Ladies and gentlemen good day and welcome to the Tata Power Q1 FY 2021 earnings conference call. 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 call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. Today we have Mr. Praveer Sinha, CEO and MD, Tata Power, and Mr. Ramesh Subramanyam, CFO, Tata Power, with us on the call. I now hand the conference over, Mr. Praveer Sinha. Thank you and over to you sir.
Thank you. Good evening everyone and welcome to the earnings call. Hope all of you are safe and secure. The last few months, we have witnessed a widespread impact due to pandemic across various businesses. It has impacted the power sector also. Wherein we saw that the demand reduced by more than 25% in the month of April and May as the country went into lockdown. However, we have seen the revival in demand as lockdown restrictions were relaxed in later part of May and then in June. In July, we actually see the generation pick up to the same level as previous year. Through our dedicated workforce and very robust and resilient processes and planning, we have been able to operate within Tata Power all our assets seamlessly and have continued to provide uninterrupted supply of power to the nation.
While distribution areas served by us also fell, there has been considerable recovery and demand are now close to the pre-COVID levels. We have also done an excellent job in taking over the management of the Central Odisha Distribution, which is now a JV with Odisha government, T P Central Odisha Distribution Company during the pandemic period. On the 1st of June, this entity was taken over by Tata Power. This has 2.7 million consumers, with this we have become a 5.3 million consumer utility, becoming one of the largest distribution company in the country. We have been enthusiastically welcomed by all our customers, as also the employees and various stakeholders in Odisha. They all feel very confident that together we will be able to deliver performance as good as we have been doing in Delhi and Mumbai.
In our renewable assets too, we saw higher availability as we took over operational control of some of the wind sites and improved availability of our solar sites too. However, due to the delayed start of the wind season, generation was impacted in the month of June. We do see a subdued wind pattern this season. The major impact of COVID-19 was felt in the EPC business. Solar EPC projects have got deferred, leading to lower revenue bookings during this quarter. Similarly, Tata Projects has experienced a significant decline in revenue and the profit of the EPC business that is both the solar and the EPC business through Tata Projects, has seen a reduction in profit by nearly INR 86 crore compared to Q1 of last year.
Despite the reduction of INR 86 crore of profit in EPC business and another losses of INR 31 crore in CESU in the first month of the takeover, we have still clocked a 10% growth in the reported PAT to INR 268 crore this year compared to last year. This has been driven by the consistent performance across all businesses, strong performance in Prayagraj, and significantly lower losses in CGPL, and reduction in interest costs. With nearly 60% of our capital employed in regulated business or with assured stable returns, our returns have been largely protected from the demand slowdown. As you would see from our results, most of the businesses have delivered consistent performance with significant improvement coming from Mundra, where losses have been significantly reduced, which has been, of course, supported by lower coal prices, higher coal blending, and better port sourcing and logistics management.
Due to the fuel, the under recovery has been lower, and this year it is at INR 0.46 and is at the same level as was last year. The consolidated revenue stood at INR 6,671 crore compared to INR 7,567 crore previous year, mainly driven by lower generation in conventional assets, lower power purchase cost for distribution business, leading to lower revenues offset by capacity addition in renewables. The consolidated EBITDA in this quarter was INR 2,037 crore, mainly driven by improved performance in CGPL. The lower coal prices and EPC businesses affected the profit from our joint ventures in this quarter, despite which our underlying business EBITDA came in at a healthy INR 2,214 crore in this quarter. During this quarter, the company won bids of 345 MW solar projects. We have also recently won another bid of 370 MW, for which formal letter of award is awaited.
With this, the company's solar project pipeline will grow to 1,515 MW, which will take our renewable portfolio to 4.1 GW. Our existing solar assets have improved their availability from 99.3% last year in the same quarter to 99.8%, and wind assets have improved their availability from 93.3% - 96.5% this quarter. Similarly, solar EPC business continues its rapid growth, with total order book now at almost INR 8,700 crore, with nearly 2 GW of large projects. The slippages in project execution during the quarter is expected to be covered in the later part of the year. We have put in place our plans for ramping up the execution during the year. We expect to cover up the delays and achieve our FY 2021 revenue target for the EPC business.
We also welcome the government policy of local manufacturing, which is going to give us significant scaling of opportunities of renewable business, because of the domestic manufacturing in India. TPSSL will support this self-reliance policy and is already expanding its cell and module manufacturing capacity to be increased in this year. Let me now move to the divestment process and debt. As all of you are aware, we completed the transaction for sale of ships during the COVID period and have now received the full consideration. By end of June, we had received $150 million, and the balance of the total consideration of $212.76 million was received in July. The preferential issue of equity shares of Tata Sons was approved by the shareholders in the AGM, and we expect to receive INR 2,600 crore in this fee. Both these amounts will be used for debt reduction.
As you would have seen, the net debt has already reduced from INR 43,578 crore at end of March to INR 40,099 crore by end of this quarter. We are also working on monetization of other assets, which we expect to realize within this financial year. Work on creation of InvIT for our renewable assets has progressed well since our board meeting approved it on 2nd July, and we are on course to sign the non-binding agreement by end of this quarter. We are confident of completing this restructuring by this year. Creation of InvIT will not only allow us up-fronting future cash flows at lower cost of capital, but also create a platform for future growth. We intend to use this structure for significant scale-up of our renewable portfolio.
