Good morning. I'll make a brief presentation on the Q2 results and the outlook. Very briefly, you are aware about BharatNet, which is about 172,700 kilometers of assets and 267 substations. Our inter-regional capacity is about 97,000. As you are aware, the increased inter-regional capacity is about 110,000 megawatt right now. Triple-A rated.
I'll very quickly go through. This is the template we have been using for several quarters now. This half year, our CapEx has been INR 3,319 crores. Our capitalization about INR 3,131 crores. The ERSS-18 scheme, the power plants under the old system and also the PIMDUNA intrastate transmission system in Madhya Pradesh are being commissioned.
Operational performance, we continue to have availability of 99.82% this half year as well. Trippings have slightly come down from 0.22 to 0.20. As you are aware, we are regulated, and as per the regulations, tariffs are based on availability.
Up to 99.75% availability, the tariffs are fixed. We are quite assured, earning incentives. Financial performance, you would have seen, here we have the Q2 performance on a quarterly basis. INR 11,349 crores revenue, about 10% increase in the income and PAT has also grown 10% on a quarter-on-quarter basis to INR 3.678 crores. H1 basis again, income growth is about 8%.
PAT is up by 11% to INR 7,481 crores. Excluding the one-time exceptional item which was there last year on the profit on account of asset monetization, which was in the first quarter of last financial year. This comparison is excluding that item. As I just mentioned, the financial performance, major heads are there.
Transmission charges have gone up by about 7% in the half year. 11% growth we see in the overall consultancy income. Telecom has grown by about 33%, primarily because there have been several new orders I will show in the next following slides, also because last year we have offered a significant repayment to settle certain outstanding dues of BSNL. Both reasons we have a growth of 33%.
The rest, there are nothing significant here. Here this is reported profit number. You see a reduction of 21%, primarily because of the exceptional item which was there last year arising from the profit on account of the monetisation transaction.
These are the consolidated number, distributed. Some of the key financial figures. Net worth is about INR 82,000 crore. The debt equity has improved to 61:39. One of the reasons for this is the repayments and also the base CapEx having come down. The debt equity, which used to be 73:69:31, has now improved to 61:39. Some of the key numbers which are of interest to the analysts.
Surcharge income this year has come down significantly, because payments are well on time and also, the rate of surcharge has come down. Incentive is more or less flat, about INR 125 crore. Then this CSR expenses this quarter have been lower than, I think about 24 crores, but this is much lower than the ask rate which is about INR 75 crore per quarter.
Monetization, which is very significant increase, but just the numbers which you require from time to time. Telecom, we had an income of about INR 187 crore this quarter. As I mentioned, we have several new orders from local entities, government departments and other entities for the broadband leasing services. We have taken on lease OPGW.
Not only our network, but we are expanding through the state utilities network having it. We took a significant OPGW from Jammu & Kashmir, Uttarakhand. Our reach improves because of these acquisitions. We have also tested the utilization of the transmission towers for FM broadcasting. Mounting these FM equipment on the towers, it has been made possible through Transco. We are in talks with the Department, Government of India for this, to reach certain areas through ANPM.
Consultancy income, INR 117 crores. This quarter has been slightly lower because our northeast works have peaked. We have received several orders and also a new JV is being formed for the Nepal MSPTC for an Indian portion of Nepal, the new Butwal-Gorakhpur link, the Indian portion.
This is about INR 400 odd crores of investment which will be made by this joint venture. We have a 50-50 joint venture that is incorporated, and it will start functioning to build this line. Another development is the cooperation agreement with Africa50 for investment in Tanzania, for a transmission network in Tanzania.
We already have signed a development agreement for investment in network in Kenya. That work is progressing. This is the second project which we have started with a cooperation agreement. Commercial performance, as you are aware, in the first quarter, we did the one-time settlement. Not exactly the one-time settlement. The case is, under the rules, outstanding dues up to June 3 have been kind of you know bundled and spread over installments.
However, INR 2,400 crores has been settled through this mechanism. After that, we have been receiving regularly the payments. The pending and due amounts are about INR 6,777 crores as of 13th September. Other related businesses which we are looking at, one is smart metering, where we have floated a tender for about 1 crore meters.
Most of these will be installed in Gujarat, where we have signed an MOU with the utilities for about 67 lakh meters. The tendering is in progress, the evaluation. Maybe by middle of December, we should be through with this. In the first quarter of the next calendar year, we should see the orders and the execution to start. The other progress is in Andhra. We have taken action.
