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

Ladies and gentlemen, good day, and welcome to Adani Green Energy Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Ms. Pritha Majumdar from Standard Chartered Bank. Thank you, and over to you, ma'am.

Good afternoon, everyone. On behalf of Adani Green Energy Limited, we welcome you all to the FY '23 earnings call. From the company, on the call we have with us today Mr. Vneet Jain, MD and CEO; Mr. Phuntsok Wangyal, CFO; Mr. Anupam Misra, Group Head, Corporate Finance; Mr. Raj Kumar Jain, Head business Development; and Mr. Viral Raval, Lead, Investor Relations. With this, I would like to hand it over to Mr. Phuntsok Wangyal for the presentation, post which the AGEL team will be available for Q&A. Phuntsok, over to you.

Hi. Good afternoon to all of you. Thank you for joining Adani Green's Q4 FY '23 earnings call. What I will do is I will give a quick update on 4 elements actually, and then post that, maybe we can have a Q&A session. First thing which I will talk about is capacity growth. Now during the financial year, Adani Green's operational capacity increased to 8.08 gigawatts. So what it effectively means is from a PPI capacity perspective, our capacity increased by 2,677 megawatt. But just a point of attention out here is because during this financial year, we commissioned the largest hybrid cluster in India as well as world that is 2.14 gigawatt. In terms of actual own ground capacity, this is 3,384 megawatts. And in terms of DC capacity, if I add over the last financial year, we added 4,246 megawatts. So that is from a capacity growth unit perspective. During the same financial year, we also signed power purchase agreement for a few of our projects, which includes 450-megawatt of wind project as well as 650 megawatts of SECI, which with sovereign counterparty, SECI. Second point is operational and financial performance. The last financial year has been a very good from AGEL perspective actually, both operationally as well as financially. In terms of the CUF, what I can inform is solar CUF portfolio increased by 90 basis points year-on-year to 24.7. Now this is largely on account of higher plant and grid availability, better solar [indiscernible] as well as seamless integration of SB portfolio for the entire financial year. During the same financial year, our hybrid portfolio also came on ground actually, and it was operational for a part of the year. So this was largely a stabilization phase. Despite that, our hybrid portfolio has a very high CUF of 35.5% actually. And we do believe that now, since the plant is fully stabilized for this financial year, hybrid portfolio CUF will be on a higher level. From sale of energy perspective, during this financial year, it increased by 58% to 14,880 million units. This is largely on account of a combination of higher capacity, which is being added as well as the better CUF which we have demonstrated. Revenue from power supply also increased correspondingly to 58,225 crores. And during the same financial year, we realized our carbon credit income of 157 crores. Now from our -- during the same period, EBITDA also increased to 5,538, along with a very high EBITDA margin of 91.6%. We have been able to consistently maintain the EBITDA margin, which I just talked about. Now purely from a -- as I spoke actually, a large part of our portfolio, especially the hybrid one was operational for a partial period. Now if we look at the run rate EBITDA perspective, actually, 48.08 gigawatt, we will be having a run rate EBITDA nearly to 7,570 crores, which effectively means that in terms of net debt to run rate EBITDA, we should be nearer to 5.4x. That's from operational and financial performance. Now from a credit profile perspective, as you know, AGEL portfolio has a very high strong counterparty profile actually with around 86% from sovereign and sovereign counterpart. Even for the balanced portfolio, actually, as far as receivable position is concerned, it has been on track. Now as on date actually, as on date, there is no receivable which is currently overdue maybe. So from that perspective, what entire 100% portfolio is on track. During the same financial year, largely rather in the last quarter, actually, what we also wanted to realize is if you recollect in Q2 or beginning or last earning call, we talked about some of the favorable regulatory orders, which we have received. Now during this quarter, during Q4, actually, we also realized the revenue from those favorable orders, which also includes around 748 crore from Kamuthi project actually. Now this will also have a recurring positive impact of at least INR 90 crores to INR 95 crores for -- as far as these projects are concerned. Now last but not the least, a very important element is basically our ESG commitment. As you know, Adani Group has a very robust ESG framework actually, which is broadly in line and guided by globally accepted ESG principle as well as some of the ESG disclosure which we have currently adopted. Now what it means is during Q4, actually, some of the notable achievements which we have is Adani Green portfolio for all its operational portfolio that is above 200 megawatt. Today, we are [ watt positive ] actually, and we have received third-party certification for that. On the top of it, as we have previously reported, entire AGEL operating portfolio is single-use plastic free and 0 waste to land certified. We are immensely proud of these achievements which we have. On the top of it, in the last quarter, we also won the prestigious Platinum Environmental (sic) [ Environment ] Award at Grow Care India Environment Management Awards 2022. Now all these effectively is reflecting in terms of very high and consistent ESG ratings, which we have been receiving, whether it is from CSRHub ranking, Sustainalytics, [ BAGI ], S&P Global or MSCI ESG rating of [indiscernible]. So just to conclude, actually, financial year '23 has been a very satisfactory year, either in terms of operational capacity as well as both the financial performance. This would not have been possible without the support which we have received from all stakeholders and not but the least, for the entirely multiteam. So that's a small recent update looking from my side actually. Now over to you, please.

