NHPC Limited (NHPC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the NHPC Limited Q1 FY '21 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] I now hand the conference over to Mr. Rupesh Sankhe from Elara Securities Private limited. Thank you, and over to you, sir.

Good afternoon, everyone. On behalf of Elara Securities, we welcome you all for the Q1 FY '21 Conference Call of NHPC. I take this opportunity to welcome the management of NHPC represented by Mr. A. K. Singh, Chairman and Managing Director; and other directors who are present. So we will begin the call with the brief overview by the management followed by Q&A session. I will now hand over the call to Mr. A. K. Singh for his opening remarks. Over to you, sir.

Good afternoon, friends. I sincerely hope that you all and your family are keeping yourself healthy and safe these days amidst the global health crisis, and let us hope that the entire world gets rid of this at the earliest. For -- the Board had adopted Q1 financial results for the period ended June 30, 2020, in its meeting held on 31 August '20. The same has already been communicated to Exchange. By now, I hope you all would have got chance to go through the quarterly set of numbers. First, I will just touch upon major highlights. Number one, during Q1 F1 -- FY '21, our power stations have achieved generation of 8,113 million units versus 8,581 million units generated in corresponding period of the previous year, excluding infirm power of 94 million unit of Parbati-II power station during Q1 FY '21, which is about 5% lower, that is 468 million units, which is mainly due to shutdown of the 2 units of Chamera-II power stations, which are under restoration and the lower water availability. Our PAF for Q1 FY '21 stands at 90.98% against the corresponding previous period PAF of 90.97%, which is almost flat. During Q1 FY '21, company has earned revenue from operation of INR 2,519 crore as against 2,421 crore in corresponding previous period, which is about 4% higher, that is INR 98 crore. During Q1 FY '21, we have earned PAT of INR 723 crore versus 80 -- INR 881 crore corresponding period, which is down by INR 158 crore, that is 18% approximate. On physical front, we have shared the active construction work at Subansiri Lower Project has been fully resumed with effect from 15th October 2019 after a clearance by honorable NGT on 31 July '19. However, due to COVID-19 complete shut -- lockdown work at site was on hold during the period of 24 March 2020 to 20 April 2020. Again, resumed with effect from 21/04/2020 with deployment of required manpower. However, we are trying our best to complete the project by FY 2024. We have already shared that unit 1 and 2 of Parbati-II projects were got synchronized on [Foreign Language] 28 April 2020 and 29 April 2020, respectively. Further unit 3 and unit 4 200 megawatt each of Parbati hydroelectric project were also synchronized with the grid on 6 July and 7 July 2020, respectively. We are trying to complete the remaining tunneling work with the help of TBM and DBM, both to complete the project by FY '22. In respect of Dibang Multipurpose Project 2,880 megawatt where Forest Clearance stage-II approval has been granted an investment approval towards preinvestment activities for INR 1,600 crore obtained. PIB memo for the implementation of the project has been submitted to Ministry of Power on 10 July 2020. In respect of Jal Power Corporation Rangit project, 120 megawatt in Sikkim where NHPC has emerged as a successful bidder with a bid of INR 165 crores. NHPC requested resolution professional to explore the possibility of expediting the matter with the Honorable NCLT Hyderabad for approval of resolution plan. In this regard, application for urgent hearing was allowed by NCLT on 26 June 2020. In the recent hearing held on 31 July 2020, the matter was discussed in detail, but the order has been reserved. Reply to the comments of various agencies and draft PIB memo for implementation of the project has been submitted by NHPC. An MoU has been signed on 22 June 2020 with Hydropower Investment and Development Company Limited, HIDCL, Nepal for development of hydropower projects in Nepal. Further, NHPC is also keen to participate in the proposed Dorjilung 1,125 megawatt and Sankosh 2,585 megawatts hydroelectric project in Bhutan. In the respect of Ratle hydroelectric project J&K, 850 megawatt, an MoU was signed on the 03/02/2019 on -- for implementing through a JV between NHPC and JKSPDC. In this regard, PIB meeting already held on 9 March 2020, and recently meeting was conveyed by adviser on the -- through Honorable Prime Minister on 1 August 2020, and discussed the same -- and discussed the issue associated with implementation of Ratle hydroelectricity project. Again, a meeting has been fixed on 7th of September for the PIB. An MoU was signed on 25/09/'19 with the government of Himachal Pradesh for execution of Dugar hydroelectric project 449 megawatts by NHPC on BOOT basis for a period of 70 years. The DPR of the project prepared by the earlier developer of the project Messrs DHPI has been taken over and a joint site visit has been conducted recently by officials from NHPC and Messrs DHPI. The updation of DPR is under process and is expected to be prepared and submitted by the end of this year. NHPC has diversified its portfolio and include solar power business and has given letter of award to solar power developers for interstate transmission system, ISTS grid-connected photovoltaic projects aggregating to 2,000 megawatt installed capacity. A power sale agreement has been signed on 28 August 2020 with Madhya Pradesh Power Management Company Limited, MPPMCL for procurement of 1,000 megawatts solar power at the tariff INR 2.55 kilowatt per hour for 25 years on long-term basis. NHPC has signed PSA for 1,300 megawatt power state DISCOM out of 2,000 megawatts, and PSA for balanced power is likely to be signed shortly. NHPC are trading margin at the rate on INR 0.7 kilowatt per hour during the contract period. NHPC has signed PPA with Eden Renewable Passy Private Limited for 300 megawatt and Altra Xergi Power Private Limited 380 megawatt solar power on 31 August 2020. PPA for 66 megawatt Loktak downstream hydroelectric project has been signed with the government of Manipur by our subsidiary company, Loktak Downstream hydro power limited yesterday only. NHPC has been allotted the State of Telangana, Odisha and J&K for development of floating solar power projects under Ultra Mega Renewable Energy Power Parks scheme for -- from MNRE. MoU signed with the Odisha 500 megawatt on [Foreign Language] 20 July 2020, and MoU with the Telangana for 500 megawatt is under consideration for approval. Besides that we are also in the process of development of 50 megawatt floating solar power projects in Kerala, 114 megawatt solar power in Odisha and 600 megawatt ground-mounted solar project in the state of Rajasthan. We are also in discussion with the State Government of Rajasthan for development of solar power projects of 1,200 megawatt capacity in the state under UMREPP. This is all from my side, now I will request Director of Finance, Shri Mittal, to discuss financial results in detail.

