NHPC Limited (NHPC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '24 Earnings Conference Call of NHPC Limited, 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, Mr. Sankhe.

Yes. Good morning, everyone. On behalf of Elara Securities, we welcome you all for the Q1 FY '24 conference call of NHPC. So I take this opportunity to welcome the management of NHPC represented by Mr. R.K. Vishnoi sir, Chairman and Managing Director; and Mr. R.P. Goyal sir, Director of Finance. So we'll begin the call with a brief overview by the management and followed by Q&A session. I will now hand over the call to Mr. R.K. Vishnoi sir for his opening remarks. Over to you, sir.

Thank you, Rupesh, and good morning, everybody, who is connected to this conference. It is really my pleasure to interact with you on this quarterly financial results, Q1 of FY '24, of NHPC. In fact, before we really discuss the detail, let me broadly tell you that this particular quarter of FY '24, we have sustained the performance which we have achieved in the past few quarters. And that's the broader impression, which can be drawn. The details are really available. I think all the participants must have gone through the numbers. But broadly, let me tell you the major highlights that as far as generation is concerned, we have almost generated 5% lower than the last quarter -- corresponding quarter in the last FY '23. And that was mainly because of low water availability in the rivers, which is, of course, beyond the control of anybody. It's a natural resource. And the plant availability factor, which is the real -- the measure of the performance of the plant, there we have performed very well, and we have remained above 90%, in fact 94% this quarter also. Now that shows that machines' availability was there. Had there been enough water in the river, we would have generated almost the similar amount of energy what we generated last year. But nevertheless, I mean this next quarter, particularly July onwards, we have been generating quite a good amount of energy. So Q2 would be much better than Q2 -- corresponding Q2 of last year. As regards to the revenue, let me tell you this revenue was approximately 3% higher than the corresponding quarter last year. And that was mainly because though the generation was less because we had certain arrears because of the tariff finalization of '14 to -- 2014-2019 period, and we received certain amount on account of that. So the revenue was 3% higher than the corresponding quarter last year. But we have maintained the PAT. PAT is almost the same. The level of the PAT is same this quarter also. So broadly, as I told you in the beginning that we have almost sustained the same performance as the last quarter -- in the corresponding quarter in the last financial year. So this was on the -- broadly on the numbers. Then there were other achievements on the physical strength also in this quarter, where we are trying to focus mainly on 2 things. One is that we have 2 major assets, which we want to capitalize gradually and improve our balance sheet. And that is -- there are 2 projects, 1 in Subansiri and the other one is Parbati-II. And then second is this financial year, we are focusing more on the capital expenditure. So the last year, capital expenditure was of the order of something like INR 7,700 crores. This year, we have kept the target of something 25% to 30% more than that. And this particular quarter, what we are discussing today, we have been able to achieve the target and subsequently also we are doing that. So this is a big thing where we are focusing. So this financial year, we'll be achieving more of CapEx, that is by ensuring the constant uninterrupted execution of the activities at all the projects which are under construction. So this is just a broader impression of what we achieved in this quarter. I think then Director of Finance I have with me in case he has to say anything, then otherwise, we can hand it over to the participants for some questions or the queries.

