NHPC Limited (NHPC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the conference call to discuss Q4 FY '20 results for NHPC, hosted by Elara Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rupesh Sankhe of Elara Securities. Thank you, and over to you, sir.

Good morning, everyone. On behalf of Elara Securities, we welcome you all for the Q4 FY '20 Conference Call of NHPC. I take this opportunity to welcome the management of NHPC, represented by Mr. A. K. Singh, CMD; and other directors. We will begin the call with a brief overview by the management, followed by a Q&A session. I will now hand over the call to Mr. A. K. Singh for his opening remarks. Over to you, sir.

Hello. Can you listen me?

Yes, sir. We can hear you.

Okay. Good morning, friends. First of all, I wish you all and your family very healthy and safe days in view of the global health crisis and pray for the entire world to get rid of this at the earliest. The Board had adopted financial statements for the year ended March 31, 2020, in its meeting held on June 27, '20, and the same has already been communicated to exchange. By now I hope you all would have got chance to go through the quarterly and yearly set of numbers. First, I will just touch upon major highlights and then detailed analysis of the results shall be discussed by our Director of Finance, Shri Mittalji. Brief highlights of the financial results and important updates of the company are as under. During the year ended March 31, 2020, our power systems have achieved generation of 26,316 million units vis-à-vis to 24,472 million units generated in the corresponding period of the previous year, including infirm power of Parbati-II and [indiscernible] generation in respect of Nimoo Bazgo and in Chutak power stations, which is about 7.54% higher, that is, 1,844 million units broadly due to the better water availability. Our PAF for the financial year '20 stands at 84.04% against the corresponding previous period PAF of 84.97%. Decline in PAF is mainly due to shutdown of Baira Siul Power Station towards renovation and modernization and shutdown of Chamera-II power station due to repair and maintenance. For the year financial '20, company has earned revenue from operations to the tune of the INR 8,735 crore as against INR 8,161 crore in the corresponding previous period. It is about 7% higher, that is, INR 574 crore. During the FY '20, we have earned PAT of INR 3,007 crore vis-à-vis INR 2,631 crore of corresponding period, which was -- which rose by INR 376 crore, that is, 14%, approximately. On the physical front, the active construction work at Subansiri Lower Project has been fully resumed with effect from October 15, 2019, after cleanup by honorable NGT on July 31, 2019. Construction work at site remained suspended from March 24, 2020, to April 20, 2020, on account of nationwide lockdown due to the COVID-19. However, we are trying our best to complete the project by financial year 2024. Unit 1 and 2, 200-megawatt each of Parbati-II hydroelectric projects were synchronized with the grid at the part load on April 28, 2020, and April 29, 2020, respectively with limited resources amidst lockdown. Further, we are trying our best to complete the project by financial year '22. In respect of Dibang Multipurpose Project, 2,880 megawatt, Forest Clearance Stage-2 approval has been granted for diversion of 4,577.84 hectare of forestland in favor of NHPC Limited by MoEF & CC, Government of India on March 1, 2020. Earlier investment approvals towards 3 investment activities for INR 1,600 crores was accorded. Also a MoU has been signed with Cement Corporation of India Limited, CCI, for exploring possibilities for the cement requirement for this project on March 11, 2020. Draft PIB memo has been submitted to Ministry of Power on May 29, 2020. NHPC has emerged as a successful bidder for Jal Power Corporation's Rangit Project, 120 megawatt in Sikkim with a bid of INR 155 crore. Resolution professional filed POC approved resolution plan of NHPC on January 28, 2020, in Honorable NCLT Hyderabad. Draft PIB memo for implementation of the