[Operator Instructions] The first question is from the line of [ Dan Cheng ] from Dan Capital Management.

My first question is pertaining to FY '24's capacity addition. So what is -- so how much capacity do you expect to add? And what is the associated CapEx?

Yes, sure. So FY '25, our capacity addition will be broadly in line with what we have achieved in FY '23. That has moved nearer to 3 gigawatt. Now this also includes a part of the capacity, which is advanced stage of development actually, and should be operational either by Q1 or Q2. So that is from a capacity augmentation perspective, actually. Secondly, in terms of CapEx, now what it entails especially for those projects which will be implemented upon, so CapEx, which we are talking about is around INR 14,000 CR actuals. This is excluding BCD, which is a change in loan.

Can you remind us how much of this CapEx is already pre-funded by committed facilities?

So as I said, between 2 point -- up to 3 gigawatts is the capacity which we're talking about and out of which, 300 megawatts is about to be commissioned. Another 130 megawatt is also multi prefunded, so it should be a related commission. There's another 88 megawatt, which is also multi prefunded. So this is a capacity which is already prefunded. Now as far as balance capacity is concerned, out of which, a part of it we have already received the term sheet, and we are in the process of achieving the financial closure. On the overall basis for the entire portfolio, the balance unfunded, which you are referring to, actually, by the end of this Q1 or mid of Q2, we should be concluding our financial closure. Although just to reemphasize, we are not in a hurry to achieve financial closure, partly from the fact that our entire capital management framework, which we have, a large part of it is largely multi funded through our nonfund-based facility. That is USD 1.1 billion of nonfund-based facility which is already in place, which is used to tie up our large CapEx commitment like multi solar modules, transformer, trackers, et cetera.

And my final question, can you remind us again, what is the holdco's attributable share of OpCo distributions? And what is the latest holdco debt?

Yes. So latest holdco debt still remains the same. Actually, it's USD 750 million. I think nothing has changed on that front.

Okay. And I would also assume that the holdco share of OpCo's distribution is still the same at about INR 16 billion.

I think you are referring more from -- yes, just 1 second. Yes, so just -- can you just repeat the question, actually, especially the first part here? Just to be clear.

Yes. I wanted to know what is the HoldCo's share of distributions from the OpCo's across dividends and payments on intercompany loans.

Yes. So I think you're referring to free cash flow actually. Okay. We've got HoldCo's market share. So now that our hybrid portfolio is being fully commissioned actually, so we should be mostly talking about nearly from -- we should be talking around INR 21 billion to INR 22 billion. That is what we are talking about post multi share.

The next question is from the line of Imtiaz from [ LGCIB ].

I have two questions. The first one, can you help recontrol your debt repayment chart on Page 29 of your presentation? The maturities total some INR 380 billion. It's mentioned on the same page, it's only long-term debt. But on another chart, you mentioned long term debt is INR 450 billion. So the difference between the INR 380 billion and INR 450 billion.

Just one second. Basically, we have given only next 10 years repayment. There's repayment even beyond 10 years.

Okay. Right. So is there any further clarity you can provide beyond 10 years or...

Yes, it's required. I think we can separately share with it because this is nothing but a legal maturity of our existing liability actually. In case, if you require, we can separately share it with you.

Okay. Great. Second question, this relates to your 2 U.S. dollar bonds. On the last call and meeting since, we were told that there were specific plans in place to meet the maturities or the 2 points for the holdco, that you have 800 million 3-year facility with global banks and for the RG issue '24 that you will be doing a private placement. Any further confirmation or clarity you can provide on these 2 funding sources?