Good morning, friends. I'm going to share with you quarterly set of numbers with the detail analysis. The NHPC Board has adopted quarterly financial results for the period ended 30 June '23 in its meeting held on the 11th August '23. 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 first quarter FY '24, our power system sales achieved generation of 7,787 million units as against 8,165 million units generated in corresponding period of the previous year, which is about 5% lower. This is mainly due to lower water availability in Kishanganga, Loktak and Dhauliganga power stations. Our PAF for first quarter FY '24 stands at 94.13% against the corresponding previous period of -- PF of 98.57%, which is about 4% lower. This is mainly due to less PAF in Kishanganga, Loktak and TLD-IV power stations. For Q1 FY '24, company has earned revenue from operations of INR 2,571 crore as against INR 2,491 crore in the corresponding previous period, which is about 3% higher. The increase in revenue is mainly due to increase in the interest from beneficiaries on account of finalization of tariff for FY -- for tariff period 2014-'19 by INR 70 crore. Other income for Q1 FY '24 is of the order of INR 279 crore as against INR 216 crore during the corresponding previous period, which is about 29% higher. This is mainly due to increase in dividend income from NHPC by INR 28 crore and increase in insurance claims on account of [indiscernible] INR 34 crore for Sewa-II power station. During Q1 FY '24, the generation expenses have gone up from INR 270 crore to INR 518 crore, net increase of INR 248 crore, which is mainly due to applicability of water cess in state of Uttarakhand, Sikkim and Himachal Pradesh. During Q1 FY '24, the employee cost had come down from INR 307 crore to INR 297 crore. During Q1 FY '24, there has been increase -- decrease in finance costs from INR 137 crore to INR 115 crore, net saving of INR 22 crore, which is mainly due to change in the average rate of interest by INR 5 crore and decreased due to repayment of loans by INR 17 crore. During Q1 FY '24, the depreciation and amortization expenses have come down from INR 287 crore to INR 276 crore, which is mainly due to completion of 12 years of life of Sewa-II power station during this year. During Q1, FY '24 other expenses have come down from INR 507 crore to INR 370 crore. This is mainly due to impairment of investment of INR 106 crore in response of Loktak Downstream Hydroelectric Power Corporation Limited, a subsidiary company, during corresponding previous period. Further, CSR expenses have also decreased by INR 30 crore in current quarter. During Q1 FY '24, we have earned PAT of INR 1,053 crore as against INR 1,050 crore of corresponding previous period, which is marginally higher. And the results for decrease/increase in the line items we have just discussed. During Q1 FY '24, the incentive position is under -- PAF-based incentive is 0 in this quarter as against INR 171 crore in corresponding period of previous year. Deviation charges are INR 12 crore as against INR 72 crore in corresponding previous period. The PAF incentive for the quarter is nil due to change in methodology for recognizing incentive income. The PAF incentives will be recognized once the capacity charges of a particular power station is fully recovered. And thereafter, we will recognize the PAF incentive. So the PAF -- recognition of PAF will be [indiscernible]. Our CapEx during Q1 FY '24 is INR 1,906 crore as against INR 1,161 crore in the corresponding period of previous year on a consolidation basis. The Annual General Meeting of the company for '22-'23 is scheduled to be held on 31st August '23. Other major highlights of the company. On relicense front, NHPC has received INR 1,647 crores from the beneficiary states against sale of energy during Q1 FY '24 as against INR 1,357 crore in the corresponding period of previous year. Trade receivables as on 30th June '23 stands INR 6,736 crore as against INR 5,887 crore as on 31st March '23. This includes INR 3,059 crore is unbilled debtors as on 30th June '23, as against INR 2,757 crore as on 31st March '23. The net receivable out of total reported trade receivables as of 30th June are as below. Reported trade receivables are INR 6,736 crore. This includes unbilled debtors INR 3,059 crore. So billed receivables are INR 3,677 crore. Out of that, debtors for bill discounting for which we have already received the amount from beneficiary states, but due to accounting compulsion, we are -- we could not reduce the debtors. The amount is INR 847 crore on this front. Then debtors' dues converted to installments under, let's say, late payment surcharge and other orders, this is INR 1,483 crore. So net amount of debtors due is INR 1,347 crore. And out of that, more than 45 days is only INR 363 crore. So our debtors position has improved a lot. Unbilled debtors mainly include impact of AFC billed versus AFC claims as per Regulation 2019-'24, including security expenses of INR 1,584 crore, unbilled debt sales for the month of June '23 of INR 851 crore and energy shortfall of INR 347 crore. Net trade receivables as on 9th August '23, that is current position of the debtors, stands at INR 1,728 crore only, which includes more than 45 days dues of INR 230 crore. The major receivables out of billed receivables are as under: J&K, INR 443 crore; UP, 349 crore: Punjab, INR 233 crore; Haryana, INR 139 crore; West Bengal, INR 110 crore; and others, INR 454 crore. So total billed debtors as on 9th August are INR 1,728 crore. Out of that, more than 45 days are for J&K, INR 156 crore; UP, only INR 10 crore; and others, INR 60 crore. So more than 45 days debtors are only INR 230 crore. This is all from my side. Now the forum is open for question answers. Thank you.