project has been circulated by Ministry of Power on May 27, 2020. An MoU has been signed on June 22, 2020, with Hydropower Investment and Development Company Limited, HIDCL, Nepal for development of hydropower projects in Nepal. Earlier a letter of intent was signed on December 13, 2019, with NEA Engineering Company Limited, Nepal, for the mutual cooperation in the field of design engineering. An MoU has been signed on March 4, 2020, with Power Grid Corporation of India for turnkey execution of dedicated transmission line of the construction of power supply lines for all existing and future hydropower projects of NHPC Limited. An MoU has been signed on September 25, 2019, with the Government of Himachal Pradesh for execution of Dugar hydroelectricity project 449 megawatts by NHPC on goods basis for a period of 70 years. The DPR of the project prepared by earlier developer of the project has been taken over and grant to visit has concluded recently by official from NHPC and Messrs DHPI. The DPI is now under possession of NHPC and is expected to be prepared and submitted by the end of this year. NHPC is also exploring the possibility of taking up 4 projects in Uttarakhand, total 762 megawatt earlier allotted but not commercially viable. Out of this now, it is proposed to make Chungar Chal and Karmoli projects viable in combination with [ intermediate ] downstream projects with increased capacity of 2,001 megawatt each. In addition, Dhauliganga intermediate 210 megawatt and Goriganga IIIA 150 megawatt would be required to be given certain exemptions to make this project viable. MOP has been requested to convene a joint meeting with the Government of Uttarakhand and NHPC to arrive at a decision on these projects. NHPC is also keenly following a decision implementation of Ratle hydroelectricity project in J&K, 850 megawatt. MoU was signed on February 3, 2019, for the implementation through a joint venture between NHPC and JKSPDC. PIB meeting already held on March 9, 2020. NHPC is also ready to take up the project on a stand-alone basis. These issues were discussed in a VC meeting convened by MHA on May 14, 2020. A meeting is also scheduled today with Cabinet Secretary, Government of India in this regard. NHPC had diversified its portfolio to include solar power business and has given letter of award to solar power developers for interstate transmission system, reconnected photovoltaic projects aggregating to 1,600 megawatt installed capacity. Previously, NHPC had successfully conducted e-reverse auction for ISTS grid-connected 2,000 megawatt solar PV projects to be set up anywhere in India. As part of our LOA, NHPC can purchase power generated from the proposed ISTS-connected solar PV projects at tariff of INR 2.55 and INR 2.56 per unit. Further issuance of LOA for balance 400 megawatt is in process. NHPC has been allotted the State of Telangana, Odisha and J&K for development of 14 solar power projects under Ultra Mega Renewable Energy Power Parks scheme of MNRE. Signing our MoU with Odisha 500 megawatt and approval with MoU with Telangana 500 megawatt was held up due to the COVID-19 crisis. Beside all of these, we are also in the process of development of 50 megawatt floating solar power projects in Kerala, 296 megawatt solar power projects in Telangana, and 140 megawatts solar project -- park, 40 megawatt in first phase and 100 megawatt in second phase in Odisha. Further, we have also invited UI for selection of land aggregator for the purpose of development of 600 megawatt ground-mounted solar projects in the State of Rajasthan. NHPC is also exploring to develop 3 numbers hydropower projects of total capacity of 155 megawatt in Union Territory of Ladakh. A proposal for development of 50 megawatt solar power project in Leh is also under consideration with Ladakh [ SRT ]. We are also in discussion with the state government of Uttar Pradesh for development of solar power projects for total capacity of 600 megawatt in the state under UMREPP. This is all from my side. Now I request Director of Finance, Shri Mittalji, to discuss financial results in detail.

