Good morning, everybody. Thank you for joining us for the Q2 and H1 FY 2022 post result virtual meeting of Power Grid Corporation of India Limited. On behalf of ICICI Securities, we would like to welcome the Power Grid senior management, led by Mr. K. Sreekant, Chairman and Managing Director. Thank you, sir, for sparing your time. From the senior management, along with Chairman, we have Mr. Taj Mukarrum, Director of Finance and CFO, Mr. Abhay Choudhary, Director of Projects, and other senior members of the Power Grid team. I would like to hand over the floor to CMD, sir, who will give a detailed presentation, post which we can have a Q&A session. Thank you, and over to you, sir.
Thank you. Please upload the presentation. A very good morning to you all. I welcome you to the call today, post our half-year fiscal 2022 results, which were announced yesterday. I'll take you through a brief presentation providing performance highlights, work in hand and outlook. Next. As you are all aware, we are a Maharatna CPSE. Government owns 61.34% of our shareholding. We have 170,000+ circuit kilometers of transmission lines and 262 substations with more than 450,000 MVA of transformation capacity. In terms of the inter-regional capacity, we have a share of more than 85%. Our inter-regional capacity owned by us is about 95,000+ megawatts. Next. This half year, we have done a project execution of INR 13,275 crore.
This is, by far, I think, one of the largest in the H1 in the recent times. Previous quarter, we did INR 5,642 crores, and this quarter we have done INR 7,633 crores. In terms of our CapEx, against a target of INR 7,500 crores for the current year, we have done INR 3,695 crores by the half year. As we speak, we have crossed more than 60% of the target, and we are trying to expedite the CapEx and reach somewhere around 90% by the December end. In terms of project commissioning, we have done 2,100 circuit kilometers of transmission lines in this half year. Several of the TBCB projects have been completed. The Vindhyachal-Varanasi transmission system has been completed, Fatehgarh transmission system.
The first intrastate transmission we have taken up, Jabalpur-Firozabad, that has also been completed. Medinipur-Jeerat system, which is being implemented in West Bengal, most of it is completed except for one line, which is from Jeerat to Subhashgram, which is under construction. Otherwise, the rest of the elements have been completed significantly. The other lines include Ajmer-Bikaner for the renewables and the AC system for the Raigarh-Pugalur system, which was holding up the entire commissioning. That we are very happy to say that has been completed in this quarter. The Pugalur to Thiruvananthapuram line, 400 KV double circuit line. With that, we have been able to complete the entire Raigarh-Pugalur transmissions, Pugalur-Thrissur system in this half year. In terms of the transformation capacity, the Jeerat substation has been completed.
Raigarh-Pugalur Bipole 3 has been completed and Fatehgarh 2 and Bhadla 2 transformation capacity of 3,000 MVA have been added. All in all, we have added 3 new substations in this half year, Fatehgarh, Bhadla for renewables and the Jeerat for the system strengthening in the eastern region. Inter-regional capacity addition has been 5,700 MW, one pole of Raigarh-Pugalur plus 4,200 MW at Vindhyachal-Varanasi system. Now in terms of project completion, I also want to add that post the half year, we have also completed the Raigarh-Pugalur system. On October 25, it has been declared commercial, and we have been able to complete the entire system of the Raigarh-Pugalur 6,000 MW.
Most noteworthy point is that this system has been commissioned during this pandemic period, progressively overcoming many ROW and also challenges in terms of floods and, I think, also river crossing, we had issues in Krishna and Tungabhadra. All those have been overcome by showing very strong project execution skills, and the entire 6,000 MW has been progressively commissioned in the last one year. If we now turn to the operations performance, our availability has been 99.82% in this half year, and the trippings also are at 0.22 per line. These are in line with what has been in the past year. Now, looking at the financial performance, I will cover this very briefly, for you have already got the results.
Our turnover for the half year on a consolidated basis is INR 20,906 crore, up by 6% from INR 19,648 crore last year. This is the total income. PAT has been INR 9,375 crore, up from INR 5,143 in the previous half year. Next. Transmission charges income has gone up by 9%. Consultancy services are up by 61%. I'm talking of the consolidated results. Telecom income is down, that is because of the one-off issue we had for the settlement with one large customer in the Q1. Other income is down predominantly because of lower surcharge on the back of better realizations and dividends received, and impact briefly of the monetization of five assets. Thus, overall, the transmission...
I mean, total income has gone up by 6%. Operating expenses are in line, up 12%, and gross margin is up 6% total EBITDA. Overall, we have the profit after tax, which is up by 85% on a standalone basis and 82% on a consolidated basis, primarily riding on the InvIT profits which were booked in the Q1. If we remove that also, I think this will be approximately 9%-10% growth has been there in the profits. Next. Some of the key financial performance indicators. Gross block is now INR 2 lakh 43 thousand. Work in progress is about INR 10,195 crore. Significant reduction on the back of commissioning of Raigarh-Pugalur and many other systems.
