and collection efficiency is improving. Last quarter again we had a challenge of collection, especially in the month of December because of COVID. Hopefully this quarter we would be able to take care of that. Similarly, our billing efficiency will also improve because large industrial and commercial consumers have come back to us, and they are very happy with the quality of supply that we are giving. We are also seeing that the places where the metering was not happening or proper metering was not there, or provisional billing was taking place, that is all getting metered. You will see a huge amount of improvement in the coming quarters.
Understood. The current quarter's profit number is more like a sustainable number with some growth element.
It will be much better than this.
Understood, sir. That's it from my side. Thank you so much.
Thank you. Please request participants to please limit your questions to two at a time. The next question from the line of Anuj Upadhyay from HDFC Securities. Please go ahead.
Yeah, thanks for the opportunity and congratulations on good set of numbers. Could you just mention about the CapEx, which would go in for the expansion of the module and cell manufacturing for the 4 GW capacity?
The CapEx is INR 3,400 crores. We would of course be getting some PLI benefit, which will be on an annual basis. Also some state government subsidy and some concession. All that will be taken care when we are executing the power.
Okay. Probably it would be INR 3,400 minus this benefit on a CapEx front.
Yes.
Over the period of time. Okay. Secondly, sir, on the equity dilution side, I mean especially on the monetization of the renewable asset, so would that platform include our EPC business as well, or it would be only the renewable assets across the Walwhan and the Tata Power Renewables?
It will be everything in Renewable, including EPC, including Manufacturing, including new Manufacturing.
Fair enough. Lastly, sir, on the Mundra, sir, if at all we find some kind of resolution with the Gujarat, then how much units we plan to run for the Mundra going ahead, sir?
As per the PPA, Gujarat is entitled to receive 1,805 MW. Three units will run for their requirement.
It would be, fuel cost would be a pass, I mean, as per the resolution which we are expecting.
Yeah.
Fair enough, sir. That's it. Thanks.
Thank you. The next question is from the line of Swarnim Maheshwari from Edelweiss Securities. Please go ahead.
Sir, what's the current carbon inventory for us, and any plans to monetize it?
Yes, we have definite plans to monetize them. The documentation and other work is in progress. It's a huge amount of detailing and, you know, invoicing details, metering details, all that has. It's a cumbersome process, but definitely under discussion and finalization.
Is that possible to quantify, you know, with the current realization trend and all, what could be the sum that could be monetized?
Yeah, yeah. Sure enough. I think Rahul will be able to provide you all the details.
Okay. Sure, sure.
Because this is from retrospective effect, from 2014 and 2016 onwards.
All right. Sir, just one clarification. Now we are bidding for Isolux and all the other transmission projects. Fair to say that all transmission projects will be bid through Resurgent platform, right? Nothing will be under-
No, not at all. See, Resurgent Power platform was created with a specific mandate and a specific amount to be invested. The INR 450 million that was set for that was used for Prayagraj and the two Resurgent Power bids for transmission that we have done. With that, the total amount gets fully exhausted. All future bids will be under Tata Power.
Okay. Everything will be under Tata. All right. Fair enough, sir. Got it. Thank you so much and all the best.
Thank you.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to Dr. Praveer Sinha for closing comments.
Once again, thank you to all for joining for the analyst call. Whatever questions you have in future, you can always send it across to Michael, Rahul and Kasturi, and we'll be happy to provide you with the necessary information and details. All of you take care of yourselves and good night.
Thank you. On behalf of Tata Power, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.