Good morning, friends. I am sharing with you the detailed quarterly and yearly set of numbers. As you know that the financial statements of NHPC for the year ended March 31, 2020, were adopted by the Board in its meeting held on June 27, 2020, and those have already been shared with the stock exchanges. The brief highlights of the financial results are as under. During FY '20, our power stations have achieved generation of 26,126 MUs as against 24,430 MUs generated in the previous year. This does not include infirm power of 190 MUs as against 62 MUs in the previous year in respect of Parbati-II projects, which is under construction because this power is adjusted against the course of the project. During Q4, our power stations have achieved generation of 3,961 MUs as against 3,670 MUs generated in the corresponding period of the previous year, which is about 8% higher, 289 MUs, and it is because of the better water availability. Our plant availability factor of FY '20 was at 84.04% against the previous year plant availability factor of 84.97%. The decline in the PAF is mainly due to shutdown of Baira Siul Power Station for renovation and modernization and shutdown of 2 units of Chamera-II, where the restoration works are in progress. NAPAF as per the CERC norms is 77.35%, and our performance is almost 7% higher than the CERC norms. Our plant availability factor for the fourth quarter of FY '20 was 73.71% against the corresponding previous year figure of 74.08%. The reasons for the decline are the same like Baira Siul Power Station is under R&M and 2 units of Chamera-II power stations are under restoration. In FY '20, the company has earned revenue from operations, which was INR 8,735 crore as against INR 8,161 crore in the previous year, which is about 7% higher or INR 574 crore. The increase in revenue is mainly due to higher power trading revenue of INR 227 crore. Revenue recognized on account of O&M and security expenses INR 243 crore, higher water cess of INR 108 crore, higher secondary energy charges of INR 161 crore, higher interest from beneficiaries on account of finalization of tariff for 2014-'19 period INR 151 crore, which is partly offset by the lower capacity charge of INR 187 crore, declining sales pertaining to previous years arising out of the finalization of tariff INR 191 crore, lower PAF-based incentive of INR 75 crore and lower deviation charges of INR 51 crore --INR 54 crores. During Q4 of FY '20, company has earned a revenue of INR 1,914 as against INR 1,950 crore in the corresponding period of the previous year, which is about 2% lower. The decrease is mainly on account of lower capacity charge of INR 261 crore, decline in sales pertaining to previous year on account of finalization of tariffs INR 234 crores, lower PAF-based incentive of INR 28 crores, which has been partly offset by increase in power trading revenue of INR 143 crore, higher interest from beneficiaries on account of finalization of tariffs INR 133 crores, and revenue recognized on account of O&M and security expenses INR 71 crore, higher secondary energy revenue of INR 100 crores. Other income for FY '20 is of the order of INR 1,036 crore versus INR 925 crore during the corresponding period of the previous year. Thus, there is an increase of INR 111 crore. The increase is mainly due to higher dividend income of INR 207 crore, which is partly offset by lower late payment surcharge income of INR 44 crore and decline in the interest income by INR 40 crores. Other income in Q4 of FY '20 is of the order of INR 385 crore as against INR 236 crore during the corresponding period of the previous year. The increase is INR 149 crore. Increase is mainly on account of higher dividend income of INR 225 crore, which we got from the subsidiary company NHDC and which is partly offset by lower late payment surcharge income of INR 49 crore. During FY '20, the generation expenses have gone up from INR 797 crore to INR 902 crore, that is, an increase of INR 105 crore, and this is because of the higher water cess on account of higher generation in the J&K projects. During Q4 FY '20, the generation expenses have gone up from INR 153 crore to INR 166 crore, that is, an increase of INR 13 crore due to higher water cess on account of a higher generation in the J&K projects. During FY '20, the employee costs have come down from INR 1,705 crore to INR 1,516 crore. There is a decline of INR 189 crore. This decline is mainly on account of the impact of regularization of pay scales of INR 198 crore allowed in the previous year and because there is no corresponding year as such in the current year. Reduction in the employee expense is due to superannuation of employees INR 184 crore, which is offset by increase in salary and wages on account of increased DA, promotional increments, annual increments, PRP, et cetera, INR 193 crore. During Q4 of FY '20, employee cost has come down from INR 440 crore to INR 383 crore, that is, decline of INR 57 crore, which is mainly due to decrease in the contribution to