The net equity has cleared down to 6,436, and return on network, not annualized, is 12.2%. EPS this half year has been 13.51, standalone basis. Next. Some of the key numbers which you would like to see from us. Surcharge, as I mentioned, has significantly come down compared to last year, from INR 220 crores to INR 89 crores. Better realizations. Incentive is up, INR 120 to INR 136 crores. Consistent operational performance is the key for this. Our interest from subsidiaries and JVs slightly down to INR 204 crores on the back of InvIT monetization. Dividends are flat from the JVs. Subsidiaries, lesser, because the five operating assets have been monetized. Trade receivables are lower, and they are on a higher revenue booking, they are lower.
In terms of other numbers, they are for your information. If we now turn to the segment of telecom and consultancy. Telecom income has been lower because, as I mentioned in the Q1, we had to book certain rebate offered to a large customer for the past year tariffs. The network availability is 99.99%, which is indeed very high. In terms of our consultancy income, there has been a significant jump because of the progress in the northeastern projects where we are doing for the Government of India consultancy assignment. There has been a significant jump in the consultancy income. There have been many new orders and expression of interest which are awaiting finalization. Next.
As I present here the commercial performance, you can see from Q1 FY 2021 to Q1 FY 2022 and then Q2 FY 2022, there has been a significant reduction in the outstandings. From INR 7,080 crores, we have come down to INR 4,953 crores from Q1 to Q2. These are roughly about 45 days of receivables. We have outstandings from J&K, Tamil Nadu, Uttar Pradesh, which are significant. Otherwise, the realizations have been pretty good. Often, in between, there will be some moments of accumulation, but then by and large, the pace of realizations has been good and we have been able to reduce our overall receivable significantly. Yeah.
Going forward, we have works in hand of approximately INR 27,500 crore, ongoing projects and new projects and TBCB projects which are under different phases of execution. We believe that there is a good potential for the new orders to come in. Briefly about the interstate transmission system. There are about roughly INR 26,500 crore of projects under TBCB, which are expected shortly. We are also under the Revamped Distribution Scheme looking for opportunities for investment in smart metering, where the target is 25 crore meters by 2025 and 1 crore by 2023. We are in discussions with many states in how we can get into this opportunity. There is also distribution infrastructure augmentation. We have...
I mentioned in the last call that post this we will be initiating discussions. We have had one kind of round of discussions with many states. Significant interest has been evinced by the states, and detailed formulation is being discussed with them. Hopefully, by the end of this fiscal, we should have some concrete shape in this regard. We are also looking to the states for incorporating JVs for improvement of their intra-state and above transmission system. We see significant traction there. Another important revenue we see is battery energy storage system, where one tender is expected shortly for 1 GW BESS. We are looking at it as a complementary to the transmission business and look to make a good investment opportunity there.
International business, besides the consultancy, we have progressed in the one cooperation agreement we have signed with the Africa50 for a transmission system in Africa. That has seen some progress. There has been in-principle agreement with the country, and now we are entering into a development agreement to take this forward. Hopefully, by the end of this fiscal there will be greater clarity in terms of the final approvals and documentation. In the telecom space, we are very happy to say that, because of the high availability of the network, we have received an in-principle approval for a large order from a government department to set up a network for them with 1,000 locations, connecting 1,000 locations riding on our broadband capacity.
We see a revenue potential of INR 750 crores over the next 10 years. We have approved an investment for augmenting the network by 6 terabytes, and it will be involving an expenditure of nearly 130-odd crores, and that will be a big investment. In addition to that, we are also looking to invest in data centers. We have already started the process. A petition is being filed with the CERC to seek approval for leasing a part of the land at some of the substations for setting up data centers. Our technical consultant bids are under evaluation or have been invited, and we expect to invest into this business going forward. The separation of telecom business into a subsidiary. Also there have been steps.
We will be very shortly filing the application for the registration of the company. Then the further progress in terms of agreements and separation of the assets through a slump sale route will take place. By the end of this year, we expect to see the separation of the telecom business into a separate company. Then it will thereafter take up this international long-distance business as well. Next. Last slide. We got the recognition from the S&P Global Platts top 250 energy company rankings. We continue to be the fastest growing electric utility for the eighth successive year and the ninth fastest globally. We have been shortlisted as the finalist for Award of Excellence in Power segment.
Also the InvIT transaction is shortlisted for the Deal of the Year in the Financials category. Dun & Bradstreet PSU Award under the Power Transmission category. These are some of the notable awards we have received in this quarter. I pause here and will look forward to your questions. Thank you so much.
Thank you, sir, for the detailed presentation. We will now begin the question and answer session. Divya from ICICI will be coordinating for us along with me. Thank you, Divya, and over to you.
Thank you, Rahul. Now open the floor for Q&A. Participants who wish to ask question may raise hand. We'll announce your name and unmute your lines. If you are unable to raise hand, kindly put your questions in chat or Q&A window, and we'll ask on your behalf if time permits. We'll wait for the questions to assemble.
First question is from the line of Mohit Kumar. Please go ahead, Mohit.
Good afternoon, sir, and congratulations on a good set of numbers. My first question is, the first half has been, you know, pretty lukewarm in terms of bidding. I believe there's hardly any bidding. Do you expect all this INR 26,500 crore of bidding to happen in the next 12-18 months? The related question is that, does the recent modification by the Ministry of Power will improve the identification of transmission projects, thereby enabling a higher growth as far as industry is concerned? That's my first question, sir.
