NHPC Limited (NHPC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the NHPC Limited Q2 FY '24 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.

Good afternoon, everyone. On behalf of Elara Securities, we welcome you all for the Q2 FY '24 conference call of NHPC. So I take this opportunity to welcome the management of NHPC represented by Mr. Y. K. Chaubey, sir, he is a Director, Technical; and Mr. R. P. Goyal, sir, Director of Finance. 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 management for opening remarks. Over to you, sir.

Just one correction. Mr. Y. K. Chaubey has retired in May '23 and Mr. R. K. Chaudhary has joined as Director Technical in his place. This is small correction from our side.

Yes, sorry. Sorry for that, sir.

Good afternoon, friends. The NHPC Board has adopted a half yearly financial results for the period ended 30th September '23 in its meeting held on 6 November '23 and the same has already been communicated to exchanges. By now, I hope you all would have gone -- got a chance to go through the quarterly and half yearly set of numbers. The detailed number analysis of financial results of the company is as follows: During half year FY '24, our power stations have achieved generation of 16,797 million units as against 18,303 million units generated in corresponding period of the previous year, which is lower by about 8%. That is 1,506 million units. This is mainly due to lower water availability and intense rain and flood in some parts of Himachal Pradesh in August '23, which has impacted the generation in the region, especially the outage of all units of Parbati-III Power Station. During second quarter FY '24, our power stations have achieved generation of 9,010 million units as against 10,138 million units generated in corresponding period of the previous year, which is lower by about 11% or 1,128 million units, due to reasons that I have just shared with you. Parbati-III Power Station is now fully operational. However, you may be aware that on the night intervening 3rd and 4th October '23, our power stations projects in the Teesta Basin were unfortunately hit by unprecedented flash floods in North Sikkim. As such, our 510-megawatts Teesta-V Power Station and 500-megawatt Teesta-VI HE project, which is under construction, have suffered damages. This has impacted TLDP-III and TLDP-IV Power Stations also leading to forced outage. We have made every efforts possible to restore these projects. TLDP-IV has already been made operational and TLDP-III is likely to be restored very shortly. Restoration of Teesta-V Power Station is being planned in the shortest possible time, which may be completed in around 1 year period. However, the assets and business interruption loss of power stations are fully insured under mega insurance policy, which has been taken from New India Assurance company. As such, financial implication of this calamity on NHPC would not be much. PAF for half year FY '24 stands at 91.93% corresponding previous period of 99.23%, which is about 7% lower. This is mainly due to lower water availability and outage of some of power stations like Parbati-III, Kishanganga and Chamera-II. Our PAF for second quarter FY '24 stands at 89.78% against the corresponding previous period PAF of 99.87%, which is about 10% lower on account of same reasons. For half year FY '24, company has earned revenue from operations of INR 5,056 crores as against INR 5,327 crores in the corresponding previous period, which is about 5% lower by INR 271 crores. The decrease in revenue is mainly due to lower generation. During Q2 FY '24, company has earned revenue from operations of INR 2,485 crores as against INR 2,836 crores in the corresponding previous period, which is about 12% lower or by INR 351 crores. The decrease in revenue is again mainly due to lower generation. Other income for half year FY '24 is of the order of INR 408 crores in comparison to INR 332 crores during the corresponding previous period, which is about 23% higher or by INR 76 crores. This is mainly due to increase in dividend income by INR 37 crores and increase in realization of business interruption loss against insurance claim of Sewa-II by INR 34 crores. Other income for Q2 FY '24 is of the order of INR 129 crores in comparison to INR 115 crores during the corresponding previous period, which is about 12% higher or INR 14 crores. This is also mainly due to increase in dividend income by INR 9 crores. During the half year FY '24, the generation expenses have gone up from INR 637 crores to INR 915 crores means by INR 278 crores, which is mainly due to applicability of water cess in Uttarakhand, Sikkim and Himachal Pradesh. However, this