superannuation fund INR 35 crore and decrease in salary and wages by INR 16 crore. During FY '20, the depreciation and amortization cost has come down from INR 1,590 crore to INR 1,545 crore, which is INR 45 crore. This is mainly due to a decrease in the depreciation on account of increase in the useful life of the power stations from 35 years to 40 years as per the regulatory norms. During Q4 of FY '20, the depreciation and amortization expenses have decreased from INR 411 crore to INR 386 crore, which is a decline of INR 25 crore, and it is mainly because of the decrease in the depreciation due to increase in the useful life of the power stations from 35 years to 40 years. During FY '20, other expenses have gone up from INR 1,166 crore to INR 1,515 crore, thereby resulting in increase of INR 349 crore, and it is broadly on account of increase in the CSR expenses by INR 109 crore, increase in the security expenses by INR 70 crore, higher provisioning against survey and investigation projects INR 94 crore, and increase in the insurance expenses by INR 42 crore. During Q4 of FY '20, other expenses have increased from INR 362 crore to INR 654 crore, that is, an increase of INR 292 crore, and this was because of higher provisioning of INR 138 crore against survey and investigation projects; increase in CSR expenses by INR 75 crores; increase in interest payable to beneficiary states, INR 40 crores; and increase in security expenses by INR 38 crores. During FY '20, there has been decrease in the finance cost from INR 895 crore to INR 795 crore, that is, a decrease of INR 100 crore, and this is mainly due to capitalization of interest cost in respect of Subansiri Lower Project by INR 145 crores post resumption of activities of the project. This is partly offset by the interest cost in respect of wind power project, solar project and higher interest outgo in respect of Kishanganga project, where there is a full impact in the FY '19/'20 as compared to 10.5 months impact in FY '18/'19. During Q4 of FY '20, there has been decrease in the finance cost from INR 223 crore to INR 151 crore. This means a decline of INR 72 crore, and this is because of the capitalization of finance cost in respect of Subansiri project, as active construction has resumed. During FY '20, we have earned a profit after tax of INR 3,007 crore as against INR 2,631 crore in the previous year. Our profit rose by INR 376 crore, which is about 14%, and the increase -- the reasons for the increase have been discussed in the foregoing paragraphs. During Q4, we have earned a profit after tax of INR 383 crore as against INR 492 crore in the corresponding period. Profit is down by INR 109 crore in Q4, and the reasons for the decline have also been discussed in the foregoing paragraphs. In FY '20, the incentive position was as under. Secondary energy FY '20, it is INR 328 crore; in FY '19, it was INR 167 crore. So there is a net increase of INR 161 crore. PAF-based incentive, FY '20, it is INR 361 crore; in FY '19, it was INR 436 crore. So there is a net decline of INR 75 crores. Deviation charges, FY '20, it is INR 131 crore; FY '19, it was INR 185 crore. There is a net decline of INR 54 crore. But our total incentives in FY '19 were INR 788 crore, which have rose to INR 820 crore. Thus, the net increase in the incentives in FY '20 as compared to FY '19 was INR 32 crore. The capital expenditure incurred in FY '20 was INR 4,155 crore as against INR 2,213 crore in the previous financial year. The anticipated cost of Parbati-II project is now INR 9,997 crore, out of which we have already spent INR 7,877 crore till March 2020. The estimated levelized tariff based on the anticipated cost is INR 5.61 per unit. The revised cost of Subansiri project now stands at INR 20,369 crore, out of which we have already spent INR 12,157 crore till March '20. The estimated levelized tariff based on this cost is INR 5.18 per unit. On the realization front, NHPC has received INR 6,795 crore from the beneficiaries as against the sale of energy during FY '20, and the last year's collection was INR 6,092 crore. Trade receivables as of March '20 are INR 3,818 crore as against INR 2,685 crore as on March 31, 2019. Now major receivables are as under. PDD, J&K, INR 1,450 crore, of which INR 1,389 crore is more than 45 days. UPPCL total dues are INR 1,288 crore, out of which more than 45 days is INR 1,226 crores. Jodhpur Vitran Nigam Limited INR 157 crores, out of which INR 143 crore is for more than 45 days. Punjab, total dues are INR 135 crore, out of which INR 98 crore is more than 45 days. West Bengal State Electricity Distribution Company, total dues are INR 126 crore, out of which INR 89 crore is more than 45 days. And others, INR 662 crore, out of which 219 crore are more than 45 days. And the total dues as of March 2020 were INR 3,818 crore, out of which the dues of more than 45 days were INR 3,164 crore. This is all from my side. Now the forum is open for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from IDFC Securities.

