JSW Energy Limited (533148) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the JSW Energy Limited Q4 FY '23 Results Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohit Natarajan from Antique Stock Broking. Thank you, and over to you, sir.

Thank you, Robin. Good evening, everyone. First of all, I would like to thank the JSW Energy management for giving us this opportunity to host the post earnings 4Q FY '23 Earnings Conference Call. Today, we have with us from the management, Mr. Prashant Jain, Joint Managing Director and CEO; Mr. Pritesh Vinay, Director Finance and CFO; and Mr. Bikash Chowdhury, Head, Investor Relations and Treasury. We will begin the call with the opening remarks from the management, post which we can start the Q&A. Over to you, sir.

Thank you. Good evening, ladies and gentlemen. The year gone by had been very, very interesting year for the power sector. We had seen in last 30 years highest ever power demand growth during the year at the rate of 9.5%. This came in on a backdrop of 8.5% power demand growth in FY '22. So this is showing a certain structural change in terms of the power demand growth. And as we speak, we saw the total capacity in the country at 416 gigawatt, which talks about the total net capacity addition of 16.6 gigawatts, of which majority, which is 15.3 gigawatts was renewable. The important point, what you have to see, is that out of the 16 gigawatt of the net capacity increase, the net generation is close to 4 to 4.5 gigawatt, whereas the net demand increase was approximately 14 gigawatt. That means 9.5 gigawatt of the overcapacity got absorbed and the similar was the situation in the previous year in which also 17 gigawatt was a total capacity addition, of which 15.5 gigawatt was the renewable capacity. So the point I'm trying to say is that enough net capacity addition is not taking place as compared to the net demand increase in the country, which is also reflecting into the abrupt increase in the power prices into the energy exchanges. Second thing also to be seen is that not enough volume is available in the merchant market, too, which is getting cleared. In the last year in day ahead market, the total volume was 51 billion units, which was down by 21% as compared to the previous year and the tariff increased by 36% at INR 5.97 as compared to INR 4.39 previous year. The thermal coal prices are continuously falling. In the quarter 4, the thermal coal prices came down by 37% on an average of $148. It has been continuously declining in the current quarter also. And in April, average prices were $130. May, it was $118. And as we are speaking, the prices have touched to $102. And on a lower calorific value basis, they are in a double-digit number. So we continue to see the moderating coal prices and power demand is very, very interestingly increasing in a very robust way. In coming to the company, this year has been for delivering the promises. JSW Energy reported second highest ever EBITDA and second highest PAT ever. The last time we saw 2015 during the high merchant prices and shortage of power, we saw such kind of an EBITDA and also in 2016, we saw the similar kind of a PAT. But in last 7 years, 8 years, this is the highest ever operating EBITDA as well as the profit after tax. Now our business has also transformed as compared to the previous year when at that point of time, about 55%, 60% of the capacity was [indiscernible]. We were dependent on the release of the merchant market power demand scenario and supply scenario. Today, 85% of our portfolio is completely tied up. This 85% I'm talking, if I'm considering Ind-Barath capacity also once that get commissioned. And so we have a very strong visibility of our -- all of our cash flows going forward. In terms of the good development, we have now won 2.4 gigawatt hour of the pump storage bid and 1 gigawatt hour of battery storage bid. These are the 2 projects which we will be constructing. So this is giving us the first-mover advantage into the energy storage space. India is at the inflection point of the energy storage requirement point of view because today, our baseload power demand is 185 gigawatts, whereas the total renewable capacity which is installed at 173 gigawatts. The movement baseload power demand and renewable capacity equals and renewable capacity overshoots at that point of time, grid will start becoming unstable and which is going to happen in the next 18 to 24 months' time frame. Because at a time when the sun is at its peak at that point of time, if the renewable power -- all power is coming, at that point of time, you cannot turn down your thermal