[Operator Instructions] We'll take the first question from the line of Mohit Kumar from ICICI Securities.

Sir, first question is on what is the status of Subansiri and Parbati-II? Are the -- are you on the track? Because I saw in the CEA that Parbati-II is slipping to FY '25. Is that correct?

Yes, Mohit. In fact, let me tell you first about Subansiri. Subansiri, in fact, physical progress is first that we are all set to now commission the project. And we'll start -- restart the work immediately after the monsoon in the month of November. And we'll try to complete everything including the commissioning of the unit in the month of January and February. So we propose to commission 2 units in FY '24. There seems to be no uncertainty as such in Subansiri. So this project is going to come in this FY '24. As regards to Parbati-II, yes, in fact, we had planned to commission at least a couple of units in this FY '24. But because of the recent floods, which you know that in Himachal Pradesh, there were provincial rains and because of which it was almost a disaster kind of a situation. This project is the one which got impacted the most and which has, in fact, disturbed all the approaches, access routes, everything. So there is certain kind of impact on the schedule. And we are trying to minimize that, but yes, at the moment, there is very little possibility of commissioning the first unit in this financial year. But we'll still try to reassess the situation next month as soon as the monsoon is over and we'll try to do something. But if it goes to FY '24 -- '25, it will be early FY '25 in the month of April only.

Understood, sir. My second question is on the change in accounting, especially for the PAF-based incentives. Is there any reason for us to change the recognition and make it more back-ended now?

No, there is no change in the regulations. It has been changed at our own only. Actually, what's happening, in first and second quarter, we were recognizing PAF incentive [indiscernible]. But in last quarter, our third quarter of the financial year, there were situations that we had to reverse the PAF incentive due to nonachievement of the NAPAF. That's why we have recognized -- changed the system. We will recognize the PAF incentive in the latter quarters only towards [indiscernible].

Sir, my last question is on, do you see any impact of the IEGC code, which is expected to be -- to happen on 1st October 2023? Would it impact our earnings in any way on account of PAF or DSM?

DSM has impact on our revenue due to change of the system.

Sir, question is on the IEGC code, sir, which is going to come -- applicable from 1st of October 2023.

[ IDC ] code, I don't think it's going to really impact the...

IEGC.

IEGC is really going to impact much on this. But still, I think we have to assess the situation. I think at the moment, we are not in a position to comment anything on this. So we'll make a statement maybe after ascertaining what exactly is going to happen.

[Operator Instructions] We'll take the next question from the line of Prashant Kshirsagar from Unived Corporate Research.

Am I audible, sir?

Yes, sir.

Just a query -- question on the Subansiri Middle and Subansiri Upper Hydro project, since you have been allotted, just wanted to reconcile the capacity of those projects. In your press release, you have stated that Subansiri Upper is 2,000 megawatts capacity. And Subansiri Middle is 1,800 megawatts. While in the annual report of yours, on Page 81, the capacity mentioned is Subansiri Middle is 1,720 megawatts and Subansiri Upper is 1,500 megawatts. Can you help us with the reconciliation, sir? How is the figure -- how are the figures?

