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

We have a couple of questions from Anuj Upadhyay in the Q&A box. First is, is it fair to assume there won't be any open capacity for the targeted 50-year-old capacity, except for [ InformPower ]?

50 gigawatt is too far, but yes, you're right, the strategy goes. We are going to derisk versus as we have started now.

Right. And secondly, on the PPAs with [indiscernible]? Is it based on similar terms as with [ SECI ] bidding or on a take-or-pay basis, also for capacity going ahead that you plan to sign with ASL, what will be the terms?

Absolutely. It's on an [ online ] basis. We followed the standard PPA guidelines of [ SEC].

Right. We have next question from Bhavik Shah, also in the Q&A box. Is the CapEx guidance for FY '27 and '28? Also is the transmission capacity of additional 7 gigawatts coming on stream by September 2026 on track?

I think the second question, Bhavik, we have already addressed with respect to additional capacity of 7 gigawatts --

Sort of [ can ] you come up on a see from CapEx perspective, the FY '27 guidance is about INR 42,000 crores of CapEx to be done for FY '27 because we are looking at about 5 gigawatt of expansion in [ Ari ] and 10 plus we want to reach as a produce capacity in batteries. So from that angle, it would be that in that range.

We'll take the next question from [indiscernible].

Just want to clarify one thing. The 5 gigawatt capacity addition target in FY '27, does that include the 500-megawatt PSP that is expected to come up?

No, [indiscernible]. That the BESS capacity and the on storage capacity is excluding.

Okay. Got it. And just secondly, on the realizations that you're getting on the inform power, do you have -- that sold on the merchant market. So for 1Q, could you share what the average realizations would have been?

Yes. I think [indiscernible] it is currently in line with what the merchant power is selling through, including [ DRC], it varies, but it is in the range of INR 2.5 per [indiscernible].

We have a couple of questions from [indiscernible]. Congratulations on a good set of numbers. First question is 10 gigawatt plus hours of battery. How should we think of phasing over the course of the year? And question 2 is on economics, how should we think of cycles and unit economics through the course of this year?

My name is [indiscernible] like look after the battery in the user system business. So I think the phasing question, you need to realize that battery energy projects are relatively new in India. So there is a deep commissioning phase on a stabilization phase. That is why we are not giving specifically quarterly guidance on when we would get commissioned. All I can tell you at this point in time, the projects are at a relatively advanced stage of construction, and we will start commissioning entities very soon. But we are not using to tell you from quarter-wise guidelines or commissioning. But yes, it will certainly be -- in FY [indiscernible] that we have committed, we are on track for that. And we are trying to see how we can further include the time lines on that. But yes, we are relatively advanced and on price for the FY '27 targets. I think the second question you asked is about the unit economics. I think way to look at it is fundamentally the store [indiscernible] works on an arbitrage model, right? So you are able to store power when it is relatively cheaper as Ashish just mentioned, let's say, around INR 25 and then you are able to monetize that during evening hours when then the market gives you better prices. And I think the way we have gone about it is look at the trends for the last 36 months, 24 months, 12 months and right for this number. So they tend to be anywhere between [ 4 to 5 ] is the arbitrage that you tend to get for these projects and they are economically viable arbitrages on which we are working. So you should typically look at unit prices. Yes, cycle does also come into play, but I think there will be or 2 years before you know whether we are able to do on cycle, grow them one side, how much more we are able to do because that's a very dynamic situation whether we are able to do cycle in the night time. So yes, that's something which we are studying and hopefully, we'll have better data by the next call.

We will take the next question from Dhruv Muchhal.

So earlier, we had a strategy that we'll go ahead and commission projects even though on a merchant basis so that we can optimize on the transmission cost so that whenever the opportunity arises, we have that transmission arbitrage also. Like for example, what you did last year and for last 2 years. So does that strategy still continue in the new arrangement? Or your commissioning of some of the projects will now align with what the offtake requirement from, say, for example, [indiscernible]?

I think -- so the strategy remains to optimize all costs and get the maximum profits on it. So that's the overall strategy, which we have -- coming back to your question in particular. You have to appreciate the fact that our new projects that we completed through that our new projects which are going to [indiscernible]. We are taking into consideration how the acquisition is [indiscernible], it is likely to come. And that's how our product strategies are as of now. Taking into consideration the PPA requirements, which we have already signed on and our commitment on delivering this and of course, for the transmission part, it is there. But you also have to appreciate that in the last 1 or 2 years, there has been certain policy interventions or waivers, which were going off on the subsidy part. Whether it is with respect to the ISTS charges or with respect to [indiscernible]. That has also associated certain investment from our side because then all those projects being commissioned with the time lines for the next 25 years, who have the advantage of those subsidies, which were available to us. So all this is taken into consideration when we have this annual 5-year plan with us. But yes, what you're saying, those optimization will always remain in line when we strategize and it is irrespective of whether it's a PPA or a [indiscernible]. The idea is to have a cost optimization, getting the maximum returns on our investment.

