NHPC Limited (NHPC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the NHPC Limited Q4 FY '23 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rupesh Sankhe from Elara Securities Private Limited. Thank you, and over to you, sir.

Yes. So good afternoon, everyone. On behalf of Elara Securities, we welcome you all for the Q4 FY '23 Conference Call of NHPC. So I take this opportunity to welcome the management of NHPC represented by Mr. R. P. Goyal, Director of Finance and his team. We will begin the call with a brief overview by the management followed by Q&A session. I will now hand over the call to Mr. R. P. Goyal, sir, for his opening remarks. Over to you, sir.

Good afternoon, friends. The NHPC Board has adopted annual financial results for the period ended 31st March '23 in its meeting held on 29th May '23, and the same has already been communicated to exchanges. By now, I hope you all would have gone through the results, quarterly and yearly set of numbers. Detailed analysis of financial results of the company are as below. During FY 2023, our power system sales achieved generation of 24,619 million units as against 24,494 million units generated in corresponding period of the previous year, which is marginally higher by 125 million units. During fourth quarter FY '23, our power systems have achieved generation of [ 2,891 ] million units vis-à-vis 3,372 million units generated in corresponding period of the previous financial year, which is about 14% lower, that is [ 487 ] million units in absolute terms. Our PAF for FY '23 stands at 88.75% against the corresponding previous period PAF of 88.19%. Our PAF for fourth quarter FY '23 stands at 67.96% as against the corresponding previous period PAF of 76.76%. For FY '23, company has earned revenue from operations of INR 9,316 crore as against INR 8,309 crore in the corresponding previous period, which is 12% higher. In absolute terms, it is higher by INR 1,007 crore. The increase in revenue is mainly due to better generation and sales pertaining to previous years, mainly on account of billing of third pay revision arrears for employees by INR 244 crore and increase in unbilled revenue on account of effective tax rate by INR 344 crore and security and other expenses by INR [ 318 ] crore, which have been recognized in revenue. During fourth quarter FY '23, company has earned revenue from operation of INR 1,717 crore as against INR 1,506 crore in the corresponding previous period, which is about 14% higher. In absolute terms, it is higher by INR 211 crore. The increase in revenue is mainly due to increase in unbilled revenue on account of the effective tax rate by INR 344 crore. Other income for FY '23 is of the order of INR 835 crore as against INR 1,026 crore in corresponding previous period, which is about 19% lower. In absolute terms, it is lower by INR 191 crore. This is mainly due to a decrease in net payment [indiscernible] by INR 176 crore. Other income for fourth quarter FY '23 is of the order of INR 254 crore as against INR 502 crore during the corresponding previous period which is about 49% lower. This is mainly due to decrease in dividend income by INR 97 crore and decrease in income from insurance claim by INR 144 crore. During FY '23, the generation expenses have gone up from INR 841 crore to INR 936 crore, that is increased by INR 95 crore, which is mainly due to applicability of water in state of Uttarakhand, Sikkim and Himachal Pradesh. During fourth quarter FY '23, the generation expenses have gone up from INR 134 crore to INR 152 crore, meaning thereby increase of INR 18 crore, which is again mainly due to applicability of water in the state of Uttarakhand, Sikkim and Himachal Pradesh. During FY '23, the employee cost has come down from INR 1,441 crore to INR 1,301 crore, resulting in saving of INR 139 crore. The decrease is mainly due to [ supernational ] [ 616 ] employees during the year. During fourth quarter FY '23, the employee cost has come down from INR 498 crore to INR 417 crore, that is down by INR 81 crore, which is mainly due to again [ supernational ] employees during the corresponding period. During FY '23, there has been decrease in the finance cost from INR 532 crore to INR 476 crore, resulting in saving of INR 56 crore, which