Adani Green Energy Limited (ADANIGREEN.NS) Earnings Call Transcript & Summary

So if you look at much of our exposure is not very high in the 42. And I do believe that this news about canceling the PPAs, let's see where it happens. I think on one side, we do believe that there would be by canceling of these LOAs, there would be connectivity released in the system. But on the other side, we all have bid with a certain return expectation and are committed for that price. So while I leave it on to the judgment of those organizations, which has signed the LOAs with us, but our overall exposure on the type of LOAs you are saying is very, very small.

Our next question comes from the line of Pradyumna Choudhary from JM Financial Group Investments.

I just had a question regarding raw material cost now that they've seen silver prices really going up. So what could be the impact in terms of -- like if you could quantify how much silver contributes to our total cost? And how do we plan on hedging from the same in terms of where the tariff has already been fixed, but the project is yet to be set up completely?

If you look at it, I think there is always -- at the end of the day, these are commodities, which will keep on going up and down. And when we make a business case, we don't take into consideration the lowest cost of commodities. We take a very conservative view on the cost of commodities. And if I now dwell -- go deep into it, the commodities which we are buying, of course, if you look at 60% of the solar CapEx on a project is the module price. We have the advantage in the future to have our own module production. So in some way, we have mitigated the risk of a supply as well as the costing part of it. Similarly, if you look at from a wind turbine, majority of the cost comes from a wind turbine in case of wind projects. And there, too, we have our group company manufacturing the India's largest 5.2-megawatt machines and even going for other types, too. So to a large extent, we have this price risk being mitigated in future. And like I shared with you, when we make a business model, we now go by the most aggressive pricing as well as the commodities are concerned. So returns expectation remains. And let me also reassure to you that most of the projects where we are going ahead, we also tie up the things well in advance so that the contracts are maintained, and we have a certainty of the items which we need for those particular projects.

Okay. Can you just quantify in silver usually what percentage of total cost it contributes in a solar project for us?

Can you just repeat your question? I missed you in between.

How much contribution does silver have in our total cost in a solar project?

So if you see on a largely basis, the module is 55% plus/minus 5% on the overall project. And in a module, my understanding is that it is between 15% to 22% as well as the silver is concerned. So on an overall basis, it's not going to make or break the light from the module part is concerned. But yes, these recent increases in the silver and otherwise do impact it on a short-term basis. But like -- but these are commodities and whenever we make a business model, like I said, we are very sensitive about what can happen to the commodities rather than being very aggressive about it.

So sir, just to follow up here. Usually, what's the target time line for us like once we -- the time line between the tariffs being decided and our equipment being ordered like the cost for the equipment being decided. Usually, what's the time lag between these 2 things?

Actually, it's -- I'm not sure whether I have understood your question well, but let me reply you what I have understood in the process. Pradyumna, if you see, if we are adding 5.6 gigawatts, say, in 12 months, virtually 450 to 500 megawatt has been added on it. So one of the advantage of having such an amazing speed and the scale of working is that you are -- that we are impacted less by the commodity variations. If you are executing a project in 18 months, then the vagaries of commodities generally impact you a lot. Since we are very fast in our project execution, and then more importantly, after execution, taking the revenues out from it so that our revenues come early. That is not the case. So if I have understood your question in a manner that are we really adversely impacted in a project execution because of this commodity? Yes, we all are impacted. But since our project execution speed is phenomenally high, and we don't have a typical 18 months period for even 500 megawatts, we completed it in 1 month's time on an average, if you see across, the impact is much, much less.

Actually, my question was what's the time lag between when we decide -- when we are able to fix the tariff for our project versus when the equipment cost like when we place the order for those equipments what's the time lag between that because that would decide the kind of risk in terms of commodity price volatility we are exposed to, right? So that's what I was trying to understand.