Actually, see, these 2 projects have been recently taken over, and we are in the process of getting the DPRs also of these 2 projects. So the capacities which were earlier marked for these 2 projects have been revised now. And we foresee that we can generate -- we can install larger capacity at these 2 plants, though it will be clear once we update the DPRs at both the projects. So at the moment, what we see is that 2,000 megawatt is the Upper Subansiri capacity potential and 1,800 megawatt is the Middle Subansiri capacity potential. So with these 2 figures, we are going ahead at the moment.

Yes. But in the annual report when you had mentioned 1,500 megawatt for Subansiri Upper, so what was the basis of the calculation? Or is it just that you didn't have the data with you? Or how does it...?

I think we need to check in what respect that has been mentioned, but this is the fact what I just mentioned to you.

Okay. And, sir, second question is about Subansiri both middle and land acquisition has been done? Or is it -- because you have taken it over from the private players, so have they done the land acquisition or that just incurred the initial cost?

That is an activity at a later stage. At the moment, they have done some initial activities where some investigations have been done and some kind of pre-DPR stage activities have been done. So at that stage itself, we have taken over these 2 projects. So all other things we have to complete ourselves.

We'll take the next question from the line of Rohit Natarajan from Antique Stockbroking.

Sir, my question has more to do with the regulated equity. We guided in the last quarter that the regulated equity will be INR 162 billion or INR 16,239 crore by the end of FY '24. Now that there are some slippages expected from Parbati, how does that number look like, both for FY '24 and FY '25?

For the last quarter of FY '24, there may be some addition into regulated equity on account of Subansiri Lower. Otherwise, it will remain at the current level.

Okay. You mean to say it will be broadly remaining at INR 13,000 crore or as such? Okay.

For the last 1 or 2 months, there may be some addition.

But you are reasonably sure that this number will be, by the end of FY '25, going to INR 220 -- INR 22,600 crore, that number?

That is for sure.

Okay. My second question has to do with the IPO or the stake sale of clean energy arm, if you could just elaborate on that part, sir?

There is no plan at present as such. In case we add some capacity in the solar or wind and that is transferred to our 100% subsidiary company, and if it requires the sources, then only we will go for IPO of our subsidiary company. Otherwise, there is no [indiscernible].

And my final question is on the pump hydro storage project. If you could just elaborate how much is the MOU that you have tied up till date? And which are the projects that are expected to go in construction at least in the near term? What would be the time lines for it?

The pump PTA investment?

You are asking about [indiscernible]?

Pumped hydro storage projects.

Pumped hydro storage, in fact, is the new business domain of NHPC where we are trying to enter in very, very aggressively. And we have recently signed one MOU for the implementation of 4 projects, about 7,000 megawatts in the state of Maharashtra. Also, we have entered into an MOU with state of Gujarat also for development of PSPs. And then Government of Odisha and Government of Andhra Pradesh. So there are 4 states where we have already moved ahead. And this is going to be 1 big business opportunity for NHPC in the near future, because we see pumped storage plants as the most emerging opportunity in the power sector. And we try to jump on it at an early stage. So this is how we are doing now. Our all teams are there on the ground. They have started working on this. So pumped storage, yes, is going to be the main stay for NHPC now in the near future.

I understood this part. But sir, if you could give us some target as in the projects that you are looking for in the near term, as in 1 or 2 projects that will be commissioned by FY '27 or '28? I mean what are the time line that you would want to see in these projects?

See, any pumped storage plant, once you start the construction activities on the ground, is going to take not less than 4 to 5 years. So that is after the start of construction activity. But before that, there are certain investigation matters, there are certain clearances, there are certain compliances. So all that we have started doing. And now that period is something like 1 to 1.5 years. So what we see now is the first pumped storage commissioning maybe by the year 2029 or FY '29. That is the first project which we can commission in Maharashtra. That is the vision at the moment, but not before that.

Okay. And what will be the costing? Like what could be the costing per megawatt? Is it fairly good to say that number will be close to INR 9 crore per megawatt? Or across multiple figures that are floating around, what is your assumption at this point in time?

