I now hand the conference over to mister Sumit Kishol from Access Capital Limited. Thank you, and over to you, sir.
Thank you, Richard. Good afternoon, ladies and gentlemen. On behalf of Access Capital, I am pleased to welcome you all for the integrated trust call to update and discuss recent acquisitions in transmission and solar sector. We have with us 6 with us today, Mr. Harsh Shah, CEO and Goltan, director of integrated investment managers limited.
Representing India grid class on the call. He is accompanied by mister Greeti Kumar Agar Agarwal, CFO, and Ms. Megana Pandes, head, M and A and IR at Indeed grid. We will begin with opening remarks from harsh on strategy and subsequently on the deal This will be followed by the Q and A session. With this, I hand over the floor to Harsh over to you, sir.
Hi. Thank you, and thank you, everyone, for joining the call today. To start with, wishing you all, you know, a great year end and wishing you a happy New Year for, the next year in advance. Today, we gathered here to discuss a couple of updates on the business that, we have recently looked to acquire. So we believe that it is something new that we have done.
And therefore, it is essential to, have a call and explain on how this fits into our overall strategy. To start with, I'm on Slide number 4 to recreate our vision. Our vision is to become the most admired in vehicle in Asia, by keeping our focus on, focus business model, value accretive growth, predictable distribution and optimal capital structure, as you have seen in most of our business and we have kept these 2 principles in place. And, most of our business strategies we do is on these principles. To ensure that that's taken to our overall game plan.
The next slide is a quick snapshot about our size and scale today. We had approximately 14,000 crores in a UN as in September, and the presence is in 14 States and 1 UT in India. We own 28 lines and 79 substations for approximately 6000 kilometers 11,000 NVAs. We rated triple it by all three rated key large rating agencies, and the residual contract life is still 33 year, 32 years. We own approximately 9000 800 Towers and having a sizable amount of metal in the portfolio.
As you would have gone through certain press releases, we are a primary focus is to acquire operating projects, with long term contracts, low operating risks and stable cash flow believe both these acquisitions that we have done is fitting that criteria. And both of them are new because neither are they from, our sponsors or, not necessarily not just a TV CD projects. So, both of them are unique in its own way. I would invite, Magna who looks after the M and A and capital raising for integrated to brief on the slides from slide number 7 onwards on both acquisitions. Then subsequent to that, we would go towards a QNS Migna, good to you.
Yeah. Thanks. Thanks, Harsh. And, welcome everyone on this call. So the first acquisition, that we have captured in the with the client is on page number 7.
Which is a booking called on transmission company limited, wherein we have signed definitive agreements for acquiring 74% stake this project was awarded on a build own operator, BIO, this is by the Ministry of Power And It is in a joint venture. The Queen Reliance Infra and PGCI, PGCI owns 26% in this experience. Another unique feature about this asset, which is a section 62 asset, which means that it was awarded on a cost plus tariff mechanism. This will be the 1st asset that a degree is acquiring, which is of a cost plus nature. It has been operational since November 2015 2015, so, a great operational tracker call that we have seen.
Totally, in this project, if you look at it, there are about 2 parrot generating elements spread across, roughly 4, 58 surface kilometers. Again, this project is a very critical project for evacuation of power from hydropower projects for the people and and coal dams, which connects with the downstream transmission network in Punjab. This being a build own operates project, again, the contractual life of, the project is about 35 years, which is in line with most of our other projects, which are being awarded on a TDC basis. Again, from a tariff perspective, it's from part of the point of connection mechanism wherein the central transmission utility which is previously acts as a CTU and, you know, through a code account mechanism, the tariff gets distributed. I think as Raj mentioned on the call, this acquisition fits in very well with our stated strategy of looking at assets which provide long term stable cash flows.
This is a fixed to term project, as I mentioned, since it was a work done on a cost increases. So a fixed ROE of 15.5% is provided through the Paris regulations by curiosity. For the period between F Five Twenty 4. On the operational performance, we have seen that or throughout, there has been annual availability of more than 99.5%. It has been constructed by Tier 1 suppliers of cultural packaging and the likes.
Going on to slide number 8, just a few acquisition details that we have provided the FDA executed in last week of November, the total enterprise value for this project works out to about 900 crores, and it is subject to customary closing adjustments with respect to the cash balance, the net current assets, etcetera. This is the acquisition is also subject to, you know, committee, they're giving to approvals, including, from PGCIL from the existing project lenders. And with currently the, underway on completing the conditions proceeded, we are expecting that the transaction will get continued yet consummated. By Q1 of FY 2021. We do not envisage any equity dilution or acquisition of this project.
We had raised about 2500 Oscar's last year to the preferential allotment that, so both funds plus the available that headroom and the internal approval will be utilized for funding the acquisition of this project. Friday's last, a table provides for the average line availability and the not a typical for revenue and EBITDA for FY 2020. Moving on, on slide number 9, we had come out with, in April 2020, we had taken a minute hold of approval for our diversification strategy which was to enter into, you know, Renewable Sector by acquiring, operational solar projects So, broadly, slide number 9 talks about how are we looking at this diversification strategy? So the assets that integrin would look at in the solar sector, very comprised of, you know, assets which have a long term contact which have minimal counterparty risk. So we will focus only on counter parties like Seckey, MTTC, GNDNL, which will again have, some track record, basis, which we will be looking at acquiring them as well as, again, look look at the quality of the project the in terms of whether the tier 1 equipment suppliers have been, have been sourced, on implementation of the project, how robust is the interest etcetera.