is mainly due to change in rate of interest by INR 22 crore and decrease in -- due to repayment of loans by INR 32 crore. During fourth quarter FY '23, there has been decrease in the finance cost from INR 133 crore to INR 112 crore, which is mainly due to change in rate of interest by INR 10 crore and decrease due to repayment of loans by INR 8 crore. During FY '23, the depreciation and amortization expenses have gone up from INR 1,126 crore to INR 1,145 crore, net -- increase of INR 19 crore, which is mainly due to additional capitalization in power station. During fourth quarter FY '23, the depreciation and amortization expenses have gone up from INR 280 crore to INR 286 crore, which is mainly again due to additional capitalization in certain power systems. During FY '23, other expenses have gone up from INR 1,348 crore to INR 1,706 crore. This is mainly due to provision of INR 106 crore against impairment of investment in one of our subsidiary company [indiscernible] downstream Hydroelectric Power Corporation Limited. Also, there is an increase in fair value loss on account on ancillary assets by INR 124 crore, increase in R&M expenses by INR 32 crore and increase in CSR expenses, security expenses, et cetera. During fourth quarter FY '23, other expenses have gone up from INR 449 crore to INR 486 crore. This is mainly due to an increase in R&M expenses and security expenses. Total tax expense for the current year is INR 605 crore, as against negative tax expense of INR 761 crore during the previous year. This is a cumulative impact of current and deferred tax. Current tax expenses for FY '22-'23 is INR 761 crore as against INR 723 crore for FY '21-'22, which is due to increase in taxable income. As far as deferred tax expense is concerned, during the previous year, we have recognized MAT Credit of INR 1,479 crore, while during the current year, we have recognized MAT Credit of INR 417 crore, out of which we have utilized MAT Credit of INR 327 crore. During FY '23, we have earned a PAT of INR 3,834 crore, as against INR 3,538 crore of corresponding previous period, which is up by INR 296 crore and it is -- in percentage term it is 80% increase approx. And the reasons for decrease and increase in the items we have already discussed. During first quarter FY '23, we have earned PAT of INR 569 crore as against INR 560 crore for corresponding previous period, which is up by INR 9 crore. And the reasons for decrease and increase as we already discussed. During FY '23, the incentive position is [indiscernible]. And we have earned secondary energy of INR 123 crore during current year as against INR 138 crore during corresponding previous financial year. So there is a decrease of INR 15 crore in secondary energy. PAF base incentive, we have earned INR 405 crore during current year that is FY '22-'23 as against INR 424 crore during corresponding previous year. So it is again lower by INR 19 crore. Deviation charges are INR 147 crore during current year as against INR 190 crore during previous year. So it is also lower by INR 43 crore. During fourth quarter FY '23, the incentive position is as below. Secondary energy, we've earned INR 110 crore in current fourth quarter as against INR 125 crore in corresponding fourth quarter of previous year. PAF base incentive, it is a negative by INR 40 crore in the current quarter and as against INR 22 crore in corresponding previous fourth quarter. Deviation charges also negative by INR 2 crore and as against INR 64 crore we earned in corresponding previous year's fourth quarter. So the total [indiscernible] incentive is INR 68 crore against INR 207 crore we earned during corresponding fourth quarter of previous year. CapEx of INR 6,961 crore has been incurred during FY '23 against the target CapEx of INR 8,061 crore on consolidated basis. The Board of Directors has recommended the payment of final dividend at the rate of 4.5%. That is INR 0.45 per equity shares in addition to interim dividend at 14% resulting into total dividend at the rate of 18.5%. And in absolute term, it is INR 1.85 per equity shares on the face value paid up equity shares of [indiscernible] for the financial year '22-'23. On realization, NHPC has received INR 7,435 crore from beneficiaries on account