Yes. So I think we can again reconfirm that as submitted in our last call, actually, by the end of this quarter, we will definitely be coming out with a firm takeout plan for both the holdco USD 750 million, as well as the RG1 bond. As we have mentioned in our last call, actually, as far as RG1 bond is being concerned, this will be taken out through a long tenor bond issuance. Similar to like RG2 type of structure, which we have in place.

And what about the holdco bond? Are we still looking at 800 million 3-year facility? Or has that changed?

Yes. So Imtiaz, that is one of the possible avenue actually. Since we have not firmed up our entire plan as far as holdco is concerned, so we have -- we are still not able to confirm that to you. But as I said, by the end of this quarter, actually, that is by June, we will come out with the firm plan as far as holdco is concerned, in line with what we have committed in our last call.

Okay. Just my last question, just relating to this two. Now that we have seen Adani ports doing an early tender, would you also consider that if you are able to firm up funding for these two bonds?

So I think in terms of that, what I can say is, okay, when we come out with our firm takeout plan actually, we will definitely [ look at shout out ] exactly in terms of what is our strategy as well as the nature, instrument, tenor and the modalities of that.

Next question is from the line of Love Sharma from Lombard Odier Investment Management (sic) [ Managers ].

I have a few questions. So look, first one, if you could just highlight how much was the merchant base revenues you had during FY '23. And at what kind of tariffs you sold or you sold the power. So if you could just break it down in terms of units sold and tariffs you were able to charge on that. And the second, I think, item was you mentioned on the press release about some onetime charge -- onetime revenues, which you recognized about 750 crores on. If you can just share what exactly is this onetime revenue. It seems like related to the [ LP 15 ], but would be good to know maybe deals there. And I think maybe second -- and third question for now, if you could just break down the debt as of March '23 in terms of the project level SPV debt and the holding company debt based on your total debt number.

As far as merchant is concerned, I think within our fleet, for financial year '23, the pure player merchant portfolio is basically 50 megawatts actually. But as far as our in-firm revenue is concerned, okay, our nature of in-firm revenue by itself means that it is being sold in the grid, sold in the exchange actually. So from a portfolio perspective, for FY '23, 50-megawatt is our merchant portfolio. In-firm revenue is largely being sold on the exchange. So to that extent, okay, you can say that, that is also a merchant multi exposure. So in terms of merchant rate, which we are talking about, okay, on an annual year basis, we realized merchant rate of approximately between 440 to 450. For second question, which is about the onetime gain actually. Now onetime gain is basically a favorable order which we have received in case of our Tamil Nadu Kamuthi project. We had a dispute with Tamil Nadu in terms of, okay, what exactly should be the tariff for it on account of when the COD was declared upon. So that matter has been adjudicated finally in our favor, and we realize the receivable actually. Just for the benefit of everyone, as a matter of prudence and conservatism, we have not recognized these revenues in our preceding year. Now that we have actually received the revenue, so we have recognized it. So this includes INR 748 crores, and it's a combination of past dues of approximately 550 crores and balances late payment surcharge on account of that. That's the second part actually. As far as your third question is concerned, I think in the presentation, we have given our gross debt number of around -- gross debt number actually. And out of which, if you see excess USD 750 million, which is basically at a holdco level, and the trade credits, which are these nonfund-based facilities, which are being issued, every other [ automatic ] liability is at opco level.

Understand. So if I could just understand because from what I had in the standalone balance sheet, there were a lot of trade credit lines which were basically incurred at the holding company. But you have classified that as under transaction or project debt.

If you see actually our trade case numbers, we have shown separately. You see our gross debt in the earnings presentation, the debt breakup, actually. If you see a gross debt of 47,424, there include a trade credit of INR 1,399 crore.

Got it. Okay. Okay. Understand. But the holding company, whatever you have shown, I think the breakdown is only INR 6,133 crores, right? So INR 6,000 crores, which is basically the holdco bond.

Holdco as well as, okay, if you strictly go by one of the legal applicant perspective, yes, INR 1,399 crore is also at the holdco level.

At the holdco level, correct.

What happens is one of the LCs gets matured actually. At that point of time, those LCs get converted into project finance, not a liability [indiscernible].

Understood, understood. And if I could just come back to the first question I asked about the in-firm revenues. Can you quantify the revenues you made out of this in-firm revenues for FY '23?

It is INR 1,854 crores actually.

INR 1,854 crores, got it. And the PPAs on -- because now they have been converted to PPAs, right? What would be the tariff on PPAs for these projects?