capacity to 0. That's where the grid storage requirement comes into the play. And CEA has forecasted that by 2030, 322 gigawatt hour of energy storage capacity will be required in that, the light -- the tenders have started coming in, and we are getting the early-mover advantage and we have already tied up or logged in 3.4 gigawatt hour of the capacity, which is going into the construction. And we will be generating higher than the normative returns in these projects. And also, we have already secured close to 72 gigawatt hour of the hydro pump storage projects where we have got the allocation, and we are in the process of taking the necessary approval. Of that, this 1 hydro pump storage will be going into the construction this year. I'm happy to share also another interesting landmark decision which our Board has taken today. We are starting the India's largest green hydrogen project, which will be 3,800 tonnes per year capacity. This project will be set up to produce the green steel by JSW Steel at Vijayanagar. This project will be tied up using the 100% renewable power, which will be consuming 25 megawatt round-the-clock renewable power. So on an installed basis, it will be approximately 80 megawatts of the renewable capacity, along with the pump storage will be required, battery storage will be required. This project will get commissioned in the next 18 to 24 months' time frame. And this will be on a cost plus mid-teen ROE basis for a 7-year contract. During the 7-year period, the entire plant will be amortized. And post that, it will be on the basis of variable cost and ROE basis between the parties. This is going to be the largest project in the country, first time for the green steel manufacturing. And the first project where the entire PPA is fully secured. This will be giving us a huge flip and advantage for going forward because we -- as we have spoken in the past that we have created our own micro grid and solar and wind farm capacity along with the pump storage and we will be able to enter into the electron to molecule business. Additionally, we are also contracting the entire green oxygen, which will be produced, which will be the 8x of the capacity of the green hydrogen that will be also sold to JSW Steel. The -- another interesting piece, which I want to talk about is solar module manufacturing facility. We had informed during the quarter that we are -- we have got LOI under the PLI scheme by Government of India for 1 gigawatt hour -- 1 gigawatt per year capacity for wafer, cell and module manufacturing facility, for which, we have been allocated INR 320 crores of the PLI. The total project cost is going to be INR 1,600 crores. In addition to that, we are finalizing the package from the state government. This project will be commissioned in 18- to 24-month period. This will enable us to completely backward integrate for our own captive requirement of the module manufacturing, wherein we will be able to produce the latest technology modules, solar PV module at the most competitive price, therefore, our positioning will further strengthen to be -- to remain a lowest cost renewable power producer in the country. The next piece, which I also want to touch upon is about the Ind-Barath. We had completed the acquisition of the Ind-Barath asset. This is going to be one of the lowest cost completed project, less than INR 4 crore per megawatt pithead plant, including the FGD installation. And the interesting piece is on a cool India linkage prices, this project will be one of the lowest cost -- fuel cost power producers, close to INR 1.30 to INR 1.40 will be the fuel price on a Coal India linkage price. The first unit is expected to get commissioned in the first half of the current financial year, and the second unit will be expected to commission in the last quarter of the current financial year. And we are seeing that this is going to be hugely value accretive for us. Because of the high merchant power prices, we are expecting that on a conservative basis, we will be making INR 2 to INR 4 kind of a range for the fixed cost recovery, which will be very, very value accretive for this particular project. We also completed the Mytrah acquisition during the last quarter. This is one of the greatest example and one of the largest acquisition in the renewable space. Originally, we had envisaged that the EV will be INR 10,500 crores. As against that, we completed the transaction at INR 10,150 crores. For an installed capacity of 1,753 megawatts, this translates to INR 5.77 crores per megawatt of the capacity as compared to today's replacement cost in excess of INR 7.4 