Adani Power Limited (ADANIPOWER) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Adani Power Limited Q3 FY '24 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from ICICI Securities. Thank you, and over to you, sir.

Thank you, Niraj. Good evening, everyone. On behalf of ICICI Securities, we are pleased to welcome you all to the Q3 FY '24 Earnings Call for Adani Power Limited. Today, we are privileged to join with the management team, Mr. S B Khyalia, CEO; Mr. Shailesh Sawa, CFO; and Mr. Nishit Dave, AVP, Investor Relations. We will start with brief opening remarks, which will be followed by Q&A. Over to you, sir.

Dear friends, good evening, and welcome to the Third Quarter Financial Year '24 Earnings Call of Adani Power Limited. As you all know, the Indian power market is growing steadily and strongly, in step with the world-leading economic growth witnessed after 2020. Power demand in this fiscal year has grown by 7.6% year-on-year till December. Thermal power PLF has also improved, and there is a growing realization that coal-fired power plants are a reliable and important part of our energy mix. This favorable situation is also reflected in Adani Power's operating performance for the recently concluded quarter and 9-month period. Most of our PPA-based capacity, including import coal-based capacity as well as merchant capacity, has achieved higher PLF. In addition to this, the Godda power plant has ramped up its operations quite satisfactorily and established its position firmly in the Bangladesh power mix. Similarly, the company has also delivered stellar financial performance during quarter 3 of '24, with higher sales volumes and benefit of lower import fuel prices. We have maintained high levels of plant availability, which is crucial for recovery of capacity charges and maintaining stable profitability. Our regulatory issues have now been almost fully resolved, and we now have adequate fuel cost recovery under the PPAs. Steps taken by the government of India to encourage DISCOMs to make payments on time have worked and improved our cash flow. Mahan power plant, which was acquired by us in quarter 4 of 2022, has turned its fortunes around quickly and started posting profits by benefiting from our expertise in power sales management, fuel sourcing and power plant operations. We have repaid the entire outstanding sustainable debt of Mahan Energen. Similarly, we have also prepaid other secured and unsecured debt of APL from its cash flows and made the balance sheet lighter. Our capacity expansion program is well underway, and the 1,600 megawatt Mahan Phase II ultra-supercritical power project is fully on track. We are also moving closer to the acquisition of Coastal Energen under a consortium arrangement, for which we have received a letter of intent from the Committee of Creditors. On the operation side, we have undertaken an initiative for digital transformation of the business. We are building digitalization and analytics into all aspects of our organization's functioning, especially in power plant operations. Our Analytics Center of Excellence has identified more than 90 projects, which are being developed, tested and implemented for more efficient, predictable and safer operations along with better analytical and decision-making tools. Coming to responsible and sustainable operations, our power plants continue to perform admirably by operating well under statutory limits for specific water consumption and CO2 emissions. We have recently published APL's 9th ESG report following GRI standards, which details our efforts and achievements on various fronts. In a nutshell, we are building a more agile, responsive and sustainable enterprise for the future. The issues and challenges that we faced earlier are well behind us, and we look forward to generating sustainable value for our stakeholders in the coming years that are full of growth opportunities. With this, I would now like to hand the call over to Mr. Shailesh Sawa, our CFO. Over to Shailesh.