Yeah, definitely, the modifications in the approval process for the new schemes is a very welcome step. It will speed up the process to bring the bids to the market. No doubt about it. As far as the schemes are concerned, I think, they will come progressively to the industry market, and we do look forward to participation in them.
Sir, the number which proves that the bidding activity to go up to INR 25,000 crore as we move into FY 2024 and FY 2025.
Sorry, I couldn't get your question.
Sir, my question is that, do you expect the bidding activity to improve up to 20-25 thousand crore per annum as we move forward? Is that a fair expectation?
Bidding activity. See, the bidding activity will significantly go up. There is a, you know, focus on building transmission for the potential growth in the renewable capacities. Definitely there will be a pick-up in the bidding. Whether it will be the number you are indicating or what could be the number, I'm not able to exactly confirm that. Yes, there will be a speeding up in the bidding for renewable energy transmission systems.
Okay, sir. Secondly, sir, on the investment in distribution companies, do we have something in the mind as how that, how much we are willing to invest as debt or equity? Is there a number which you're looking at to invest in FY 2023 or FY 2024? Just some broad numbers, some broad indication that the capital allocation will go towards this particular, you know, segment.
See, these are very early days to give any number. We are open to invest. You know, if we look at it, we had in the past invested approximately INR 20,000-22,000 crore annually on the ISTS system, and that is the kind of potential we can easily achieve. Therefore, we look to kind of you know reach those kind of levels. If we get even INR 60,000 crore of investment opportunity in these companies, we will be able to handle it very easily. There is a significant opportunity there, particularly in the smart metering as well as in the distribution, I mean, the trusted transmission infrastructure, which we are trying to take up with the DISCOMs and the state utilities and invest there.
Number for capital allocation, resource constraint is not there. It is the opportunity site where we can come to an understanding with the DISCOMs or state utilities. That is the major concern or the criteria.
The last is there any proposal to move the cost plus assets into the InvIT platform?
See, there is immediately no such proposal, but we are open to evaluating that as well. In the National Monetisation Pipeline, we have a target for INR 45,200 crores. We have already done INR 7,773 crores. Next year we target about INR 7,500 crores. As of now, we have enough TBCB assets to do the monetization, which we believe is easier. Having said that, we are open to looking at the RTM assets if required or if there is a good opportunity to monetize.
Understood, sir. Thank you, sir. Best of luck.
Thank you.
Thank you. Thank you. Next question is from the line of Lavina. Lavina, please go ahead.
Sir, just a little bit more. I just want to understand a little bit more on Ladakh project. Where is it at this stage, and how are you viewing it right now? Thank you.
Ladakh. We have already submitted the detailed projects report to the government. It is under consideration of the government.
Sir, size-wise it remains approximately the same, what has been discussed in the past or still more? Okay. Thank you.
Thank you. Next question is from the line of Sumit Kishore. Sumit, please go ahead.
Hi. Thanks for the opportunity. My first question is, in the previous presentation for Q1 results, you had talked about INR 108 billion opportunity in terms of immediately upcoming projects which has increased to INR 26,500 crore. You had given a breakup of intrastate and interstate back then. You know, what is the breakup now and, you know, what has driven the increase over the last three months?
Okay. I'll just read you these numbers. There has been some improvement in our renewable energy systems. I think the Khavda system is one which has been now formulated. That is one addition. The breakup between intrastate and interstate, I will give you. I think I'll come back to you on this. Let us take the next question. I'll come back to you on this.
What is the size of Khavda?
Khavda is, I think 24 or so, 27 GW of total renewables. Potential for this is. There are several elements in the Khavda system. Okay? I think it is Khavda Phase IV Part C. Roughly INR 4,500 crore is there on Khavda system only.
I see. We'll wait for the other numbers. My second question is, regarding the business model that Power Grid would be following as far as smart meters are concerned.
I think this entire INR 26,500 crore which we are talking of is primarily interstate opportunity set. Okay? Intrastate is only-
Sure.
Intrastate is only about INR 500 crore.
Okay. We should read that the increase which has happened in last three months is mainly because of renewables transition project.
That is right.
The timeframe over which you expect this to get awarded is what, six months or 12 months?
They should be coming anywhere between six and 12 months.
Okay.
Some of it will be linked to the renewables also, so.
Okay. My second question is regarding the investment that you are planning in smart meters. What would be Power Grid's role there? In the second element of the revamped power reform scheme, what is going to be Power Grid's role? What is going to be the business model?
Sir, I mean, in the smart meters, the business model is one of TOTEX where we would be doing the investment and also operation of the system for the next seven years or eight years. We intend to invest into the entire smart metering system, the metering data management system, and provide those services to the utilities on a per meter per month payment basis. This is the business model we would like to explore.
What is the expected return?
These are yet to be, because some of them can be under the TBCB model and some will be, hopefully through an understanding with the utilities on MOU basis. We are exploring both the opportunities and, you know, the returns will be, I mean, when we would like to target what is there in the MOU route or, I mean, and RTM basis, but it will again depend on the final negotiations we will have with the utilities.