While we work on reduction of debt through divestment and restructuring, it is heartening to note that existing businesses have generated strong cash flows to support CapEx as well as debt repayment. Through this robust framework, we have been able to reduce our debt to equity to 1.81 x versus 2.48x a year back, and net debt to underlying EBITDA from 5.46x - 4.44x during the same period. Let me now move to Mundra. The under-recovery with falling coal prices have reduced over the period. With the various initiatives undertaken, loss funding has been also brought down. While we are still working with the procurers to resolve the long-pending issue of PPA amendment, which has delayed the resolution, the company continues to work on all options to optimize its costs.
As you are aware, the government of Gujarat has moved our case from HPC framework to the GERC approved framework, which they adopted in case of one of the other power companies in Gujarat. We are in discussions with the states on securing timely approval for the compensatory tariff mechanism framework and hope that all states take a pragmatic view in resolving this issue in benefit of all the stakeholders. In fact, the Maharashtra government has approved the proposal for PPA amendment in line with the HPC directions, and we do hope that the other states will also follow soon. Update on Prayagraj and Setu. Prayagraj continued its strong operational performance, achieving a 78% availability in last quarter. It is now third in the U.P. merit order dispatch and is a critical asset for servicing demand in U.P.
While receivables continue to be a challenge, we expect a significant portion may get liquidated from PFC-REC package, which has been provided by Government of India. We have now completed two months since we took over CESU, and through TPCODL, we have made considerable progress on rolling initiatives to improve operational performance and bring better efficiencies and better customer service. Work on meter replacement has been picked up. Similarly, all the other works relating to ERP, new billing and collection softwares are going on, and we do expect that in next one to two quarters, many of these new initiatives will start showing results. The next one year will be very interesting, and we are confident that with the support of our employees from CESU, our employees from TPCODL, and the people of Odisha, we'll be able to replicate the Delhi success in Odisha too.
I now turn towards the restructuring of businesses that is being proposed. A decision has been taken on restructuring, which has been announced today. Continuing further efforts with our intent to strengthen the balance sheet, the board has approved scheme of merger of CGPL, Tata Power Solar, and Af-Taab Investment Company with Tata Power, subject to regulatory approvals. This amalgamation, subject to necessary approvals, is part of a strategic initiative to simplify the company and the group holding structure and a broader plan to set the company for future growth through fiscal consolidation. The merger aims to achieve the long-term objective by facilitating efficient use of cash and is also likely to improve the ability of the project in getting funding to sustain its operations due to their financial position.
Despite being one of the most challenging quarter because of COVID, Tata Power has been able to deliver on some of the significant promises it had made on strengthening the balance sheet. We are excited as we set ourselves ready for Tata Power 2.0 journey. As the time available on an earnings call is short and the focus is more on the results, we wanted to share with all of you in more detail the strategy for turning around the company. Given the COVID times we now live in, we have now organized a virtual analyst meet on 19th August to discuss the same. We'll be able to share with you more color on our strategy and growth plans during the meet. Our IR team will share the details of the meet shortly. I now hand over the call to Ramesh for question and answer.
My colleague, Ramesh Subramanyam, the CFO, and my other senior colleagues are here to respond to your questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions 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 questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Puneet Gulati from HSBC. Please go ahead.
Yeah. Good evening and thanks for the opportunity. My first question is on Mundra. You said that there is a progress in Maharashtra site. Can you give us an update on what's happening with Gujarat and some of the other states?
As far as Gujarat is concerned, I mentioned to you that they have moved from HPC to the GERC order, which was passed some time back for another imported coal-based plant. There has been certain recommendations of GERC. We are in discussions with the Gujarat government to understand what will be the implication of these on CGPL. Hopefully, we should be able to come to an arrangement so that the amendment to the PPA can be agreed. Maharashtra, of course, has approved as per the HPC. Based on that, we will be taking up with the other states also.
Yeah, can you not start segregating the PPA now? Is there still some hurdle in the segregation of PPAs?
In principle, of course, as you know, the government had also indicated that there is legal reason for separate PPAs. Right now, the Maharashtra Government as it is approved, I think it will all happen at ERC level. We have to first kind of finalize the PPA with Gujarat Government, and then I think from there, we can handle it.
Any expected timeline?
Well, it depends on now when we have first Gujarat government for requisite changes in the PPA. Let's see when that happens. Because of COVID and other situation, many governments are focused on other issues. We are hoping that will be taken up.
Okay. My second question is on CESU. Within a month, there was an EBITDA loss of INR 36 crore. Is that how one should think about it? Or if you can give more color on what is the trajectory of profitability for this company?
Our advice is, I think it's such a large distribution company. I think we can't jump into conclusions in one month. This will have to run for two quarters before we get a handle on. On the trajectory. I would say that we should avoid discussing really stable financial numbers until it gets stabilized.
Okay.
Right now, it's really in an interim stage.
Okay. At least for the next two quarters, is that the run rate one should assume?
You're wanting me to quote numbers. The point is, it all depends on how quickly work starts and how quickly our CapEx program and improvement program takes shape. What we can do is probably in September include the report, how that is shaping up. It's too early right now to really speak about run rates.
Sure. My last question is on Prayagraj. Is there any further capital infusion requirement from our side, and how would we earn out of this business? When does the dividend get paid out, and what are the other payments that we intend to receive from Prayagraj?