has no impact on profitability of the company as this is a pass-through item from our end. During Q2 FY '24, the generation expenses have gone up from INR 367 crores to INR 397 crores, means by INR 30 crores, which is again mainly due to applicability of water cess in Uttarakhand, Sikkim and Himachal Pradesh. During half year FY '24, the employee cost has gone up from INR 598 crores to INR 619 crores, means by INR 20 crores. The increase is mainly due to increase on account of increments, promotion, et cetera, by INR 30 crores, which is partly offset by decrease in expenditure on account of superannuation of employees. During Q2 FY '24, the employee cost has gone up from INR 291 crores to INR 321 crores, means by INR 30 crores, which is mainly on account of increment, promotion, et cetera. During half year FY '24, there has been decrease in the finance cost from INR 244 crores to INR 229 crores, means by INR 15 crores, which is mainly due to change in rate of interest. During Q2 FY '24, there has been increase in the finance cost from INR 107 crores to INR 115 crores, means by INR 8 crores due to higher interest on short-term loans. During half year FY '24, the depreciation and amortization expenses have come down from INR 571 crores to INR 553 crores, means by INR 18 crores, which is mainly due to completion of 12 years of life of Sewa-II Power Station in FY '22-'23. During Q2 FY '24, the depreciation and amortization expenses have come down from INR 284 crores to INR 277 crores, means by INR 7 crores, which is again mainly due to completion of 12 years of life of Sewa-II Power Station in FY '22-'23. During half year FY '24, other expenses have come down from INR 858 crores to INR 725 crores, means by INR 133 crores. This is mainly due to impairment of investment of INR 106 crores in respect of Loktak Downstream Hydroelectric Power Corporation, a subsidiary company during corresponding previous period. Further, CSR expenses have also decreased by INR 39 crores. During Q2 FY '24, other expenses have gone up from INR 352 crores to INR 355 crores, showing marginal increase. During half year FY '24, MAT credit of INR 529 crores has been recognized and MAT credit of INR 175 crores has been utilized during the period. This has resulted in a positive impact of INR 354 crores on the PAT of the company. During Q2 FY '24, MAT credit of INR 519 crores has been refined and MAT credit of INR 77 crores has been utilized during the period. This has resulted a positive impact of INR 442 crores on the PAT of the company. During half year FY '24, we have earned PAT of INR 2,500 crores as against INR 2,483 crores of corresponding previous period, which is up by INR 17 crores or 1% approx., and the reasons for decrease/increase in the line item we have just discussed. During Q2 FY '24, we have earned PAT of INR 1,447 crores as against INR 1,433 crores of corresponding previous period, which is up by INR 14 crores and the reasons were decrease and increase we have just discussed. During half year FY '24, the incentive position is as under: We have earned Secondary Energy to the tune of INR 6 crores, PAF-based incentive is 0 against INR 353 crores in the corresponding half year. Deviation charges is INR 20 crores as against INR 119 crores in the corresponding previous period. So total 3 incentives during current half year is INR 27 crores as against INR 472 crores in the corresponding previous half year. During Q2 FY '24, the incentive position is as under: We have earned Secondary Energy of INR 6 crores as against 0 in corresponding previous period. PAF is -- in current quarter is 0 against INR 181 crores, and deviation charges INR 10 crores against INR 47 crores in the corresponding previous quarter. So total of 3 incentives is INR 16 crores as against INR 228 crores in corresponding previous periods. The PAF incentive for the quarter and half year is nil due to change in methodology for recognizing incentive income. The PAF incentive shall be recognized once the capacity charges of a particular power station is fully recovered. So it will be back-ended. CapEx of INR 4,095 crores has been incurred during half year FY '24 against the target CapEx of INR 2,646 crores for FY '23 on consolidated basis. Other major highlights of the company are as under: On realization front NHPC has received INR 5,065 crores from the beneficiaries against sale of power during half year FY '24 as compared to INR 3,800 crores in the corresponding period of previous year. Trade Receivables as on 30th September '23 stands at INR 5,970 crores as against INR 5,854 crores as on 30th September '22. This include INR 2,685 crores as unbilled debtors as on 30th September '23 as against