Good afternoon, friends. I'm going to share with you the detailed quarterly numbers. As you know, the Board had adopted the quarter 1 results ending June 2020 in its meeting held on 31 August 2020, and the same was communicated to the Exchanges. The brief highlights of the financial results of the company are as under. During quarter 1, our power stations have achieved a generation of 8,113 million units as against 8,581 million units generated in the corresponding period of previous year, which is about 5% lower. This is mainly due to shutdown of 2 units of Chamera-II Power Station, which is under restoration and because of the low water -- lower water availability in the other power stations. Our plant availability factor stands at 90.98% against the corresponding previous period of 90.97%, which is almost flat. As you know that NAPAF as per the CERC norms is 77.35%, and our performance is almost 18% higher than the CERC norms. For Q1, the company has earned a revenue from operations of INR 2,519 crore as against INR 2,421 crore, which was earned last year in the corresponding quarter, which is almost 4% higher, and the increase is primarily due to the trading revenue of INR 211 crore. Other income for quarter 1 in FY '21 is of the order of INR 87 crore as against INR 87 crore during the corresponding period, which is almost flat. During quarter 1, the generation expenses are INR 291 crore as against INR 287 crore last year. So the expenses are more or less flat and little bit increase is on account of higher water cess which is paid in the state of J&K depending on the generation. During quarter 1, the employee cost has come down from INR 357 crore last year to INR 326 crore in the current quarter, which is INR 31 crore down. And this is mainly because of the superannuation of the employees. The depreciation and amortization expenses in Q1 have come down from INR 387 crore to INR 330 crore, which is down by INR 57 crore. And this is because of 2 reasons: one is because the Dulhasti Power Station has completed 12 years of operation and the depreciation after 12 years falls drastically, so impact is INR 55 crore, and there is a little bit impact because of the increase in the life of the hydropower stations from 35 years to 40 years. During Q1, the other expenses are INR 274 crore as against INR 273 crore last year, so this is also identical to the figure of the last year, and the figure is flat. During Q1, there has been increase in the finance cost from 3 -- INR 237 crore -- from INR 237 crore there has been a decrease, it's not increase, it is a decrease in the finance cost from INR 237 crore to INR 147 crore. And the decline is INR 90 crore. This is because in the current year, we have capitalized the finance cost of Subansiri project, INR 69 crore post resumption of active construction. Whereas in the last year, this amount was booked in the PL account. The balance decrease of INR 21 crore it is because of the repayment of loan and refinancing of loans, et cetera. During Q1, an exceptional item of INR 185 crore on account of onetime rebate which has been allowed to DISCOMs for the COVID has been factored. And because of this, the profit has declined to that extent. Although the end result on the bottom line is lesser than INR 185 crore, the total decline in the profit is only INR 158 crore. During quarter 1, we have earned a PAT of INR 723 crore as against INR 881 crore last year, which is down by INR 158 crore. And the reasons for the increase -- or decrease in the line items, various line items, which is resulting into the decline of INR 158 crore have just been discussed. The incentive position was -- is under the plant availability-based factor incentive, last year, it was INR 141 crore, this year, it is INR 148 crore. So there is an increase of INR 7 crore. Deviation charges, last year, it was INR 19 crore, this year, it is INR 35 crore. So there is an increase of almost INR 16 crore. So our total incentives are higher by INR 22 crore as compared to the last year -- corresponding quarter of the last year. Our CapEx in the Q1 is INR 646 crore as against INR 334 crore in the corresponding period of the previous year. The anticipated cost of Parbati-II project is INR 9,997 crore, for which we have already sought a revised cost sanction from the government. And out of this, we have already spent INR 8,260 crore till June 2020. The estimated levelized tariff based on the anticipated cost of the project is INR 5.61 per unit. The revised cost of Subansiri project is INR 20,369 crore, out of which we have already spent INR 12,326 crore till June 2020. The estimated levelized tariff based on the estimated cost is INR 5.17 per unit. The status of receivable. We have collected INR 997 crore from the DISCOMs against sale of energy as compared to INR 1,385 crore in Q1 of the last year. Trade receivables as on 30 June 2020 stands at INR 4,672 crore as against INR 3,818 crore as on 31 March 2020. So roughly, there is an increase of almost INR 850 crore in the trade receivables. The major dues are from J&K, INR 1,843 crore, which includes INR 1,753 crore for more than 45 days. UPPCL, INR 1,380 crore, which includes dues of INR 1,257 crore for more than 45 days. Punjab, INR 305 crore, which include INR 256 crore overdues. West Bengal, INR 170 crore, it include INR 110 crore, which is due for more than 45 days. And there are others also. So that sums up the entire figure of receivables. So with this, now the forum is open for question and answers. Thank you very much.