We receive payments in two different ways. On our investment, which is in the nature of debt, we get returns, as well as we will start to get dividends from a little later. The third stream we have is a fee, because we are also the asset managers. What you will see in the Tata Power numbers is a combination of a fee and the interest that we get on the debt instrument that we have put. To your first answer, first question, CapEx, the company looks like in good shape to take care of its CapEx, although we have planned for some amount going forward, especially on SGV and other things. We have allocated some funds for that. The company is doing very well, they might even do it themselves.
They have some payable issues, which is why the worry is. Will you need to infuse further, or do you think they can sustain on their own at least?
I think they should be able to sustain, and even their recoveries are now getting done. The company is now in the list of top list of people that will be benefited from the scheme.
Okay. Just following on this, on your INR 24 crore of Canadian dollar for your shares in distributed power, how much has the cash actually flowed in?
It will all be converted into cash, obviously. It's a matter of probably, I don't know whether the payments have been made out or not.
Okay. The dividends will probably come later, but they're interesting.
We have put liquidity there. We can do interim dividends.
Okay.
The fee, of course, is a regular one. The annual fee is a regular one.
Okay. That's it. All the best. Thank you.
Thank you. The next question is from the line of Sumit Kishore from JPMorgan. Please go ahead.
Good evening. Thanks for this opportunity. Introduction that is indeed a step in the right direction. The first question I have is, could you elaborate on the timelines, the bottlenecks, details, and size of the assets that will be injected into the InvIT? What stake are you looking to offload in the renewable projects to the InvIT?
Sumit, as you know, the rough size of the assets we have is close to INR 20,000 crore. That's the EV of this business roughly, just plus, minus, whatever you take for valuations. All of these assets would land up into the InvIT in the next couple of quarters. As to your question on what is our stake in that, one of our objectives also is that we would ultimately deconsolidate our debt. Therefore, as you know, it would be probably less than 50%, but may not be much less than 50%. It's probably thereabouts. The rest would, of course, be invested. That's the plan currently.
Because InvIT would have the operational projects.
Yes.
The pipeline would get transferred as it is.
Today we are close to 4 GW, including pipeline. Our operational assets today are about 2,650 MW. That will go. By the time we open the InvIT, there's a certain qualification criteria for what is operational and what stage some assets can go if development is at what stage. Maybe some will go in that 2,650 MW will definitely go.
As of date, you would say that against 2,650 MW, how much debt is sitting on your books for the operational assets?
INR 11,000 crore.
Okay. Out of INR 118 billion that you show in your renewable slide, INR 110 billion is related to the operational projects?
Yes. There is projected debt also for this. We can't tell you the debt at the time of transfer. Okay?
I understand.
Debt will also have internal debt also.
Okay. The second question is in relation to TPSSL. You mentioned in your opening remarks that the cell and module manufacturing capacity will get expanded. Could you talk about what it is currently, for cell and module separately, and what is the plan in terms of increasing it this year and given the opportunity spectrum maybe up to three years roadmap?
We haven't got our plans approved yet, but the plan is in place. We have existing plant about 400 MW of cell and module.
It is already under the implementation. The plan is from cell 400 MW, it will go to 530 MW, and the module is 380 MW-530 MW. The exact numbers Rahul will share with you, but it's in that range, and it is under implementation.
That is the expansion. He's talking about the manufacturing, the new manufacturing.
No, this is the expansion of-
You're talking about expansion of existing assets?
Yes.
Okay. You're right.
Okay. On the solar EPC business, the INR 8,700 crore odd order book that you have, how do we look at the profitability of this EPC, both, I mean, they come out of some of the COVID impact, but how do we look at this?
Well, Sumit, you know the EPC businesses are not today, nowadays, delivering double digits. Certainly, it's a lower number, but we will not give you the exact number. All we could say is that COVID issues are leading to notice time overruns, and these time overruns are pretty much taken care of by the force majeure clauses and also the specific notifications from government granting extra time for these projects. We don't see them seriously affecting profitability, it's the timing of the project completion.
Got it. Just the last question. I find in your presentation that your working capital has actually reduced in a quarter which was such a disrupted one. We’ve been finding that the overdue payables for SPV has gone up meaningfully. What is really the driver for that reduction in working capital?
First is the January collections,n umber one. Number two, we have also done a little bit of factoring. Remember that these are all not factoring for the selling receivables. They are also getting collected. These are already crossing one or two cycles. In that sense, that is one. Secondly, extra supplier credits, in many cases, have also helped us in improving our working capital. For our coal purchases and other things, we have been able to secure very good terms. That has also helped. I think the combination of all these things has helped. We have had excellent control over inventory buildup. All these initiatives we have taken. Truly, receivables have been surprising, as it may sound. It is a factor we have done pretty well in collecting from many of our customers in time.
Super. Thank you and wish you all the best.
Thank you.
Thank you. The next question is from the line of Girish Achhipalia from Morgan Stanley. Please go ahead.
Thank you for the opportunity. Sir, my question is around the merger of the subsidiaries. I think the benefit of lower tax rate would be enjoyed. I think that would be one of the big things. Could you please help us in terms of timeline as to how much time will it take and what kind of consolidated tax rate for the standalone entity, would you be able to save on? Are there any other financial benefits apart from credit rating benefits that you've spoken about from your presentation?