With that focus and with that strategy in mind, we have gone ahead and acquired our you know, entered into definitive agreements for acquiring about 100 megawatts basic capacity of 2 solar PV plants. From an entity called FRS photo ratio renewable, ventures. This is a Spanish entity and has, attached record of developing about 5 gigawatts of projects across, solar projects across, entire Europe, US, Middle East. This project for sale of 50 megawatts is placed into experience. And the PPA they have become have an operational history of about two two and a half years.
The tariff for the project is 6.43 per unit, with about some, for lack of leisure for megawatts. From a connectivity perspective, they are directly connected to a PGC as station that is, about, or between 3 and 8 kilometers for P2 and P8. As I mentioned, the assets were commissioned in July 18 and have an have a practical order for around 2.5 years. The existing lenders to the SCVs are, again, refrigerants lenders of ISCSMO and Erla. As far as the equipment suppliers are concerned, the modules were provided by Trina and Lonji, which form part of the Tier 1 category, invoices are provided by some go, and the EPC contracts have been, a 13 PC contracts were done by.
So an important feature to talk about this asset is, you know, the assets in FY 'twenty, have generated about 200,000,000 units, which basically means that they have ended up saving about 1 lakh 60,000 tons of carbon dioxide emission, which is equal value to carbon dioxide absorbed by 76 lakh created. Again, moving on to Slide number 11 on the acquisition details, the definitive agreements were executed, the, just about a week back, this will this will be the 11th potential accretive acquisitions after listing. And after we acquire PKTCS also, life for PCCM, we are not in the search of any equity dilution for acquisition of this project, and it will be funded through the preferential issue proceeds. And the existing debt from an abdominal approval. For these projects, the enterprise value comprises of 660 crores with 0 cash and 0 receivables, As I mentioned, there is sufficient technical which is which is available, which will be localized.
The last the the table on the slide provides the plant and the grid availability, which are key matrices, which we typically look at, in solar projects. As you can see, They the plant and the grid availability has been very robust since nearly more than 99.5% in both the plants. With the revenue and EBITDA being about 97 crores 86 crores, respectively? Moving on to the, to the next slide, slide number 12, broadly, if you look at both after acquiring both these projects the KTCL and FRB, we expect our AUM to increase by about 12% from existing 14,000 outcrores to 15,005 range. The net debt to AUM, which currently stands at around 54 or percent after accrual acquisition of these projects will be about 58%.
Leaving sufficient headroom for acquiring, our framework asset of NER and KPLs from Thomas Power, which we have already announced. The annual EBITDA of both these projects, that we are estimating is close to about Tukami's escrow and the estimated and your NDC accreditation on both these projects will be in the range of about 40 to 50 crores. If you look at the right hand side map of India, as you can see, we have all set with great geographical diversification with these with the existing 11 projects. Plus the addition of these projects will just add on to it across north, across the northern region as well as with the solar, with the solar assets the presentation. So with that, I think we will end the presentation and the submission from our side, and I will request Sumit to open the discussion on the Q and A from the investor's group.
Thank you.
Thank you very much.
We'll now begin the question and answer session.
Phone.
Questions. The first question is from the line of Mohit Kumar from Dan David. Please go ahead.
Yes. Good afternoon. The two questions assist on the congratulation on the completing on anything the, agreement required for the assets. Two questions. First is on the on the tariff.
I think tariff is 4.43, which is fixed for 25 years. Is there any dispute on the tariff with AP? Are we being paid half of the amount? And what is the receivables outstanding? And is there any adjustment we need to pay over and above that once the once the judgment comes in?
That's the first question. Yeah.
Okay. So, The first question that I'm returning to this question is pertaining to solar, I believe, on FRB side. So while this plant is located in physically located in Ahmed Pradesh, but this is a second contract. So our counterparty is second. And therefore, at this moment, there is no litigation or any outstanding matter with, Aliparish.
So there is no issue or tariff within or reduction of any kind. There is no dispute. Our receivables are the line of approximately 75 days, which is, at the market with, sorry, Seki, pigments. And CECI publishes the payment track record publicly for all gencores, right, and one can check back. Until now, there's been 100% payment track record by hecky and without any delays.
So while directly physically this plant is located in Andreas, the location is good because of radiation. The contract is with the central sector counterparty.
Okay. I understood. Assuming me, what are the capital costs coding VTF, what is what is the capital cost applicable to setting up this power plant, F RB?
Okay. So Magna, do you want to answer that question?
Yes. Yes. So the project cost for, the projects put to for both the plants put together, so close to about 650, of course. 6.50 crores.
Oh, and, and, on the on the reliance policy called out mission as it last time, of course, we have supposed the the the acquisition failed. I don't know the exact reason So is there something, to, when we expect this transaction to conclude, and do you see any hurdle in completing this acquisition and what happened last time exactly? Why this fell through?
So, you know, I mean, we can't comment on somebody else's. No. No.
No. I understand that there are some procedural issue. Right? That's the reason I'm asking. Yeah.
Yeah.
So so procedurally, what we can say is that this asset is a joint venture with, Power Grids. And, in the 5 years from commissioning, if any feel of this asset were to happen, power grid had the right to send over, okay? And and therefore, probably it didn't happen because of that, this 5 year lock in completed on 3rd November 2020, and our agreement got signed after that. So in that scenario, the SHA was power grid in the joint venture provided them right the first refusal However, they did not have right to single, right? So that is the difference probably, is there between the two implant.