INR 2,751 crores as on 30th September '22. The net receivables out of total reported trade receivables as on 30 September '23 are as under: Total reported trade receivables are INR 5,970 crores. Out of that, unbilled debtors is INR 2,685 crores. So balance remains -- billed receivables are INR 3,285 crores. The break-up of bills receivable is as under: Debtors for bill discounting is INR 965 crores, for which we have already received the cash. But due to accounting compulsion, it will be reversed in the coming period on repayment of the installment by the DISCOMS. So it will -- it is coming as outstanding as on date. Debtors' dues converted to installments under electricity late payments surcharge rules, it is INR 1,132 crores. This amount is being realized in installments as per the Ministry of Power orders. So net amount due is only INR 1,188 crores. And out of that, dues more than 45 days only INR 367 crores. Unbilled debtors mainly include Impact of AFC billed as against AFC claimed as per regulation 2019-24, including security expenses of INR 1,314 crores. Unbilled sale for the month of September of INR 744 crores and water usage charges INR 469 crores. So all these 3 items will be billed in the coming period. Net trade receivables as on 5th November '23 stands at INR 1,124 crores, which includes more than 45 days dues of INR 142 crores only. On physical front, as we have been sharing that the active construction work at Subansiri Lower Project site is going on in full swing, I am very hopeful that we can commission 2 units of the project in fourth quarter of current financial year, and remaining 6 units are expected to be commissioned one by one by May '25. The estimated cost of the project is INR 21,248 crores, out of which we have already incurred INR 19,459 crores till September '23. The estimated levelized tariff based on the anticipated cost is INR 5.6 per unit. In respect to Parbati-II HE Project, we have achieved a major milestone towards full commissioning by the daylighting of 31.5 kilometer long headrace tunnel of the project. We are trying our best to complete the project by September '24. The anticipated cost of the project is INR 11,063 crores, out of which we have already incurred INR 10,686 crores till September '23. The estimated levelized tariff of this project will be around INR 6.09 per unit. In respect of Dibang Multipurpose Project, LOT-1, LOT-2, LOT-4 and LOT-6 packages have already been awarded to different contractors and construction work and package for design, engineering and infrastructure work, construction of HRT, E&M works have already been awarded. The balance packages which are yet to be ordered are relating to civil work of dam and 3 packages of hydromechanical works. These packages will also be awarded in current financial year itself. The estimated cost of the project is INR 31,876 crores, which includes grant of INR 6,735 crores from the Government of India for flood moderation and enabling infrastructure works. Out of which we have already incurred INR 2,268 crores till September '23. Further estimated levelized tariff of the project is INR 4.46 per unit and the scheduled completion of the project is February '32. In respect of Lanco Teesta Hydro Power Limited consisting Teesta-VI project of 500 megawatt, work was progressing well at site. However, due to flash flood in the region on 4th October '23, the work was affected to some extent. However, all assets and works of the project are insured under construction all risk policy. The estimated cost of this project is INR 5,748 crores, out of which we have already incurred expenditure of INR 2,974 crores till September '23. Estimated levelized tariff of the project is INR 4.07 per unit and expected commissioning schedule of the project is August '26. Further, we are in the process of merger of Lanco Teesta Hydro Power Limited with NHPC and second motion application has already been filed with MCA. Jal Power Corporation Limited consisting of Rangit-IV project of 120 megawatt is also progressing well. The estimated cost of the project is INR 938 crores, out of which we have already incurred expenditure of INR 792 crores till September '23, and estimated levelized tariff of the project is INR 4.37 per unit. Further, we are in the process of merger of this company also with NHPC. The project is expected to be completed by August '24. In respect of Ratle project in UT of J&K of 850 megawatt capacity, that work is going very well at the project site. The estimated cost of the project is INR 5,282 crores, and we have incurred expenditure of INR 431 crores till September '23. Estimated levelized tariff of the project is INR 3.92 per unit and the