Yes. So PPAs on tariffs will be between -- at least between 2.6 to 3 actually. But I think another point which we need to be mindful is in-firm revenue is something actually, it is basically a timing mismatch between when I have to legally operationalize my multi project compared to actual operationalize of my projects. So from that perspective, in-firm revenue will continue to be there, but yes, in nature and the project which will generate that in-firm revenue on a year-on-year basis will vary.

[Operator Instructions] The next question is from the line of [ Shawata Rani ] from [ Arkin Capital ].

Just a question on the opco financing. I guess, can you give us a sense of, I guess, availability of financing this -- given what happened over the last 2 or 3 months and it's still easy for you to access financing for under construction projects? Any thought process around, I guess, extending out some of the time lines for your completion of the pipeline?

Yes. So I think [indiscernible] that is where maybe a good point to recap our capital management philosophy. But before that, I think just to emphasize that from a long-term financing perspective, as we have mentioned in our last call, we have a very diversified funding base actually, which is basically a combination of our domestic financial institutions, specialized institutions, domestic banking market, our capital market at domestic level as well as more, okay, our construction multi facility which we have put in place. So from that perspective, we have diversified multi funding base. But what is more pertinent to emphasize is the entire capital management framework and the nonfund-based facility, which we have put in with USD 1.1 billion of nonfund-based facility. And as a response to the previous questioner, we showed the debt profile actually, where we showed that on March, and actually, our outstanding trade credit was 1,600 crore. So we have these nonfund-based facilities in place. What it effectively does is for major capital commitment like module, inverter, transformer as well as trackers actually, where, okay, we need to issue open LCs, we have these limits in place already committed. What it also gives us is our ability to time the financial closure actually. These LCs can have a maturity up to 365 days. So to that extent, for 365 days, I'm already multi committed. But from an AGL perspective, actually, we also want to be prudent and conservative. So from that perspective, as far as financial closure are concerned, we will be achieving the financial closure within maybe Q1 or latest by -- for the entire fleet, by latest by mid or full Q2. We have already started [indiscernible] receive other part of our portfolio. We already have binding term sheet from domestic market actually in place, okay, which will go through a bit of like a back and forth in terms of negotiation. From in terms of appetite perspective, we don't see any shortfall in appetite. And since we have this nonfund-based facility in place, we have the ability to time our financial closure.

Understood. Okay. So this $1.1 billion facility that you mentioned, does that fall under that $1.64 billion construction facility, the mix of funded and nonfunded exposure or...

No, it's completely separate actually. This is a commitment, revolving commitment which we have, which is already live actually. A part of which is utilized 1,399 credit, which we showed in our earnings presentation. Balance is available right now.

And the $1.64 billion construction facility, what are the terms of that, if you can help share some in terms of maturity or...

That is basically our -- under the framework agreement which we have and which is -- which we have put in place for the hybrid portfolio actually.

Next question is from the line of Amberish Rathi from T. Rowe Price.

Just want to start with a follow-up question on the previous one. So in terms of rolling over this nonfund-based line into the new facility, how much do you essentially need to raise a new facility for the 3 gigawatts per annum?

Yes. So these nonfund-based facility can have a maximum tenor of 365 days actually. So to that extent, okay, maybe if I open, I'll see for, let's say, my incremental capacity for module or any of those maybe large capital commitment actually, I have 365 days to achieve the financial closure. But that's not what -- how we'll do, how we will do that. That's a separate matter actually. But we have flexibility 365 days.

Okay. So you will probably -- if I were to kind of think about a deal raise, you will need to roll this $1 billion basically per annum into a project finance or an opco facility. Is that the right way to look at it?

Yes. And as when we utilize it actually, let's say, hypothetically, when a guy today, when, I guess, sitting today, if I open this entire nonfund-based facility for 365 days, yes, at the end of 365 days, I need to take out -- I need to -- okay, we could take out the [indiscernible] project financial [indiscernible].

Okay. Got it. On the revenue side, there is the 7 billion of one-offs from [indiscernible]. Can you also tell us what the GBI, carbon credit and REC revenue was in FY '23?

Yes, just one second. So carbon credit is going to be 157 crores actually. GBI, let me just [indiscernible]. Yes, so if you say carbon credit is 157, VGF and CIL is 37, and GBI is 6. So total of INR 200 crore.