I think that's what we believe could have happened. Understood.
Thank you.
The next question is from the line of Sarish Gupta from Maxim Capital Please go ahead.
So first question, if you can comment on the project and equity IRR, for these 2 transactions, for, for the stake that we have purchased for PKTC and for the full asset on the FRV. Okay. So, Suresh, thank you.
For the question are for new acquisition, we look at different metric and for this case, also both these assets are a built in nature. So we'll try to arrive, how one could look at it. Starting from PKPCL acquisition, which is unique because it is a cost plus asset Over here, more than Ira, we are looking at it as a dividend rate, and one can look at it as a dividend, discounting model as well. This project has approximately EUR 275,000,000 of equity, which is regulated equity on which the project comes approximately 15.5%. There are, there are really, certain minor adjustment, both on up and down.
So one can take 15.5 percent as a regulated return on the equity days of 275 crores, right? That's the that's the more or less. So now if this is the dividend that is accruing to us, right, as a project, this dividend is post tax. So we can actually take this amount and up screen to integrate as a dividend pay, and integrate can provide to investors as a dividend received on which investors will not have to pay tax. Because the SPV is in the old tax regime.
So we use, I would say, this dividend is kind of a perpetual dividend that we all of these assets. And therefore, the right metric to look probably would be a a dividend discounting or a dividend
you acquired this at price to book of 1?
No. No. No. No. We are not acquiring the price to book of 1.
We have acquired price to book of approximately 1.5. So if 15.5 becomes a 10.5 and with a little bit of leverage headroom that we have, we can increase it further, right? So on an unlevered basis, if you were to look at it on an unlevered equity basis, there's an unlevered project right now. We earn approximately, 10.5 percent to 11 percent dividend, right? And this will
be tax free if you declare dividends on this.
Correct. Correct. Correct. Now I'm not commenting on complete tax remitur because if somebody were to receive more than 10 lakh rupees of dividend, probably it's taxable in their hands, right, in whichever tax regime you are. But this is an old tax regime, So one more to say in old tax regime, the dividend will be taxed in the end of investor.
So this is a bit different because this is tax free, at 10.5 versus maybe 12%.
Again, 10.5 is unlevered. So which is just 10, 15% extra liberate more than SPV, we increase it to, substantially higher. Right? So that's, that's the, I would say, that's the right way to look at it. In addition to that, as you know, this is not a, I would say, this is not a acquisition which is necessarily requiring us to do capital lease.
So the entire amount is coming on the same equity basis.
So you will pass this on a dividend not as interest? Yes. That is correct.
We're not yet acquired, but that is correct. Directionally, the unique aspect of this asset is also that we will be able to pass through the dividend as a dividend not as interest. Okay. And if
you just do 2 by 9, I mean, 2,000,000,000 of EBITDA divided by 9,000,000,000 of enterprise. That looks to be on the higher side. So what what am I missing here?
Sorry. What is 2
by 9? The last EBITDA of 2,000,000,000 divided by 9,000,000,000 of interest. Right?
There's no important question. I think we have given the 200 crore EBITDA as a matter of fact, the representation. This also includes depreciation payment. In a costless project, typically your depreciation payments are also paid as part of your EBITDA, right? And therefore, in the initial years, we have a very high EBITDA.
And the later years, we have a fixed, dividend coming out of the project. So which also provides us opportunity to actually optimize further for better IRR. Okay? In addition to that, There's also increased one time revenue of particular, to be received in, you know, one time revenue was booked, on account of change in COD for the earlier 3 elements.
Understood. And can you just comment on FRV IRF as well?
Correct. So if I mean, again, IRR is a function of leverage in cost of debt, everything put together, but I can give you we have acquired it approximately 7.25to7.4kind of EBITDA multiple. Right? That our cost of debt and our leverage would result into a even if you were to assume a reasonable leverage. So, basically, it's it's far more because of the multiple I think multiple is a better way to look at these assets.
So IIR would result into a substantial accretion from what we are right now, but I don't want to give a specific number, multiple is something which is easy to communicate in public.
Yeah. And Magna commented that the project cost was almost equivalent to the enterprise value. So now this this came in 4 years back and interest has substantially declined in the market. So how are we able to get it at the similar enterprise value as the project cost 4 years back?
Okay. Okay. Good question. See, we, first of all, we have been working on this asset for about a year and then our values are locked much earlier. So as per the contract, we have, we have locked in this asset very early on.
Second, as such, we are not really linked to the capital cost of the project. We are largely in terms of how do you value a particular project based on the ability to earn cash flow? And as we have seen it in the past, we've acquired projects at a below market price below CapEx cost also and above CapEx also. So As such, we don't really, I would say, consider the CapEx amount on account of, you know, if they made a higher cost or a lower cost, right? That's not afterrogative.
How we have acquired, I think that's something which is based on our, I would say, strategiveness that, we are able to provide a, you know, a swift solution, a better solution, right? That's the way to look at it. And again, this project had a VEGF etcetera. So overall cost etcetera makes approximation slightly more complicated. Like link directly key, it's not just connected to the customer.
Okay. And since for solar assets, the problem was the possibility of volatility in the cash flow as opposed to our usual stuff that we do. So what has been the volatility in the last 3 years, FY18 to 20 for this asset? If you can comment on that volatility.
In terms of? Sorry.