of sale of energy during FY '23 as compared to INR 8,691 crore in the corresponding period of previous year. Trade receivables as on 31st March '23 stands at INR 5,887 crore as against INR 4,621 crore as on 31st March '22. This includes INR 2,757 crore as unbilled revenue -- unbilled debtors as on 31st March '23, as against INR 1,961 crore as on 31st March '22. The net receivables out of total reported trade receivables as on 31st March is under. Reported trade receivables in the account is INR 5,887 crore. It consists unbilled debtors to the tune of INR 2,757 crore. So billed trade receivables is INR 3,130 crore. Out of that, we have already received INR 948 crores on account of bill discounting, but due to accounting compulsion, we have shown it as outstanding as on 31st March. But in fact, we have already received the sales to the tune of INR 948 crore through bill discounting. Then debtors dues converted into installments under electricity late payment surcharge rules and other orders is to the tune of INR 1,619 crore. So this amount of INR 1,619 crore will be received in installments as per the orders of Government of India. So net amount due is only INR 563 crore, which considers debtors less than 45 days as well as [indiscernible] more than 45 days. Unbilled debtors mainly include effect of [indiscernible] claimed as per Regulation 1924, including security expenses of INR 1,871 crore. Unbilled sales for the month of March to the tune of INR 422 crore. Energy shortfall of INR 354 crore. Net trade receivables as on 28th May '23 stands at INR 787 crore, which includes debtors for more than 45 days to the tune of INR 80 crore only and the rest of the amount is less than 45 days. The major receivables out of billed receivables are as under. I'm giving backup of INR 787 crore in the current position of debtors. Punjab INR 178 crore which consists debtors to the tune of INR 10 crore only, which is more than 45 days. J&K, INR 171 crores, more than 45 days. Debtors are only INR 63 crore. Uttar Pradesh, total due is INR 120 crore and whole amount is less than 45 days. Haryana, INR 73 crore, whole amount is less than 45 days. And West Bengal is INR 37 crore, it is again within the limit of 45 days. And others are INR 280 crore. On physical front, as we have been sharing that the active construction work at Subansiri Lower project site is going on in full swing. Some of the major milestones have been completed towards commissioning of the project. Along with -- I along with other directors visited the project on 26th April '23 and reviewed the ongoing construction activity. I feel pleasure to say that in a significant step towards completion of hydromechanical work of the project, [indiscernible] which are country's largest [indiscernible] in terms of hydraulic capacity size and [indiscernible] have been successfully operated. I am very hopeful that we can commission 2 units of the project in second quarter of current financial year and balance 6 units are expected to be commissioned in second quarter of the next year, that is '24. The estimated cost of the project is INR 21,248 crore, out of which we have already incurred INR 17,985 crore in March '23. The estimated levelized tariff based on the anticipated cost is INR 5.50 per unit. In respect of Parbati project, the project has received a major milestone towards full commissioning of [indiscernible] restoration of Unit 3 and Unit 4 on 3rd March '23 and on 21st April '23, respectively. The HRT excavation progress hampered on TBM phase due to encountering of [indiscernible] formation, which required complete backfilling. Further breakdown of some components of TBM resulted in complete stoppage of excavation from 11th April '23. [indiscernible] activities are under progress. We are trying our best to complete the remaining tunneling works to complete the project by March '24. The anticipated cost of the project is INR 11,135 crore, out of which we have already spent INR 10,515 crore till March '23. The estimated levelized tariff based on the anticipated cost is INR 6.14 per unit. In respect of Dibang Multipurpose Project, of the capacity of 2,880 megawatts, investment approved for implementation of the project has been accorded by the Government of India on 27th