We have bid out the APGM 1,000 plant. It will be used for ourselves as well as sold out. Those plants are looking to be opened shortly. 2 PVC projects have been acquired in this period. One is the Bhuj transmission system.
There is the ER and ER transmission which is 2 small projects in Northeast and state of ER. In terms of our cybersecurity initiative, we have signed a long-term MOU with the Indian Institute of Science to set up POWERGRID Center of Excellence in Cybersecurity to provide research facilities and do research in the area of cybersecurity for the grid. It is a long-term commitment for 10 years.
We will depute our people also, and there will be industry experts and research scholars studying various aspects of cybersecurity. We have signed an MOU with Odisha and MP Utilities for establishment of state transmission asset management system. These are inspired by the National Transmission Asset Management Center.
We have at Power Grid about 260 substations. Odisha and MP want for themselves a centralized monitoring and operations center. Those we are undertaking consultancy and project management to set them up for them. Under CSR recently, this one of the flagship schemes of Power Grid is the Vishram Sadan for patients and patient attendants. We are making Vishram Sadans.
This one at Durgapur at a cost of INR 16 crore has been inaugurated by our honorable minister. We also won a few awards in this time, employee excellence, then power transmission from Tamil Nadu Power State, and then CSR works. We also have won several awards. Now turning briefly to the growth in the sector. A
s you are aware, we are now on the journey towards energy sustainability as well as energy security. In that direction, we have a commitment of the government for 50% capacity to be from non-fossil sources by 2030. It will require significant capacity addition about 10 to 30 odd gigawatts by 2030. The peak demand is expected to increase to around 430 gigawatts.
There is going to be a significant growth in the installed capacity for at least the renewable segment, and that would warrant significant investments in the ISTS because the investment made, the tariffs for ISTS are paid currently till 2025, and then there is a lot of demand to extend this period beyond 2025 as well.
In itself, there is a need for intra- and inter-state transmission because the generation sources are usually Rajasthan and far off places where the demand is at different locations. We will be seeing significant investment. About INR 1,40,000 crore is expected by 2026-2027 and similar number by 2030.
The growth in the transmission segment is going to be significant and will pick up as the renewable projects are expected to come up and in line with the commitments we have made at various international forums.
Currently, we have over INR 100,000 crores of CapEx. This year, our target is INR 0.85 million crores, similar to what we did last year. Next year again, we expect to do the same number, but after that in 2024, 2025 we are expected to go up in excess of 12,500 crores. That concludes my brief presentation and the floor is now open for questions. Thank you.
Thank you so much, sir. Before this house is open for Q&A session, one can make representation of online questions. We have with us Shri Sunil Agarwal. He is Executive Director, Corporate Planning. Executive Director, Finance, Shri Pramod Kumar also with us. Shri S. Ravinder, he is the Executive Director of Western Region. Now with the due permission of our CMD, the house is open for Q&A session.
Thank you for giving the presentation. I have two questions. One related to the industry and one related to your company. The question related to the industry is that the biggest thing in this whole power industry in India are the distribution companies. These, you know, in the end they are not, you know, either load efficiency or privatization, which is a long-term, you know, time frame.
Until that time, you know, the only alternative is direct pass from benefits by the government to the people that actually deserve it. Otherwise, you know, you see that most risk goes to the percentage of, you know, theft, et cetera, and in the end the losses are very high. One, I require a comment on that. What do you see as far as the power industry is concerned?
Secondly, as far as your company is concerned, you know, as you said that additional capacity is going to come, 50% is going to come from renewable sources. Now, renewable sources, you know, is wind and solar. You know, they have low, you know, PLFs. So if they have low PLFs, your transmission grid, because you have to evacuate the power from, you know, the source to the end consumer.
So your evacuation grid to the main grid, that investment, you know, how will that be compensated in terms of tariff? You know, because if the PLF is low, then your capacity, which is a CapEx, is lying idle for 50% versus the percent of the time. Thank you very much.
Can you please identify yourself?
Sorry. My name is Sharat Chandra. I'm an investment analyst.
I can just respond to your two questions. As regards the industry, right, it is true that the distribution segment is the weak link. It's a demand link. See, while the distribution segment is the weak link, I don't know how the direct benefit as such will, you know, improve or totally remove the different things that are ailing this segment.