crores to INR 7.5 crores per megawatt. The normalized EBITDA of the asset will be INR 1,650 crores, which translates to INR 941 crores per gigawatt. Today, on a competitive landscape, the best bid, which we are winning at JSW Energy, also the per gigawatt EBITDA is around INR 840 crore to INR 870 crores per gigawatt as compared to that INR 941 crores. So that's translated to the hugely value-accretive transaction. We have given a guidance that from a normative -- from an actual EBITDA of INR 1,200 crores, we will be going for INR 1,650 crores in 12 to 18 months time frame, of which INR 400 crore or INR 390 crores to be precise was coming from the generation increase and grid availability and machine availability and INR 60 crores was coming from improvement in operations and maintenance cost. I'm happy to share that in last 45 days, we have already made up and running 103 wind turbines out of 128 turbines, which were down and balance 25 turbines, they will be also up and running by first week or second week of June. Thereby, we will be getting the generation much, much ahead as compared to earlier entities. Same is the situation in terms of the machine availability improvement, we have already improved the machine availability by 500 basis points. And the performance ratio in terms -- in the solar generation has been also significantly improved. Therefore, we are expecting that the guidance what we had given that 12 to 18 months' time frame which will be much, much ahead of the schedule. And during the current financial year itself, we will be achieving the normative EBITDA run rate what we had forecasted earlier, which is INR 1,650 crores. I am expecting on a most conservative basis, this year also as compared to INR 1,200 crores EBITDA last year, we will be doing between INR 1,400 crores to INR 1,470 crores EBITDA in the current financial year because some of the high base season, which is right now going on, will not be available for us for generation. Now I'm coming to the very important subject, which is our strategy, which we have explained in 2021, wherein we had given a formal guidance that JSW Energy is going to be a 10 gigawatt company by FY '25 and 20 gigawatt company by FY '30. In that particular strategy, we had spelled out that our EBITDA will be going up to 2.5x in 10 gigawatt and 5x at 20 gigawatt capacity. Because we are doing exceptionally well, we have already locked in 10 gigawatt of the operating capacity, which will be completed in the calendar year 2024. In addition to that, we will be also completing 1 gigawatt WCM manufacturing facility and also 1 gigawatt hour of the battery storage capacity. Because of this, our cash flows are also improving dramatically, and we are coming out with the enhanced guidance, which will be improved by 25%. Now our revised Strategy 2.0 is by 2030, we will become a 20 gigawatt generation capacity and 40 gigawatt hour of the energy storage capacity along with green hydrogen facility of 3,800 tonnes per annum and also 1 gigawatt of WCM capacity. All this is without any equity dilution, only from the internal accruals. Also, what we are talking about is that earlier guidance was that by FY '30, we will be having a leverage of net debt-to-EBITDA of 4x. Now we will be reducing our leverage to 3.5x to 4x and our profit after tax and EBITDA will -- both will go up by 25%. So we are giving a guidance that our EBITDA will be 6 to 6.5x in -- at 20 gigawatt capacity in FY '30 as well as our profit after tax will be 7 to 7.5x, which is also 25% up at 20 gigawatt capacity. Also, it is important to note that on a achieved capacity in FY '23 basis, already, we have achieved on a normalized EBITDA of 1.8x and profit after tax at 2x as against what we have guided. So we are quite confident that we are not only doing better, and we will be growing much, much aggressively. Earlier, we have given guidance that we will be doing a capital expenditure of INR 75,000 crores. Now this all is envisaging a total capital expenditure of INR 112,000 crores, of which INR 35,000 crores has already been deployed, which will get completed in next 12 to 18 months' time frame. The important thing, which I am also envisaging and putting up for -- on record that our balance sheet size will grow at 22% CAGR from FY '23 to FY '30, while we are delivering our balance sheet and deploying only our cash flow. And our cash profit yields are going to improve only what we have delivered from here. With this, I would like to hand over the forum to Pritesh to touch upon the operating performance as well as the gearing ratios and receivable cycle. Over to you, Pritesh.