All the things that you mentioned could happen, at this point of time, to exactly pinpoint all the numbers would also depend on how the profitability of the standalone develops and what would be the taxation-related issues. That we can't quantify straight away. Yes, it's an overall fiscal optimization exercise. Plus, we also remember that being the SPV which is not doing well, the borrowing rates are also higher, which we believe will optimize by this merger because the balance sheet support will be there. Whatever fiscal savings can come. Of course, there's a lot of compliance synergy and administrative synergy that comes in. All the factors that you mentioned are truly the drivers for this.
Can you just give a timeline here as to how this will proceed? The second question I had was on the receivable side. Are you able to quantify what was the receivable number roughly at the end of Q1, and how do you see it proceeding in Q2, which is, I would say, receivable collections should be better in Q2 from the liquidity measures also coming through at a stronger rate.
The first question you asked is about timeline. I think the timeline is very soon we'll be filing the schemes in the NCLT. It will be a process which will be really driven hard from our side. Now, of course, the NCLT process, as you know, it's not in our hands. Timing, we can't, but we are trying to do it in this fiscal for sure. Our target is that, subject, of course, getting approvals. Your second question was on receivables. What particularly you wanted to know about receivables?
If you could quantify the absolute number at the end of Q1, and how do you think it should proceed by the end of Q2, given that some liquidity infusion measures have been taken and it is stronger?
In June end, our total consolidated receivables across the company is about INR 900 crore. If your question is how is it likely to proceed, given the last four, five months of activity, I don't see a major swing either way. It could lie in the similar levels.
Okay. Fair enough sir. Thank you. I'll join back with you.
Thank you.
Thank you. The next question is from the line of Lavina Quadros from Jefferies. Please go ahead.
Yeah. Hi sir. Just two questions from my end. One is on the Arutmin coal mine. How much of the proceeds will be yet to be received? That's question one. Question two on Mundra, just to understand. What we understand is the Gujarat government has also said that they will not pay higher than what any other state is paying for off-take from Mundra. Is that a little bit of a setback, or how is it that you all are planning to handle that aspect? I mean, will you need all the states to therefore agree to a certain price, or will you still look at segregating PPAs? Thank you.
I missed the second part of the question. Can you just repeat it?
No. I mean, are you viewing this as a bit of a setback if the Gujarat government is saying that they'll not pay a higher price than any other state, therefore will you need all the states to have a buy-in on the price, or will you still be able to go forward and segregate the PPAs? Just want to understand how you're looking at it.
Okay. Let me handle your second question first. Gujarat is not saying we will not give you a higher price. What Gujarat is saying that it should not be a situation that we give you an increase and you sell to somebody else at a lower price. Which could mean that if two of the major states like Gujarat and Maharashtra, they agree to a common stand, which they have today, barring the technicalities of the Gujarat regulatory order, which Mr. Sinha mentioned, then the other states, it's their choice whether they want to take or not. We would take a stand depending on their feedback.
We seem to have lost the line for the management. Please stay connected while we reconnect the management. Pardon me. Please stay connected while we reconnect the line for the management. Ladies and gentlemen, thank you for patiently holding your lines. We have the line for the management reconnected. Over to you sir.
Lavina, did you hear the answers and did you get your answer? We lost you somewhere?
Sir, I think your line got cut at that time. If you could please.
Did you lose me?
Yes, sir, your line had gotten cut at the time. If you could please repeat? Thank you.
Okay. Your first question was on Arutmin. We've collected about INR 220 million, and we continue to collect every month. Also the collection also accelerates or decelerates depending on the coal price movement, because a lot to do with the surplus that gets generated with our counterparty. It is moving steadily. Your second question on Gujarat, that what is the meaning of this that everybody should have the same tariff. The answer to that question is that Gujarat State always saying is that once we agree to give you a certain increase in tariff, it cannot happen that you go ahead and sell it to some other state at a lower tariff. For us, that's not a big issue. You asked whether that should be a very big negative. No.
It is always understood that Gujarat and Maharashtra, if they are on board, then the other states are likely to support us. If they don't support us, we have alternatives, which we will work on once we go to CERC after Gujarat signs off.
Okay, sir. Thank you.
Yes.
Thank you. The next question is from the line of Abhishek Puri from Axis Capital. Please go ahead.
Congratulations on good set of numbers sir. Just couple of questions. One is on the Q2. You mentioned that one should not take this INR 360 million as a base for the current month, as in for the first month. What could we look at as an overall fiscal year? I mean, in your budget, what should be the AT&C losses or the trajectory that we should look forward to? I think you gave a three-year number last time.
Abhishek, what we are saying is that today we are taking charge, we are taking stock. I think come probably the next quarterly result, we will be in a far better position to articulate what could be the target. This is too early a start and also at a time when pandemic things et cetera. I know generally, we are far more optimistic than beware. The only issue is that I don't think there is any point in giving guidance right now. I think next quarter we will be able to give a much better clarity.
Okay. In relation to this, there were some news media article on the testing order being challenged by Tata Power as well, in terms of giving up easier loss targets versus what was there in the tender document during the pandemic. Is that news item correct or we're not seeing any counterpoint from your side as such?
No, nothing. I think it's not that serious. I think we have asked for certain clarifications because the conditions at the time of takeover and the time of the bid, they were slightly different. Certain questions have been asked. We don't see this as a major issue. I think it's a little bit of too much has been made in the media on that issue.
Okay. I think the issue has been that Odisha has had difficult experience with a couple of other players historically, so that's why it's an issue too as an add-on.
No, I agree. I don't think that's the feedback we have. Things are pretty much going as per plan and we are working together very closely with the Odisha government.