One, it is a concurrent subject, so each state will have its own call. Direct benefit has been attempted by many, a few states. But more than that, you know, the government has come out with this Revamped Distribution Sector Scheme, RDSS. Which is a combination of grants and funding from PFC, REC to basically address two issues. One is to strengthen the infrastructure at the distribution level, and second, there is cost reduction measures. They are aimed at-
Electricity plays a vital part in the development of the country. Just by turning on one switch, a whole world will flourish. Power at 2047.
Cost reduction and also various indigenous measures which have to be taken. They have to publish quarterly accounts. They have to, you know, do tariff revisions every year. If they are not done, then their funding and grants will stop. That is a kind of a direct relationship which has been provided under this scheme. It is a big scheme with about INR 3 lakh crore of outlays, of which INR 97,000 crore is free GBS, the support from the government.
A significant amount of funding is at stake. States are coming on board and, you know, formulating schemes which are getting reviewed and approved, and metering has also started there. I think the government from the center is very much focused on making distribution utilities viable, long-term viability. That is the focus.
This message has also been conveyed in the recently held power minister's conference. They are having their iterations. There is no denial that you know everybody is on the same page. Depending on their own financial conditions and their own choice of the way they want to subsidize, they will do those.
This RDSS scheme has been brought to improve the health of the utilities. As regards renewables and the transmission with the help of that, yes, renewables have low PLF. The line utilization will be correspondingly low. Today, the tariff structure for transmission assets is based on availability, not PLF. Transmission tariffs are not in dispute.
What will be the bigger issue is the viability of the line, viability of the generation, whether that kind of a transmission costs can be borne by them. Two things are happening. One is what is the immediate evacuation? That definition is changing, so that is one. Most of the lines will be treated as grid strengthening.
Second is that storage is also being looked at as an option to improve the line utilization. For example, in Ladakh, when we are talking of a scheme, we are talking of a large storage component also in going forward, so that the line utilization can go up to as high as 67.76%. Third is the use of hybrid sources, so wind plus, solar, so that they complement and then they come at different times, and then the line utilization improves. These are various methods which are being planned during this session. Yes.
Hi. I am
Yeah, I think it was much clarified long back that it is rejected by the government. We were never party to that. In the sense it was a proposal which was under consideration. It was clarified that it is rejected. It's not there on the table now.
Understood. Sir, on the inter-state transmission tariffs, CEA has come up with national draft regulatory model. The number is INR 14 trillion and INR 17 trillion for 2027 and 2032. We are talking about a number which is INR 2.8 trillion. It seems to be more on the lower side. Do you think we'll have some kind of national transmission plan in a few more months?
Yeah.
In place by this year?
Yeah, it is in the works. What we are seeing is INR 1,40,000 crore up to 2027. Beyond that it is still to be developed. It is our estimate that it will require similar investment for up to 2030 generation. It is still under development. Various schemes are under discussion to optimize the investment in transmission.
We are just talking about the merchant addition. We have a target of INR 75 billion in the fiscal 2023. Where are we right now? Do you think we are able to complete in the due course of time or will it again get pushed forward to by 2024? Does it mean that once this happens, we, the stakeholders will get special dividends?
Sorry, I couldn't get you.
Does it mean that whenever it happens, can we expect special dividends?
One, this year the target was 7,500, but last year we did more than the initial target. This year's target, we would like to open, it will be reduced. Second, there are still discussions around the planning and the contract mode of monetization.
Until those are resolved, it will take some time. As regards the special dividend, yes, if there are, you know, premium realized out of monetization, we can consider. Last year we gave a special dividend, precisely because there was inflow of premium. If there is, we will be open to it.
Understood, sir. Thank you. I understand.
Good morning, sir. This is Harshad from ICICI Securities. The first question is on the investment of INR 1.4 lakh crore, which you mentioned. Does that include battery storage as well, or the battery is separate investment, which PowerGrid is having?
In the INR 1.4+ crores-
Yes.
No more but he includes that.
Sir, what is your view on battery storage in terms of along with the transmission lines compared to battery storage along with in the capacities generation capacity?
Battery storage is, you know, coming. So far, two tenders have come there. Both have come as an independent storage service, one by SECI. There, the tariffs are still significantly higher. That tender is yet to be finalized.
As it stands today, the battery storage costs are significant and, you know, but the problem is that over time, again, the trajectory it will fall, there will be reduction and there will be viability and with battery, the utilization of the transmission system will go up. Therefore, as a total system cost of power, landed cost of power, it will be economical. That is the basic argument, and that is on.