Thank you very much, Prashant. A very good evening to all of you, and thank you very much for taking time out to join us for our fourth quarter and annual results conference call. Prashant has already said the macro context in terms of what happened to the broader power markets for the year as a whole. In that context, if I were to briefly touch upon the performance for the fourth quarter and then I'll come to the annual results performance. If you see the net generation for JSW Energy during the fourth quarter was up by 16% Y-o-Y to over 5 billion units. This was on account of, a, additional renewable energy capacity like the 225-megawatt solar plant and the first batch of the SECI X project that was commissioned earlier in the year as well as higher sales of power on the merchant side as well as out of offtake. So from a revenue point of view, on a reported basis, you will see that the revenue for the quarter at INR 2,806 crores was up by 6% Y-o-Y. However, I would like to highlight that in Q4 of 2022, there was a truing up order at JSW Hydro for the Karcham Wangtoo plant that had come because of which there was a one-off exceptional impact of INR 525 crores included in the revenues. Adjusted for that on a like-for-like basis, the revenue for this quarter on a 16% higher net generation is actually up by 32% Y-o-Y. This is largely on account of the fact that higher fuel prices on a Y-o-Y basis, which led to a pass-through of the fuel cost also impacting that. Coming to the EBITDA performance. Again, after stripping off the EBITDA for exceptional including the truing up liability of last year, the EBITDA for the quarter stood at INR 881 crores, which was up by 7% Y-o-Y, and the adjusted net profit stood at INR 272 crores for the quarter. Wrapping up the year as a whole, if you see for fiscal 2023, the net generation was up by 5% at 21.8 billion units. The reported headline total revenues was at INR 10,867 crores, which is up almost 25%. Again, the impact of truing up on hydro stood at last year of almost close to INR 600 crores. So adjusted for that, Y-o-Y, the revenues are up by 33%. EBITDA adjusted for exceptionals for the year as a whole stood at INR 3,817 crores, which is up by 5% Y-o-Y. And the adjusted profit after tax after taking off exceptionals, while we are truing up liability exceptions last year, this year, we had an exceptional gain of INR 120 crores in the first 9 months due to reversal of a loan that had been given to a third party in the previous years. So adjusted for that on a like-on-like basis, the adjusted net profit at INR 1,348 crores was up by 15% Y-o-Y. That was on the P&L side. Now coming to the balance sheet side. And here, I would like to set a few things in context. We completed the Mytrah acquisition on 29th of March 2023. And therefore, the Mytrah assets were available to us from a consolidation as per books point of view only for 2 days of the year until 31st March. Whereas the balance sheet is consolidated as of that particular day. So therefore, to make sense out of these numbers, we think that it is important to look at the pro forma basis on a combined basis. So I would request everybody, you have access to our presentation which has been uploaded on the website. So if you can please look at Slide #39, which explains the net debt bridge, that would give more clarity in terms of how to interpret the debt levels. So as of the quarter and 9 months ended December 2022, the total net debt of the company stood at INR 9,840 crores. Of this, INR 6,475 crores was a net debt on the operating companies and another INR 3,365 crores was the project loans drawn for the capital work in progress. During the quarter, if you see the debt from the operating companies went up by about INR 3,500 crores to just under INR 10,000 crores. And this incremental debt was largely the balance sheet borrowing that we did at the existing thermal business in order to fund our growth, both for M&A as well as to infuse promoter's equity contribution into the ongoing projects. So on the operating companies, the net debt stands at roughly INR 10,000 crores. So on an underlying INR 3,800 crores of EBITDA, the net debt-to-EBITDA for the operating company now stands at 2.6x. The next batch of debt to look at is the debt on the CWIP. So what was INR 3,365 crores has gone up marginally and now stands just north of INR 3,600 crores. For Mytrah, there's a net debt of close to INR 8,600 crores that has come on to the books. Mytrah, let me spend a few minutes on that in terms of how to look at Mytrah's performance. Prashant already