Okay great. Sir, just two more questions. One, reason for including Af-Taab Investment Company. I believe it was a whole portfolio of telecom shares only. Does it have any further business and what is the value add in bringing them together?
Now, more or less, nothing is there. Some small investment is hardly there, and it's not really worth much. It's pretty much inoperative to that sense. There is no other operation there.
Okay. You have more or less extinguished the entity.
Exactly. This we found it a better way to extinguish it than in any other manner.
Understood, sir. Lastly, on the DISCOM, I see that the numbers that you have given in between the losses distribution in your presentation are slightly good to be true, given that your counterpart, Adani, in the Mumbai transmission business has actually seen a significant increase in their distribution losses. Similarly, if you look at Tata Power results into NDMC, even they have seen significant increase in AT&C losses. How did you manage to keep your reductions in such a great way?
Part of effort was made, sir, to do digital collection. During that period, we reached out to all our customers and gave them the option for digital collection. During that period, nearly 75%, sir, the digital collection crossed 91%. I think, generally the collection was good. Wherever there were some delays, sir, all those are being collected in the month of July. I think, as I mentioned to you, the consumption has also improved, and so also the collection has improved in the last two months.
I think even in Odisha, actually slight deterioration in that case also because what you are saying you're comparing with the others. That's a separate issue.
We also had pressure, but not such a high pressure.
Yes. How you have managed it, I think that's very interesting as well.
Yes.
Just to understand this a little better, in terms of the commercial and industrial loads, how much would that mean in your Mumbai distribution and Delhi distribution?
Okay.
The two large circles, there you've seen maximum reduction in volumes and the mix change of how the consumers are distributed. The residential has increased and that's why the AT&C losses have increased.
Absolutely right. That trend is exactly right. I don't have the ready numbers of C&I reduction versus consumer increase, but this trend is clearly noticed. Of course, sales have come down. Okay? That's clear. The collections have stood up, but sales have come down, and that is reflected entirely by C&I segment. Some of the catches have happened from the domestic consumer segment. We can give you the numbers. We don't normally discuss the question here, doesn't get asked, so we don't carry it here. We can share it with you sir.
Sure. I'll take it from you Ramesh. Thank you very much.
Sure. Thank you.
Thank you. The next question is from the line of Swarnim Maheshwari from Edelweiss. Please go ahead.
Swarnim Maheshwari. Thanks for the opportunity. Couple of questions, sir. Sir, first question is, I mean, sorry to harp on this, I mean, on the working capital reduction that we've seen, I think that majority of that reduction is actually coming from CGPL worth about INR 750 crore. Is this kind of a temporary phenomenon? I do get your point on the working capital reduction from the distribution businesses, that is likely to sustain and everything. How about this working capital reduction in CGPL? How is that working out?
This is basically extended supply credit. Okay? Now this has been working, this is not very long ago that we tied up. As new purchases happen, you see this working capital getting stretched. Well, this is a proper arrangement of supply credit. Whether it will sustain? Yes. We don't see any reason why it should not sustain. Incrementally, going forward every quarter, once it fills up to the maximum capacity of the supply credit, of course, incremental, it will stop at some place, right? It's only because of last year versus this year, previous quarter versus this quarter, you will see an improvement, but slowly it will reach a saturation limit.
Got it. Sir, the second thing is actually on the CapEx side. In your last commentary, you did mention that the CapEx will likely to be restricted to the cash flow generation. What is the number that we are actually looking out for FY 2021 and FY 2022? Is it that the majority of it will be towards renewable or now incremental CapEx in what we are planning on the CESU side also?
Yes. First is we have close to 650 MW of under-construction renewable assets for which CapEx will start to happen in the coming quarters. That is one clear, that is about INR 3,000 crore of CapEx that is going to happen in the next 18-24 months. Right. The CESU, of course, will happen. CESU also at least INR 400 crore-INR 500 crore we are seeing in the next 6-12 months. Mumbai transmission will happen. Mumbai distribution, Delhi distribution will also. Normally, there is a minimum INR 300 crore, INR 350 crore-INR 450 crore kind of CapEx that happens. We have CapEx lined up. In terms of staggering, we are trying to just ensure that we also run along with cash generation. That is the tightening challenge that we have set for ourselves.
Of course, in the next year or so, we have regulatory CapEx of over INR 3,500 crore coming from ADEs and other stuff which will happen from next year onwards, which is again fixed return CapEx. CapEx is clearly planned for the next 24-28 months, it will start from now on.
Sir, this INR 3,500 crore of regulatory CapEx in FY 2022, is that just in FY 2022 or it will be spanned over two or three years?
Sorry, say that again.
Sir, you mentioned that there is a regulatory CapEx coming starting from FY 2022 that's worth about INR 3,500 crore.
Yes.
That is just in FY 2022 itself?
No. It's 2022, 2023, and 2024.
2022, 2023.
That the regulatory CapEx is spread over nearly three years.
Over three years. Okay.
It's specifically for all these environment-related stuff.
Got it, sir. Thank you. Sir, just in the opening remarks, Praveer sir was mentioning that there is about INR 300 million of divestment that has come in July 2020. Sir, this was with respect to our shipping assets?
Shipping, yes.
Okay.
Total price was INR 214. Out of it, INR 150 million came in June. The balance came in July.
Okay. This number, this is still to be reflected in our net cash position?
Yes. INR 70 million is still to be reflected.