In terms of the cash flow that will accrue to you, I mean, for the solar assets, the, I mean, the possible problem is there can be a volatility as a post office revenue Understand. Which is independent of everything, right, in your usual business?
Yeah. So we've seen that we've, but he's there good good at this project as a full year of history and And this project has also several other 100 of megawatts around, in the solar power plant. And, we've seen that, The grid availability has remained more than 99.899.9. So there are no issues, and it's a very small line, which is connecting to a large substation. Great availability has not been an issue at all.
Plant availability, I think 1st 3, 4 months, obviously, there is a settling period, but last 18 months have been phenomenally good. So I would say not operational, not technical, and not collection. I think none of the parameters we have seen any surprises of volatility in this plant.
Okay. And my final question, if I may, you know, not there are, like, 5, 600 crore assets that we are requiring. I wanted to know now that we have built some sort of a platform What is the advantage that is coming to us as a platform as opposed to, let's say, a family office which wants to buy, you know, this sort of asset at 5600 crore because these are not very large amounts for, UltraHNI or even a, other firms to sort of try to buy, especially when the yields are coming down across the board. So are we getting some advantage now because of the platform. And if you can quantify it a bit.
Yeah. So I am let's say, let's say you are a large NIIO500 Curran, would you buy a listed instrument which you can sell any day and have a tax advantage, versus mind of physical assets, which you need to run every day and figure out how you're going to run it. Right? So, I mean, that's the first question. It becomes a new pillar.
That, when the skill comes, the benefit is that we are able to deploy the right kind of resources behind it, right, whether it's in terms of people or in terms of managerial leadership bandwidth or in terms of technology, right? I'm sure you would have read about recent partnership with IBM that we did. A portfolio. Now that's a sizable CapEx. You couldn't have done that in a 1, 2, 3 portfolio asset size.
So with scale, the advantage come in terms of reliability of asset, predictability of asset because you are able to deploy right amount of technology and resources on that. And the third one, which is, overall reduction of oil and cost then because we we are having the scale. That's, I would say, called an operating synergy. The next synergy exists for us on account of, I would say, financial synergies. We are typically, and I would say we have one of the one of the few, it's not only AAA in the country with having a AAA rating and acquiring renewable energy assets.
Right? So we do have I would say, cost of pineapple advantage. And the third one is just structural advantage. We have framed as an invite and which allows us to at all the cash and provide it to our investors, which, for some investors is preferred, and therefore, you know, what are we able to provide a better outcome because of these 3 parameters?
Understood. Your NDCF accretion for the last four, five acquisitions that you have announced will be around 100 crores, cumulatively, 40.50 is coming from these 2 only. So that is like 1.5 rupees per unit So what is the plan now? Is it more acquisition with this or increase of GPU? How are you thinking about that?
So, sir, I think the right question, you're waiting for the year to end, right, and we need to take stock of what is the NDCF by the the full year basis. In any case, we have to distribute 1,000,000 of 90 percent at both SPV and integration levels. These acquisitions would happen in quarter 4. So may not yield materially in this financial year, right? These numbers are annualized, not quarterly.
So we'll have to take a decision in quarter 4 and the board of the manager and ask me to decide what is the right set of, CPU based on the NDCF? And we'll we'll come with a plan in in probably quarter 4 meetings. Because, you know, we have just come out of COVID, I would say, the 1st 2 quarters, we are discussing about reserving cash. Now suddenly there is a turn in the turn of revenge and markets have become far more liquid. We would like to just see the full year catch up how does that become before we, you know, I would say, increase, the decrease.
If at all, our NDC, because material charge, we anyways have to do it.
Yeah. So that's the question. The 90% of these annualized cash flow for all the assets that have been announced till now. Is that greater than 12?
Not now. Because these assets were going to come in quarter 4. So
Oh, no. The annualized number, next year. I'm not sure.
Yeah. So maybe next year, next year, there might be a compulsion to do that. Right?
All the best, Harsh. Thanks a lot. Thank you for all the questions. Thank you.
The next question is from the line of Abhilashasatari from Barddalalandbrochup. Please go ahead.
Thank you for taking my question. Sir, we have we have fixed the tariff at 4.4 Alright. We are seeing most of the cooler, the tariff, you know, the recent solar tariffs are below Given the recent one which, that has back in the PCS that it is below 2 repeats. So, do you find any threat of the virus going down you know, in future or anything like anything of that sort of distinguish here in this contract?
Yes. So, you know, Bausage,
I think it's an important question. We evaluate from a perspective and you acquiring that is this materially higher than APPC of the of the state or counterparty. In this case, also, we are not materially as an APPC. So I don't think we can evaluate contracts from or other contracts entity from incremental cost, right? Because by that logic, a lot of capacity in India would have become redundant.
Right? So, the way we see it is incremental cost of facility of solar will come down. But on the other hand, if you have a reasonable cost of power, In that scenario, we suspect that these contracts will be renegotiated. They are very, very strong, clear contracts and we have a credible counterparties like Seki. So we don't see that as it is.
Historically, there has been such attempt by even Gujarat, the state like Gujarat is a direct, like, 15 rupees, and it hasn't succeeded, right? So we believe the regulators and judiciary is fairly clear on this point. And if a state asset with a state TPA with a 15 rupees kind of this incentive had to eventually pay and still pay with the central counterparty, with the 4.5 rupee, we don't see it as a risk for the business. And what is your current debt level and what will be, the debt level after these acquisitions? I think the debt level after this acquisition was there in the presentation approximately 58%.