Yes. In fact, if you see -- see, there are different kinds of pumped storage plant schemes. There is one which is on the main river stream where you -- if you really make a project, it's going to cost you much more than what you are making off the stream. So now we are focusing off the steam projects also, which are costing us less. If you ask me per megawatt cost, if it is on the river stream, it is around INR 8 crores to INR 9 crores per megawatt. But if it is off the screen, then it is INR 6 crores to INR 6.5 crores per megawatt. Now depending upon the type of scheme, then depending upon the topography, the particular outcome of the investigations there, of course, this figure may vary 5% to 10% here and there. But this is broadly the number.

We'll take the next question from the line of Aniket Mittal from SBI Mutual Fund.

A few questions. Firstly, in your opening remarks, you mentioned that you're planning for a 20% to 25% higher CapEx for FY '24. If you could, one, provide what that amount is for FY '24 and break that up across different plants?

I think the total is INR 10,700 crores -- INR 10,857 crores. The Director of Finance will give the details.

Total CapEx, as we have planned is INR 10,857 crores, including our subsidiary and joint ventures. And if you are interested in plant-wise numbers, I can share the same. The Parbati-II, we have planned for 9 -- INR 595 crores; Subansiri, we have planned INR 787 crore; Dibang INR 412 crore; then [indiscernible] INR 75 crore; Dugar, INR 350 crore; then Sawalkot INR 143 crore; Subansiri Upper, INR 121 crore; Subansiri Middle, INR 217 crore; then solar as a whole, INR 2,517 crore; then our Pakal Dul, subsidiary company, INR 1,215 crore; Kiru, INR 857 crore; Sewa, INR 220 crore; then Lanco Teesta, INR 1,151 crore; Rangit IV, INR 455 crores; [indiscernible] INR 454 crore.

And the numbers that you've given for the subsidiaries and JVs, these are your share of the CapEx or is it the entire CapEx?

This is entire CapEx.

The next question is, in your opening remarks, you also mentioned that there are certain arrears that you've received for this quarter. Just wanted to understand what has been the total amount, for what purpose has it come, and is there any portion in that, that is sustainable in nature?

That is a small number, only INR 80 crore, which is on account of arrears, including interest.

So this is like a onetime item, that's correct?

This is all time.

Okay just on Parbati, actually, I wanted to understand what is the type of work that is remaining on the tunnel? I mean has the tunnel been completed? Have we started with the lining work? If you could throw some light there?

Yes. In fact, see, the main issue was -- there in the Parbati was the excavation of the tunnel, which is becoming too challenging. And we are doing excavation by 2 different construction technologies. One was through tunnel boring machine. The other was through drilling and blasting method. Now while we were about to complete this excavation, and this all disaster took place last month, we are left with hardly anything now. I think less than 100 meter?

It's probably 65.

Sixty five meter is the only portion which is left for excavation now. And we have made preparations to start lining immediately. And we have also planned to do this lining in an expeditious manner by deploying the most efficient construction technology. So that is what we are trying to do here, but this has been a setback. I mean with the floods in July -- in March. Otherwise, Parbati-II, everything is online, machines are [indiscernible]. The tunnel is also excavated fully almost except the 65 meters. So we don't see any other uncertainty except that we get some time now to complete this excavation and start the lining.

Okay. What is the amount of lining of the tunnel?

It's 2,900 meters, so approximately 3 kilometers, you can say.

Just one clarification. So you mentioned that there could be some amount of regulated equity addition to Subansiri as the 2 units commission. Just to understand how the tariff for you determined? I mean would you take the entire capital cost and divide that by 4? How does that process work?

In fact, tariffs will be fixed by dividing by 4. In case we've commissioned 2 units, total capital expenses will be divided by 4 and tariff will be fixed accordingly. So in the initial period, tariff will be high. And in books, expenditure will be more than what we would be able to pick out in tariff. But that will be for some period only.