February '23. Further, [indiscernible] package related to infrastructure work has also been awarded. The estimated cost of this project is INR 31,876 crore, which includes grant of INR 6,715 crore for flood moderation and enabling the infrastructure work to be received from Government of India. Further estimated levelized tariff of the project is INR 4.46 per unit and assured completion of this project is February '32. As I said earlier that NHPC had acquired Lanco Teesta Hydropower Limited, Teesta-VI project of the capacity of 500-megawatt through NCLT route and estimated cost of this project is INR 5,748 crore, out of which we have already incurred expenditure of INR 2,305 crore till March '23. The estimated levelized tariff for this project is INR 4.07 per unit and expected commissioning of the project is August '26. Further, we are in the process of merger of LTHPL with NHPC. In this regard, NHPC has ordered to convene the meeting of creditors and shareholders of NHPC and we are in the process of convening the same. As we have already shared that NHPC had accorded Jalpower Corporation Limited consisting of Rangit project of 120-megawatt in Sikkim through NCLT route. The estimated cost of the project is INR 938 crore, out of which we have already incurred expenditure of INR 527 crore till March '23. And estimated levelized tariff is INR 4.37 per unit. Further, we are in the process of merger of JPCL also with NHPC. The project is expected to be completed by August '24. The Ratle HE project in UT of J&K of 850-megawatt project is being developed by Ratle Hydroelectric Power Corporation Limited, a joint venture of NHPC and JKSPDC in which NHPC is having 51% shares. The contract for [indiscernible] project has been awarded to myself, Megha Engineering & Infrastructures Limited on 18th January '22. The estimated cost of the project is INR 5,282 crore. The work has already been started at site, and we have incurred expenditure of INR 270 crore till March '23. Estimated levelized tariff of the project is INR 3.92. The project is expected to be completed by May '26. Presently, NHPC's sole subsidiary, CVPPL, is [indiscernible] UT of J&K. Construction of Pakal Dul HE project, 1,000-megawatt is progressing well. The estimated cost of the project is INR 8,112 crore, out of which we have incurred expenditure of INR 2,922 crore till March '23. Estimated levelized tariff of INR 4.28 per unit and the project is expected to be completed by September '26. In respect of Kiru HE project, we have incurred expenditure of INR 1,006 crore till March '23 out of estimated cost of INR 4,288 crore. Estimated levelized tariff of the project is INR 4.64 per unit, and estimated completion date of the project is March '26. Further, Honorable Prime Minister of India has laid the foundation stone of the Kwar Hydroelectric Project, 540 megawatt, on 24th April '22. [indiscernible] has already been awarded in May '22 and the work has also been started at site. The estimated cost of the project is INR 4,526 crore out of which we have incurred expenditure to the tune of INR 382 crore till March '23. Estimated levelized tariff of the project is INR 4.40 per unit and the project will be completed by November '26. As we have said that some of the largest hydraulic projects in the Siang and Subansiri Basin have been allotted to NHPC by Ministry of Power in December '21. The project in Subansiri Basin of the size of 4,000 megawatts Subansiri Upper and 1,800 megawatts Subansiri Middle shall be developed by NHPC on stand-alone basis, while 10,000 megawatts Upper Siang and 2,700 megawatts Siang Lower in Siang Basin are to be delivered in JV mode. Apart from above, NHPC is working on 3 new projects in UT of J&K, that are Sawalkot 1,856 megawatts, Uri-I Stage-II 240 megawatts, Dulhasti Stage-II 260-megawatt and Dugar project in Himachal Pradesh of the size of 500 megawatts. In respect of Sawalkot, agreement for handing over -- taking over signed between NHPC and JKSPDCL in December '21 and NHPC took over the project. Minister of Power has accorded investment approval on 12th July '22 for incurring expenditure on the investment activities for an amount of INR 973 crore at November '21 price level. Process for obtaining forest clearance has been initiated.