Got it, sir. Got it. Sir, thank you so much, and wish you all the very best.
Thank you.
Thank you. The next question is from the line of Muthu Saravanan from Kotak Securities. Please go ahead.
Yes, sir. A couple of questions from my side. One is, you put out close to INR 1,780 crore of cash flows from the disinvestment. How much more is your target for the current fiscal and following that, and where does that come from? Number one. You put out a slide on your overall debt profile where Tata Power standalone has a INR 10,000 crore overall debt. Can you tell me how much of that would be attributable to CGPL, which is showing a number of close to about INR 8,000 crore, and to the renewable, which is showing about INR 11,000 odd crore? The third piece is on Mundra. Sir, what would be the carry forward tax losses which could be beneficial on the merger of CGPL with Tata Power?
You asked first about disinvestment.
Disinvestment
of non-core assets.
Yeah.
The balance left is some of our overseas assets in Zambia and IndoCoal asset will in the next 6-12 months is a target, but this may take a little extra time. They will be close to INR 2,000 crore all put together. Then, of course, the renewable assets in the InvIT form, we will get our share of it depending on the final share. That is another flow that is expected. What else you asked?
Sir, the debt profile that you put out in slide 29, shows Tata Power standalone at roughly about INR 20,000 crore and Mundra at about INR 8,000 crore, and the renewable, the two entities combined about INR 11,000 crore. Just wanted to get a sense of the INR 20,000 crore in Tata Power standalone, how much would be on account of loans extended to CGPL under the renewable sort of business? What is the core Tata Power standalone business debt?
Tata Power, when you. Yes. In question number 20. 4+8 .
INR 8,000 crore.
Sure.
We find three, if you remember the Western acquisition.
Yeah.
We are also funding losses for CGPL. These two put together, maybe INR 12,000 crore, INR 14,000 crore.
Sure. On the carry forward tax losses available in Mundra, that should be available on merger with Tata Power?
Together with business losses and depreciation, it will be close to INR 18,000 crore.
Thank you so much, sir.
Yeah.
Thank you. Do we move to the next question?
The next question is from the line, Subrat Dwivedi from SBI Life. Please go ahead.
Hi sir. Thanks for taking the question. Just wanted to understand from a group point of view, data points is increasing, including some of the key companies, something Arista and Office Range being under great stress. Tata Motors Power and EPC. Also Tata Power, with so many things going on positively, divestment targets, working capital doesn't seem to have any too stressed. What was the reason for this EPC raising now?
All this while we were asked exactly the opposite question as to why the parent company is not infusing capital, Subrat. I think the whole idea is, as you know, the CGPL funding has ballooned the company debt. There had to be an effort to cut it down to a more sustainable level. We believe that once this exercise is over, CGPL is virtually on its own overall in the overall scheme of things. I mean, it's all fungible in that sense, that debt comes to the parent and you can decide to keep it wherever. At the end of the day, what we're trying to do is to make the entire overall operations of the company in a manner that the debt servicing doesn't balloon anymore.
To that extent, all the concerns around what happens if the carriage resolution does not happen, et cetera, kind of got baked in now to ensure that we have sustainable kind of EBITDA, I mean, debt linked to the EBITDA that's generated. At the same time, there's enough capital for growth in the chosen lines that we have got to play with. I think this is part of a larger plan to ensure that the company doesn't now have any kind of stress situation, and now it's just that we focus on growth and growth alone. That's the whole idea behind it. Maybe you could question whether we needed it today or tomorrow, but actually our plans are quite ambitious. Therefore, I think it's all part of the larger plan.
Okay, sir. The second question is on the cash position. That has increased substantially in Q1 at INR 6,600 crore. Will this remain like this or because the repayments are not that high for the full year or is it likely to come down?
No, of course, this cash position is not something which will carry on like this. We are also paying back loans that you will hear in the next month. Obviously it will all come down.
Okay. Thanks a lot. That's all from my side.
Thank you.
Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
Yeah. Thanks a lot for taking my question. Actually, most of my questions were answered, but just one doubt appeared when you answered the question on what part of the INR 20,000 crore debt is allocated to renewable and to CGPL. Now, when I look at your slide number 28, I see a total number of about INR 10,000 crore between both the renewable assets. On the renewable assets slide, the number is close to about INR 12,000 crore. Is it fair to assume that the number is close to INR 2,000 crore that has been given from the parent company to the renewable assets? Is it a different number?
INR 4,000 crore has been pumped into TPREL to fund the purchase which we did few years ago. That continues to be the funding for renewables.
Sorry, go ahead.
Yeah. No, you tell me, you were interjecting. Tell me.
What I'm trying to understand is the EV number, which you said is about INR 20,000 crore. Would it not be slightly higher if I actually add the total debt? Because in which case, the total debt at the renewable portfolio would be about INR 12,000 crore plus another INR 2,000 crore. Is my understanding correct?
Don't mix the two things. That was just an indicative number based on all the debt, which is both internal and external. I don't think you should go into calculating EV using all this. Otherwise, you will end up in different conclusions totally.
What is the total debt at the renewable asset, which will be considered for the purpose of paying InvIT?
INR 11,500 crore thereabouts.
Understood. Okay. That's it from my side.
Thank you. The next question is from the line of Mohit Kumar from IDFC Securities. Please go ahead.
Hello.
Yeah.
Good evening sir. Sir, three questions. Primarily, first is, sir, why are we merging CGPL with the parent company right now? Why don't wait for the resolution to happen?