project is expected to be completed by May '26. Presently, NHPC through its subsidiary company that is CVPPL (sic) [ CVPPPL ] is executing 3 projects in Chenab Basin in UT of J&K. Construction work at Pakal Dul 1,000 megawatt project is progressing very well. The estimated cost of the project is INR 8,112 crores, out of which we have incurred expenditure of INR 3,410 crores till September '23. Estimated levelized tariff of the project is INR 4.28 per unit and the project is expected to be completed by September '26. In respect of Kiru HE Project 624 megawatts, we have incurred expenditure of INR 1,314 crores till September '23, out of estimated cost of INR 4,288 crores. Estimated levelized tariff of the project is INR 4.64 per unit and estimated completion of the project is March '26. In respect of Kwar Hydroelectric Project of 540 megawatt capacity, the work is progressing very well at site. The estimated cost of the project is INR 4,526 crores, out of which we have incurred expenditure of INR 497 crores till September '23. Estimated levelized tariff of the project is INR 4.44 per unit and the project is likely to be completed by November '26. Apart from above under construction projects, NHPC is also working on some projects such as Teesta-IV 510 megawatt, Sawalkot 1,856 megawatt, Uri-I Stage-II 240 megawatt, Dulhasti Stage-II 260 megawatt, Kirthai-II 930 megawatt and Dugar project 500 megawatt, which are at different stages of clearances. In the effect of hydroelectric projects in Nepal, DPR preparation is under progress for 750 megawatt West Seti project and the inception report submitted by NHPC has been accepted by Investment Board of Nepal in respect of 450-megawatt Seti River-6 hydroelectric projects. Further, an MoU has been signed with Vidhyut Utpadan Company Limited of Nepal on 1st June '23 for development of Phukot Karnali hydroelectric project 480 megawatts in Nepal. PPAs for all under construction projects of NHPC including its subsidiaries have been signed or consent has been received from the DISCOMs for the same. In respect of 1,000 megawatt capacity solar power project, the work is progressing very well in respect of 300-megawatt project in Bikaner, Rajasthan. And land acquisition is in progress in respect of 600-megawatt project in Gujarat and 100-megawatt project in Andhra Pradesh. NHPC is also exploring to develop pumped storage projects in the state of Andhra Pradesh, Odisha, Jharkhand, Madhya Pradesh, Gujarat and Maharashtra. Following progress has been achieved by the NHPC in PSP so far: In Madhya Pradesh, Government of Madhya Pradesh has already allotted the Indira Sagar Omkareshwar 525-megawatt PSP to our subsidiary companies that is NHDC on 7th June '23 and PFR has been submitted by NHDC to Central Electricity Authority on 13th June '23. Further, PFR of Tekwa-2 pumped storage project of 800-megawatt has also been submitted to Government of MP and CEA. In Maharashtra, MoU has been signed with Department of Energy, Government of Maharashtra, on 6 June '23 for the development of pumped storage schemes and other renewable energy source projects in the state of Maharashtra. The MoU envisages development of 4 pump storage projects aggregating to 7,350 megawatt namely Kalu of 1,150 megawatt, Savitri 2,250 megawatt, Jalond 2,400 megawatt and Kengadi of 1,550 megawatt and other renewable energy source projects in the states. PFR of Savitri PSP has been submitted to Government of Maharashtra and CEA on 11th and 20th September '23, respectively. And preparation of PFR of further 3 PSPs are under process. In Odisha, MoU has been signed between NHPC and Government of Odisha through GRIDCO Limited on 23 June '23 for development of pumped storage projects and renewable energy in the state of Odisha. The MoU envisage setting up of self-identified pumped storage projects of at least 2,000 megawatts and setting up of renewable energy projects, which consists ground-mounted as well as floating solar projects of 1,000 megawatt or above in the state. In Andhra Pradesh, MoU has already been signed between Government of Andhra Pradesh and NHPC on 4th March '23 for investment -- for development of 2,000 megawatt PSPs in Andhra Pradesh in joint venture mode. In line with above MoU, NHPC signed an MoU on 23 August '23, with Andhra Pradesh Power Generation Corporation Limited for implementation of pumped hydro storage projects and renewable energy projects under joint venture mode in Andhra Pradesh. The MoU envisages implementation of 2 identified pumped storage projects namely Kamlapadu 950 megawatt and Yaganti 1,000 megawatt PSP in the first phase. This is all from my side. Now the quorum is open for question-and-answers. Thank you.