Yeah. Okay. Thank you. Thank you.
Thank you. The next question is from the line of Varun Agarwal from BYXA Mutual Fund. Please go ahead.
So my question is around the strategy of increasing, going forward, increasing the share of renewable energy in our portfolio. So what kind of impact, it can have on
the overall IRRs and distribution and in our overall asset profile? Sorry. Can you repeat that question, please? I missed that.
Am I audible?
Yeah. Okay. Sorry. I repeat my my question. So I I wanted to understand the overall impact of, sorry, overall strategy of increasing the renewable energy assets, which is solar and other assets, generating assets in our portfolio.
So what kind of impact it can have going forward on our dividend payment IRRs and oral asset profiles.
Okay. So, I mean, we can kind of look at it from different angles, whether it's from a risk perspective or perspective, but I'll try to address it on both. 1 is, the solar assets which we are acquiring even central counterparty assets are going to be more accretive. Right? So there will be higher returns.
So as I said, you know, we acquired it for 7.7 and a half kind EBITDA multiple, whereas transmission assets go at least 10, 15% higher, so about 8, 8 and a half 9 kind of multiply. So there is a difference between in terms of accretion that happens. On the other hand, there is also slightly higher risk, right, because power, there's a point of connection mechanism tool for transmission assets, which has got a far longer track record versus what we are acquiring from CACI and TPC as a relatively short We believe the contracts are equally strong. However, what, as a part of our strategy, we don't follow a particular mix, right, that we want to be 20% renewable or you want to be X percent something, etcetera. Our focus is to, as I started with the presentation, to find assets with long term predictable cash flow, right now, right now, we've identified as a solar as an area.
Maybe we may get good acquisition opportunity. Maybe we go right? So there is no effect pattern that we need to follow. And therefore, I think we are neutral to a percentage. However, as a guidance, we have been telling investors and, debt participants as well that at no point in time, we are looking to cross solar assets or a portfolio of 20%, twenty five percent, okay?
So that is an outer cap. Doesn't mean we have to be at 20%, 25% He may be at 15% and still be happy. So our focus is on managing the risk by selecting the good quality asset with good counterparty. And ensuring that they are agreed. After that, the percentage is not something which is part of our business plans.
Okay. Thank you, guys. So one more question on the similar line. So, in terms of predictability, a lot of these solar assets might have variability in terms of the the availability of sunlight and other things. So do you think this, between 20% exposure will have too much impact on our, cash flows, considering, till now, most of our assets are more or less, of Yes.
I mean, yes,
no, good, important question. I didn't see the way to look at it is twofold. 1 is solar resource is not as unpredictable. I mean, you can, solar started in India on a commercial scale somewhere around 2007,008 period, right? So in most of the solar generating stations or rather, let's say, regions, there is more than a decade of solar data available.
So the solar generation of irrigation per se is not materially variable. Right? So that's one point. Second point, and right now, we have, we are looking just one asset. But let's say, if at all, we are at 15% to 20% we are not looking to buy it in one area, right?
So maybe you have 5% capacity in Andhra Pradesh, 5% capacity in Pakistan, maybe 10% capacity in Gujarat, We don't know that. What solar offers has an opportunity is diversification. So you are not concentrated in a particular geography, which will hit you hard if there's one suddenly there is a higher drain in that year, and you are kind of impacted. So it's not a concentrated it is a distributed capacity in relation to scale. And therefore, we don't get, material impact right, on that account.
So solar that way gives diversification and the impact in less, vis a vis transmission, and I'm not not kind of saying the transmission is more risky, but kind of a concentrated impact, right? If our one line is 10% of our portfolio and is down for 1 month. We'll have a far higher impact on her balance sheet P and L, then one solar plant having a little bit of less generation on account of, you know, higher rainfall. Okay? So it's not, it is not really adding that much of risk on account of solar radiation.
Thanks. Does that help,
Yeah. Absolutely. So just one last question. In terms of the, I mean, in terms of the payment, pattern, we don't see any issues in terms of solar assets. And as we have already mentioned, we are focusing more on, Turkey and all central, comment or, when, a sense that you're buying are more linked to, where there's a productivity of cash flow, there can be so that the cash flows itself are not delayed.
Correct. No. No. Salim, let's not club all solar generation into one bucket. As we are buying solar assets with very select counterparties.
That means SECI and NTTC, which exactly addresses the risk that are trying to, address. Thank you.
The next question is from the line of Anseltakar from local securities. Please go ahead.
Yeah. Hi, Harsh. Hi, Meghna. Congratulations on
the last two acquisitions. Just, one
quick can you throw some light on the cost of debt on the last two acquisitions and then
on the on the portfolio in general?
Yeah. So, thanks, Ansel. And this question keeps coming. It came in quarter 2 review also because the cost of debt in the market in general has come down materially. And optically, our cost of debt takes us at 8.5%.
We believe in kind of conservative management. So we've been fixing our cost of debt in past, and therefore, a lot of instruments are fixed. However, approximately 40 odd percent of our balance sheet, debts, approximately 8000 crores, we can be the refinance of prepaid, you know, some kind of other restructuring way we can do. And we are working on that. For example, we raised recently, just about a month back, 1,
non convertible debenture at a
cost of backup, 6 0.85 percent quarterly on a three and a half year period, right, which is about 77% annualized. And today, we have opened up another issue for the upcoming acquisitions, which is at 7% to 7.2% PAPQ. Which is approximately 7.257.4 percent annualized for, 4.5 year maturity. So I would say that transmission is happening. The substantial reduction is happening.