Sorry to interrupt, sir, your voice is breaking up.

Yes. Some disturbance is there. I think we sorted out. I think fine? Better?

Yes, sir. Much better.

Process for obtaining forest clearance has been initiated. CEA vide letter dated 27th December '22 vetted the cost estimates at completion level for an amount of INR 22,705 crore, including INR 4,593 crore for IDC and INR 1,124 crore for enabling infrastructure. In respect of Uri-I Stage II, DPR has been concurred by CEA on 7th March '23 amounted to INR 2,527 crore at December '22 price levels, including INR 249 crore for IDC and INR 26 crore for enabling infrastructure. EIA/EMP studies for government clearance is in progress. Forest clearance is also in progress. In respect of Dulhasti Stage-II, clearance of 7 out of 9...

I'm extremely sorry, sir, to interrupt, but your audio is breaking up. We are unable to hear you clearly.

Is it better now?

Sir, slightly better.

Yes, we can continue.

Sir, please proceed.

Yes. In the Uri-I Stage-II, DPR has been concurred by CEA on 7th March '23, amounting to INR 2,527 crore at December '22 price level, including INR 249 crore for IDC and INR 26 crore for enabling infrastructure. EIA/EMP studies for environment clearance is in progress. Forest clearance is also in progress. In respect of Dulhasti Stage II, clearance of 7 out of 9 chapters have been received and EIA/EMP studies for environment clearance is in progress. No forest clearance is required and NOC has been obtained from Forest Department. Further, defense clearance has also been approved by Ministry of Defense. DPR of Dugar project has already been concurred by CEA on 26th April '22. Approval for forest clearance is under process. Further draft PIB proposal has been submitted to Ministry of Power on 13th May '23. To expand NHPC footprint in the neighboring countries, an MoU has been inked with the Investment Board of Nepal at Katmandu on 18th August '22 for development of 750 megawatt with Seti and 450-megawatt Seti River 6 hydroelectric project. Now Office of Investment Board Government of Nepal has issued survey license to NHPC for 440-megawatt SR-6 project, Nepal on 16th March '23. Further, the discussion for implementing 480-megawatt Phukot Karnali project in JV mode in Nepal are in final stages. NHPC has received a letter of intent dated 16th May '23 from Gujarat Urja Vikas Nigam Limited for 200-megawatt capacity solar power project at a tariff of INR 2.73 per unit within 600-megawatt Gujarat Solar Park at Khavda, the estimated financial implication for the said solar power project would be INR 1,007 crore. NHPC build 1,000-megawatt capacity solar power project at a viability [indiscernible] of INR 44.9 lakhs per megawatt under CPSU Scheme, Phase II/Phase III in the e-Reverse auction conducted by Indian Renewable Energy Development Authority on 23rd September '21. Further, EPC contracts have been awarded for development of project and transmission lines for power allocation to [indiscernible] substation, along with comprehensive operations and maintenance for 5 years. An MoU has already been signed between NHPC REL and Government of Uttar Pradesh on 31st January '23 for setting up of 100-megawatt floating solar power project in Uttar Pradesh. NHPC is also exploring to develop pump storage scheme in the state of Andhra Pradesh, Odisha, Jharkand, Karnataka, Madhya Pradesh and Maharashtra. We have completed a pre-feasibility report of Indrasagar, Omkareshwar 525-megawatt pump storage scheme. Also PFR would take over 2 pump storage scheme of the capacity of 800-megawatt has been submitted. Further, MoU between DVC and NHPC to explore the possibility of forming a joint-venture company for exploring and setting up hydropower and pump storage, signed on 20th July '22. [indiscernible] 600-megawatt PSP was issued by DVC to NHPC on 16th November '22. PFR of [indiscernible] pump storage project was submitted to DVC on 30th January '23. Observations were held by DVC on the same, which were duly withheld. Some additional observation has also been received, which are under process. This is all from my side. Now the forum is open for question and answers.

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

My first question is, sir, when do you expect the Subansiri to get commissioned? Can we expect unit 1 to get commissioned by -- in a couple of -- in this quarter, I mean, in next quarter?

Yes. We are expecting to commission 2 units of Subansiri in third quarter of this year, FY '23. We have to commission 2 units in third quarter of '23 and [indiscernible] commission second quarter of '24.

Understood, sir. Two in this -- 2 in this fiscal year and the balance 6 in the next fiscal year. Is that right, sir?

Yes, yes, yes.

But we should be able to -- should do it before the monsoon next season, next calendar -- next fiscal year. Is that right, sir?

Full year benefit will be available in FY '24-'25, but part benefit -- financial benefit will be available in current financial year as well as next financial year.

Understood. My second question on the Parbati, sir, I think you mentioned about the -- we are much ahead in terms of construction and commissioning. Can we assume that all the 4 units will be commissioned by the end of fiscal year '24? Is that a fair assumption?

Yes, yes. You are right. Actually, only 115 meters of excavation of HRT is left as on today and lining of 3 kilometer HRT is to be done. Otherwise, all the 4 units are already tested and commissioned and all the 4 units will be commissioned in a single day. So you can expect full commissioning of this project by end of March '24.

Okay. Sir, my third question is, can you expect tender of Sawalkot in FY '24? And are you looking to start work on any of the pump storage hydro projects in FY '24?

Actually, we are still preparing PFR and exploring [indiscernible] pump storage projects. We have already submitted 2 PFR of pump storage projects, but modalities of [indiscernible] pump storage are yet to be explored. So you can expect taking off one of the pump storage in next year -- next financial year.