I am not sure why, let's say, you believe, Mohit, that it is connected in the first place. The resolution is for a project whose economics are well known. Whether we merge it or not, you have the coal price, and you have the tariff, and you have a gap. Right? Therefore, where the company lies, where is the SPV, it has got no connection with the tariff issue, right? We don't see it that way. For us, it's more important that we support this company right now, and also bring down the financing cost. That's what we are trying to do. If in the process, if we are getting fiscal optimization, most welcome, but first and most important is to sustain the company properly.
Okay. Secondly, sir, I saw that we have withdrawn our de-merger, some merger process with Tata Power Renewable standalone with Tata Power Renewable. Am I right? What is the thought behind that?
If you recall, the whole idea earlier was to de-merge these renewable assets and put it as part of the renewable company so that all renewable assets are in one place. What is happening is, by the time that petition got done, there were changes in our plans in terms of the InvIT. Certain assets are now part of the hybrid bid that we won. Therefore, we have to change the whole configuration. The revised plan now is that only few assets will go to TPREL, and therefore they will go along with the InvIT. Certain will stay in Tata Power for further development because their PPA contracts are coming to an end. We would like to wait for them to be tied up before they are transferred. The rest will continue in Tata Power for some time.
It's because of this whole InvIT and the renewable plan changing and the emerging opportunities coming up, we have to change the plan, so we withdrew that old petition.
Does this mean that 380 MW in the standalone company, most wind, the contract expiring and they may not be transferred to the InvIT? Am I right?
Not all. There's a small portion whose contracts are near expiry. Some have already expired, some are near expiry. Those who are tied up recently in the hybrid wind, et cetera, we will have to develop it here, and only at the operational level, we will have to deliver to the InvIT. We will not transfer now. All other assets which have a sufficiently long life period left, they will all go to the InvIT. That will be done through a normal business transfer.
Thirdly, sir, we are awaiting the renewal of coal concessions for our Indonesian mine, Kaltim Prima. Is there any development?
Well, I don't know the development, when was the last update you had. Basically, the government, as you know, has approved the law which governs the change of license. Also, the procedure involves application post that law, and we have done it, and we are awaiting now the process at the government level.
Okay. Sir, on the Prayagraj, how much we are charging as O&M for our standalone company, and how much it contributes, and something on the profitability from that Patco O&M contract?
We don't normally disclose individual commercial contracts, so to speak. We do disclose equity investments, but not commercial contracts.
Understood, sir. Is it possible to share, sir, how much is CESU investment? How much you have made? I believe you have made INR 10 billion right now. How much you expect over next five years?
Initial equity, as you know, is INR 175 crore for our share. What was the next question? What is the going forward investment?
What is the capital outlay for the next five years?
INR 1,500 crore is the commitment that we have made in terms of next five years.
Is it possible to share the T&D loss trajectory committed?
Yes. That's part of the bid. The bid has a clear trajectory laid out.
Is it possible to share the numbers for the next four or five years?
What was there in the bid, yes, we can. I don't have it ready.
Sure.
I'll get it to you.
I'll take it offline, sir. Last question is on Tata Projects. Tata Projects have made a loss of INR 24 crore in the quarter.
Yeah.
How do things improve in the Q2, and how do you see this contributing to our bottom line for FY 2021? I do understand the COVID situation, and it's not in our control, but still, some sense of the number?
The projects have begun to now move on the ground, right. Of course, the last four months, it was affected. As we see in the last one month also, we've made a good progress in terms of project sites commencing. Let's assume that it looks like things will be much better in the subsequent quarters. As you know, the country's COVID situation continues to be not so great in the hinterland where many of these projects are going on. Therefore, we'll have to wait and see whether there's any significant impact of that, but we are optimistic.
Okay understood, sir. Thank you, sir.
Thank you.
Thank you. The next question is from the line of Aniket Mittal from Motilal Oswal. Please go ahead.
Thank you for the opportunity. My first question is on the KPC mines. If I have a look at this quarter, the cost of production has gone down significantly. If you could just throw some light as to why that has gone down so significantly, and what could be the trajectory going forward.
Typically, what happens is when there is a price pressure in the mines, two things happen that you do put a lot of pressure on efficiency, and secondly, you do negotiate with the mining contractors to pull down the prices. Both has happened. Also fuel prices, wherever they were beneficial to the company in terms of contracts, et cetera, that has also panned out. Generally, it will be the mining contract terms, which generally are the ones which kind of help you drive down the price in such a scenario.
Okay. In going forward, because the decline has been pretty sharp. We were doing somewhere around $35 - $36 per ton.
Yes.
It's gone down to around $31.9.
Correct.
What's the sustainable number? Is this sustainable?
No. At every level, what happens is that depending on the situation and recovery of FOB estimation of that time, thus plan, both the mining plan is also changed and repricing also for mining activity changes. Sustainability is a matter of, let's say, you can say short to medium-term, this will be sustainable. May not be long-term.
Understood. On the offtake front as well, you've mentioned on the slides that has been hit some impact because of obviously the lockdown coming in, the overall demand sort of going down. How is the offtake happening at KPC?
Offtake in KPC is pretty strong. As you will see, normally they do about 15 million tons a quarter, and they are around this number even now. Because they have a certain quota, which is given by the government, it's nearly 60 million tons. Normally, that's the range. That's about 15 million per quarter. That is continuing to happen.