So you will essentially take the estimated project costs for Subansiri and then divide it by 4, if you're to, let's say, commission 2 units, you can count that as regulated equity.

Yes, yes. For tariff purpose, actual expenditure will be divided by 4, and the tariff will be fixed accordingly.

We take the next question from the line of Riya Mehta from Aequitas Investments.

My first question is in regards to Subansiri. By when do we expect it to get commissioned and what kind of cost overruns are we seeing on this?

Sorry, I couldn't -- your voice was not clear. Can you say it again, please?

For Subansiri, when do we expect it to get commissioned? And what kind of cost overruns are we seeing for Parbati-II as well as Subansiri?

Yes. As I said in the beginning, Subansiri Lower now, we are all set to commission the project. It's all because of this interim monsoon season that we had to put everything on hold to commission the project. Now we will restart the activities in the month of October, say, mid of October. And in another 3 months' time, we'll try to commission everything, at least the first unit and the second unit subsequently. So as I said, as far as the Lower Subansiri is concerned, there is no uncertainty left now. These 2 units will come in this financial year. Parbati-II, I just mentioned, we had a plan to commission 2 units in this financial year, but there has been a setback because of some floods in Himachal Pradesh. So I think these 2 units will go in FY -- early FY '25.

And what kind of cost overruns are we seeing because of this delay?

Subansiri, as we are doing it on schedule, hardly any cost overrun except for that 3, 4 months IDC would be there. But regarding Parbati-II, yes, there could be some additional costs, which will be incurring on making damages good, which have happened because of the floods, and some other expenditure, like expeditiously completing the lining and then deploying some construction technology. These are normally nonconventional. So because of that, some cost increase could be there, but it's not really substantial, which is going to cost much on the -- or impact much on the tariff.

Okay. And in terms of pumped hydro storage project, what kind of -- what is the business model? And what kind of margins do we expect from these MOUs? And when -- how long and when do we see that execution starting from?

Yes. See, pumped storage plant, at the moment, is an essential component of the grid of the country. Now this particular asset can be used in many ways. But as far as our margin is concerned, of course, it will be a regulated margin. And -- but how we are going to use it, what model we'll be implementing for this? There are several options. Like we can even combine this pumped storage plant with renewable energy assets where we can have the intermittent power from the renewable energy day power, which we can convert into round-the-clock power by using the pumped storage plants and then finally supplying it to the consumers like who needs round-the-clock power like the railways and the other industries. The other could be that the grid stability where the transmission system, particularly, whether it's a state transmission system or the national transmission system, because of some kind of overload and underload conditions, if we have to either inject the power or absorb the power, then these are the assets which can immediately come handy for this. So there are ancillary services where we can monetize the -- these ancillary services for pumped storage plants. But what I'm trying to say is it's much different on the normal hydropower project, where we generate electricity and we supply the electricity. It's not only generation alone. It's the conversion of electricity from one form to the other, and that could be -- that could happen in many ways. It could assist the transmission system, it could assist the generators like the renewable power generators. It could also assist the DISCOMs where DISCOMs are under stress. So this is how these pumped storage plants are very, very useful. But in what manner we are going to use it, that will, of course, depend upon where this particular asset is situated and what could be the best use of that asset in that particular topography. So there are several ones.

What kind of margins you will be seeing in this kind of projects like per megawatt or something?

Per megawatt cost, as I said, it would vary from anything between INR 6.5 crores to INR 8.5 crores per megawatt. That's the cost of developing it. But as far as margins are concerned...

ROE will be at the rate of 16.5% in case of hydro projects.

In case of pumped hydro projects, 16.5%?

16.5%.

And these also include the escalation like we have on the normal projects?

That will be on cost-plus basis.

Cost-plus basis.

Cost-plus basis. Okay.

Compared to hydro projects.

We'll take the next question from the line of Nikhil Abhyankar from ICICI Securities.