Okay. I'll get back in touch with you. Thank you.
Thank you. I would request participants who have asked their questions to put their hands down so that we can assess the question queue. Next question is from the line of Subhadip Mitra. Subhadip, please go ahead.
Yeah. Good morning, sir. My question is with regard to the TBCB pipeline. While we are looking at about INR 26,000 crores of projects which are currently in the bidding stage, how do you look at the landscape, let's say over the next two to three years? You know, is there a basket of maybe INR 40-50 thousand crores more projects which can potentially come to the TBCB pipeline, whether it's for renewable connectivity or otherwise?
Beyond this, I think the schemes are still under formulation and deliberation, so it will be very difficult to kind of give a number at this point of time.
Understood. Is there any ballpark figure which is currently, you know, under evaluation?
No. You know, there is a discussion around preparing a long-term roadmap for the transmission to take it up from current levels to the level of 500 GW by 2030 or 450 GW, you know, previously. When that kind of a scheme is formulated, we will be able to come to a more clear assessment. If we look at the infrastructure pipeline, National Infrastructure Pipeline, it talks of about INR 3 lakh crore investment in the transmission sector by 2025, and both interstate as well as intrastate. Beyond that, I think schemes are still under formulation. They will be looking to the growth in renewables and also kind of setting the pace for growth of renewables. It is a.
I mean, it will be too early to hazard a guess at this point in time.
Understood. On this point, you know, what you mentioned that there is INR 3 lakh crore investment in transmission expected by FY 2025. Roughly how much of this would have already gotten spent out of this INR 3 lakh crore, in your estimate?
See, I can tell as far as Power Grid is concerned, because the rest of it is, I don't have that kind of number. Power Grid planned for INR 65,500 crore. Up to this point, we were to spend, roughly INR 35,000 crore, and we are on track for the end of FY 2024.
Okay, understood.
Understood.
Secondly, with the investments in partnership with the states, you know, whether it's on smart meters or infrastructure, would it be possible to again get, you know, a sense of what could be the rough bifurcation between the CapEx and on smart meters and other infrastructure that you would be looking at?
The smart meters, we are, very, you know, I mean, contemplating to come out with some large bids to get a sense of the market and be in a position to offer competitive prices to the DISCOMs. Roughly INR 5,000-10,000 per meter is the kind of investment. We would be interested to target at least 2 crore meters in the next, say, four years. Out of the 25 crore meters which are being talked of, we would like to target at least two crores, and that would require investment of, say, INR 10,000-12,000 crore over the next three years or so.
That is the kind of, I mean, ballpark number I can say, but again, it is a function of the acceleration in the process by the DISCOMs and adoption issues. Otherwise, we are very keen to do this business.
Understood. Barring smart meters on the rest of the infrastructure build up, where you would be, you know, talking to the DISCOMs, would there again be a similar ballpark number that you're targeting?
Yes.
Uh, so we.
You can assume that.
Another INR 10,000 crore-INR 12,000 crore that could potentially come from that?
Yeah, it should potentially come from that. Because there are many schemes, and when the kind of growth in renewable capacity or the conventional capacity takes place, to absorb that, there needs to be significant investment even in the intrastate or the distribution infrastructure. We believe there is an opportunity out there. We have already initiated dialogue, and we will take this up much vigorously in the second part of the half year.
Understood. Thank you so much for answering my questions.
Thank you. Next question is from the line of Puneet Bharati. Puneet, please go ahead.
Yeah, thank you so much. My first question is with respect to the INR 7,500 crore CapEx that you talked about in FY 2022. How should one think about this CapEx number going into FY 2023?
Similar or maybe with a slight upward bias. Maybe we can think of INR 7,500-INR 10,000 crores.
I think this INR 11,500 is largely for RT and project, right? Are we expecting more?
No, it is not so.
Okay, understood. Second, when you talk about the smart meter opportunity, is it something similar to what probably EESL JV is also doing where you're an associated partner?
That's right. The EESL, where we have increased our stake to 33%, has a joint venture, where it has a 49% stake. They are doing smart metering, IntelliSmart. They are currently the implementation partner for EESL, but on their own also they are participating in bids. The opportunity set out there is so large that, you know, there is space for both EESL, the joint venture, as well as Power Grid to do the business.
On the battery storage side, what kind of opportunities you see? How large a tender do you foresee?
See, we will be interested in large tenders. We have created a separate group within the company to evaluate these battery storage systems and participate in it. CEA has also given, I think, 27 GWh kind of a storage capacity requirement going forward. More renewables will require investment in storage also to optimize the transmission network created. Therefore, we believe there is an opportunity there for significant investments.
What kind of technology are you going to adopt for this battery storage? Is that finalized yet?
No, we are not. I mean, specific on any particular technology, but I think the lithium-ion battery storage system is the, I think, most common and well accepted for large systems. That is what most likely to be considered. We are not having any particular preference for.
Understood. That's very helpful. Thank you so much for your comments.
Thank you.