Whether some part of it will come with generation because people are asking for round the clock or some kind of, you know, longer duration supply assurance. Those will definitely go with the generators. The opportunity for transmission will be in the form of those who want storage as a service.
Yes. Sir, you mentioned the smart meter for both retailers. Sixty-seven lakhs is the number that you mentioned with Gujarat. If you could inform us the remaining thirty-three lakhs meters have been already—are we already in discussion with other states? Which states are we discussing and we are in discussion with?
You know, I think this quantity in Gujarat itself is likely to be consumed. We are in talks with them for other utility also. Otherwise, once we have finalized the tender, we will be taking up with other utilities. So far, in the smart meter segment, the joint venture of our joint venture, EESL, which has a joint venture with NIIF IntelliSmart. They have submitted or in the process for submitting bids for about 4.3 crore meters. Many of them are yet to be decided. Through that entity, we would like to have about 2 crore meters participation.
This 1.5 crore meter, what is the?
This will be through PowerGrid directly, but through IntelliSmart, again, we are looking at the first phase, about 2 crore meter target.
Understood. Thank you so much.
Yeah. Hi, sir, this is Akshat from Multi-Act. Sir, if you look at, you know, our CapEx guidance for FY 2023 as well as FY 2024, we are saying it to roughly about INR 8,800 crore-INR 9,000 crore. Now, if you look at our cash flow generation, we are almost generating about, you know, INR 12,500 crore for H1 . You know, annualized, that will be around INR 25,000-INR 26,000 crore. Our net debt to equity has already come down to, you know, 61:39.
You know, going ahead, what are we thinking on, you know, either deployment of this capital or on increased dividend payout? Because, you know, a lower net debt to equity will significantly affect our return on equity ratios. You know, what's the view on dividend payout and cash flow deployment?
One, I would like to clarify. The lower debt equity does not affect the returns because the regulated tariff structure is such that over time the debt comes down, but equity remains constant. It doesn't impact the returns. Second, we have been consistently increasing the payout. We are not fussy about, you know, keeping cash. If we don't see significant investment opportunities, we will increase the dividend payout.
Yeah. Thank you.
After this INR 25,000 crore, actually there is also debt servicing to be done.
Sure.
As per this CERC norms, if you don't service the debt, whatever depreciation is collected, to that extent if debt servicing doesn't happen, then you don't even earn interest on that.
Mm-hmm.
Depreciation is treated as pre-loan repayment. Okay? It is better that whatever depreciation we get, about INR 10,000 crore, it is used for repayment.
Sure, the debt to equity further reducing, you know, as per the current tariff decisions of our regulated assets, you don't think that return on equity will be impacted at least in the medium term?
Yeah. See, if you are, you know, aware of the target structure, you start with 70-30 debt equity, right? In 12 years, the debt will get exhausted by nearly 66 odd %. It continuously comes down. Equity remains constant, 30 till end of the life. The decreasing debt equity does not impact the return on equity.
Hi, sir. This is Tanmay from Anand Rathi Financial Services . There was earlier question on the asset monetization. I wanted to ask, like you mentioned, that there are some modes of monetization which are still under discussion. Could you please elaborate on that? Like what are the modes of monetization with relation to the models? The second question is on how do you look at the monetization involving any private players? Could you please throw some light on that as well?
What is the second part?
What are you looking at, the vehicles of monetization, like the InvIT route or monetization by private players? If you could throw some light on that.
Yeah, these are the questions which are yet to be resolved because models of monetization, one is the InvIT route, and we have already sponsored one PGInvIT. Whether we should put the new assets only into that or there are, you know, competing InvITs, which compete with PGInvIT, we should also want to participate.
Do we invite bids or do we? Those issues are to be resolved. Whether we should do a monetization or should we do a securitization? You know, that is also one option. One of our sister PSUs has done that. Whether that is an option we are evaluating. These are things which are still under discussion, not yet finalized.
Sure. Thank you, sir. Can we expect a timeline on the same or tentative timelines?
Tentative timelines are, you know. This year, as per MoP, we have to do about by adding up this year INR 15,000 crores. We have done nearly INR 8,300 crores. This year we want to do about INR 6,600 crores. Let us see. We still have about five months to go, if we can do that in this current fiscal.
Thank you.
Within the improving debt equity ratio, we are not under any stress to you know look for resources.
Sure. Thanks.
Sir, this is Mohan Rajan from 1990s Software . My question is more on, you know, the Leh project. When are we planning to start the CapEx? From the CapEx numbers that you gave, it seems that you're looking at maybe FY 25 as probably is the timeline to start.