The way we work is that whenever we have a project in place, first of all, we are very clear that, that project where is the land and where is the evacuation of this thing. So once we have those elements in place, then it is a matter of a project execution. Now if I tell you the project execution time, our philosophy is that the balance of systems because if you look around, as I said, 55% to 60% is the module pricing. We complete the balance of the systems very quickly. We import the -- or we get the modules in place. And with our high speed of execution, then we do actually get the revenues out in the quickest time. Like -- if you ask me, on an average, like, I'm sharing with you, if we are executing 500 megawatt of commissioning, we are deploying 500 megawatts of modules in a month's time on an average, if you see your 450 megawatts of module. So the time period is very short in this particular process. So it is very difficult to answer your question in a manner that if I go out to get land, if I then start the whole process and then go out for a transmission line and ROW issues, I have one period in place. But since I already have Khavda with us, where I have a land in place, I have infrastructure in place, I can quickly add on to the transmission line. And only thing which matters is how quickly I can execute the project, our time lines are very different.

Our next question comes from the line of Anuj Upadhyay from Investec.

Sir, can you just quantify your merchant realization when it comes to both solar and wind for the quarter and comparable quarter for the previous year?

During the current quarter, our solar merchant realization was INR 2.20 per unit. And for the last quarter, it was -- for Q3 '25, it was INR 2.82 per megawatt per unit. And for the wind, it was around INR 3.5 for this quarter, while it was INR 4.15 for last.

And let us also add that there RECs on the top of it.

Next question comes from the line of Kalpit Sabhaya from GYR Capital Advisors.

So my question is like how strategic will the battery and the pump storage be in the Adani Green's portfolio over the next 4 to 5 years?

Kalpit, very strategic. Very, very strategic if that is what can satisfy you. We are going to deploy, operationalize and take full advantage of it. We are also having the advantage of an input solar available with us at a time where we can co-locate the batteries as well as the solar projects. The pumped storage, we have already announced. We are on track. And in this particular quarter 2, we have announced that our Chitravathi project is on track to come in the coming -- in this calendar year itself. And the work among the other projects is also at a very big pace. We do believe that renewable power from a stand-alone solar is going to shift towards a point of RTC power where more and more organizations and including the government will look towards a certainty of this power during the peak time or during -- as a round-the-clock power. And our strategy towards investment and expertise in this particular way will be a differentiator between us and others in this industry. And of course, as you know, we work at a scale which is unprecedented in this country for that matter.

Okay. Okay. And sir, as you mentioned that in the next year around we are planning to CapEx approximately INR 35,000 crores to INR 40,000 crores and approximately INR 16,000 crores will be our recurring earnings like EBITDA and all. So for the remaining balance CapEx, how are we planning? Like, are we going through debt raising? Or what are we planning actually?

See, for us, we are constantly into the debt raising phase because of the under construction project that we have. A lot of that is already in the -- it is already sanctioned for the next year's phasing also because we continue to raise debt at a pace where for the next 9 months to 1 year horizon the debt is already available with us for the next set of requirements. So from that aspect, the sanctions of about 9 months are already there in with us.

Okay. Okay. Understood. And sir, like currently, we are already having the net debt of INR 76,000 crores. And we had about 9 months of area where we can fulfill our requirements leading to repayments and interest payment, right? So what is the next expected peak of debt net -- net debt level?

From an operating debt to EBITDA -- run rate EBITDA, we are at 4.6. And from an overall debt to run rate EBITDA, we are at about 5.6 levels. So we see that it is more or less in the same range that we will move along in the next set of 2 to 3 years till we reach the 50 gigawatt capacity.

Our next question comes from the line of Surya Narayan Nayak from Sunidhi Securities.