And so what about Sawalkot, sir, has the -- are you looking to tender it out in FY '24?

Tendering of Sawalkot is expected in the next financial year, that is '24-'25.

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

Yes. Sir, a couple of questions from my side. Firstly, what is our regulated equity as on 31st March? And what are our CapEx target for next 3 years?

Yes. So basically, the regulated equity as of now is INR 13,000 crores. And going forward, after commissioning of Subansiri Lower and Parbati-II, it is likely to be INR 22,000 crore after full commissioning of these 2 projects. Going forward, our CapEx will be in the range of, on an average, INR 8,000 crore to INR 9,000 crores. For example, current year budget estimate is INR 10,857 crore.

Sir, second question is related to, sir, recently there was a media article saying that we might merge 2, 3 public sector companies which are into hydro space. What is your thought on that, sir?

Actually, we are at the initial stage of exploration of this possibility and nothing concrete has been finalized. We will intimate to the market in the due course of time.

The next question is from the line of Abhineet Anand from Emkay Global Financial Services.

Yes. Sir, can you just give us the incentive breakout for '23 and 4Q?

Yes. So basically, you want incentive breakup of Q4 versus Q4 of previous year?

Yes, yes.

Yes. So Q4 FY '23, we had secondary energy of INR 110 crore. Incentive -- negative incentive we had INR 40 crore and the deviation charges were also negative to the tune of INR 2 crore. So total incentive was INR 68 crore as against INR 206 crore in the previous quarter.

So this last year, 4Q '22, we had INR [ 216 ] and this year 4Q, we are having a negative INR 68 crore?

Yes. So last year, secondary energy, we had INR 125 crore, incentive INR 22 crore and deviation charges of INR 60 crore. So total incentive during last fiscal Q4, it was INR 207 crore. And this quarter, FY '23, we have INR 68 crore total incentive.

Okay. And can you also help me with the yearly numbers?

Yearly numbers? Of course. So the total secondary energy during current fiscal is -- I mean FY '23, it is INR 123 crore, incentive INR 405 crore, deviation charges INR 146 crore, total INR 675 crore as against secondary energy of previous year, INR 138 crore, incentive INR 424 crore, deviation charges of INR 190 crore. So total incentive during current fiscal INR 675 crore as against previous year's incentive of INR 752 crore.

Sir, just a small question. I mean, 4Q of this year and last year, we have a similar PAT level, incentives are lower, other income is lower. And so can you just pinpoint where the number has been additional?

Yes. So basically, if you look at the [indiscernible] our power station as a whole, it comes around 77%, right? During this Q, I mean, Q4 FY '23, the actual PAF was 67%. So the PAF was substantially down, particularly in 4 projects like Rangit-IV, TLDP-III, Dulhasti and Kishanganga that is the reason our PAF was lower in Q4 FY '23 and that is the major reason of negative incentive.

Yes. So what I'm trying to understand is your incentive income is almost down INR 150 crore for the quarter on a Y-o-Y basis from INR 207 crore to INR 68 crore. Your other income is also down significantly. So I mean the PAT levels are flat. So one of the things I think employee cost which is lower, but any other thing, any one-off or something in the quarter which has led to a flattish PAT despite a lower incentive and lower other income?

Yes. So major reason of this flattish PAT is basically, if you look at the tax rate, the last year tax rate was flat rate. This year, our tax rate is normal rate. So last year, grossing up was at the rate of 18%, whereas this quarter, we are grossing up at the rate to 28%. So this has resulted additional revenue of INR 350 crore and that is the main reason of our profitability, which is flattish or you can say higher.

Just to -- just for my understanding, this PAT gross up at -- while revenues might be higher because of the gross up. At the PAT level, this wouldn't impact, right? Because that's a part of a...

We have dosed up our tariff at normal rate, that is 28%. But by utilizing the available MAT Credit, we have paid lower tax. So there is a mismatch between revenue and tax actually paid. And this has resulted in...

So basically, if I understand correctly, your gross up has happened at 28%, but your levy has happened at 22%?