Got it. No, that's helpful. And sir, second question at a very macro level, what you're observing is that the rooftop market has picked up quite meaningfully. You are seeing installations of 8 gigawatts last year and probably this 1Q itself is about 4 or 3 gigawatt analyzing about 12 gigawatt oddish. How should we think of this? Is this to some degree, eating away the market potential from the utility segment because at some point, demand is what it is, and somebody else is taking away that market share. And can I have some implications for future PPAs from the industry -- I mean, from the discounts and others? I mean just trying to visualize how should we think of this?

Sorry. I think it is -- if you look at India's energy demand, the electricity demand, that's been growing. It is in line with our GDP growth. On that growth on the trajectory and how the [indiscernible] energy itself is proving as a very sustainable and cost-effective electricity [indiscernible]. We don't foresee that distributed generation of a rooftop, which is going to disrupt the overall market of energy requirement in this contract. It is -- I think both can sustain its growth in its whole sales. And we are seeing -- and then you also have this element while the solar has certain role to play during that time. you have evening peaks and night and early morning requirements to which a rooftop at some one [indiscernible] or C&I segment will not if to sustain. So in our view, we see it as a very good sign in the way people are embracing clean energy. And we don't foresee any major challenge to utility segment, to C&I and those who are primarily bigger consumers of energy per se.

And sir, last question, on the battery point, you had mentioned -- I mean, [indiscernible] mentioned that scheduling the visibility of scheduling at a granular level is not as probably accurate. I'm just trying to understand why does that happen? I thought if you have transmission connectivity, generally, these are kind of set equipments. So I thought there should be a better visibility versus, say, for example, a typical windows solar project, but it seems a bit different --

I think, Dhruv, you took scheduling to a different understanding. When we were talking about scheduling is that there is a plan on how much gigawatt power is going to be installed in a particular month. The first quarter itself should give the market enough confidence on the capabilities of Adani Green to execute and operationalize project. We have a target of a 10-plus gigawatt basis. Let me also add here that this capacity itself we are virtually half of the total operational capacity as well as banker is concerned in this country. By the end of the year, we are going to be even more than 2/3 of that when we are speaking of a scheduling point, it was with respect to years. Many times, a quarter may not -- it quarter may not be 10 divided by 4. It can be plus 500 plus megawatt hour, things like -- that is where the scheduling was -- and we also have to look how the second cycle plays into [indiscernible].

We'll take the next question from [ Abhishek Kana ].

Just one question on the industry more broadly. But like you said, we are still in the early phases of battery installations for the country as a whole and even for Adani, let's say. But I think there is a risk of some of these battery fires, unfortunately, like we've seen across the world. I think there was uncertain side that happened with one of our competitors also thankfully not very severe. But is that a real risk? One second, if that is the case, do we get any warranties or cover from the battery provider or the [ EPC ] guy or is there a third-party insurance for that, that is available and we are taking?

So Abhishek, I think I'm glad you asked this because -- we also come across this news reports and video circulating [indiscernible]. Let me clarify that it may be a competitor, but they are now industry players. So I think what has been circulating in the video is a bit misleading. So what caught fire was not the batteries. Right? What caught fire actually what is called PCS or inverters because there was what is called [indiscernible] here. While that itself is not a good thing, but that's not very uncommon. It has happened in past factories per se are not a fire is another component, which can happen in any other plant. It can happen so another plant. So it's not a battery fundamental risk. Yes, you are right. The energy density of a little LFP so high that you're packing in a lot of emerging the container. So you have to maintain a lot of safety protocols. I can only tell that we have invested in technology and vendors with the highest levels of safety norms, some of them actually comparable with what goes in Europe. But we are constantly monitoring both from a data point of view as [indiscernible] point of view. And as and when there is any further action needs to be taken to take. But that part of incidence, I will categorically clarify is not fire in the bar system. It is actually as one component.

Got it. And the second part of the question of course, we will -- everyone takes per questions like they would -- but is there any insurance that anyone gets or guarantees or warranties that you do get from the supplier or any insurance service provider out there?

Yes, absolutely. So insurance like it is covered for any equipment, it is covered by standard insurance policies, including our battery projects. There is a very rigorous process by which the insurance agents value and then the underwriter policies. And all these projects are battery [indiscernible] specs, we are designed for specs of our particular location in terms of temperature weather and our type of operations. So the -- and of course, our OEMs are all [indiscernible]. So we are not expecting any --

We'll take the next question from Nikhil Nigania.