Yeah.
Which are the recent other projects that will be?
Right now, we have invited bids for study. There are two types of study which are required. One is the system study and the other is engineering study, particularly because of the altitude and topographical conditions and also because of you know at Leh there is no generation or no significant demand.
The grid there is a considerably weak grid. Therefore, how will a HVDC system to be designed to deal with such kind of a grid is currently under study. Once these studies are done, the system parameters will be frozen. There will be a tender for procurement and ordering. It will be around at least one year down the line. After 2023-24 or 2024-25 already there will be expenditure, CapEx expenditure.
This is government grant and other such things you are expecting from.
Mm-hmm.
There was some government grant expected to fund this project too.
Right. That is still under consideration.
Thank you. That's all.
Hi, sir. This is Nikhil Abhinkar from DAM Capital. I've got a couple of questions. DCA accounts have increased to 1.6 billion in September 2022 as compared to 91 million. Any specific reason for it?
I think part of it is because of classification issue. The unbilled is also now part of the settled debtors. That is one reason.
Sir,
DCA?
Huh?
Sir, DCA?
Yeah. Unbilled is also now part of that. Previously it used to be in other financial assets also.
Okay. Sir, the trading activity has been low in H1, so any specific reason for it? When you expect it to pick up? One of our private competitors mentioned that there's an allotment of about INR 72 million, and most of it is stuck only because of the GIB issue. Any kind, like any views on it?
That is partly true. Due to the GIB, some amount of transmission projects have been deferred. As I understand, the bid process coordinators are going to the Supreme Court-appointed committee to get the clearance. See, to get clearance from that committee for the route and, you know, overhead lines.
If they run the bid and then the winner goes and gets it, then it delays the process. That committee, typically we are seeing takes about 3-4 months to get the clearance. Rather than do that, the bid process coordinators have been tasked to go and get the clearance and then float the tender so that it can start.
Any timeline as to when we can expect like the bid out?
I think another 3 months or 2, 3 months it should be there.
Sure. Thanks, sir.
Okay.
Hi, sir. Anuj Upadhyay from HDFC Securities, sir. Sir, any update on the Khavda transmission projects? I mean, any near-term bids which is likely to come up. The first one I believe had gone to the other party. Any update on the second or third bids? Secondly, could you just quantify near-term bidding opportunity, the size probably for the current fiscal and next year?
That would be helpful. Sir, may I complete the second part?
Start there.
Can you please repeat?
Any near-term bidding size opportunity, sir?
Any near-term bidding too. One is the several projects in Rajasthan which will come up after the Supreme Court completely hears. Khavda also there are, I think second part too and all which are expected to come out shortly.
Could you quantify, sir, for the size of the?
Khavda 1 project is already done and the further 2 or 3 projects are maybe coming after 6 months or so.
Could you just quantify, sir, for both the Rajasthan and the Khavda one?
About INR 24,000 crore is what is expected.
Both together or.
Yeah, yeah. Various schemes, Khavda as well as other systems. Now these are to be initially, this will come subsequently but immediately this is there.
Thank you, sir.
Yeah, sir. Yeah, this is Anuj from Citi . Just two questions. This CapEx estimate that you shared, INR 1.4 lakh crore till 2027 and then similar number between 2027 and 2030. How much of that will be TBCB? How much of that can be under nomination? That is one. What can be your market share in that, so maybe around that and then the other one.
A significant part of it will be through PGCIL. Much of it. We are targeting to get around 40-50% of that.
Okay, sir. The second question is on this smart metering tender that you have put out. What will be, say, the size of equipment procurement that you'll be doing for IntelliSmart or Adani? This expense or the investment that you will do, what is the revenue model around that? How are you going to recover your CapEx and what is that policy?
The investment in this will be of the order of say INR 7,000-8,000 crore excluding the OpEx. Revenue model is very simple. We have to offer a per month meter rental. For 90 meter months we have to quote a meter rental and that will be paid by the utility to Power Grid.
These one crore meters are under the nomination route so there are general broad guidelines for the entire determination through competitive bidding route for the capital costs and operations. After that, there is certain, you know, project management charges and then the WACC will be somewhere around 10%. It is not in terms of ROE but it is in terms of WACC. We have to optimize on the cost of debt and see what kind of returns it will give.