Okay. My second question is actually on Prayagraj. If I have a look at the year-over-year number that sharp increase that's happened, could you just help us understand what led to such a sharp difference in the year-over-year profitability? I understand that we've taken over the project, but could you just throw some light over there?
Just one minute. Okay. What you are seeing in the slide 13 is actually Resurgent, which is consolidated picture of Resurgent's own numbers plus the Prayagraj numbers. Last year, of course, it was not there.
Okay.
This is essentially coming from probably the interest on the debt. Yeah. It's coming from more of the debt instrument that is put there.
Sir, I'm sorry, I'm not able to understand this. This INR 24 crore number, the profit that you've shown over here, what does that include?
INR 24 crore is the PAT?
Yeah. What does that include from Prayagraj?
The company has invested in equity and debt instruments both CCDs. This must be the return from the CCDs which have been booked. Okay. Prayagraj overall made INR 55 crore of PAT. Our share is 26% effectively. 20% effectively, because the whole 100% is not held by Resurgent. Our effective share is 20, plus the interest on the CCD instrument put together is this INR 24 crore number.
Understood. Sir, another question on the standalone front. We've seen a dip from the numbers on a year-over-year basis, despite us doing on the operational front pretty well. If you could just help us understand why there's a year-over-year decline that's coming, and is there any impact of the new regulations that have hit us this quarter?
No, the year-over-year number in standalone is essentially because of dividend. Last year, we had dividend of INR 74 crore. Yes, operating profit level you're asking, that we had certain interest entitlement in the distribution, which due to the change in the MYT regulations, there's been some impact, INR 25 crore-INR 30 crore of impact on that front. Other than that, there's no major change. Of course, wind, yeah. In the standalone, there is wind assets, and generally this quarter has not been very good for wind.
Just understanding on that, if you could give a sense, what's the impact of the MYT regulations on the standalone business as a whole?
About INR 20 crore.
This is for the quarter?
Yep.
Okay. Sir, another question on the debt slide that you've given on slide number nine. Just two points that I wanted to confirm. This INR 1,780 crore of divestment, this would essentially include the profit that we've got. This would include Synergy as well as Trust Energy, right?
Correct.
We'll get another INR 5 billion-INR 6 billion from Trust Energy to you. That's the only thing that's remaining on a divestment as of now, right?
No. From Trust Energy, we have to receive another INR 70 odd. These are quarter end numbers.
Okay.
Q1 quarter has seen INR 70 million flow.
Okay. What's progress on the HDB front? Can we expect that on the sale of HDB?
HDB, o kay. We are close to now closing the transaction. Hopefully in the next month or two, we should be able to close the transaction because we are getting all the important approvals already, and things are moving fast.
Okay. Just on the guide itself, there is this INR 1,600, INR 1,006 crore of cash that you've received. What is that amount? I'm not able to understand that. Is it CESU cash?
CESU cash. Correct. There are the customer deposits, et cetera. You have to have corresponding investments to be done in liquid state. Those are the investments.
Sorry, I'm not able to understand. This is something that you've received upfront?
No, it's not received. When you take over, it's just the acquisition debt and acquisition investment. Both are coming in now. They are cash and cash equivalent, which have to be maintained compulsorily as per the regulation.
Okay. Sorry.
They are not usable. They're not usable in the sense that I can't just divert that cash anywhere.
Okay.
They are supposed to be equivalent amount of back-to-back liabilities on customer-funded schemes.
Okay. One last question, if I may. If you could just let me know on your receivables front, what is the total receivables just for your renewables business, which is Walwhan plus TPI?
Total renewables all put together is INR 1,700 crore.
INR 1,700 crore. Okay.
Yeah.
Just on that front, sir, we, I believe, had done a bill discounting at the end of March on one of our receivables for the renewable project. Has that money then flown through? I believe we've done our borrowing on that, right? That's how we had accounted for it.
Yes. It has flown through. It is being recycled. Payments are being made.
Okay. Our debt would have reduced by that amount, right?
Of course, the new discounting also keeps happening.
Wonderful. Thank you. That's it.
Thank you. The next question is from the line of Sumit Kishore from JP Morgan. Please go ahead.
Thanks. I just had a follow-up after you mentioned that Mundra has overall unabsorbed losses which can be used for tax credit of almost INR 18,000 crore. I find that in the standalone entity, last year you paid a cash tax of INR 74 crore net of refunds in the standalone entity. The year before that it was INR 101 crore. How do we look at it? For the next few years, the standalone entity will not have any cash tax liability after Mundra comes in the parent. What are the tax laws here? How does it work?
Broadly, Sumit, I'll give you only a broad idea about the question which you're asking. That we only paid some INR 70 crore of tax. This is a wider restructuring, right? There is Tata Power Solar coming in, and soon we'll have InvIT being held directly by Tata Power, so that money will come directly. That's all I want to tell you. The rest, if you want detail, some calculations and details, of course, you can get in touch with our team and we'll help you to understand it.
Sure.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
Thank you very much. If you have any more questions, you can definitely get in touch with our colleagues. Both Rahul and Kasturi are here, and they'll be more than happy to furnish you all the details and information that is required. I definitely look forward to seeing you on next Wednesday, 19th, to have a much more detailed discussion and sharing with you our long-term strategy and plans of growth and how we are planning to turn around the company and make it Tata Power 2.0. That's all, thank you once again for joining in the call.
Thank you very much. On behalf of The Tata Power Company Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.