mentioned in his opening remarks that if you look at the pro forma 12-month performance of Mytrah for the year ended fiscal 2023, it stood at about INR 1,187 crores. The headline net debt stood at INR 8,600 crores. However, the EBITDA is not normalized. We have a very active asset optimization and performance improvement plan that Prashant already talked about. They are very encouraging signs. And this has an EBITDA potential of INR 1,650 crores. So INR 8,600 crores of net debt on a INR 1,650 crore normalized EBITDA translates to about 5.2x net debt-to-EBITDA on the Mytrah business. So on a combined basis, Mytrah normalized EBITDA plus the existing debt on the operating business, we have about INR 18,500 crores of net debt, which is going to be serviced by EBITDA of close to INR 5,500 crores. And therefore, the combined net debt-to-EBITDA is 3.4x. And if you look at the combined EBITDA, as I said, will be close to INR 5,500 crores for both the businesses for the entire 12 months of fiscal 2024 from a run rate point of view. So this is on a net debt side, I will also like to take a few minutes on Mytrah's financing itself. This was a very complex transaction and a very landmark and benchmark, the refinancing and debt sizing package was put in place immediately. It is very rare typically for large-sized M&As. The typical model is that you do a bridge financing, acquire the assets and then you take between 6 to 12 months to put the permanent capital structure in place. Here, what has happened is that we consummated the deal on 29th of March, and we drew down the first tranche of the refinancing facility on 31st March itself. So on Mytrah portfolio per se, while we have talked about the EBITDA improvement, but there's going to be a substantial benefit below EBITDA as well. There is more than 240 basis points of annualized weighted average interest rate that we have achieved by putting the refinancing and debt sizing packaging to place, which will lead close to INR 240 crores to INR 250 crores of savings on the finance cost from a run rate point of view from day 1 itself. That is on the Mytrah financing. Now I will take another moment to talk about the receivable cycle. I'll break this conversation into 2 parts. One is the JSW Energy portfolio on its own without Mytrah. There, if you see, there's been a very, very encouraging performance there as well. If you look at one of the particular slides that we have on the receivable cycle. At the end of March 31, 2023, in terms of day sales outstanding, the receivables stood at 60 days of sales compared to 63 days of sales. While you will look at a headline absolute rupees crore number is higher, but that is because of the higher fuel cost and therefore the higher revenues that we talked about. So the right metric to look at is in terms of days sales outstanding. Even within that, if you see the total amount of overdues that stood at the end of the year were about 20% -- close to 20% of the total receivables and we've had very, very healthy collection trends in the last 1.5 months since then. So receivable cycle continues to be healthy. If you look at the micro receivable cycle, that is also a very interesting situation in the investor presentation, we put 1 full slide on that, slide #8, if you see -- sorry my bad, it's Slide #10. When we had -- we were submitting our binding bid, this was last year when Mytrah sale process was owned, we had the March '22 audited numbers and Mytrah's receivables outstanding were touching almost close to INR 2,000 crores. In the last almost 12 months, since then -- maybe 14 -- 13 to 14 months since then, we've seen that receivable cycle has come down by close to INR 500 crores during this period. We have put in place a very strong and focused collection efficiency that is also in place. So month-on-month, what we are collecting vis-à-vis what we are selling is consistently high. If you look at the bottom left-hand chart on this particular slide, that shows for 3 particular months on an index basis, we are collecting between 150% to 220% higher than what we are billing. So we are very confident that we will be able to optimize the receivable cycle of Mytrah portfolio as well to healthy levels within the 12 months which will release a lot of liquidity into the system. And in this context, if you look at the enterprise value that Prashant had talked about, of INR 10,150 crores plus net current assets, this is really going to be a very, very cash accretive transaction for JSW Energy. So maybe I'll just stop there. And operator, we can open the queue for Q&A.