[Operator Instructions] The first question is from the line of Anuj Upadhyay from Emkay Global.

Yes. Sir, just need an update on the infirm power of Parbati-I and -II. In the last call, you have mentioned that probably the infirm power in the current fiscal would be much higher compared to the previous fiscal because of the linking of another nala. So how has the status been during the Q1, I guess, the -- sir has mentioned the number, but I missed it? And how things are panning out till August?

In the nala work, basically, there's an approach tunnel, very poor geology. That is the worst geology ever we have faced in NHPC. It is now only 3.2 meters balanced. Hopefully, today, we'll be able to do 1 meter, then next day 1 meter. So by 3rd of September, that excavation part, tunneling part will be over, then we'll be doing lining, and we are planning to complete it by end of October. So that the water can be discharged into the tunnel in the October itself if everything goes well there because of some weather condition. Thereafter, definitely, the water will be more from both the nalas, Jiwa nala and Hurla nala, and we'll try to go for the COD of the project depending upon the water availability during the October-November because it is a winter season, so we'll be waiting for that discharge to come. And definitely, that water is going to add in the Parbati-III. Even if it's a 1 cubic of water that is going to add good size of generation in Parbati-III. That is the progress at present now.

Okay. And what was the infirm power, sir? You mentioned about some number in the opening remark? I missed that number, sir. If you could just repeat it, it would be helpful.