Thank you, Khyalia sir, and good evening, friends. The CEO has already given you a broad overview of APL's performance during the recently completed quarter. I will provide you with some more insight into it. I hope you have downloaded the analyst presentation for the quarter, which has been published on the stock exchanges and our website. APL achieved a PLF of 68.6% and sales volume of 21.5 billion units for Q3 FY '24 on a consolidated basis as compared to 42.1% and 11.8 billion units, respectively, in Q3 FY '23. The figures for FY '24 include operating and financial performance of the incremental capacity of 1,600 megawatts of the Godda power plant, which has come online in Q1 of the current financial year. On a year-to-date basis, APL achieved PLF of 62.4% and power sales of 57.1 billion units till 31st December 2023 in comparison to 46.6% and 39.1 billion units in the first 9 months of FY '23. Apart from the incremental addition of the Godda power plant, higher volumes were also contributed by the Mundra, Udupi, Raipur and Mahan plants. A reduction in prices of imported coal has helped us improve the offtake of power from Mundra and Udupi plants. APL's merchant capacity enjoyed a strong logistics cost advantage because of being located close to the main coal belts of India. This allowed us to gain the maximum benefit from the current surge in power demand. As mentioned by the CEO, our plants have posted high uptime on a consistent basis, which allows us to claim full capacity charges under PPAs and help us generate a very stable core EBITDA. Now coming to the financial performance. As you may be aware, our financial results in the past used to incorporate prior-period revenue items, which were recognized due to regulatory orders for recovery of alternative fuel costs, carrying costs and late payment surcharges from DISCOMs. However, in order to give you a clear understanding of our quarter-on-quarter performance, I'll present an analysis of recurring revenues and EBITDA. On a recurring or continuous basis, the total consolidated revenue of APL for Q3 FY '24 grew by 72% to INR 13,405 crores with an 82% growth in sales volumes. The apparent reduction in realized tariffs is primarily due to lower prices of imported and alternate coal, which reflect in the energy charges under PPAs. On the other hand, merchant tariffs realized during the quarter improved significantly, as we have detailed in our analyst presentation. The fuel cost for Q3 FY '24 increased by only 36% over Q3 FY '23 due to this very reason. This resulted in a strong growth of 242% in our recurring EBITDA to INR 5,059 crores in Q3 FY '24 as compared to INR 1,479 crores in Q3 of the previous year. For the 9-month period, continuing revenue increased by 40% to INR 37,173 crores in FY '24 with a volume growth of 46% as compared to the corresponding period of FY '23. Tariffs under PPA and from merchant sales moved in a similar way to the quarterly change. Similarly, for the 9-month period of FY '24 also, the continuing EBITDA was higher by 118% at INR 13,516 crores, driven by a strong growth in revenues and a reduction in import fuel prices that was witnessed over the current year. In comparison, continuing EBITDA was INR 6,210 crores for the corresponding period of FY '23. EBITDA as reported, including prior period adjustment, has grown by 151% to INR 5,009 crores for Q3 FY '24 as compared to INR 1,996 crores for Q3 FY '23. For the 9-month period of FY '24, reported EBITDA has grown by 92% to INR 22,743 crores as compared to INR 11,851 crores in the comparable period of FY '23. We have utilized the cash flows from operations, including the recoveries of past dues from DISCOMs very judiciously to reduce debt through prepayments. We have recently prepaid the remaining outstanding senior debt of Mahan Energen Limited. As a result, the finance cost for Q3 FY '24 reduced by nearly 16% to INR 797 crores versus INR 946 crores in Q3 FY '23 after considering the incremental borrowing for the Godda power plant. For the 9-month period, finance cost was broadly similar to the corresponding period of FY '23 being INR 2,560 crores versus INR 2,588 crores. At both the stand-alone and consolidated level, our leverage and debt service indicators are now very healthy, reflecting a strong creditworthiness, setting the path to improve returns and creating growth headroom. On a continuing basis, profit before tax for Q3 FY '24 was a strong INR 3,261 crores in comparison to a loss of INR 305 crores for Q3 FY '24. After considering onetime items, the reported PBT for Q3 FY '24 was INR 3,210 crores as compared to INR 212 crores for Q2 FY '23. Similarly, continuing PBT for the 9 months of FY '24 was INR 8,006 crores as compared to INR 1,136 crores for 9 months period of FY '23. After considering onetime items, the reported PBT was INR 17,234 crores versus INR 6,777 crores for the 2 periods, respectively. Profit after tax for Q3 FY '24 was reported at INR 2,738 crores as compared to INR 9 crores for Q3 FY '23. For 9 months of FY '24, the PAT was INR 18,092 crores after considering deferred tax credit of INR 858 crores as compared to PAT of INR 5,484 crores for 9 months of FY '23. As you can see, Adani Power now generates strong profitability and cash flows on the back of gainful deployment of our high-quality assets and operational excellence. It is our endeavor to continue to deliver the company's full potential and create maximum value for our stakeholders. Lastly, before I hand over the call to the moderator for your questions, I would like to share a personal update. Effective April 1, 2024, I will be transitioning to a new role at group level in group regulatory engagement function as part of a leadership development initiative that is in progress across Adani portfolio companies. I will be handing over the position of APL CFO to Mr. Dilip Jha, who is currently Finance Head of the Integrated Resource Management vertical of Adani Enterprises Limited. Mr. Jha has deep and varied experience in the finance field and has been associated with Adani since 2010. I'm sure you will enjoy interacting with him as well. Thank you. And now over to you, moderator, for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Nirav Shah from Geecee Holdings.

Many congratulations for a fabulous set of numbers. Sir, a few questions. Firstly, sir, has there been any repayment of unsecured perpetual securities during Q3? I mean, Q2, the balance was INR 9,180 crores, and we are seeing INR 1,000 crores deleveraging approximately on a sequential basis against our EBITDA from INR 5,000 crores. So I just want to understand, any repayment of perpetual securities that has happened during the quarter?