[Operator Instructions] The first question is from the line of Sumit Kishore from Axis Capital.

I must compliment you on the opening remarks and the growth outlook that you have laid out for the company. My first question is in relation to the government, which has given a monthly plan to award 50 gigawatts RE capacity as the fiscal starting FY '24. What do you think is likely in this fiscal? That's my first question.

It's a tough call for me because we are not concentrating more on these kind of bids as a company because we are still finding that the rates which are getting discovered in these bids are not remunerative for a company like us to undertake the projects and achieve the normative returns what we are targeting. So that's why we are not at all following these bids. So it's a tough call for me.

Also, a follow-up on this given that you are setting up 1 gigawatt manufacturing facility for modules integrated up to wafers, does that also mean that it is setting up a platform for you to set up at least 1 gigawatt solar capacity at JSW Energy every year thereafter?

Yes. So we consider that, that kind of a requirement we will be having because most of our requirement what we are contemplating that close to 1.8 to 2 gigawatt of the kind of capacity which we are going to build, which will be both by solar and wind put together and the majority of the capacity, which we will be able to utilize.

Okay. Over the next 3 to 5 years, in addition to the locked-in capacity of 10 gigawatt on the generation side, what visibility do you have on group captive generation projects, which is requirement from the JSW Group, especially JSW Steel?

So we have made a medium-term plan, and we are looking that we will be having close to 6 gigawatt of kind of a group capital requirement going forward. In addition to that, we are also looking for certain C&I segment. And in addition to that, we are also looking for electron to molecule business also. So we -- that's how we see that this generating capacity which we keep on adding will be primarily within the group captive or C&I customer or certain very attractive tenders where there is not a substantial competitive landscape. The way we have been building our business is -- it's different kind of energy product segment, which are there. So whether it is battery storage, whether it is pump storage, hydro or solar, wind, thermal, wherever we find a great opportunity to deploy the capital to generate industry-leading returns for which, in our case, minimum mid-teen returns are most important. That's how we have been deploying our capital and we will be continuing to do that. In addition to that, we are also scouting inorganic growth opportunities. If any good growth opportunity like Mytrah is available, where we will be getting on a normative equity base, we will be getting north of 16% equity IRR whereas the entire transaction for us is 100% leverage buyout. So on a net worth basis, an entire thing is value accretive for us. But this is how we are contemplating, and we will continue to do that.

Just to clarify the 6 gigawatt number that you said through captive plus C&I is in addition to the 10 gigawatt locked-in capacity?

Absolutely. Absolutely. So my guidance, what I'm giving is that we are talking about by FY '30, we are becoming 20 gigawatts of generation. Of that, we are talking close to 6 gigawatts will be a group captive in the next 7 years' time frame, which will be coming up and another 4 gigawatt from various other opportunities.

Sure. My last question is that MoEF has recently approved exemption of pump storage hydro projects from environmental impact assessment. Is it likely to help speed up your project plan in pump storage hydro? How much capital are you likely to commit to pump storage hydro over the next 3 years? And what is the actual balance sheet investment likely over the same time frame?

Sumit, we -- as I explained that our FY '30 target is around 40 gigawatt hour of the pump storage capacity and -- which means it is going to be close to INR 25,000 crores to INR 26,000 crores of the total capital expenditure we are going to do by FY '30. And first project will be getting into the construction in the current financial year -- end of the current financial year and which we have already locked-in with the Government of Karnataka. So this is how we are seeing. Second is, the approval side, yes, there are a lot of exemptions which are being provided by Ministry of Environment and Forest in terms of the [indiscernible], in terms of the geotechnical surveys. So these are really welcome steps and these are really going to help us to execute the project in a much faster -- at a much faster speed. I also want to tell you that we are the largest hydropower producer in the country and having the best experience of operating of these assets. For the last 3.5, 4 years, we have been building Kutehr project, which is going to be the fastest ever build the project in spite of corona wave conditions and various other difficulties, which we have built. So we have built the strong execution capability of doing the project which is primarily being done in-house with a small contractor teams, which is making us more and more confident that we are one of the best place to -- in terms of the industry to execute these projects.