So you said that the -- before setting up the facilities, you would look at the evacuation issues and you start the BOS activities very fast. So that is fine. So you are saying that due to the grid availability issues, the evacuation is not possible and curtailments are actually creating issues as far as revenue is concerned. So I understand what is the gap that is coming from the understanding of the facilities of the evacuation and setting up the facilities. So what is lagging because ultimately, it is creating stress on the balance sheet so far as the EBITDA to net debt that is concerned, that is one thing, number one. Number two is that what is the plan of battery storage in the power areas I mean in terms of capacity of the solar to battery storage in terms of banking of the power? And lastly, in terms of EPC, we have seen that recently, your framework has changed and you have changed giving assignments to outsiders. So what is the intent of that of the shift to expedite the work and -- or let's say or to reduce the cost? You will appreciate that [Technical Difficulty].

Can you be silent on your part, Surya. There's a lot of background noise coming. On the evacuation part, like we said that there is a gap and there is a delay, which has impacted us that is there. But you will also appreciate the fact that, say, the evacuation of 2 to 3 gigawatts, which we were expecting in the last quarter you can't build a 2 to 3 gigawatt on 1 day and the evacuation will come. So we have to time it up. We have to time it up on this factor. You will appreciate the fact that what we are saying 2 to 3 gigawatt in Adani's framework is virtually twice or more than twice by a normal or a top renewable company. So we do things at a scale. And since we are talking in gigawatt terms and not in megawatt terms, we have to start the work well in advance and take advantage of that on the day the evacuation comes, we should be ready for it. any 3 gigawatt, even with our best in the industry scale of 400 to 500 megawatt a month basically will take 6 months plus or 7 months if we are timing it up after the evacuation has come. So we have to time it up. And there will be always a challenge of on the day it comes, how much we can evacuate and how much we cannot, which is work in progress. Second point, there is a quarter shift, which we shared with you, which has definitely impacted us in this process. That has been an impact in the last quarter, and we are not hiding it from anyone. It is an impact on us, which we are not liking, but we are hoping that in this particular quarter, things will pan out as we are seeing. Regarding your question on the battery storage, we have already said that 3.5 gigawatt hour of battery storage is what we are committed to commission in this particular -- in this coming quarter or in this financial year. And like we said, we are hoping while the numbers are still being worked out, but our expectation is that we will do more than twice of it in the coming financial year as well as the battery storage is concerned. So in a nutshell, this battery storage will act as absorbing the power, which otherwise would have been curtailed on a short-term basis because on a long term, we keep on mapping when and how the power is going to be evacuated. But there will be always a challenge on a short-term basis. We cannot take that point away from the business we are in, in infrastructure. Regarding your question on EPC, yes, we are best and we continue to remain the best. But we realize that for the scale at which we are going to go for, we do need other EPC -- other contractors to at a scale which can work with us. Frankly speaking, we don't call them contractors. We call them partners who will co-develop these projects with us as partners and take it forward. We have a road map of 30 gigawatt in the next 4 years per se. And I think it is important that we take advantage of all the best resources which are available in this country to build these projects. Ultimately, by 2030, we are going to be 50 gigawatt, and we need all of the best resources which are available in the country to help and support us on that particular cost while we remain steadfast and our performance till date has shown that it is not because of any other reason, but to augment what we can do to enhance our capacity addition build.

So storage facilities will it be designed for 2 hours or 4 hours?

It is -- you have to appreciate the fact that it is not a design criteria per se. But yes, we are conscious of the fact that it can be extended from that standpoint. Even if you have 3 hours, you can evacuate the power to 2 hours or 4 hours depending on that particular frame. But 2 to 3 hours is what is the generic there, and you can extend it.

So you are saying irrespective of the evacuation challenges the setting of the installations of solar will continue?

We are saying that evacuation is a challenge on a short-term basis. We are timing it up so that we install our solar project in line with what is coming on a long-term basis. However, to mitigate the risk on a short-term basis, battery storage will come very handy in mitigating those risks. I hope I'm clear on our statement on this account.

Okay. And secondly, sir, finally, you said roughly 11% of the project cost is impacted by or that is silver related and which has seen a very stupendous rise of rate. So my question is that whether some of the power -- some of these IPPs, which were stocked and where the DISCOMs were not showing interest due to the subdued tariff. So will it show some kind of spike in interest because the -- then the cost of projects will also go up, so as the tariff may also have some sort of upward trajectory movement maybe in short term. So will it spike interest and it will remove the -- even it will impact the merchant tariff in our case?