It was -- that is 94 million units I have mentioned.

How much, sir?

94, 94 million units.

94?

Yes.

Okay. This is versus last year, how much was that, sir?

Last year, it was not there due to -- because some preparing was going on in the tunnel. And to your information, by this date, we have already done 160 million units.

1-6-0 or 1-1-6?

Yes. 1-6-0.

Okay. Okay, sir. So any year-end targets, sir, which we are looking out for, especially like the commissioning of this -- sorry, the linking of the nala is now taking much higher time than what we had anticipated in the beginning of the year. So we were targeting somewhere around 50%, 60% kind of incremental power -- the infirm power from this. So what targets are we looking at now as the linking would happen probably by October, as you mentioned?

Yes. So after joining this nala, Hurla to this Parbati-II unit, we are targeting to generate around 325 million units from Parbati-II.

This is the annual number you are saying, right, sir?

Yes, annual number.

[Operator Instructions] The next question is from the line of Rupesh Sankhe from Elara Securities.

Yes, sir, a couple of questions from my side. Firstly, over the next 2 to 3 years, what will be the equity, which will be required in the ongoing projects? And secondly, the -- no, an update on Parbati-II, how is the work progressing there?

Yes. The equity -- physical progress at the Parbati-II. We had already planned for the -- this '21-'22 financial year. March '22 we have kept the target. And since the work is going on from -- in Head Race tunnel from both the sides, agency has already mobilized the site. So if everything goes well, definitely, we're going to complete by -- before March '22. This is for the physical things are going well. And for the CapEx, DF will tell.

Yes. In -- you see the equity requirement in 2020/'21 is INR 2,067 crore based on our CapEx target of INR 5,255 crore. So this is for the current fiscal year. Next year, our target is INR 7,618 crore, which includes investment in JVs of INR 1,100 crore. So the entire INR 1,100 crore will go out of equity. Plus, we have our own direct CapEx, which is INR 6,500 crore. So against this INR 6,500 crore, our equity requirement is 30%. So it will be INR 1,950 crore. So total, if you add both, next year, our requirement becomes INR 3,050 crore for equity. That means in '21/'22, the equity requirement is going to be INR 3,050 crore. '22/'23, our investment in JVs will be INR 845 crore, which include Lanco Teesta our subsidiaries Chenab Valley and other like Jal Power, et cetera. And our direct investment in the CapEx will be INR 7,300 crore. So 30% of that will be roughly INR 2,190 crore, plus INR 845 crore, that means our equity requirement will be INR 3,035 crore in '22/'23. So I have given you the equity requirement for 3 years, the current year is INR 2,067 crore; next year, 3,050 crore; and thereafter, it will be INR 3,035 crore.

The next question is from the line of Rahul Modi from ICICI Securities.

Congratulations for good numbers. Sir, of late, you've made some very interesting announcements with regard to renewable projects that as a company, you would like to set up along with announcements in Ladakh and as you mentioned in Rajasthan also. So can you give a road map as to how much capacity are we targeting, which are the legs that we are looking at across the country in terms of renewable capacity, please?

Actually, at present, we are targeting for around 6,000 to 7,000 megawatt. And some discussion is also going on because number of schemes are there. So mostly, we are talking for the REPP scheme, where we can just take the land and some -- develop the solar park and go as a trading business in there by giving the land as a scheme. And in small, small patches, say, 100 megawatt, 50 megawatts, at number of places, we are targeting for the -- as a developer mode. So all the -- everywhere the things are in a -- moving in a good condition. We are talking in the UP also. Even today, they were in meeting in the Ministry of Power in the UP government for some PPA. Odisha, we have already signed the MoU and there are some discussions going up for signing of the joint venture. Similarly, in the Eastern UP also, there land is there, we have surveyed and the land is around 10,000 acres, we can develop more than 1,000 megawatt there also. And there is Assam. So we are talking and in discussion with a number of states, and it is at present, around say -- you can say 6,000 to 7,000 megawatt.

This will be mostly on a trader mode, sir, is it?

Trader mode. Mostly on the trader mode. But definitely out of 7,500, at least 600, 700 megawatts, we do at the capacity less than 100 megawatt in the development mode.

Okay. And sir, what about the Ladakh program?