This would be, this is approximately 120 tablets lower than our weighted average cost of debt. We are looking to refinance, assets. And, as in when we do, it'll result in, benefit on that account. And just especially the capital that we are raising now is gonna go towards the acquisition that we are doing right now. So for refinancing, we will keep you know, focusing on opportunistic, I would say, tenure as well as facilities that allow us to reduce further.
Great. Great. So as I understand, the FRB acquisition was done on a 100% debt. Right?
Oh, yeah.
If I will speak it, they both are not done yet, but
As in they will be delivered.
Yeah. Yeah. We're undelivered right now. We'll be based on, you know, that the funding reacquisitions are there.
Brilliant. Wow. So that's a really lucrative acquisition then.
And, some idea on the PLF on the FRV. Would you have that handy by any chance? Yeah. I think we can give you a little bit of past data. Sure.
So the generation is in the tune of approximately 20.00 units. So that comes to,
approximately,
18 to 18.6 percent. Let's let's call it 18.5 percent, CF. But this is on a DC capacity. Okay. So the DC capacity of the plant is 137 megawatts of a 135 megawatts, not 100 So if you were to try to calculate the math, it comes from 137 megawatts multiplied by 18.5%.
Multiplied by 3 65 to 24 into 4.43. That's that's the calculation. Yeah, but it's you need to consider a DC capacity. Okay. Okay.
And the 4.43 you are mentioning is without the VGS? Yeah. VGS is actually, you know, VGS is a a one time payment that gets paid, when when a particular milestone is achieved, right? And in this case, with my some of the milestones are not yet achieved, So they will be paid over the period of next 12 to 24 months. As in when, you know, those milestones are achieved by the plant.
And part of this, we will have to share with, FRE as an earnout. However, some part of it will also result into our accretion, which is additional to, what we are making right Okay. So keeping the VGR as a one time, it would be safe to assume that the rate
per unit will still be 4.43.
Oh, yeah. 4.43 annual payment VGR, which is one time grant that gets paid?
No.
Not one time. It comes in 4 tranches, 50% on, 1st year in CRE and then 10% every year. So in 1st 5 year VGS and get paid. So VGM is over and above this. Okay.
Brilliant. Great. Great. Thanks for the clarification. Congratulations and all the best.
The next question is the follow-up questions from the line of Mohit from Dan Capital. Please go ahead. I'm sorry. His line got disconnected. Sir, we have next question from the line of Sunil Pothari from
it's, my competition for is to make this happen. So it's really, really commendable. So my question is, just to understand, we, up to now, we were in a transmission
assets, and now we are
a little bit moving towards, the missing assets. So which of the risk factors you will be keeping in my Yeah. So, Srinji, thanks a lot. And, I think, we've already signed the agreement. So you can just describe what risk factors we had kept in mind.
And, and also make that presentation, it was there in the beginning what we are looking Right? So if you look at Slide 9 of a presentation, right, which, which kind of secure. So firstly is buying a good asset. And buying the gold asset means that asset quality is good, constructed well. There are good care about equipments in place and therefore, we have described some of the equipment name of manufacturing also because that makes the big difference in your productivity, in your generation, in your sustainability.
So
The conference is now being recorded.
Yes. Sorry. Yes. That's the right one. So, so from a refinancing perspective, there are no structural issues.
There are, largely with respect to, you know, when you do a bond, right? It's a fixed price bond. Then it reads in the market. You can't buy them out cheaper, right? So for example, if you issue a bond that 8.5% in 2019, Okay?
For 100 rupees, it is trading at 105 today, for 110, right? Now we can't refinance that because that is a listed contract, right? We can only refinance, loans of floating rate loans or something which car is coming from maturity. Cool. That's why we need to just, maintain that calendar schedule that as and when it comes to opportunity, we'll be happy.
That's what we meant. It's a rebalancing. So in in near future, maybe another 6 to 9 months, you, do you see you we have renewable good chunk which we can recognize at this lower rate? Yes. Yes.
We have sizable amount of loans, which we have, ability to refinance. Great. Great. Great, sir. Thanks a lot.
I'm with you, very happy and healthy new year. Thank you.
The next question is from the line of Mohit Kumar from Dan Capital. Please go ahead.
Yes, sir. Thanks for the opportunity. Once again, using a provision in the, in the, in the policy called them contract to buy out all this.
Yes, Mohit. The provision is there, if Power Grids wants to sell and we want to buy, we can. But that is not part of the plan. It's a 26% shareholding. So it's not a material in size as well.
Okay. So we can simply assume that, you know, that the the dividend will will keep flowing to to us. And as far as, you know, if all the assets are concerned, more likely, the the return will come in far of interest. Am I correct? So, sir, on the on the who are you doing LYNM right now for the, for the Apabi asset?
And, And it was just, the VTF component, the quarterly spending, will it come to us, or it will go to the, to free ask why it won't miss?
There is a ratio
that you have.
Yeah. Yeah. So there is a ratio that you have agreed So part of, I mean, exact numbers we have not disclosed, so probably we'll disclose on closing, a part of the VGR will approve to us as In addition to that, there is also a GST, claim. Right? So GST payment, both GST payment and VGM.