So I think if there is a shortage of power, it will improve the merchant tariff in our case, for sure. Having said that, I think we have to look for when we are signing a 25-year PPA, it has to be a win-win for both the parties. I don't think so that DISCOM are just holding it up because of the pricing part. There was a challenge with that. And again, this 42 gigawatt was bid without any backup as well as the offtakers are concerned. And I think that's a challenge in the whole system. You first bid the project, you get a price and then you go to the offtakers for that particular price. A silver pricing, which is a critical component in a module to change the whole dynamics, I'm not very sure that's the right way to put it across.

Our next question comes from the line of Abhinav from ICICI Securities.

Just a final question on overall industry. I mean we're seeing a slowdown this year compared to the past 2 years in terms of tendering. What are your views on tendering within renewables for the next couple of years?

You're talking from our standpoint or from an industry?

Overall industry standpoint.

I think in the industry, there has been a realization that like we have been said in this call itself that there are 42 gigawatts of I would say, LOAs but not translated into PPAs and PSAs. So I think there is a backlog out there. I like to believe that -- it is not a matter of one particular way. When we talk of renewables, we should look holistically taking into consideration the storage, taking into consideration wind, taking into consideration solar, which can be utilized for input to storage, whether it is pumped storage or it is battery storage. And I think it is important that we look at the whole thing very holistically. I also do believe that there could be some, I would say, rather than the central grid to be utilized, the state grid can be utilized and tenders can come from a state too, where they have connectivities on the STU level, which can be connected and which will not be impacted on that way. I think there are many aspects which are very dynamic in nature today as well as LCAM is concerned, which is going to come up as well as this untied capacity is concerned as well as new evacuation capacities are concerned. And in any case, there are commodity pricing, which is going to impact the tariff per se on a short-term basis. But when you look at renewable per se, I would suggest that we should look into a holistic manner on a long-term basis for a solution, which is good for the buyer as well as for the seller. In this particular case, developer as well as the procurer. And I think a stage has come where the peak power tenders, the RTC tenders are going -- we will see more of them rather than a pure-play solar tenders per se.

Our next question comes from the line of Pradyumna Choudhary from JM Financial Group Investment.

Sorry, just beating around my previous question a little more. So like you spoke about there being a 12-month time line between a project being executed, being actually commercialized. So -- and silver prices during this time have actually gone 3x. And again, silver for our projects is around 10%, 11% of the total cost. So what does it really do to our IRRs of these projects, right? These are anyway 15%, 16% IRR projects. So how do we really deal with it? Is there a way to -- is there a way to pass on these prices because otherwise, the IRR really takes a hit, right? 3x increase in a commodity contributing 10% of the cost increases our total project cost by quite a bit.

Let me not -- I don't know why you're saying we are not answering it very clearly. Let me answer it very clearly. And if you're not clear, do say it rather than a subsequent question. What we have said is, we -- when we bid the project, always take into consideration the vagaries of commodities. We have bid these projects a long time back, not at the current stage itself. At any stage, we have a clarity on what can go with the commodities because it remains a commodity. To the extent we can hedge, it's one matter, but we take that into consideration on our return expectation. That is why you will appreciate the fact that whenever you see the tenders being bid and all those factors, you will not find us at a certain level, which people question as well as the tariffs are concerned. So we are very, very conservative in our costing. We are very focused on our return expectation. And when we bid the project, that is the time we are going to buy that particular element. Now today, well, the silver has gone up. But in the past, the silver was not that up. And in future, too, there is no guarantee that silver will remain at this particular level, which will further impact the module pricing. At the time when -- again, I'm saying at the time when we are buying it, we'll look at it. But at the time when we are bidding, we are overly conservative on our commodity pricing, particularly in this field because there are -- these are primarily commodities per se. So price at a higher rate, yes, ideologically, the returns should be impacted. But since we are conservative on that particular cost, it is still a very different and a decent level of returns, which this project gives to us.

