NHPC Limited (NHPC) Earnings Call Transcript & Summary

Our CMD had had to go for an emergent call, so he's not available at present. I sincerely hope that you and all your family members are keeping yourself healthy and safe. The vaccination drive has started now. And I sincerely hope that all of us will get protection at the earliest. Friends, the Board has adopted 9 months of financial results for the period ended 31st December, '20, in its meeting held on 11th February, '21. And the same has already been communicated to the exchanges. By now, I hope you all would have got the chance to go through the quarterly and 9 monthly set of numbers. First, I will touch upon the major highlights and then detailed analysis of the results shall be discussed by our Director of Finance, Shri Goyal. The brief highlights of the financial results and important updates on the company are as follows: during 9 months financial year '21, our power stations have achieved generation of 21,262 million units vis-à-vis 22,152 million units generated in the corresponding period of the previous year during FY -- during 9 months FY '21, which is about 4% lower that is 890 million units lower. This is mainly on account of low water availability and complete shutdown of Sewa Power II station with effect from 25 September, 2020. Restoration work is under progress on the station. Our PAF for the 9 months of financial year '20 stands at 88.59% against the corresponding previous period PAF of 87.47%, which is about 1% higher. During 9 months FY '21, the company has earned revenue from operations of INR 7,165 crores as against INR 6,822 crores in the corresponding previous period, which is about 5% higher that is about INR 343 crores higher. During 9 months financial year '21, the company has earned cash of INR 2,829 crores vis-à-vis INR 2,624 crores of the corresponding period of last year, which is about INR 205 crores that is 8% higher. On the physical front, the -- as we had shared earlier, the active construction work at Subansiri Lower Project has been fully resumed with effect from 15 October, 2019, after clearance by the honorable NGT. And the work at site is going on in a full-fledged manner. Our hope is that we shall commission one unit by August 2022 and the complete commissioning shall be done by August 2023. We have already shared that unit 1 and 2 of Parbati-II Hydroelectric Projects were got resynchronized on 28th and 29th April, 2020, respectively. Further, unit 3 and 4 of 200 megawatts each of the Parbati-II H.E. Project were also resynchronize with the grids on 6th and 7th July, '20, respectively. We are trying to complete the remaining tunneling works with the help of tunnel boring machine and drilled drafting method, both to complete the project in the financial year 2022. In respect of the Dibang Multipurpose Project, which is a 2,880 megawatt project, their Forest Clearance stage 2 approval has been granted and investment approval towards pre-investment activities for INR 1,600 crores obtained, PIB memo for implementation of project stands submitted to the Ministry of Power. The NHPC has emerged as a successful bidder with a bid of INR 165 crores in respect of Jal Power Corporation Rangit projects in Sikkim. This is a 120-megawatt project. The honorable NCLT Hyderabad has approved NHPC's resolution plan while its order dated 24th December, 2020. The definitive agreement for implementation of the approved resolution plan was signed on 13th January, '21. The estimated cost of the project is INR 943 crores. And estimated levelized tariff is INR 4.40 per unit. As you are aware, the Jal Power Corp. is the second company after Lanco Teesta Hydro Power Limited, which we have acquired through the NCLT route. We are constantly on the lookout for such strategic acquisitions as a part of our portfolio-building process. In respect of the Ratle Hydroelectric Project in Jammu and Kashmir, which is a 850-megawatt project, an MOU was signed on 3rd February, 2019, for implementation through a JV between NHPC and JKSPDC. A supplementary MOU to the initial MOU has been signed on 3rd January, '21, in line with the recommendations of the PIB. The Union Cabinet has recorded investment approval of INR 5,281 crores on 20th January for implementation of the project. The levelized tariff of the project would be INR 3.92 per unit. Tendering for the execution of the project is under progress. An MOU was signed on 25th September, 2019, with the Government of Himachal Pradesh for execution of the Dugar Hydroelectric Project by NHPC on BOOT basis for a period of 70 years. Installed capacity of the project has been increased from 449 megawatts to 500 megawatts as per power potential study by the CEA, resulting in increase in design energy from 1,610 million units to 1,758 million units. Detailed project report has been submitted to the CEA on 25th November, 2020. Survey and investigation of the project is under progress. MOUs have been signed with Jammu and Kashmir State Power Development Corporation on 3rd January, '21, for execution of Kirthai-II Hydroelectric Project, which is 930 megawatts; Sawalkot Hydroelectric Project, which is 1,856 megawatt; Uri-I stage 2 H.E.P., which is 240 megawatts; and Dulhasti stage 2 H.E.P. 258 megawatt; and Ratle H.E.P. 850 megawatt in the Union Territory of Jammu and Kashmir. Kirthai-II H.E. Project shall be implemented by CVPPL, which is [indiscernible], while Sawalkot, Uri-II, Dulhasti H.E.P. shall be executed by NHPC. Ratle H.E. Project shall be executed through a separate JV consisting of NHPC and JSKPDC (sic) [ JKSPDC ] where NHPC shall have 50% equity -- 51% equity. NHPC has been allotted the states of Telangana, Odisha and J&K for development of floating solar power projects under Ultra Mega Renewable Energy Power Parks, scheme of MNRE. MOU has been signed with Odisha for 500 megawatts on 20th July, '20. The project shall be developed by a JV between NHPC and JEDCOL, which is Green Energy Development Corporation of India Limited. In-principle approval has been obtained from MNRE on 8th December, '20, for setting up of 100-megawatt floating solar by the proposed JV company under Solar Park Scheme. MOU with Telangana for 500 megawatt is under consideration for approval. Development of solar power projects in other states like Uttar Pradesh and Rajasthan is also being explored. In-principle approval has been obtained from MNRE on 17th September, 2020, for development of 1,200 megawatt Solar Park Scheme by Bundelkhand Saur Urja Limited under Ultra Mega Renewable Energy Power Parks mode of the Solar Park Scheme in the Jalaun District of Uttar Pradesh. We are also in discussion with the State Government of Rajasthan for development of solar power project of 600-megawatt capacity in the state under UMREPP. Besides the above, we are also in the process of development of 50-megawatt floating solar power project in Kerala and 150-megawatt solar park in Odisha. In-principle approval has been obtained from MNRE on 8th December, 2020, for setting up of 50-megawatt floating solar power project in Kerala under the Solar Park Scheme. Now I would request our Director, finance, Shri Goyal, to discuss the financial results in detail. Thank you.