Part of it will accrue to us, part of it will accrue to sellers. So we will have an upside. However, the sellers need to deliver in a particular time right, that if it comes in 12 months, then you get X, if it comes in 24 months, you get white, right? So, that is the formula that we have put in place, which incentivizes seller, to continue to work with us to get the claims as well as there is an upside for us. Right?
So it's a it's a mix of both.
You can ask for the kind of my tone, just still pending, you know, because this power plant will commission in 2008, Jan 2018, and, sure, 2019, basically.
So, for this power plant, there are certain, some small amount of land, not just the power plant, the entire solar power park. So amount of land mutation pending, which is required by SECI to do the payment, which is the one milestone which is pending to receive the 1st VGS. And we believe Seki has already given the waiver for the first media. So now it is procedural. And obviously COVID had slowed all of us down over last six months.
So now according to us, it is proceeding on GST side, there are certain petitions outstanding in CRC, which they have just before closing down, ruled in some other projects favor that the GST payment will be one time and will be paid by the by SEKi. So both these things, the materials, I would say, vessels have been crushed. Now it is a matter of procedure.
And how much of the amount pending, Ellisna?
Nigna, would you have the exact number of total GST and total, Vijaya, please?
I don't have it offhand. Wait a minute. Let me just give that to you, Alicia.
It's for a while. And, to to intend to do answers to going forward. We intend to continue with selling and listen for O and M, for now.
While we have the all the managerial capability, we will have our own project manager side, but earn in contract will continue as is because we're doing a good job.
Lastly, on the on on the funding of the Ava IV. I think that there is a loan amount you're taking from. It's a more IFC and IRada. What is the portion in which they are funded alone? And what is our plan going forward?
I think I believe that's not the solve their mom be speaking a bond from it from home.
Oh, yeah. So okay. So, from our perspective, we are looking to refinance all of it. And bonds have, completed 3 years in the country. So regulatory wise, there is no hurdle.
So we would be looking to buy out the bond and continue with that. So it will be entirely refinanced from
For rupee loan. Am I right? Yes. Yes. Rupee loan.
Correct. Sure. Sure. Sure. I'll be at the I think we can raise the money for Bang also now.
Right? So I thought this morning was fine. Okay. Yeah. Thank you.
You. The next question is from the line of Kathy Mehta from Tata AIG. Please go ahead.
Hi, Harshan Magna. Thanks for taking my questions for me.
Just wanted to have
some color on the, disclosure made yesterday regarding SPPA becoming one of these sir.
Can you repeat the question? Your question was regarding the merger of and SP.
Yes. And then becoming a sponsor, so
Okay. So, no, this is just the corporate action that has taken place. SPGBL, a 100% subsidiary of SPPLs was the sponsor of, integrated when it was formed. However, Stolite SPTL and SP GBL have emerged now. And therefore, SPGBL seems to exist.
And therefore, the resulting company SPPA becomes a sponsor by virtue of merger. So this is just an intimation your intimation on account of that. Does that answer your question?
So are, is it a co sponsor? Because I think KKR was inducted as a sponsor, I think it was.
Sorry. So that continues. Is just a legal entity changing from Starlight side. Nothing else have changed.
Yeah. And, the state of Indian Institute,
Sorry?
Of the whole day of SVP and integrate would be how much as of approximately 4%.
Okay. The next question is from
the line of Sarvesh Gupta from Maxim Capital.
2 of this year as well as for FY Twenty 2,
what is the extent of
refinance that we can do And what will be the average basis point reduction in interest cost on account of that?
Okay. So, I mean, that's that's a question which you need to derive answer to from our balance sheet. So On our balance sheet, we have won 4.35 crores of bond, which is, getting refinanced in, in in in Feb 21, which is, which is very mature so we can refinance that. Other than that, we have, a lot of, projects, project level load. Right?
We have project level loan in GPTL, project level loan in E and ICL project level loan in, OGPL. Right? These three put together would come to approximately 25 to 2600 crores. I will need to refer to the quarter 2 presentation, that that 3 bank loans plus the bank loan at Invict level. So put together approximately, 3000 to 3500 crore 3000 crore of debt, which is at either STV or at a integrated level.
We can potentially look to 35.
And at around 150 basis point reduction on an average?
That's something which you and I won't know. As in when we do it, we'll come to know actually. Right? I mean, today, when we are I can give you the exact, public number which we have raised, so we are raising the debt now. But I think the future one depends on when we are refinancing.
Right? That can be up, that can be down. So that's something we'll have to wait for when we refinance. Right? It can improve as a written person.
Right? So don't wanna give you an upfront commitment on that.
Okay. So what is the ballpark cost of debt on this 3000 crores?
Ballpark cost of debt. I think, we'll need to calculate that, to be honest. But it'll be up for the rate that I can tell you. It's 8.25to8.5. Average.
Okay. Understood. And are you also planning to now, remove Escalight as I sponsor now that their shareholding is so low, and they are, anyways, KKR is the sponsor. Is there a procedure to remove the existing sponsor as an sponsor of the company?
No. Factually speaking, there is a procedure to be moved by a simple vote of, unitholders. We can integrate the unitholders can remove. Provision is there. However, the manager board hasn't made any such decision or plan in place.
So it will be premature. Understood.
Thank you. All the best and wish you and the team a very happy New Year. Thank you.
Thank you.
The next question is from the line of Sunilsha from Total Style Portfolio Managers. Please go ahead.