Sir, we have been mandated to roll out renewable projects this year. So what is the expected bidding from our side this year? And how much has been remaining and what are the tenders in pipeline?

Okay. So in fact, there are different modes. We have already bid out capacity of something like 1,000-megawatt under CPSU scheme. But at the moment, recently, we have bid out 3-gigawatt, that is 3,000-megawatt capacity. That is a part of the total 10-gigawatt capacity, which we have to roll out this particular financial year. So 3 gigawatts we've already done it and 7 gigawatts will come gradually. That is the mandate which has been given to NHPC. And as soon as we finalize this capacity, then immediately, we'll roll out the further tender for this.

So of the 7 gigawatt, the entire tendering process is also yet to start?

We have already started tendering process [indiscernible] But 1 thing I want to clarify that there will be no CapEx from our side. We will be just intermediary.

Understood. Understood. But we are confident of achieving 10 gigawatts this year?

Yes. We are confident.

And sir, any update on Sawalkot tender?

Yes. Sawalkot is a project in the pipeline. And there are certain last-stage compliances and some kind of understanding with the state government, which is almost now through. We are ready with the tender document. And very shortly, we'll issue the NIT for the civil works as well as the other packages for Sawalkot.

You mentioned that the consol CapEx is around INR 109 billion. So what will be the stand-alone number?

Just a minute. Just hold on for a minute. INR 5,700 crores.

INR 5,700 crores. And sir, just a last question, if I may add. You mentioned that we might even look at monetizing ancillary services for pumped hydro storage. So how will it actually happen? So will it be on a bilateral basis, short-term, medium, long-term agreements? Or will it be through exchanges?

Yes. See, government has issued the guidelines now, and there are certain more guidelines which are in the making at the moment. There the developer of pumped storage plant would be free to enter into bilateral agreements with any of the industry directly or the end user also. And he's also free to convert that power into either the peak power or round-the-clock power and sell it through the exchanges. So both the options are available. And this has been thrown open now, and this has been left to the market. So this is how it is going.

Okay. And sir, right now, can you see -- is there any traction in the ancillary market to exchange it or even say buy later in market?

Yes, already we have started feeling the demand. As you know, the compliances are getting stricter day by day. This requirement of compliances on account of ancillary services are becoming more stringent and because of which the importance and significance of this pumped storage plant asset is coming to fore.

Understood. Sir, if you can reveal this, so what -- can you quantify the bids that you have already taken in ancillary markets?

No, not this time -- I mean nothing of that sort has been yet done. But, see, first, we are focusing on starting the project and then we'll focus on with what model we'll enter into the market.

[Operator Instructions] We'll take the next question from the line of Gopal Nawandhar from SBI Life.

Sir, just one for me...

Sorry to interrupt, Mr. Nawandhar, your audio is feeble, sir. May I request you to use your handset please?

Sure. Is it better?

Yes, sir.

Yes. Sir, I want to know the renewable projects, which are getting commissioned in FY '24 and '25 and '26, and the projects we target to bid for our CapEx for the next 2, 3 years?

I think we have a detail. At present, we are working on 1 Kalpi solar power project, 65 megawatt, in our 100% subsidiary, that is BSUL. And then -- we are working in CPSU scheme, 1,000 megawatt. Out of that, 300 megawatt is being [ substituted ] by Tata Power in Bikaner, that is sure for -- to be commissioned in the current financial year. And rest of the capacity, 700 megawatt, will be commissioned in FY '24, '25. And we are -- we have just received a letter for it from Gujarat for 200-megawatt solar capacity, for which we are in the process of awarding EPC contract. So this is the solar capacity which is likely to be come up in FY '23-'24 and '24-'25. One more, one 88-megawatt floating solar project is being done by our subsidiary company, that is NHDC. That will also come up in the current financial year.

And any target we have in terms of the bidding for every year for the next 2, 3 years?