Good morning, friends. I'm going to share with you detailed quarterly and 9 months set of numbers with the detail analysis. The Board has adopted 9 months financial results ended 31st December, 2020, in its meeting held on 11th February, 2021, and the same has already been communicated to exchanges. Brief highlights of the financial results and important updates on the company are as under. During 9 months of FY '21, our power systems have achieved generation of 21,262 million units vis-à-vis 22,152 million units generated in corresponding period of previous year, excluding interim power of Parbati-II, which is about 4% lower in comparison to previous 9 months. Our PAF for 9 months FY '21 stands at 88.59% against the corresponding previous period PAF of 87.47%, which is around 1% higher. Our PAF for third quarter FY '21 stands at 83.11% against the corresponding previous period PAF of 81.43%, which is about 2% higher. For 9 months FY '21, company has earned revenue from operations of INR 7,165 crore is against INR 6,822 crores in corresponding previous period, which is about 5% higher. The increase in revenue is mainly due to increase in sales pertaining to previous years on account of tariff order for TLDP-IV power system at -- which has resulted in additional revenue of INR 723 crores and INR 142 crores towards interest on -- towards [Lanco Teesta ] tariff orders. During quarter 3 FY '21, company has earned revenue of INR 2,092 crores as against INR 795 crore in the corresponding previous period, which is about 17% higher. The increase in revenue is mainly due to increase in sales pertaining to previous year on the tariff order of TLDP-IV as I mentioned for 9 months period. This increase is partly set up by lower secondary energy by INR 17 crore and lower incentive by INR 92. Other income for 9 months FY '21 is of the order of INR 714 crore vis-à-vis -- versus INR 651 crore during the corresponding previous period, which is about 10% higher. This is mainly due to increase in late payment surcharge by INR 34 crore and increase in dividend income by INR 27 crore from NSBC, one of our subsidiary. Other income for quarter 3 FY '21 is of the order INR 202 versus INR 65 crore during the corresponding previous period, which is about 211% higher. This is mainly due to increase in late payment surcharge. Current period -- during current period, we have recognized surcharge of about INR 156 crore as against INR 15 crore recognized during corresponding previous quarter. During 9 months FY '21, the generation expenses have come down from INR 736 crore to INR 723 crore. That is by INR 13 crores, which is mainly due to lower water cess on account of lower generation in J&K projects. During quarter 3 FY '21, the generation expenses have come down from INR 158 crore to INR 119 crore that is by -- decreased by INR 39 crores, which is mainly due to lower water cess on account of lower generation in J&K projects. During 9 months FY '21, the employee cost has come down from INR 1,133 crores to INR 1,049 crores that is by INR 84 crores -- lower by INR 84 crores. The decrease is mainly due to subordination of employees, which has impact of INR 138 crore and capitalization of employee cost of Subansiri Lower Project by INR 36 crores, which was being -- earlier being charged to [indiscernible]. This saving has been partly offset by increase due to DA increment, promotion, et cetera, by INR 90 crore. During quarter 3 FY '21, the employee cost has come down from INR 399 crore to INR 379 crore. That is by -- decreased by INR 20 crores. The decrease is mainly due to subordination of employees by -- having impact of INR 46 crore, which is partly offset by increase due to DA increment, et cetera, by INR 26 crore. During 9 months FY '21, the depreciation and amortization expenses has come down from INR 1,160 crores INR 998 crores that is by INR 162 crore. This is mainly due to completion of 12 years of life of Dulhasti Power Station in FY '19/'20. During quarter 3 FY '21, the depreciation and amortization expenses has come down from INR 387 crores to INR 335 crores that is by INR 52 crores. This is, again, mainly due to completion of 12 years of life of Dulhasti Power Station in FY '19/'20. During 9 months FY '21, other expenses has gone up from INR 860 crore to INR 1,009 crores by -- that is by INR 149 crores. This has increased by INR 149 crore. This is mainly due to increase in provisioning in respect of Tawang-II H.E. Project, which is under survey and investigation. Provisioning of Tawang-II has impact of INR 133 crore on other expenses. During quarter 3 FY '21, other expenses has gone up