Congratulations on a good set of numbers. Sir, I have 2 questions primarily. Firstly, on the receivables, has receivables gone up in the COVID days? I'm talking about the current receivables. And how much is it? And secondly, whether -- what is the -- when do you think the receivables will come to a normal cycle given the fact that there is a discom liquidity scheme? And have you heard anything from the -- from your beneficiaries regarding the liquidation of the same?

Due to lockdown effect, between these 45 days, we have received INR 2,389 crores only. If you compare with the previous one, then it is INR 2,945 crores. So there is an outstanding due of INR 556 crore more. So the outstanding due, it has increased by INR 556 crore, and that is due to the COVID-19 effect.

So any plan on the liquidation, sir? Have you heard anything from the discoms?

Outstanding due from small discoms have increased basically, and those are J&K, UPPCL, Jodhpur and Ajmer. And if you compare there they are [indiscernible] outstanding dues have increased to [ INR 2,600 crores ] compared to the previous of INR 2,105 crores. So there is a difference of INR 500 crores.

The next question is from the line of Akhilesh Bhandari from ICICI Prudential Asset Management.

Sir, under the MOP guidelines, what is the rebate which we are offering to the discoms?

Actually, under the guidelines, they have requested all this power PSUs to give in the range of 20% to 25% of the bill amount the capacity charges. So in case of NHPC, we have given around INR 185 crore for a 3-month period of this COVID period. And further -- this is the final. We are not going to give any more if this period is further extended. So we have given 24-point something -- less than 25%, and it is total of only INR 185 crore.

Sir, what would be the amount for NHPC? Is that separate or is INR 185 crore total for the consolidated entity?

It is total for NHPC.

So it includes NHPC also?

This is for NHPC only, INR 185 crore. If you go for the whole PSUs, probably the figure is...

No, no. Sir, I'm asking, does your subsidiary's number, NHPC subsidiary's number is also included in the INR 185 crore or they will be an announced separate -- that will be announced separately?

No, only NHPC. Subsidiary is not giving any discount.

Okay. Sir, there was also -- the proposal was there to defer the collection of the fixed charges for this period as well. So what is that quantum which will be deferred and collected later in equal installments?

We have not deferred anything. Rather, the dues already were pending with the discom. You must have heard that Government of India has given around INR 19,000 crore to them, and they are working on the issues so that our payment from the discom is received. So probably, we are going to get around INR 2,800 crores out of that INR 19,000 crore earmarked for all the discoms.

The next question is from the line of Dhruv Muchhal from HDFC Asset Management.

Sir, a few questions. Firstly on Subansiri, now has the work resumed and any status? Because I believe before the monsoon, it was a critical period, so do you expect any delays to be originally scheduled now?

The work has started, and it is doing quite well, but again, due to the COVID, I told you, for a month's time, there is no work. And now we are being allowed to work in only dayshift. Night, we are trying to get the permission from the state authorities. And definitely, there was some slippage during this -- we could have done during this period before the monsoon, but we are planning everything, increasing resources, and we are not changing any final schedule date. We are going to complete this project in the '23, '24. So whatever the delay has been done partially during this COVID period, we will make it up.

Okay. So the schedule remains. So -- okay. And sir, there was also a contract which was pending to be awarded. I think in May, it was to be awarded, I think, Lot 4 or something. So is that done?

It is in process. Hopefully, within 15, 20 days, we'll be able to award it.

Okay. Okay. And sir, any update for Parbati-II? How is the work progressing there? And any delay do you expect?