Thank you. Next question is from the line of Anuj Upadhyay. Anuj, please go ahead.
Yeah, thanks for the opportunity, sir. Sir, I need one clarity. In your opening remark, you had mentioned that Power Grid is eyeing close to INR 60,000 crore of investment opportunity in smart metering and intrastate distribution network development. While answering to one of the earlier question, you mentioned that in the smart metering we are eyeing INR 10,000 crore-INR 12,000 crore of investment and similar level of investment in the distribution network as well. What about the balance thing, sir?
No, I don't think I said the number in my initial remarks. This is the number which I have given you. These are the kind of investment size which we can look for as far as Power Grid is concerned.
Is the size you said in the three lakh?
Yeah.
INR 3 lakh, one of which we are eyeing 60,000 is what you had mentioned. INR 6 lakh-
Right. INR 65,500 crore is the NIP number, which I mentioned.
Yes.
In reference to smart meters, I have not said. See, in the presentation also we have shown 25 crore meters, which will require an investment of roughly INR 1.5 lakh crore.
Overall it's INR 3 lakh. Okay.
That's right.
Oh, fair enough, sir. We are eyeing somewhere around INR 20,000-25,000 crore of total investment across both the distribution network and smart metering. Is that correct, sir? Over next three-four years.
Over the next three years. Yes.
Fair enough, sir. Sir, could you throw some light on the issues related to the power evacuation in Rajasthan because of the GIB issue? What is the current status and what quantum of project actually has been stuck because of the same as of date?
We won five projects last year. Of the five, we got licenses for two. For the other three, licenses are yet to be received. The issue came up because of the GIB order. There has been, I mean, a committee constituted by the Supreme Court, which is to recommend overhead lines after considering the technical issues and all. Our lines are primarily 765 KV lines, and these are not possible to be underground, so we have made our representation to this committee and the committee is currently deliberating this, and it will be, I hope, very quickly resolved. Because 765 KV AC transmission, there is no way it can be done through underground cabling. Expect a resolution very quickly.
I think roughly, INR 5,000-INR 6,000 crores of projects are currently held up because of this.
This 5,000-6,000 are projects, sir. TBCB.
Yeah, TBCB projects.
TBCD.
I mean, we are, you know, progressing in terms of, supplies, engineering, all that is taking place, but execution on the ground will pick up once these issues are cleared.
Right, sir. These are part of our work in hand, the 26,500 you mentioned.
That's right. I believe this will be very quickly settled because it is not possible that, you know, none of these lines are going through the critical areas. These are all potential areas. It is not part of the priority area also. I don't think there should be any issue there.
No, fair enough, sir. Lastly, on the capitalization target for the year, current year.
We stand by what we have told in the last call as well. It will be somewhere between INR 17,000 crore-INR 20,000 crore. We have done, I think nearly 16,000+ already, post September, if we include. We stick to that number.
Fair enough, sir.
Alright.
That's it from my end. Thank you for the opportunity.
Thank you. Next question is from the line of Celine Tan. Celine, please go ahead.
Yeah, I'd like to ask about the battery storage projects. I understand that globally, actually LCOS is not a priority yet. I would like to understand how you plan, what is your cost base and how you plan to make a return from that. Are these projects under some form of a regulated return or will they be kind of TBCB and therefore what do you expect of the tariffs and your costs?
You are very right. Costs are not yet settled and they have to make economic sense when viewed in totality. Technically these are going to be invested to make renewable power a kind of round-the-clock power, so and better serve the transmission system and therefore overall economics will drive the investment in this area. Most of it, we believe, will come through TBCB route. It will have to be seen what kind of competition, what kind of. Because a large number of players are interested in this. Battery storage is one which is of interest to a wide variety of segments: generation, distribution, transmission, and even outside the current electricity value chain, they are also looking at this.
We expect a very strong competition and it is too early days to talk in terms of what kind of investment potential and what kind of returns we can see there. Next, please.
Thank you.
Next question is from the line of Ajinkya Bhat. Ajinkya, please go ahead.
Yeah. Thanks a lot for the opportunity, sir. Sir, two, three questions from my side. Number one, on the renewables, evacuation capacity, you mentioned, Khavda location where, you mentioned 27 GW of evacuation and INR 4,500 crores potential investment requirement. If I apply the same benchmark to the totl INR 26,000 crores of opportunities that you see as of now, that can potentially take care of evacuation worth about 160 GW, which probably could be sufficient for next five or six years. Would that be the right assessment, that once these projects are ordered out, we might not see another bout of investments for another five, six years for renewables evacuation?
I don't think that is a very fair assessment because I don't see how do you reach to this conclusion.
You mentioned.
Sir, you mentioned INR 4,500 crore.
You mentioned 27 GW of evacuation.
No, no. It's not 47 GW. No, no. These are being prepared in phases. Okay? I don't think this is. Your arithmetic is not right, because it is not that for the entire 27 GW this has been prepared. As far as. I think these are the schemes which are being envisaged for the next two-three years, generation which is likely to come up. It is not that after, you know, this or the next five years there will be a holiday. No, it's not like that.