from INR 267 crores to INR 417 crores that is by INR 150 crores. This is mainly -- again, mainly due to increase in provisioning in respect of Tawang-II Project, which is under survey and investigation. During 9 months FY '21, there has been decrease in the finance cost from INR 644 crores to INR 435 crores, resulting in saving of -- by INR 209 crores, mainly on account of capitalization of finance cost in respect of Subansiri Lower Project, post resumption of active construction in the project and balance decrease of INR 51 crore. Capitalization of Subansiri Project has resulted in decrease in finance cost by INR 158 crore, and the balance sheet decrease of INR 51 crore is due to repayment of loans. During Q3 FY '21, there has been decrease in finance cost from INR 156 crores to INR 142 crores, decrease by INR 14 crores, which is mainly due to repayment of loans. During 9 months FY '21, an exceptional item of INR 185 crores on account of onetime rebate has been passed on to beneficiaries due to effect of COVID-19. During 9 months FY '21, we have earned PAT of INR 2,829 crore vis-à-vis INR 2,624 crores of corresponding period, which is up by INR 205 crores. That is 8% increase approx. And the reasons for decrease and increase in the line items, we have just discussed in following paragraphs. During Q3 FY '21, we have earned PAT of INR 808 crore vis-à-vis INR 404 crores of corresponding period -- previous period, which is up by INR 404 crore. That is 100% approx increase. And the reasons for decrease and increase in the line items, we have just discussed in the following paragraphs. During 9 months FY '21, the incentive position are as under. Secondary energy, current 9 months, it was INR 69.68 crore as against corresponding previous 9 months of INR 100.69 crore, resulting in decrease by INR 31.01 crore. PAF-based incentive. Current 9 months, it is INR 359.90 crores as against INR 346.12 crores during corresponding previous 9 months, which has increase of -- increased by INR 13.78 crore. Deviation charges. Current 9 months, INR 118.51 crore as against INR 87.94 crore in corresponding previous 9 months, resulting in increase by INR 30.57 crores. Our total incentive amount is INR 548.09 crore in current 9 months as against INR 534.75 crore during corresponding previous 9 months. CapEx during 9 months of FY '21 was INR 2,268 crore as against INR 2,855 crore in the corresponding period of previous years. The Board of Directors has declared and approved the payment of entering dividend at the rate of 12.5% that is INR 1.25 per equity sale, on the sales value of paid-up equity sales of INR 10 each for the financial year 2020/'21 against 11.80%. That is INR 1.18 per sale -- per equity sale in previous financial year. The Board has fixed Tuesday, that is, February 23, 2021, as record date for the purpose of ascertaining eligibility of shareholders for payment of interim dividend. The anticipated cost of Parbati-II Project is INR 9,898 crore, out of which we have already spent INR 8,705 crore till December 2020. The estimated levelized tariff based on the anticipated cost is INR 5.58 per unit as per CERC formula. The revised cost of Subansiri Project now stands at INR 19,992 crore, out of which we have already [ invest ] INR 12,855 crore till December 2020. The estimated levelized tariff based on the estimated -- anticipated cost is INR 5 per unit, that is again as per CERC formula. Other major highlights of the company are as under. On relation front, NHPC has received INR [indiscernible] from the beneficiaries against sale of energy during 9 months ending FY '21 as compared to INR 5,531 crore in corresponding period of previous years -- 9 months period. Trade receivables as on 31st December, 2020, stands at INR 4,170 crore as against INR 3,818 crore as on 31st March, 2020. The major receivables are as under. UP Power Corporation, that is UP state, as on -- trigger as on 31st December, 2020, INR 1,458 crore. These are total dues. Out of this, more than 45 days dues are INR 1,384 crore. PDD, J&K, including newly formed [ discount ], total dues are INR 1,080 crore, out of which dues more than 45 days are INR 945 crore. Punjab, INR 353 crore total dues, out of which dues more than 45 days are INR 318 crore. Rajasthan, INR 143 crore, out of which INR 133 crore is more than 45 days. West Bengal, INR 119 crores. More than 45 days, dues are INR 79 crore. And others are INR 1,017 crore, out of which dues more than 45 days are INR 387 crores. This is all from our side. Now the phone is open for questions and answers. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital Services.