Parbati-II, we have awarded 1 package recently in the month of -- 1st week of the June only for -- because only 2.5 kilometer of Head Race Tunnel is to be dug. At one place we are facing still a problem with tunnel boring machine because of very poor geology. And because of that issue, we are unable to get the required progress. But from other side, we have awarded the package to one of the agencies, and they have started mobilization also. And we have just changed the schedule for 3 months because during the COVID period, we could not do proper mobilization and suppliers of material. At the same time, all the work was closed for this COVID. So earlier, we had kept the scheduled date for the commissioning in December '21, now we are just extending another 3 months, March '22. So we are keeping the schedule. And definitely, we are going to complete within the schedule only. And one thing I wanted to add that we are generating from this Parbati-II also. Even today, we have around 110 megawatt of the power generated from our machines by using some nala work -- nala water. And we are putting 1 nala, which is going to add further -- we'll be generating around 230 to 280 megawatt from October onwards when the -- if the water is available. So partially, we have already commissioned Parbati-II, regenerating power also. And we are committed to complete this balance work by -- latest by March '22.

And sir, this -- what you sell from this 230 to 280 will be netted off from the project cost. This will not be booked to revenue, right?

The booking of 230 to 280 megawatt?

Yes.

This -- Mr. Dhruv, the infirm power, which is being sold, you are asking about that, I think?

Yes, yes.

Yes. It is being decapitalized basically. It is being adjusted against the capital cost. So the capital cost is coming down to that extent. Like last year, we sold roughly 191 MUs, and it is being sold at INR 1.78 per [ car ]. So you multiply by that and say there is a revenue generation of almost INR 250 crores. So the capital cost of the project is going down to that extent.

Further one thing I am mentioning here is now we are getting the amount as infirm power, but when we are going to add some more water and for running up one machine in the full load, it will require around 26 cumec of water. We are getting from 16 cumec at the present, and by adding for another nala, we'll be getting around 32 cumec. So we'll be doing the COD for at least 1 machine, so the firm power will now [ be sold at ] something INR 5 approximately. So we'll be further reducing the cost from the project.

Okay. So you will commission 1 unit and start billing for that?

Yes, we'll take the COD, when the water reaches more than 26 cumec of water. So likely, in the month of February, March, April, we'll definitely within this financial year only, we'll do that.

Okay. So from next year onwards, you will see at least from FY '22 onwards, at least 1 unit -- from start of FY '22, at least 1 unit will be commissioned, and by end of the year, probably the whole plant will be commissioned.

Yes, yes. Machine has already -- the 2 units have been commission. Balance 2 units will likely be synchronized within a day or 2. So all 4 units are ready, machines are ready, but we'll be getting the supplies from [indiscernible].

Secondly, next question is on the capital cost approval for a few projects. Have we got for all the projects? And is the benefit coming in our numbers now? Or there is some pending for the 5 projects that the capital cost was pending?

RC for some of the projects is under evaluation in the various states, either in UP, Bihar and [indiscernible]. And for the Parbati-II and Subansiri, RC has already been put up for their consideration. So the things have already been approved -- mostly has been approved. Few -- only 3, 4 projects, the RC is in the process of approval.

Sir, I was speaking about the projects which are already commissioned and the capital cost approved from CERC was pending, and that could have given a boost to the numbers. So is that already there? The benefit has already come? Or that is still pending?

There are 2, 3 projects, which RC is still pending, like Uri-II, Chamera-II...

Sir, sorry to interrupt, sir, we are not able to hear you clearly.

Hello? Is it coming now. Sounding okay?

It's slightly better. Yes.

There are 2, 3 projects, RC put up with the government for approval like Uri-II, Chamera-II and all that, and those RC is still under discussion, in the final stage, and it will be approved soon.

Okay. So still a few projects pending, which can benefit us in FY '21?

Yes.

Got it. And sir, last thing on the LPA amount. So I believe you're not accruing the LPA. You are booking out on cash basis. So is it possible to share what is the accumulated LPA if we were to collect it now? I mean if the discoms were to all pay up the LPA amount? You have disclosed that in your annual report. So if you can just share that number.

You see, as you rightly mentioned, we are booking the late payment surcharge on a realization basis. And the LPA, which is outstanding at the end of June, is around INR 475 crore. So if you realize today, it will increase our income by INR 475 crore.

This is the cumulative amount. INR 475 crores is cumulative?

Yes. Yes.

And sir, just one last one, please. On the CapEx, for FY '21, what is the CapEx guidance?

FY '21, you want to know the CapEx plan?