Just continuing again on the C&I space, given it's a significant change. I wanted to clarify, do these contracts have any exit or termination clauses in case ASL is not able to sell that power at the right price. So either party do they have any termination clauses if there are, is it very similar to a SECI contract.

So I told you, Nikhil, these contracts are on the basis of the SECI PPA. And it is -- there is no termination on convenience for those contracts. These are contracts which has been signed between markets. And I would like to reiterate here that these are primarily signed from AGL standpoint, is the ups and downs of the market and get the predictable [indiscernible] for which we have made our assets and these contracts will be substantiate and honor that strategy.

Makes sense. And if I may just add one more question. I think as you mentioned earlier, A, your strategy to early commission these assets to take benefit of [indiscernible], et cetera, was a big advantage we had but that advantage of that INR 50 a saving in transmission cost, where does that sit now after this? Will it still be with AGL, will it be with ESL?

I told you from AGL's standpoint, we have [ derisking ] pluses and minus on that part. And it is very difficult to predict how these advantages will pan out in the future. in the next 25 years. And I think that is a risk which ESL has taken. AGL has been insulated from -- we are basis the online transaction or getting the predictable returns for which we have built these projects.

Perfect. Understood. And just one last question then on the execution side, given that's the entire focus now. So [indiscernible] has been -- I mean, excellent for us. It's already up to 10 gigawatts has been mentioned. Are there any other similar large sites that we are evaluating, which could come up in the near term?

Of course, -- so we are seriously evaluating many large sites and are working on it. [ Card ] experience has been phenomenally good for us and given us the confidence of executing and operationalizing these large projects. And I think basis, this experience has given us immense confidence on even working on those. So you're right, we are working very seriously towards other large sites, too, at the places where the radiation levels are as good as possible in this country.

And would there be to a comparable scale to carbon anything in that ballpark or?

It's difficult to say to which it will be -- but yes, it will be very, very large side, some which are valuing. And as and when it comes into picture, you are -- we are bounded as a public company to declare the same. And you will be the first one to know about this.

[Operator Instructions] We'll take a follow-up question from [indiscernible].

Just quickly, a bookkeeping question on BESS. So you highlighted that you've added about 1.7 gigawatt of capacity in 1Q. Does that imply that your closing capacity at the end of FY '26 would be about 1.6 gigawatts just based on the math because your previous presentation at the end of 4Q had mentioned 1.4. I just want to clarify that.

So if you had seen it was like toll as well as commission executable capacity was mentioned. So installed capacity was 1.6 -- and this year, this quarter, we have installed about 1.9. So the total capacity installed is at 3.5 gigawatt.

Okay. Got it. And just secondly, on the best. So your presentation mentions you have facilities available for 2 gigawatt under construction best projects. So 3.5% is already commissioned 2 gigawatt hours facilities available. So balance 4.5 gigawatts are that you're looking to add? Are there any risks on delays there? And in terms of the supply chain also, I just want to understand, is the supply chain secured on these best projects? Is there any risks to that as well?

Sean, I think if you read it well, we are committed to have 10-plus gigawatt in this financial year besides what has happened in the past. And as we speak, we are committed, and we are very clear to achieve this -- we don't -- while the risks are always there. But with our experience of the past, we don't foresee much risk in achieving these capacities in this financial year for sure.

Okay. Understood. And just if I can ask one last question on the realization profile. I believe this question was asked earlier, but I may have missed the answer. I just want to understand. The realization of the tie-up with ASL would be in line with the long-term PPAs that we already have tied up? Would that understanding be correct?

Absolutely sure. definitely in line with the long-term [indiscernible].

We have one question, the Q&A box from Bavisa. What is our CapEx cost of batteries and similar to what you answered, how many years or warrant your guarantee do they come with?

The cost, of course, is a function of so many moving pieces, liquid dollar exchange rate and other things. But at this stage, I think a reasonable good thumb-rule would be INR 1.5 crores per megawatt of installed capacity. So I think that's a good number to work with. And it may change a bit depending on what it is to our system or our system, but let's not get into that answer yet. But right now, I think INR 1.5 crores is on the which [indiscernible].

Thank you, sir. There's the final reminder to the participants for any questions. If there are no other questions, I'll hand over the mic to the management for any closing remarks.

Yes. Thank you, everyone, for coming on the call. We look forward to continued interest in Adani Green Energy. Thank you, Macquarie for arranging this. And thank you all and hoping to see you next quarter. Thank you.

Thank you.