Am I audible?

Yes, yes.

I have first question on this, sir, why is the revenues up by INR 500 crores? And how much is the impact of the Teesta lower dam for tariff order? Can you please quantify that?

Yes. Revenue squeezed up by more than INR 500 crores is due to earlier year sales in respect of TLDP-IV power system. Principal amount is INR 323 crores. And INR 142 crore is on account of interest on tariff. And additionally, current year sales has also increased by INR 80 crore around, for 9 months period. So these 3 factors have resulted in additional revenue by around INR 500 crore.

Understood, sir. And secondly, sir, on the upcoming projects, Subansiri and Parbati-III -- Parbati-II, do we have the PPA for the entire quntum?

Yes. We have -- we pay for entire quantum in respect of Parbati-II as well as Subansiri, minus 130 megawatt in respect Subansiri, for which we are talking to daily discounts.

So only 130 megawatt is left.

130 megawatt.

Understood. Sir, lastly, sir, on this increment of this hydropower, IHP obligation, which was recently notified by the Ministry of Power, how does that help us in near term to tie-up, if anything, which is left? Does it help at all?

Just -- basically, discounts will be under obligation to purchase hydropower to fill up the gap of renewable energy. So hydropower will be -- will have a boost for development and to attract purchase of hydropower by discounts.

See, this will help us in the future -- upcoming projects also [indiscernible] the discounts have an obligation to buy hydropower, any power which has not been coming under a PPA, we will be able to sell it through the HPO. And -- yes...

Understood sir. Does it help us on an immediate basis given that we already have, I think, almost all the power tied-up. Am I right in saying that?