Excellent. I have more questions, but I'll get into the queue now. Those are my best wishes.

[Operator Instructions] The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

Hello. Congratulations on an excellent performance. My question was around the collections at Mytrah. In terms of how do you manage to accelerate and is there a systemic change that has happened that in the future also, you'll not see the collections build up? Is this any one-offs that has happened because of the government scheme? That's my only question.

Vivek, thank you for your question. So it's the way we do our business and we take pride in doing that, and that's how we maintain our receivable cycle low for our -- all our existing business also and that same thing we are trying to replicate at Mytrah. Of course, one thing which I want to tell you as well as all the audience that there are the structural changes, which is taking place in the power sector. The Government of India has taken various -- very interesting steps, which is helping to recover the receivables. At the same time, we are also having the strong relationship and a very good management of the receivable. And today, if you look at our presence, we are present pan-India and with all kind of a discount, and we are able to maintain a very low receivable cycle. So I can assure you that this is -- the Mytrah cycle -- receivable cycle will be aligned to JSW Energy's past performance, and it will be a permanent solution.

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

Sir, I've got just 1 question. So can you explain the economics of the battery storage project because 50% of our capacity will be reserved for SECI. So how do we plan to utilize the remaining capacity and what will be the cost economics of the storage?

So the -- in terms of the storage, the first tender, what we have won, we have contemplated 2 opportunities. Number one opportunity is the ancillary market, which has got opened up, and we are seeing very attractive trend in that particular ancillary market. And we see that we will be in a position to generate better returns than what we have contracted with SECI. And second thing is we also have the option to make a bid in any of the energy storage bid, which is going to come in future. So both the options are available to us. But at this point of time, we have considered the ancillary market where the battery storage power will be scheduled in order to maintain the frequency and the demand. So new protocol guideline, which has come up based on which the ancillary market has opened up, and we will be generating much better return than what we have contracted. And later on, we can continue to remain that or we can tie it up in any of the future base.

Understood, sir. And sir, what portion of our Ind-Barath plant is tied up with [indiscernible]?

We will not be tying it up given the macro situation. So we will keep it in...

So 100% will be for merchants?

Yes. Because this is going to be a very low cost. And if I say that, for example, last year, average tariff for the entire year was INR 5.96. And as I explained on a Coal India linkage price, the fuel price will be INR 1.30. Even if I pay 100% premium on the Coal India linkage price in the e-auction market, my fuel price will be close to INR 2.20. That means I can make around INR 3.50 as a fixed cost into the merchant market. So we will be keeping this capacity open for some more years. And then as and when we see the macro situation changing, we will be going into the long-term market.

Understood, sir. And is the coal tie-up already done with [indiscernible]?

So coal is available under the Shakti linkage scheme. We will be making the bid and also the spot option, which is being done by the NCL. There is enough coal available in and around mines, which can be done either for Shakti scheme or we can do it in the Spot e-Auction.

The next question is from the line of Anuj Upadhyay from Investec.

Sir, a few clarifications. On Ind-Barath, you just mentioned that the entire capacities will be set up out of merchants. Kindly correct if I'm wrong, because my earlier assessment was part of this capacity will be tied up towards the model manufacturing side. So is there any change in the...