Actually, we are keeping our return on equity at least 12%. So in case we are able to achieve this 12% of ROE, only then we will take solar projects. That's why we have not kept the high target for solar capacity. We are doing selective projects only.

Okay, sure. And sir, if you can just highlight some of these regulations which are going to come for next year, how do you see impact of these regulations on NHPC? Do you see any more incentives being given to hydro? Or is there any expectations of return the cut or something which you can just give some light?

In a nutshell, we will be not loser on account of new regulations to come. There may be some benefit, but we are waiting for the draft regulations as of now. We have given our comments. We are -- we have demanded more return on equity, but that is to be seen.

We'll take the next question from the line of Riya Mehta from Aequitas Investments.

In the pumped storage hydro project, I think we have signed the MOU. So any concrete plans, so when these revenues would start flowing more? What kind of opportunity are you seeing further on this? Because I think lot of ordering is happening on the same. So what will be the revenue potential from this?

Yes. See, as I said, these are the first memorandum of understanding with the state government where we have agreed to develop these pumped storage plants in that particular state. Now left to NHPC now. NHPC will start work on the ground. And the first thing is, of course, the investigation. What kind of projects, what kind of scheme? And then how this scheme can be optimized on account of cost and time line? So all these things will be done, and they will be completed in maybe next 1 to 1.5 years time. Once that is complete, then we'll start the construction also. But before that, of course, there will be another agreement with the state government where the permissions for starting the construction and then finally, [ catching ] the power and then operating the plant in that particular state would be there. So -- and then the mode of operation of this pumped storage plant would also be decided there. So at the moment, we are at the very early stage. But yes, we have already set the ball rolling.

In terms of cost of borrowing, what was your average rate?

Our average rate is around 7.7%.

7.7%.

As of now, it is 7.7%.

7.7%. And in terms of -- so for the September, since you see torrential rains in the month of July as well, do we expect a little lower PLF or something like that?

In fact, there were a couple of plants which remained shutdown for about a week or 10 days. But then because of the more water availability, we generated quite a good amount of energy in the month of July. So as far as PLF is concerned, PLF is not going to go down. But PAF, certainly, it got impacted because of the...

Sorry, what got impacted? I cannot hear you.

PAF, the plant availability, where the machines need to be available. That got impacted because the plant remained shutdown for about 1 week or 10 days.

We'll take the next question from the line of Prashant Kshirsagar from Unived Corporate Research.

Just wanted to clarify one thing that you've been preparing fresh DPRs and technocommercial due diligence for Subansiri Middle and Upper now? Or is it that you will rely on the earlier DPRs done by professional consultant, EY?

No, see, NHPC is a very competent engineering organization. So we'll first update the DPR and review the DPR ourselves. And we'll try to optimize not only the cost of this -- rather the technical competence of the project also. So we will update the DPR completely. So for both the projects. So of course, there will be guidance from the previous DPR, but not completely.

Not completely. Okay. And your -- in the question-and-answer session, you had mentioned the capital expenditure to be done for Subansiri Middle and Upper also. So what kind of CapEx is this, if you can?

This is just the cost incurred on takeover of these 2 projects. See, because the earlier developers, they had spent a lot of amount on development of these projects. So there was a scheme of Government of India that whatever amount is visible on the site, or which is meaningful at the moment, can be reimbursed to them and the project can be taken over. So it is that CapEx, which has -- which we are proposing now.

Ladies and gentlemen, due to time constraints, that would be the last question for today. I would now like to hand the conference over to Mr. Rupesh Sankhe for closing remarks. Over to you, sir.

We thank Mr. R.K. Vishnoi sir for giving us an opportunity to host this call. And we also thank all the investors and the analysts for joining this call.

Thank you, everybody. Thank you, everybody, who participated in this conversation.

Thank you, sir. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference. We thank you for joining us, and you may now disconnect your lines. Thank you.