Sir, secondly, as I understand, especially for these large locations like solar parks, the evacuation infrastructure is basically a common evacuation infrastructure and then multiple land parcels are given out, or after capacity auction to various bidders. From an incremental perspective, once the current common evacuation infrastructure is in place, do you think that the incremental investment from your side would be linearly proportionate to the actual capacity addition? Or would that be a drop in that incremental investment requirement?
See, when the transmission planning is done, it is done for a certain potential. For example, when you talk of Rajasthan, the next block is about 20 GW in Rajasthan, which is under consideration. For the next 20 GW, once these corridors have been built, so long as it is within the 20 GW, it will not require much investment. After that, again, you have to plan for another 20 GW or 10 GW, depending on the next level of potential. You know, I mean, what I would like to say is that these are all built for a certain capacity. Once that capacity is reached, you have to again invest into it in a big way to take it up for the next incremental capacity plan.
Okay. Understood. Sir, final question from my side. The investment in the smart meters and related programs, you mentioned that you will invest your money, plus you will also do O&M for seven or eight years. Now, does Power Grid plan to undertake this O&M in-house? Do you have that kind of experience, or would it rather be an outsourcing to the actual equipment providers, say the likes of Siemens, from whom you might source some of these smart meters, one of the players in this industry? Would that be the model? Because if that is going to be the case, then the core role of Power Grid again reduces to just as a provider of capital, rather than operational contribution. I just wanted to understand that bit. That's it from my side. Thank you.
See, in the smart meters there are two, three components. One is meter manufacturers setting up the meters installation. There is also a big role for the system integration and maintenance of the system. Power Grid will definitely provide the capital, but its technical inputs are in terms of system integration and subsequent operations. As far as the O&M is concerned, some part of it will have to be sourced from the meter manufacturers because we don't have the kind of spare parts or the servicing capabilities.
As far as the data analytics and meter data management system and other things go, we will definitely be playing a role there. It is not just a provision of capital, but it is also the system integration and maintenance where Power Grid will have a role to play.
Got it, sir. Thank you and all the best.
Thank you. Next question is from the line of Bhavin Patel. Bhavin, please go ahead.
Yeah, thank you for the opportunity. Could you help us with the expected commissioning target for the next financial year from 2023?
Next year commissioning target will be between INR 12,000 crores-INR 15,000 crores.
Sure. In the INR 26,000 crore pipeline that you highlighted for the next six to 12 months, would it be possible to share what could be the annualized opportunity set for the FY 2023 and 2024?
No, I think most of it will be once they are out in six months, they will have a commissioning target of 18 months. 18-24 months will be the commissioning targets.
No, let me rephrase. The opportunity bidding pipeline, which is INR 26,500 crore over the next 6-12 months, what could be that number on an annualized basis, for the next three years?
You are asking how much is the bidding likely to come in the next three years?
Yes, please. Yes.
I know. I would not like to hazard a guess there. It is again a function of how much RE potential is identified and expected to come. We have a large RE target to be met. Significant investment opportunities will arise, as I mentioned initially, but I would not like to put a number there.
On the Ladakh project, any clarification from the government whether it will be a regulated model or TBCB model?
No, not yet.
Just last question. On the data centers, if you could help us. You had earlier mentioned that we have some surplus lands in our existing substations. If you could just give us some detail opportunity-wise and expected timelines on that, it will be useful.
We have already floated out a tender for a technical consultant for one data center at Manesar. Hyperscale data center, we are again engaging another for the hyperscale data center, technical specs and the models. We have gone to the CERC, as we speak. Either today or tomorrow, the petition should have been filed, for seeking permission to lease out land, because under Section 17 of the Act, we need the approval of the CERC to lease land. The permission to lease land for the data center business to our subsidiary will be sought by this petition. All in all, we expect the first data center to come, say, between 18-24 months from now.
The kind of investment where we look at it is, say, maybe INR 1,000 crore in the next year and a half.
Sure. Thank you so much.
Thank you.
Hello. Yeah. We've got the next question from Aniket Mittal from SBI. Aniket, you can go ahead. Just a second, sir.
Yes.
I'm just trying to figure out the unmute.
Hello.
Sir, bear with me for a moment. Just one second.
Yes.
Just till the time Divya relogs in, there was some network issue. I will just ask a couple of questions which were there on the chat. There was a question from Deepika Mundra. The guidance for INR 7,500 crore-INR 10,500 crore CapEx next year includes smart metering distribution. Those together will be INR 5,000 crore each year. Is this correct?
As of now, the INR 7,500 crore which we talk does not include any significant investment in terms of smart meters or distribution.
Yeah. Divya, are you back?
Yes. Apologies for that. Next question is from the line of Aniket Mittal. Aniket, please go ahead.
Yes. Thank you for the opportunity. Just a couple of clarifications, sir. Firstly, on this INR 26,500 crore pipeline, these would largely be the projects under the original 66.5 GW that were in MoUs, right? I mean, there's no new projects that have been added to this pipeline as such, right?
Yeah. It is largely the renewables for which it is being built.
Part of the original 66.5 GW.
Yeah. It is part of the entire set of 175 GW.