Anuj, initially, we were considering that polysilicon capacity is we will set up at Orissa. And that is very -- that's the most important thing in our management agility that we take a decision on a dynamic situation. Right now, the polysilicon market is becoming overcrowded globally. Last year, the total demand was 800,000 tonnes. And now China has -- is putting up a large capacity of polysilicon and in next 12 to 14 months time frame, total capacity will be in excess of 2.5 million tonnes, which is sufficient to produce 850 gigawatt out of solar panel. Last year, the solar PV panel demand was 260 gigawatts because of this polysilicon prices, which were rolling at $42 per kg has come down to $16 per kg and are expected to come down to below $10 per kg. That is why we have taken a decision to not to enter into the polysilicon capacity at this point of time and because of which, we have also refrained participating in PLI scheme for polysilicon to module capacity. However, we can look at the situation 2 years, 3 years down the line, but we don't want to be caught on to the wrong cycle. And that's why we are not looking at any polysilicon manufacturing facility at least in the near foreseeable future until this demand and supply situation is favorable to set up such kind of a facility in India. And therefore, the entire capacity will remain open up for the merchant tariff because we are in a position to capitalize in this kind of a scenario.

Okay. Just to follow up on this, this capacity of around 2.5 million tonnes as you mentioned, I mean, any -- sorry, for 50 gigawatt, any time line by when this will get [indiscernible]?

Another 12 to 14 months time frame this all capacity is building up in China.

Okay. And on your CapEx plans, you mentioned around INR 75,000 crores of incremental CapEx will now be required over next 6 to 7 years kind of a time period and for which we won't be diluting anything. Could you just elaborate further on what kind of internal cash flows we could or likely be generating so as to fund the equity CapEx -- on capacity And lastly -- so last time...

One by one because I will forget otherwise, Anuj, because you can ask your question later on. Otherwise, I will forget. Your question is that on the capital expenditure as well as the cash generation. So last year, we had generated close to INR 2,700 crore, INR 2,800 crores of the cash and which is going to go up in the FY '24 and thereafter because our EBITDA is going up very rapidly because from INR 3,800 crores of our EBITDA for the next year will be at least 1.7, 1.8x and that's the similar kind of a situation, which is going to happen, which if you are taking incremental debt on 3:1 debt-to-equity basis, you are in a position of doing the capital expenditure between INR 12,000 crore to INR 13,000 crores per year and which will be going up as the cash flow further increases. Therefore, we will be deploying close to INR 112,000 crores capital expenditure as against what we have [indiscernible] earlier INR 75,000 crores. Out of INR 112,000 crores, already INR 30 crores, INR 35,000 crores has already been planned like INR 16,600 crores on the capacity expansion of the SECI and group capital project, INR 2,700 crores on the Ind-Barath, INR 1,600 crores is now -- we are talking about for wafer cell manufacturing facility and INR 2,200 crores for the battery storage project. And in addition to that, INR 10,200 crores or INR 10,150 crores is for the Mytrah acquisition. All this put together is translating to around INR 30,000 crores, INR 31,000 crores. So balance INR 85,000-odd crore will be spent from 2024 to FY '30. This is how it will translate.

And lastly, on the green hydrogen, what capacity exactly are we looking at and the selling arrangement? I mean exactly to whom this green hydrogen would be supplied? What kind of PSAs or selling agreement we are aiming to? Have we already tied up...

Yes. We have already tied up. This capacity is 3,800 tonnes. This will be sold on a [ take-or-pay ] contract with JSW Steel. The period is 7 years -- the complete plant is amortized period of 7 years. Post 7 years, it will be variable cost plus ROE. It is cost plus mid-teen ROE. It will [ price ] something like approximately between $2, $3.5 per kg kind of a number on which this will be contracted. And also, the entire oxygen will also be contracted.

The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.

If I get it right, you mentioned the group captive itself can give you about 6 gigawatt. That's over the number of the 1 gigawatt that you've already -- that's already in the pipeline, right, sir?

That's true.

And so I understand, so if it's for JSW Steel, they would probably require round-the-clock power. So will this also be accommodated along with probably some hydro which can also drive some additional investments of battery storage? Or that's just 6 gigawatt you're really thinking of?

You are absolutely right. In addition to that, there will be the storage facilities also.

And it's safe to assume that a large part of this will be on, I mean, what we can say, regulated ROE kind of returns basis?

Absolutely.

We have the next question from the line of Mohit from ICICI Securities.