Yeah. Thanks for the opportunity. Congratulations, Harsh and the entire team of Indigorate on this acquisition. So I have just one question, which is, you know, I think in this acquisition, you're saying that our NDCF is going to be in the range of 40 to 50 crores. I think in the course of the presentation, you mentioned that a part of it will be submitted as dividend.
Could you could you give us some sense on, you know, how much could that be and from where? How how will that go about? Okay. So I think if we can give an approximate way to compute that because we are not yet acquired, so it's difficult to predict from that perspective. But but let's say, as we said, you know, approximately 2.75 crore.
So this asset would throw anywhere from 42 to 48 crores of, dividend. Per year on a 100% basis, right, considering the ROE and, 15.5% cost of net, Right? And we only own this. We only own 74% of this. So we get approximately, say, 32 crores, 32 crores of, dividend from this asset.
Right? And, divide that by number of units, which will come to about, what, half a rupee, somewhere around that half a rupee or 60 tests or something. Now at a higher level, that's what the math is, right? We'll need to figure out accounting and how that gets captured and all that eventually. But on a long term basis, there's about 33 crores of dividend on a on a 58.5 crores of, unitholder days.
So that's that's the ratio one can look at. Right. So does it mean that, you know, the solar asset like, in future, if we acquire, there could be a window to which, you know, this kind of dividends could accrue in future as well, depending on the structure, but I think in transmission lines, clearly, it's a it's not a dividend payout that you can give. But in Suraj said, that possibility remains? Oh, no.
No. You mix the 2 assets. The dividend that we spoke about is for PTCL, which is a transmission asset, but a cost
plus transmission asset you get a post tax return. Oh, okay. Okay.
For sooner, it will be interest. So it does nothing to do with the sector. It's to do with the cap structuring for that asset. Got it. Got it.
Okay. There is one more point, which is, you know, I think there is some new decision going around about, going forward in future government is concentrating on policy, wherein if the distribution comes is not able to deliver the power, there will be a penalty, which will be levied. Does that any way create any kind of, you know, business risk for us No. So first is that is for distribution license. We are a transmission licensee.
So it doesn't create on us, directly. Indirectly, it creates on our customers, right, which is distribution companies. So, see, all these capture measures that you keep hearing about is towards overall improving the sector efficiency. Right? Mhmm.
So while it may look like penalty is there, but eventually, the government has spoke I mean, government is only providing liquidity also to meet that energy, right, on the other end. So the idea is to create a infrastructure and environment so that distribution companies become more efficient. Right? So that the overall sector becomes more efficient. In the longer run, I think these will result into rather positive environment for the sector, then the negative.
And in the short term, anyways, we don't get directly impacted. Okay. And one last question, you know, and this is, we are talking about assets that were acquired, but if I can get an update on the 2 framework assets, which are in the pipeline. That is NER and K KTL. Could you just update us in terms of, you know, what is the status by when do we think that those could materialize?
Yes, sure. So any project is, under construction, and I think it is at the last stages of option. There will be obviously a force majeure on account of COVID in all of their aspects. So there's 5, 6 months delay on that project. We believe at least what we have been informed is that the project will be commissioned by March.
And therefore, we have very parallel started diligence for that. K? So exact acquisition date, we don't know, but maybe quarter 4 or, you know, next 6 months. We'll look to close this acquisition 6 to 9 months as in when the project is commissioned. It looks at least what we have informed is that, you know, the project is at good stage and then we should be able to look at it, in 6 months time.
That's that's one factor. On KPL, it is, substantially delayed one part of it. So 50% of KPL is commissioned and, it's revenue generating. However, the other 50% is substantially delayed. So probably 12 to 14 months, maybe for that.
So it will be slightly delayed than, earlier plan. So by quarter 4 of FY22, we expect that we could get good clarity for both of them. What's the form of s I 22 to acquisition? 2 months of. Yeah.
So we should be done with, by that Yeah. 15 months is a good class. Correct. Yeah. Alright.
Thanks. Thanks for all this clarification. I'm good to hear Magna on the call as well. Thank you so much.
Ladies and
gentlemen, as this was the last question for today, I'd now like to hand the call over to Mr. Sumit Kishore. Thank you. And over to you, sir.
Thank you, Harish Magna Jiti, on behalf of Access Capital. Thanks a lot for giving us the opportunity to host this call. Would you have any closing, closing remarks, please? Yes. I think, we've been just on a track of delivering our strategy.
This is, a stable business with predictable returns and, now the integrated has good is to both capital as well as management team and, asset base. And therefore, we are in a very good position to execute a strategy which was focused on long term contracts, low operating risk, stable cash flows, and then which is what we are executing. I would reiterate, I think, a year before there were a lot of questions around solar. I would reiterate that our focus is, to go conservative, then aggressive. And before, we provided, you know, auto caps of, you know, 20, 25%.
However, we don't necessarily are running to achieve those caps. We may be operating at lower level. We are looking to acquire monitor and generate the yield before we jump on to, I would say, growing materially on, especially a new sector. And it took them out to us, I would say about a year or 14 months from starting to think about it to evaluate, put together risk framework, build capability, and finally educate. So I would say that we will just remain conservative and, focus on, you know, the fundamental of the business, which is to get predictable cash flows and generate yield for investors.
And I think a lot of you have been tracking us since the beginning. And thanks a lot for all the right questions, which you don't want to run the business. Which, which allows you to evaluate the business better. So thanks a lot for participation and wishing you all a Merry Christmas and a Happy New Year.