Just to understand this more from a planning or an execution perspective, like you said, some of these projects in Khavda, in Rajasthan are something that are being planned, but they are not yet coming on board. An earlier thought was that, you know, whenever we lay these transmission lines, those need to be matched with an appropriate generation capacity component. Just to get an idea, is it because the corresponding generation capacity is yet to be formed up, that is why we are seeing some delay? Or is it this issue of Great Indian Bustard that's you know come up wherein we now have to relook at some of the transmission schemes.
From a planning point, given that you operate as a CTU as well, if you can just lay some thoughts as to what's delaying some of the new schemes coming up on board.
See, renewable generation and transmission are very, intrinsically linked, right? You always have a chicken and egg situation that until the transmission visibility is there, renewables are not keen to invest. If we go on waiting for the renewables to come up, formed up, then transmission will get delayed. Rather, you know, the renewables will be able to establish themselves in less than a year, and transmission takes more time. The thought has kind of been that we should set up the transmission ahead of the generation. Therefore the system of approvals has been streamlined significantly. More likely that following our rules notified by the ministry for the transmission system planning and all, there is going to be sped up process for this scheme approvals.
Definitely they will be set up ahead of the generation. It will be planning these to ensure that there is not a significant gap between the transmission and generation is a big challenge. Now I believe that transmission will be set up ahead of the generation so that it is also able to create the demand in addition to supposedly the growth of the renewables. In that sense, we can see more transmission to come going forward.
If we-
Without a LTA, applications and sanction, transmission systems were not being taken up. That connect is being now dispensed with. Transmission systems will be built ahead of the generation. Definitely, you know, depending on the response and all, the next level of investment in transmission will be made.
Sure. Just a few more of the comments you made. You said that around INR 75 billion worth of assets are something that you're looking to monetize next year as well to the unit. If you could let us know which are these assets that you'll be looking to transfer to the unit, let's say in this year and next year as well.
There I said INR 7,500 crores. That is the target for next year. Mostly these will be TBCB assets and also, the residual 26% in few assets which we will have to transfer as per the agreements.
In terms of TBCB assets, mostly we someone's got interconnector project.
That is a major one which is under consideration.
Just one last question on this quarter's number. If I were to, you know, do certain adjustments for the LPS income that you've earned this quarter, and the dividend that you've received, the number on a quarterly basis seems pretty high. If I adjust for the-
It's not audible. It is not clear.
Sure. Can you hear me now? Is this better?
Better.
Just one question on the quarterly number. If I look at your numbers, if I adjust for the LPS income for this quarter and next year's quarter, on a YY basis, that number seems pretty high. That's almost core base is almost an INR 5 billion jump in the annual profitability. Is there some other one-off that I'm missing out?
Charge down, dude, and down.
Which LPS income I could understand.
Sir, Late Payment Surcharge income, so
Okay. Yeah. See, I think significant increase is because of the additional CapEx.
Commissioning.
Commissioning of assets. Otherwise, you know, in the whole half year, there is an INR 300-odd crore increase compared to the previous. Due to these one-time orders which have been received from the CERC. Other than, I don't know. I mean, there is nothing one-time or anything in there.
Yes, sir. Sorry, one-time orders are part of your prior year sales.
Pardon me?
Sir, these are part of the prior period income that you gave in your notes.
That is right. That's what I'm telling you, from the notes on.
Nothing apart from that. Okay. Okay. Sir, thank you.
That's it.
Do you hear me take the next-
Thank you. Next question is from the line of Murtaza Arsiwala. Murtaza, please go ahead.
That seems to be a very. Hi, sir. Just wanted to check on the quarterly numbers. You know, the movement in regulatory deferral account, you had a INR 500 crore positive contribution in the previous quarter, INR 339 crore negative in the current quarter. If you could just highlight which are the key components, you know, both in the last quarter and the current quarter, which have caused that difference.
Basically because of the deferred tax.
Okay. Thank you.
Thank you, Murtaza. Next question is from the line of Swarnim Maheshwari. Swarnim, please go ahead.
Yeah. Hello, sir. Thanks for the opportunity. Sir, two set of questions. First, sir, you know, just wanted to better understand on this smart metering opportunity. Now, is there something like an embedded, you know, orders over here where you have to, in order to actually take those system integration and system contract orders or the O&M orders you have to invest also? Or is it possible that, you know, you can actually do that on a standalone basis also for a third party?
No, embedded system means I couldn't get you. What exactly you meant by it?
Basically, sir, one is about the investment in the smart meters that we are talking about. Second is the services that you are likely to provide, right? For the system integration or the O&M services.
No, it is entire one combined package. It cannot be just you put the smart meter and you know. No.
Right.
We have to set up the smart meter, do the headend system, communication systems, then the meter data management system. Whole works have to be done. Output to the utility has to be provided in terms of analytics and also billing information so that they can raise the bills.
Right. That means that it is embedded and you cannot do it for any third party also, right?
Any third party means?
For someone who is installing smart meter, can you actually provide a system integration solution or something like that? That's not possible, right?