[Operator Instructions] The first question is from the line of [ Marcel Luis ], an Individual Investor.

Yes. Sir, can you please advise that how much is our renewable portfolio? Currently, how much project we are executing? How much is already live? And what's our vision for the next 2 years, for example, by the end of fiscal year '24-'25?

As of now, we have commissioned only 2 renewable energy projects, 1 50-megawatt one solar project and another 50-megawatt wind power project. And we are in the process of construction of 1,000 megawatt solar project as of now and in -- at our own balance sheet and 65 megawatt is being developed in one of our subsidiary companies that is Bundelkhand. Another 88 megawatt is being developed in our another subsidiary that is NHDC. And we have just won a bid of -- for 200 megawatt in Gujarat. So this is our portfolio as of now, which is under construction in renewable sphere. And we are not much aggressive on renewal energy front. We are basically hydro company. But keeping 12% -- at least 12% ROE, we will be taking solar or wind projects. Otherwise, we will not take up solar or wind projects.

The next question is from the line of [ Krishna Duttar ], an individual investor.

Sir, this is regarding -- my question is regarding the dip in revenue in this quarter. Can you please explain?

Sorry to interrupt [ Krishna ], sir, your audio was not clear.

My question is regarding the dip in revenue in this quarter.

Dip in revenue?

Yes.

Our generation during this quarter was 9,010 million units against INR 10,138 million units in corresponding previous quarter. So it is -- it was down by 1,128 megawatt -- million units. That's why our revenue was lower in the current quarter -- second quarter of current year.

[Operator Instructions] The next question is from the line of [ Marcel Luis ], an Individual Investor.

Yes. Sir, can you please advise regarding our portfolio of hydro, how much capacity is already live? How much capacity we are in the execution mode? And how much is it, for example, in the pipeline for the project is not yet awarded? And then can you also give, for example, what is this like cost of project or cost of funds, sorry, like total project like cost how much and then whether everything is tied up or not?

Mr. [ Luis ], we have already commissioned 6,971 megawatt in hydro and we are in the admission process for -- just a minute, yes, we are likely to commission our Parbati-II of 800 megawatt and Rangit-IV 120 megawatt in FY '24-'25. And 2,000 megawatt will be added in FY '25-'26 by commissioning our Subansiri Lower Project. And Subansiri Lower Project 2000 megawatt and 624 Kiru project also in FY '25-'26. In '26-'27, we will be commissioning Pakal Dul 1,000 megawatt, Kwar 540 megawatt, Ratle 850 megawatt and Teesta-VI 500 megawatt. And thereafter in hydro, we will commission our Dibang project of 2,880 megawatt in 2031-'32. So by end of '31-'32, our total install capacity in hydro will be 16,285 megawatt.

And sir, how much is the existing capacity?

Existing is 6,971 megawatt of hydro.

And how much we are going to store during the current year, FY '23-'24, '24-'25, remaining 2 quarters and '24-'25?

By March end, we will be commissioning 2 units of Subansiri, but revenue will come in next financial year only.

No problem. No problem. I just want to know about the megawatts. So how much more megawatt you will commission during this...

End of March '24, we will be commissioning 500 megawatt in respect of Subansiri Lower Project and rest units will come in FY '25-'26.

So '24-'25, how much will commission, '24-'25?

By end of '24-'25, we will be commissioning around 2,500 megawatt.

So means -- no, like other than this for '25-'26, you said 2,000 one and 644 one. So that is separate?

This comes in 800 megawatt Parbati-II, 120 Rangit-IV and 6 unit of Subansiri. 6 unit means 1,500 megawatt. So 1,500, 800 and 120, it will be around 2,420.

Okay, sir. And then, sir, what about this, the cost of funds, like the entire funding is tied up or like do you see any, for example [indiscernible] so for example, the project under execution, which will be commissioned during '23-'24, '24-'25, '25-'26, whether the entire required project cost has been funded, has been like sanctioned?

As per CERC regulation, our funding pattern is 70-30, 70 is debt and 30 is from our internal accruals, equity part. So we raise loans on our balance sheet strength, and there is no issue of financing. We have complete tied-up for loan part, and we have sufficient internal accruals for infusing equity part. So there is no issue of funding.

So sir, like regarding -- because see, now we need to go very -- like fine tune our cost so since you have got many projects in the hand, so are you able to secure some better interest rate or not like for the new loan you are getting?

We are raising loans at the cheapest rate. Recently, we have raised INR 2,000 crores loan at the rate of 7.54% per year, and that is variable. And we are keeping clause regarding repayment at any time without any prepayment charges. So we are able to raise the loan at cheapest rate in the market.

What rate you said, sir? Like there was disturbance, I couldn't hear you. What was the interest rate?

Interest rate is 7.54%.

Very good. Very good. Beautiful. Beautiful. Okay. And then this other than this any cost escalation? Just let me finish, let me finish, one second. Any cost escalation, sir?

Cost escalation is generally pass through in the tariff.

Okay, very good, sir, very good. Sir, like one suggestion, sir your PPT is not available in the stock exchange. Since you are such a big company having thousands of megawatt of like power project, I think PPTs you can give, we can get all information with PPT, sir.