Our commissioned officer, the Magistrate Directors, after [ year pre-'19 ], all those have been covered under HPO, which is a separate thing under malls owners. So they are compulsory that they have to buy.

See, at present, it does not make a material difference because all our power is tied-up. We already have PPAs for the existing projects, but it will definitely help us for any untied power in the projects which are going to come up.

So Subansiri and Parbati both will come under HPO.

Sir, one more question, if I may squeeze in, sir. Is Chenab Valley Power Projects Ltd. will get consolidated post the acquisition of 2% from PTC. Am I say -- am I right in saying that?

Yes, yes. We are in the process of acquisition of 2% from PTC. Our Board has already approved the agenda, and we are just waiting for government approvals. Otherwise, all the parties have already agreed for the 2% transfer from PTC to NHPC.

[Operator Instructions] The next question is from the line of Dhruv from HDFC Asset Management Company.

Sir, first question was on the receivables. If I remember correctly, the last quarter end, the receivables were about INR 5,000 crores, which have reduced by about INR 1,000 crores now. But sir, under [indiscernible], I think UP and J&K have got a decent amount in this quarter. But it seems we have not benefited much from it, sir. [indiscernible]

Yes, please. I'm just taking figures for the September ending quarter and vis-à-vis current as on date. So UP and J&K, we were having total dues of INR 2,247 crore and as on debt, we are having INR 1,226 crore in respect of PDD and J&K. Uttar Pradesh, it was INR 1,272 crore and as on debt, it is INR 827 crores. Punjab, as on 30th September, '20, it was INR 354 crore, which has been reduced to INR 146 crore as on debt. Next, West Bengal, it was INR 167 crores as on 30th September, 2020. Now it has been reduced to INR 148 crore. Himachal, it was INR 152 crores, which has made almost nil. And -- in rest of the others, it was INR 813 crore, which has also been reduced to INR 369 crore. So in totality, in September ending quarter, we were having total dues of INR [ 5,005 ] crore, which has been reduced to INR 2,778 crore as on debt.

INR 2,000 crore or INR 4,000 crore?

INR 2,778 crore as on date, today.

Okay. So the total receivables are currently INR 2,272 crores?

INR 2,778 crore as on date.

Okay. Got it, sir. Sir, with this approval of Teesta, now the capital cost is approved heavily. So what is the incremental annual revenue you benefit from? Is it INR 100-odd crores?

It is INR 125 crores around.

So that is -- that was not there in the last year, which we'll benefit from the future years now? Will be beneficial to the future years?

Yes, yes. That's why we have recognized earlier sales of around INR 500 crores.

Git it, sir. So sir, now, all the project -- there were 5 projects or 6 projects which were pending capital cost approval. Now all -- for all of them, the capital cost is approved. There is nothing pending now?

No, there is no as such pending cost as on date.

Okay. So this was the last time, this is also done now. Got it, sir. Got it.

Yes, yes.

So even for Kishanganga, the approval is done or there is some under recovery there?

Kishanganga, in case of Kishanganga, we have bilateral arrangement with the state. And this is -- this will have no impact on cost.

Okay. So no -- so there is no impact already. I mean, there is no impact to the business, like no benefit also?

Yes, yes.

And sir, on Sewa, probably this is a small amount, but the shutdown, how much is the AFC impact annually?

Sewa. This -- actually, in case of Sewa, the shutdown was after peak season. The shutdown has taken place in the lean season. So there is hardly any impact on the revenue. This can be around INR 30 crores, INR 40 crores.

Okay. And sir, okay. Annual year fee is INR 30 crore, INR 40 crores.

Excellent.

Okay. That's okay. And sir, you have written off Tawang-II. So that -- does it like mean you're not going ahead with the project, so that's the reason [ you need ] the INR 133 crore write-off?

Tawang, we are not getting a good response from the state government. So for the time being, we are keeping it at bay. And when we'll get proper response, then we'll go ahead.

Okay, okay. Got it. So that's the reason you have taken it off for now. Okay. And sir, last thing was on Parbati. In our last interaction, you had mentioned that you have started the work from both the sites now, and the tunneling work has to achieve a run rate of about 200 meters per month. So sir, is that on track? I mean is that achieved?