Yes, yes. You get all these components separately also. You get them together. I mean, otherwise, you know, there has to be some value addition from Power Grid also. Otherwise, what is the point?
Okay. Sure.
No, that is not the model we are looking at.
Right.
Right.
Okay, sir. Secondly, just, you know, wanted your thoughts on the recent guidelines, which actually, you know, talks about the change in the planning. Now, what we understand, the planning is now given to the National Committee on Transmission. Is this like, what according to you, likely to expedite the transmission lines rollout? Also, sir, now the load system evolution, you know, that will drive the planning rather than the generation base. Ultimately, is this likely to expedite the overall transmission framework? Your thoughts on that.
Definitely. See, it is not that, the planning process has been, changed or the entire thing. What has been done is a certain degree of delegation has been provided to the CTU and to the NCT also to approve schemes. Previously, one size was, you know, fits all for any level of investment, be it an addition of one transformer of INR 50 crores or, large scheme of INR 10,000 crores. All were being dealt with the same yardstick and process. Now, the CTU has been given the power to approve up to INR 100 crores and the NCT up to INR 500 crores, beyond which the government will approve. This will definitely speed up the process.
You want a transformer to be added in, say a X substation because load has increased and the investment is only a few crore INR, then it need not go through the entire process. The RTC will do it and then, you know, the CEA CTU will plan, take it to the RTC, and then it will be approved by the, CTU. So in that sense, it will definitely speed up the process. The fundamental shift is that, you know, to achieve the larger goal of 500 GW, we have to do planning and, implementation of transmission ahead of generation so that there is a signal for the renewables that, okay, in such and such location transmission is being built, we can plan for the renewable there.
That will support the growth of renewables also, and definitely it will speed up the process of investment in the transmission sector.
Got it, sir. Thank you so much.
Thank you.
Thank you.
Thank you.
Next is from the line of Bharani. Bharani, please go ahead.
Good afternoon, sir. First question on the CapEx for the smart meter. We assume about INR 5,000 crore of CapEx over and above the-
Mr. Bharani, you are not very clear. Can you please come closer to the mic or speak a little loud?
Is it better now?
Yeah, definitely.
Yeah, yeah. Sorry. The question on the smart meter CapEx of about INR 5,000 crores, should we assume this over and above the INR 10,000 crores of CapEx in transmission from FY 2023?
We said INR 7,500 crore-INR 10,000 crore. INR 7,500 crore is definitely out of our traditional business. On top of it is what we are looking from the smart metering and distribution opportunities.
Right. This CapEx in smart metering will also happen in the 30/70 equity debt kind of a mix or how will it be?
Depends, you know, how we conclude with the utilities or, if it is a TBCB, then we may have to be more aggressively levered.
Got it. One of your observations was that earlier we used to do close to INR 22,000 crore to INR 25,000 crore of yearly CapEx, and we could easily, you know, achieve that in the future. Any ballpark timeline where we can get to this number by FY 2024 or 2025?
There is no ballpark. It is our continuous striving to reach there again, you know, because all the investors are very keen that our growth and investment cycle picks up again. As I mentioned, it is a function of the opportunity set. We are continuously exploring and trying to reach to the adjacent businesses in terms of smart metering or intrastate or distribution infrastructure. To put another time frame for that will be very difficult at this point.
Appreciated. Final question. Usually we have this bid process coordinators, this PFC, REC, who give out these TBCB projects, where you know the data of the bid outcome is given. For the projects in Khavda, Ladakh, also the bid process coordinators would be the same?
I don't know.
Right. No, trying to understand where to monitor the progress of awarding of these, you know, projects, TBCB projects.
Maybe CEA site can be an opportunity, I mean, possibility.
You're telling PFC and REC are not the bid process coordinators?
I am not saying that.
Okay.
I'm not saying that. I'm saying I am not the one to answer this question. I don't have that input.
Okay, no problem.
Yeah.
Thanks. All yours.
Thank you, sir. That was the last question. There is one question which has been posted, and then we'll conclude the meeting. The question is from Mr. Devanshu. Dev, he's asking: Can you share some more details on the Africa project, the RE investments, and some more clarity on, you know, the plans for the international projects going ahead?
I don't think I have the right to share at this point the details. It is an investment opportunity of about INR 2,000 crore, where we are planning to sign the development agreement and then take it forward. When more certainty is there, we will definitely share the details. We are looking for more opportunities where investment outside, but we are not very aggressive as of now in international investments.
Right, sir. Sir, that was our last question. With that, I would like to thank you and the entire senior management of Power Grid Corporation for the extensive discussion that we've had today and your time. Thank you for your concluding remarks. Handing over to you. Thank you very much.
Thank you very much, Rahul. I think, I can only say that, there is a significant opportunity for the investment, in the transmission segment and also, in the smart metering and this, intrastate infrastructure investment segment. The recent changes in the procedures for approval of transmission schemes will definitely accelerate the flow of projects into the segment. Power Grid is well-positioned to capitalize on them and look forward to your continued support. Thank you.
Thank you very much, sir.
Thank you.
Thank you.
Thanks to all the participants for joining us today. Thank you, sir. Have a great day.
Thank you.