Yes. You will give the second question or I should respond now? Let me take...

I think we can take it, yes.

Yes, thank you for your compliments. Yes, perpetual outstanding now today is INR 7,435 crores. So that is...

INR 7,435 crores?

Yes, INR 7,435 crores. So that is what -- so difference is what has been paid out of the surplus cash flows.

Absolutely. Great. And sir -- yes?

I must also clarify that we have perpetual securities, we have unsecured support received from the group. And also, we had long-term debt. We have 3 baskets of the debt. So we have used cash flow judiciously to keep it balanced. We have retired -- we have prepaid the secured debt as well, unsecured debt and part of the perpetual security also.

Got it. So the actual cash outgo to -- on account of perpetual will be slightly more because there have been an interest component, which will be added? This is you're talking about the principal outstanding.

Yes, this is principal and approximately INR 2,000 crores that's been paid towards the yield on that.

Okay. So total is INR 2,000 plus the INR 1,700-odd crores?

Total, both together, yes. It's INR 2,000 crores plus little above INR 2,000 crores, all inclusive.

All inclusive. Makes sense. And sir, what's the EBITDA for the first 9 months for Godda and Mahan? Revenue, EBITDA and PAT, if you can just disclose it separately?

Actually, we don't give separately. We have given the consolidated numbers. So that number I've just read out to you for your information.

Got it. Got it. And sir, I mean, any update on Amarkantak? I mean, where is the process right now?

Nothing right now. COC has not taken any view on this right now. So process is currently on, and we can't comment on the outcome and the time lines.

[Operator Instructions] The next question is from the line of Nikhil Abhyankar from ICICI Securities.

India is going through kind of a thermal capacity addition, even the government is asking everyone to add thermal capacity. Sir, basically, are we rejigging our plans to add thermal capacity in the long run?

Actually, last time, we already gave a plan that today, we have capacity of 15,250 megawatts, and we have already saved the plan up to 21,116 megawatts or so. So as of now, we have something approximately 6,000-megawatt capacity addition plan, which we have already shared. So that is what we have as of now.

Sir, this is purely greenfield or does it also include acquisitions?

This includes 1.1 gigawatt of acquisitions, also which we thought probably could be the -- in the offing.

So it is both. Actually greenfield as well as the new and -- it may interchange also if greenfield is not materializing, it may include the acquisition or some acquisition is not getting materialized, so we may add the new one also.

So that is the target capacity as we speak.

Understood. And sir, regarding Mahan II, so what is the status of the project, as in has the EPC tenders been finalized? And can you just share an update on that as well?

Yes. This is being implemented and the process is in -- the project implementation is in full swing. The broad packages have been all ordered now and see more are in the process of being ordered. It is not on EPC basis, they're on split package concept basis. So BTG has been already ordered with BHEL and rest is on the way of being placed.

Understood. And sir, does this quarter's income include any past period adjustments?

Insignificant. Not much. Excuse me, is the moderator online? We lost the contact.

Sir, can you hear me?

Yes, we could.

[Operator Instructions] The next question is from the line of Koundinya from Jefferies India.

Sir, just a couple of questions. So firstly, on the capacity expansion plans, outside Mahan II, can you please help us understand what are the projects where you're looking at greenfield expansions? I'm not speaking about the acquisition part, but the greenfield or brownfield expansions which you may want to look at.

No, we -- our existing facilities have a potential to expand. So other than Godda, we have other 6, 7 plants. We have -- we can think of expanding it. And when Mahan expansion I is taking place, maybe at Mahan or Raigarh, we can add another maybe 3.2 gigawatt of capacity. So if you look at what has been disclosed by us, it's about 4.8 gigawatt of expansions. So this could be at any of our locations, with Mahan II is already underway. And maybe at Raigarh and maybe at Mahan, again, we can have a Phase III as well there.

Understood, sir. So...

Greenfield, what we are targeting is 4.8 gigawatts.

Understood, sir. Understood. And sir, on the acquisition side, I mean, you said Amarkantak which -- discussions are underway. But other than that, do you see any projects which are worth looking at or which -- I mean, where we will have certainty of PPA or FSA being tied up or any other assets, I mean, in the pipeline which you think -- or what's -- even if you count or if you don't want to name the asset, what is the kind of pipeline at an aggregate level that is existing already, if you can help us understand that, please?

We would not like to guess at this point of time.