Just to understand it, so once this is supplied to Gujarat Discoms, they take it from you and then they install it at their-
No, no. We have to install. We have to maintain them for 90 meter months.
Essentially as labor-intensive or as operationally intensive as a typical distribution work where your own personnel have to go door to door and install it and make sure that everything works fine.
Yeah.
Do you have plans for doing all of that and?
We will engage agencies to do that. We don't have to send our people to do it but then we will have to have teams to supervise that and there will be agencies who are equipped to do this work.
Okay. Sir, just wondering why wouldn't the company itself do it because they already have presence on the ground. Isn't it, I mean, what is the thought process behind an interstate transmission company like Power Grid doing the operationally intensive work and not the distribution company which already has its presence on the ground? What is the thought process behind the scheme?
One is the availability of capital and, you know, like we also do the transmission work we do and get an annuity kind of revenue. Here also it is similar. That is one. Second, to design the system and to bid out in large number, that economies will come if we do it.
Okay. Thank you. Thank you.
Hi, sir. Girish Nair from Nomura Research. First question was around the long-term approach that you got approved for INR 8 trillion. Is it possible, you know, to just understand the breakup of how much of it will be conventional versus renewable? A clarification around that was the Green Energy Corridor project. Is that also a part of this subsumed into this scheme?
No, conventional will be very limited because new capacities in conventional are not significant expected. Okay? Maybe most of it is RE only. Which Green Energy Corridor we are talking? The one we already built it or the one. No, that is not part of it.
The second one was around the monetization. Just a clarification here that the regulated projects, have we received all the approvals granted or are in place in terms of moving the regulated projects also for monetization via the InvIT route?
No, regulatory assets, what do you want us to do? Do you want us to do regulatory assets also?
No, I'm asking you, I mean, earlier there was this, disallowance, right? Only the TBCB-
There was never a disallowance or ban on regulatory assets. There was never such prohibition. By the very structure we have, the TBCB are in separate SPVs, so to move them to the InvIT is easy. Regulatory assets are sitting on the main balance sheet, so you have to carve them out and then do transfer. That is more complex and there will be leakages. We don't want to do that as a preferred option.
Sir, final question was around battery storage. I mean, is there a thought process that you put forward to the government that you become a storage operator for the grid?
No.
for surplus solar parks, et cetera?
No. There is not any such.
Okay, thank you.
I mean, as per the government guidelines also, anyone is free to set up a battery storage system and offer it. It is free license. It is not transmission, it is not distribution, it is not generation, so there is no kind of restriction. It can be offered by any of the providers or it can be offered even by independent battery storage service facility providers.
Okay.
Yes, sir. Again, Arjun here from Citi. Sir, just on this, opportunity to monetize even the regulated tariff projects. You touched on it, but NMP document also seems to suggest that to minimize this simultaneity/tax leakage, there's an alternative available where instead of transferring the legal ownership to InvIT, you could just assign the revenues to InvIT while the legal ownership remains with
Power Grid's main balance sheet. Have you done any, like, checks on that or engaged any tax consultants on that, whether that scheme can work or that is just like a, you know, initial thought process and that may not hold water?
As per our study, assigning revenues may not work because it can be treated as a lease and subjected to GST. That is, you know, kind of, leakage. For transmission assets it will not work.
It appears that there's no way to avoid this leakage and hence any monetization of the regulated tariff mechanism projects unless there's a change in law by government itself is not feasible at this point of time. Is that right?
No, that is not right. You can think of various other ways to do this. There are other structures which are feasible and those are under discussion.
Like, sir, can you elaborate? Because all of a sudden I'm wondering when we move on to the next step of monetization, of even the RTM projects.
No, you know, for example, you can transfer the shares for a limited period. In a TBCB SPV, the shares of that SPV can be transferred for a limited period and then they can be bought back. That is effectively transferring the revenues.
No, sir, I'm talking about the RTM projects.
I am not talking about RTM projects at all.
The RTM monetization is off the table. There's no monetization happening anytime soon.
No, no, I'm not saying that also. I'm just saying I'm not talking about RTM. When I said the monetization, I am looking at it agnostic, RTM or TBCB. Which one makes more sense? Which is easy to execute? The TBCB are housed in SPVs. We have enough TBCB assets which are available. What is the rationale to shift and do an RTM asset which is that much more difficult?
The objective of this exercise is to raise funds. If that objective is to be met by, you know, easily by monetizing TBCB assets, then it should be the first preference. Because RTM assets by their very nature are sitting on the main balance sheets, we have to carve out.