Yes, we are on the track and around 2.3 kilometers are left. And next financial year, we are planning to commission the units. I mean, COD of the units.

Okay. So sir, what is the drilling rate right now? I mean, what have you -- what level have you reached monthly run rate?

[ January ], we achieved 100 meters from both the end together.

Okay. Okay. So we have to move toward 200, which you believe we are on track for to achieve that?

Yes, yes, we might get more than 200 also.

The next question is from the line of Aniket Mittal from Motilal Oswal.

My first question is on the CapEx front. Could you provide me a project-wise CapEx detail for FY '21 and FY '22?

Just a minute. Project-wise CapEx for FY 2021 as per project estimate is as under: Parbati-II, INR 1,318 crore; Subansiri Lower, INR 2,135 crore; Kishanganga, left over was INR 281 crore; Dibang, INR 1,367 crore; then solar projects, around INR 80 crore; and RMU of Baira Siul Power System, INR 70 crores; RMU of Loktak INR 12 crores. And total CapEx for FY 2021 has been planned for INR 5,401 crore.

And for '22?

'22, just a second. Total CapEx for FY '21/22 is INR 8,202 crore. It includes Parbati-II, INR 1,058 crore; Subansiri Lower, INR 2,355 crore; then Dibang, INR 635 crore; Teesta-IV, if all goes well, it will be INR 431 crore; then solar power projects, INR 460 crore; and solar projects under CEPC scheme, INR 1,600 crore. This is a broad detail of CapEx for FY '21/22.

Okay. Sure. Sir, just [indiscernible] a lot of that you're implementing. Let's say, if I were to take on 3 to 4 year from you, would it be fair to assume that your CapEx [ number ] would be somewhere around INR 7,000 crores to INR 8,000 crores going for the next, let's say, 3 to 4 years as well?

Yes. After 2, 3 years, our CapEx will be around INR 8,000 crores annually.

Okay. And just to, word only, I think you mentioned earlier also the certain solar projects that you're undertaking. And [indiscernible], I think CapEx used, you'd be probably doing at an EPC move. Could you tell me which are these projects? What's the total quantum in terms of megawatt?

You're asking about solar or hydro?

Sir, solar. So in your FY '22 as well as your FY '21 CapEx predictions, you've made a certain amount of CapEx for solar projects, right? So just wanted to understand the quantum of these projects in terms of size in megawatts?

During FY '21/22, we are planning to go for around 300 megawatt in different states.

And just solar projects that you're are implementing under CPSU, has the approval for that come?

For CPSU scheme, we have already signed PPA and PSA and developers are developing projects.

And sir, what's the quantum on it? What's the quantum under CPSU that you're developing?

Quantum in terms of megawatt?

Yes. Since December.

That is 2,000 megawatt.

2,000 megawatt?

Yes.

Okay. And sir, just one question on TLDP. If I recall this current year, I think in FY '20 as well, we had -- I think we revised our booking for TLDP-IV based on the fact that we were expecting the final tariff order to come.

Yes. Yes.

Yes. So just -- so what's happened anything other than FY '20? Now we've revised it further based on the final tariff order, right?

Yes. During next year? During next year, it will impact of INR 125 crores around on revenue.

Okay. Could you tell me in terms of capital cost, maybe, what were we, let's say, booking at?

[indiscernible] capital cost has been approved INR 1,698 crore. That has been considered by CFC for fixation of tariff.

And what were we booking less that?

There is a gap also of around INR 90 crores. Like, if you are asking about the actual capital costs, that is higher by INR 90 crores around.

So roughly INR 90 crores of capital cost?

INR 90 crores. Yes. There's a gap.

The next question is from the line of Anuj Upadhyay from HDFC Securities.

Yes. Sir, one clarification. On the debtor side, initially, you mentioned that the total outstanding is around INR 4,170 crores. But later on, the follow-up question, one of the participants, you mentioned it around INR 2,778 crores. Whereas...

You're right. Actually that figure was as on 31st December, 2020. That is cut-off date for Q3 results. And annual fee as on date, current figure.

Okay, INR 2,778 crores as on date?