So like I understand that we will be conservative in the price range. But at the same time, we wouldn't have accounted for a 3x increase in silver, right, during this period. So like no one would have, right? So there, how are we really -- and my sense is modules are amongst the last equipments to be ordered, like just before the project is being completed is when modules are really ordered, right? So then how do we really account for such projects?

Yes, yes, I can answer you on one part. I'll also ask Raj to further help you. Somehow, I think I'm not getting that clear to you. The fact remains that if you are in the industry, then around 4 years back, there are certain module pricing. Sometime back, if you look at the cell price at that particular time or the module prices 1.5 years back, was even less than the cell pricing, which was quoted a few years back. You do take advantage of those situations too when the prices go dramatically down. However, like I said, these are projects where you make profits. At a particular time when the commodity goes up, there is always a dent on the return. However, if you are conservative at that particular time, you make a better return. And if you are conservative at the time of bidding per se and your returns expectations are higher than the normal, you also make a decent return on that too from an industry standpoint. Raj, you'd like to add on to this?

I think, Ashish, you have been very clear. And again, just to bring it to the light, the recent module prices, which you saw in the last year were the lowest in the history of module pricing. And obviously, I -- in case of our portfolio, we have almost all our bids, which are at a price where we had factored in much higher module prices as well as built in relevant risk framework where we had discounted them with those potential vagaries in the various factors, whether it is modules or other considerations. So yes, obviously, if the module prices go up, it will increase the cost for the developers, including for us. But it is a question whether you have factored in. If people have gone very aggressive based on yesterday -- last year prices and they have won something, they may face certain issues, but that is not the case with Adani Green.

Understood. And my last question is, what are the -- like if you could just tell us how much increase in module prices are you seeing currently on a Y-o-Y basis compared to same time last year? What were the prices then and what are the prices now that you're seeing?

Yes. So yes, it's around 10%, which we are seeing. I think you have to appreciate the fact. Do you have a long-term relationship with the suppliers? At what scale one is buying? What is the relationship with those particular suppliers which you have, Which country you are buying from, what are the capacities which are available there at that particular time. So it's not an apple-to-apple comparison per se. There are things which changes across. We do -- we have been seeing an increase in the recent past of around 10%. But at the end of the day, they are commodities. They can go up and down in that time. Some people are even reporting slightly more. But that's up to the individual company when and how they buy it.

Ladies and gentlemen, due to the interest of the time, that was the last question for today. I would like to hand the conference over to management for the closing comments. Thank you, and over to you, sir.

So I really appreciate all those who have participated in the call and are being closely monitoring our organization, I think it is the most exciting time for us. There have been challenges which we openly and transparently have been sharing with you with respect to the transmission line constraints, the augmentation, which was expected to come on that delay. There has been some subdued market pricing as well as the solar price is concerned. And of course, the weather has not helped us, but these are very seasonal in nature. And I think on the overall industry part, we have to give it a longer time frame than a quarter on that. The fact remains that our EBITDA margins and our costs remain -- the EBITDA margin remains the highest in the industry and the cost remains lowest. Our expansion is going on. We are very excited about our storage solutions, which we are adding at a great scale, which I said is further going to derisk some of the challenges which we have been facing with respect to pricing as well as with respect to evacuation constraints. It's a very exciting time for us. Q4, we are very excited to further add up and then reach the commitment of an expansion in this particular year, which we have already committed. We are very excited to reach that. And of course, Adani Green will remain as #1 renewable company in this country from all aspects. Thank you once again for joining this call and of course, organizing it.

Thank you very much. ICICI Securities for helping organize the call. And thank you all the investors and analysts for joining this call. Please feel free to reach out to us for any further questions. Thank you.

Thank you so much, sir. Ladies and gentlemen, on behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.