Either you have to do a demerger or you have to do some other structure and then transfer them to the new entity. Is it not difficult that every year if you have to do INR 10,000 crore or INR 5,000 crore of monetization that you do a demerger, you want the whole scheme to take out some assets because it's only a demerger that the stamp duties and all are exempt. To us it looks very complicated.
Okay, sir. Thank you.
Hello. Hi.
Puneet.
Yeah.
This is Puneet from HDFC. My first question is on the Leh-Ladakh project. Has that project taken off? When is it expected to start work?
Now, studies are, you know, undergoing. We are doing studies, for the system as a whole solution. It is yet to take off. It will, I think, at least a year away.
A year away. Before you put in the first CapEx.
Before we do the.
First CapEx.
Huh?
Sorry, 24 or 25 it would want to work with.
Late 2024.
On your smart metering project, you mentioned drive down 10%. Essentially 10% post-tax earning capital employed or it should be looked at 3 times?
I think it should be 10% to the utility.
10% to the utility in post-tax on the capital employed.
On the?
On the total capital employed.
Capital employed.
Do you get the same sort of benefit that you enjoyed under tripartite with the distribution companies or does the distribution risk actually now is significantly reduced?
That is interesting. We haven't really thought about it. There is a facility for recovering through the realization from the customers.
Yes, sir.
That amount we will talk about later on. That should solve the issue. Secondly is in selecting the utilities Gujarat, which we have chosen, is one of the best utilities around. Third is, you know, to read the fine print of the tripartite agreement because if it is on our balance sheet it will not. I mean, it may be recoverable, but it is only recoverable through our subsidiary. Subsidiary dues are not covered in that. I will check.
All right. That's all from us, sir. Thank you.
Yeah.
Sir, Ramesh Poddar from India IIFL You gave considerable importance to smart metering. That is the way we look at it is T&D losses will come down substantially with the installation of smart meters. My question was, sir, to what extent when you are taking Gujarat as a model state. If we install in the entire state of Gujarat these smart meters, to what extent are we looking forward to reduce the T&D losses in percentage? What will be eliminated completely?
There are two aspects of these losses. They are called as technical and commercial losses. The commercial losses are when you do this with billing delays or connection delays. Those will be eliminated because of the smart meters. If you have prepaid smart meters, definitely there is no question of non-connection or non-billing. Okay? As far as the technical losses, there will be technical losses which are unavoidable. They are inherent.
That extent you cannot avoid some amount of technical losses. When power flows through a distribution network, there will be losses. Besides this, the smart metering will give you more benefits. It will also give you the benefit of, you know, determining your tariffs according to the time. Time of the day tariffs, then peak shaving.
Yes, sir.
You can do demand side management. You can incentivize people to switch on some loads at different times where you have low-cost power. Do more analytics on the data which is generated by the smart meters. There are many benefits. It's not just a reduction in T&D losses.
Yeah, exactly. Because once there is a considerable T&D loss conversion, I was thinking why not the cost per unit to the consumer can be reduced?
Yeah, that cost per unit to the consumer will reduce, when all these attendant benefits come.
Right. Absolutely.
That is the idea of that smart metering, not just to reduce T&D losses.
Yes. Yes, I see. Sir, how much is approximately the cost of a single smart meter?
It depends on single phase, three phase. I think different types of meters there are different costs. If you talk of a single household, single phase meter, maybe around INR 7,000-INR 7,500 rupees it is.
Same for industrial units?
I don't know. I haven't asked them.
Okay.
Few bags.
Okay.
Again, it depends on the.
Okay. No.
-size.
Thank you. Thank you.
Sir, this is Divya Mundra from JM Financial. Just one question on the Leh project, you mentioned that CapEx and corporate can start right around. Just in terms of how the project will start generating revenue, is it going to be towards end of life of project or while it's in parts as opposed to scheduling?
It will be, typically, I mean, there are four phases. As each pole is commissioned, you can earn revenue. Then the time lag between the poles will not be very large. Say for example, if the whole project cycle is about six-seven -years, you can think of earning revenue from fifth, sixth and seventh year, something like that.
Understood. Thank you. In terms of, you know, you're seeing globally there's a lot of investment going into grid automations because of higher scale of renewables. Can you give us a little color as to, you know, how would you expect these investments to pan out in India over the next three-five-year period? Are the states doing the same?