Got it. Final question. If I just look at your consolidated balance sheet, it's got about INR 22 billion of receivables. But I was trying to reconcile that to the Page 44 on your presentation, which totals to around 12 billion or thereabouts. So I just wanted to reconcile those two numbers. You mentioned that there are no overdues. So what is the actual receivable number that you're looking at?

No. Yes. Yes. So this actually, the numbers which you are seeing in balance sheet is basically a commission of trade receivables that is under the PPA as well as some of the equipment which we have purchased actually and sold it to, let's say, [indiscernible] NWL for value engineering actually. So that is why I look at that number as coming that way. If you want the exact breakup, power sale is 1,206. Other than power sale is 1,060. And then okay, there are a few other miscellaneous items.

Okay. So 1,206 is the actual power sale receivables. Okay.

Absolutely, absolutely.

Next question is from the line of Prapti Gupta from BlackRock.

I have a couple of questions, honestly, follow-ups from the previous one is, one, on your lease trade credits. So when you say that these [ multi prefunded ] lines are for less than 365 days, which also means that your existing trade credits will fall your way soon, how are you guys planning to address this?

Yes. So I think the gross debt number, if you see, we'll say, right now, my trade project margin number is basically outstanding trade credit number is 1,399 crores actually. And if you will recollect, I talked about a part of my multi capacity is likely to be like operational investment into Q1 and beginning of Q2. This 1,399 multi pertains to those multi projects only for which commitment is already in place.

I'll just add. So basically, this 1,399 is something which will get converted to project funding as the maturities come in. And for those, since those are the projects that are already under execution, the project funding is already tied up. This is a timing difference where from an efficiency of capital cost, those are lined as trade credit. Otherwise, the funding is already tied up. Once these are paid out -- paid up, then you have another one -- the full 1.1 available for use in the projects which we have planned. And based on the cash flows, we will decide what trade credit to use, where debt to use and where the payments to be made out of it.

Take out -- just want to summarize, take out is one already in place actually. The financial closure for those projects are already achieved.

Okay. So which means that once you take out this, you will have that another revolver of 1.1 billion.

The 1.1 billion is anyway available. Part of which 1,399 crores, which has already been utilized actually. Once the 1,399 is taken out, entire 1.1 billion will be available. That's what I'm saying.

Got it. And what is the cost of funding of these trade credits?

Very competitive actually. Okay, the issuances could be between 60 to 80 basis points. And then like, okay, if I discount these, this should not be more than 7.5%. So what it does is it gives me a flexibility in terms of when I need to achieve the financial closure. At the same time, it optimizes my interest cost market.

So these new facilities with which this will be taken out are also project finance facilities with onshore or onshore max?

Yes, yes, absolutely. Onshore and offshore, combination of that market.

Could you -- is it possible to share some sense on what is your current -- what will be your potential cost of borrowing on these takeouts?

So I think what -- okay, going forward, okay, it will be market determined. What I can definitely say is, okay, in Q1, in February and March, we achieved -- we tied up our financing for one of our projects. And then we took disbursement under that. That is at 9.1%. It's a project finance facility. I'll put it that way.

Sorry? [indiscernible]

So what I'm just -- just to highlight is that multi facility which I talked about is a 20-year facility at 9.1% fixed.

Okay. Okay. Got it. And looking ahead, how can we expect your cap structure to be like -- for like, I think a large part of your committed CapEx or whatever planned CapEx for that matter does not have financial closure. Yes, it is expected to close. But what I'm trying to understand that are you guys expected to avail or bring in more such nonfunded lines at holdco levels to have those 365 days flexible funding and then come up with project? How are we expecting the cap structure to look like maybe in the next 12 to 24 months?

So as far as nonfunded facility is concerned, yes, we have the ability to increase the limit actually. But from our capital management philosophy perspective, we are absolutely clear. We are in an infra business. And these are on a long gestation with very long-term revenue, 25 years. So what it effectively means is I need to have proper project finance facility in place as early as possible, irrespective of the fact that this nonfund-based facility gives me a competitive advantage in terms of IDC. Some instances, okay, I have the flexibility, but logically, I will not try to increase this limit, right, as well like to have project finance facility as early as possible, even before the expiry of 365 days.

Okay. Got it. Last question for me, and this is again on the receivables follow-up. So largely, 40% of your receivables is from something that you mentioned about [ 9% ] and getting it [indiscernible]. Why is Adani Green looking to do this? I mean what is the business proposition?