Grid automation, you know, there will be several aspects. One is that because of the renewables, there will have to be new investments in, say, equipment like STATCOMs to maintain the voltage profile and all. Those will be part of the ISTS network. At the utility level, grid automation will be in the form of, as I mentioned about, MP and Orissa in my presentation, they are looking for transmission asset management centers for their intrastate network.
Those investments may be done by the utilities for remote operation and monitoring their network, or they may ask us to do, and that can be an opportunity either for project management and consultancy services or investment. There is also the investment in the communication network for the grid.
The state utilities want their OPGW network and communication infrastructure to be augmented. That is giving us an opportunity, particularly I think in the northern region and eastern region. These are the two regions, no? Northern and eastern regions where SCADA operations. There we will be doing the investment and recovering tariffs through annuities.
Another aspect is the digital substation. These are substations where there will be communication between the equipment and the control centers digitally. You will avoid lot of cabling and improve the communication infrastructure. That is again another dimension in which investments will take place. One of these we are now building in Navsari. In Navsari, we are building a digital substation. We have previously upgraded one at Malerkotla in Punjab.
One more we are doing in Chandigarh, it's a new substation, and this will be the third one, Navsari. These are some of the dimensions from which digital grid automation investments will take care.
Hi, sir. Sumesh from Nuvama Capital.
Yeah.
Sir, could you speak about the intrastate project opportunities for Power Grid, either through the JV route or through the TBCB route? What's really holding back the large scale of investment and when will it be addressable by Power Grid?
Yeah. The intrastate segment is rather slow. Many opportunities have come. We have built so far two systems, Gung-Jina in Guna system, and two others are under construction in Meerut, Siddharthnagar and Kanpur, Sambhal. These are not very, I mean, as frequent or as regular as we thought they would be. Couple of developments.
Each state is now required to do what is called as resource adequacy study and plan for their capacities in the future, and accordingly also give their requisition for the General Network Access, the intrastate system. I think there will be more systematic planning for the intrastate transmission which will throw up these opportunities. Right now because of you know their conservative investment approach, they are not building the network.
Some of the states like Tamil Nadu and all, they are building on their own. Odisha, Tamil Nadu, they are building, they are making their own investment, so they are not bringing them to the TBCB or joint venture route. Joint venture route, except in Bihar, and we have not been successful, that is where they have not been very forthcoming. States like UP, Rajasthan, MP, they are going for TBCB route. JV hasn't really taken off, though we have approached, but there is not a lot of relevance.
Over the last one year, whatever TBCB business you had, could you qualitatively give us some color on the equity IRR profile of those bids and how they compare with the earlier performed projects, for instance, which you transferred to?
The early transferred assets are, you know, what you can say, they have much richer. Now it is not so.
Is it fair to say that the IRR there will be in the range of 10%-12%?
Yeah.
My last question is on the tax rate. In the H1 of the year, it has been pretty strong. Tax rate appears to be in the range of about 10%. Is there any specific reason which is depressing tax rate versus earlier periods? What is the recurring tax rate going forward? Yeah, because it's got a booking in the first quarter and the second quarter.
Either due to reversals or deferred tax.
There is no one.
No, there is no one.
Thank you, sir.
Relatively, our tax assessments and all are fairly straightforward. We are quite upfront on this.
Well, with this we come to the end of the question and answer session. I thank all of you for coming over here. On behalf of Power Grid Corporation of India Limited, I also thank the Government of India, the Ministry of Power, the Ministry of New and Renewable Energy, the Ministry of Communications, various state governments and the Power Grid family of approximately 8,000 dedicated employees who make things happen on a day-to-day basis.
I also take the opportunity to thank Chairman, sir, Mr. Kandikuppa Sreekant, for patiently answering all the questions in rather a volume of questions that you took, sir. Thank you to Mr. Abhay Choudhary, Director of Projects. Thank you to Mr. Ravindra Kumar Tyagi, Director of Operations. Thank you to Mr. G. Ravisankar, Director of Finance. Thank you to Sunil Agarwalji, ED Corporate Planning.
Thank you to Mr. Pramod Kumar, Executive Director of Finance. Of course, thank you to Mr. Mrinal Shrivastava, Company Secretary, and all the members of the Power Grid family who make this today's session a fantastic success.
Please do join us for lunch after this. For any further questions, Adfactors Investor Relations team would be happy to coordinate with the management. Please do write us to the team at Adfactors and also you could reach out to the Power Grid Corporation team. Thank you very much, sir, and have a good day. Please do join us for lunch.