Yes. So basically, PPT is available at our website, nhpc.co.in. Even for 10 years, you can access those PPT.

Sir, I tried. Every time we are trying it's not -- yes, it's not very user-friendly also. So what is the harm if you can send 1 PPT copy...

Yes, yes, yes. We have been...

Everybody is sending, sir. What is the issue, sir?

No, no, no. No issue. We have been sharing with BSE, NSE also and this time also we'll share, don't worry.

No, no. I'm saying please share this before the commencement of...

Yes, yes. We have noted your suggestion and it will be done.

Immediately after con-call, we'll share our PPT.

Not after con-call, you must do before it, so that we can read it and then we can ask only related questions.

Okay. Noted, please. Noted.

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

Sir, the first question is the levelized tariff for the 2 projects have increased marginally although, but have increased despite the project cost remaining the same versus what you were communicating in last 2 quarters. So what's causing this increase?

So basically, you see, Parbati-II, it was earlier INR 6.14, it has been decreased now, levelized tariff is coming around INR 6.09. So there is slight reduction in the capital cost of Parbati-II...

Okay. INR 6.9 -- I thought it is INR 6.9, it is INR 6.09. Okay.

INR 6.09. And Subansiri, we have been sharing at the same level. So there is not much change in Subansiri, per se.

And sir, the second question is the unfortunate thing with Teesta-VI, I think now. So you have already spent INR 2,900 crores. And I think your large part of that you'll have to reconstruct is what our basic understanding is. So do you get the whole amount from insurance company or how does this work?

Mr. Dhruv, there is no loss to our already constructed part of the project. Only loss is in shape of filling up debris in the -- our reservoir, our tunnel, or washing out of our one of the stores. So there is not much loss. We estimate the loss at around INR 250 crores and it is fully insured through our contractor's all risk policy.

Okay. So the loss of INR 250 crores is insured, and you will recover that amount.

Yes.

Okay. And sir, last question is on the MAT credit. So you have a negative tax amount this quarter. So does it lead to a benefit on PAT or it becomes a pass-through in tariffs?

No. It is -- it will be in the benefit through PAT. It is -- MAT pertains to NHPC only. It is not a pass-through to beneficiaries.

Okay. Sir, because -- but I thought whatever tax you have to ultimately get effective tax, so it does not become a pass-through in tariff?

Generally MAT credit or any tax item is pass-through in the tariffs. But the period -- tariff period for 9-14, there was a clause that whatever tax we have taken that is final. So in 9-14 period, we had paid higher tax and that's why we are -- we had paid higher tax for MAT, that's why we are able to recognize MAT credit and taking benefit of that.

Okay. Probably I'll understand this better, sir, from you later.

The next question is from the line of Abhishek Khanna from Kotak Securities.

My question is answered. It was on the MAT credit only. It's been answered. Thank you.

The next question is from the line of [ Abhineet Anand ] from [ Kriti Investments ].

Yes, just on the pump storage hydro, any of the projects where elementary study has been done and what tariff does it imply?

We have prepared our PFR for Indira Sagar Omkareshwar project and the tentative tariff, which is coming is around -- for generation tariff, it is coming around INR 5 per unit. And the pumping costs will be additional.

What that number could be, sir?

You can take INR 2.75 maximum.

So effectively, the overall tariff will be anywhere like INR 8.5...

INR 8.

And this is for what period, sir? I mean for 4 hours is what -- is there something that sort?

Six hours.

Six hours of peaking?

Yes.

The next question is from the line of [ Bhavesh Patel ] from [ Patel Investments ].

Good performance. My question is about confirmation on our cost of equity. We expect in terms of the return on the equity around 12%-or-so. And the second part is overall general La Niña condition, do we expect similar situation even next year? And will that impact our generation? In case you can answer, that will be good.

Yes, certainly. So you see if you look at the cost of equity of the company, so that is basically your perspective how much, what you call, the market rate of return. If you take 10 years, 15 years so that accordingly, it will vary, means, accordingly, if you consider 5 years beta or 1 year beta so accordingly it will vary. But broadly, I can share with you the cost of PBT broadly, you can consider about 12%.

And about La Niña condition? Because people are expecting that even next year, the water -- the rain might be lesser. So will that impact our generation like it has done this year?

Yes. So if you look at the desired energy is designed in such a way, so in any particular financial year, we are not able to achieve the desired energy, there is a provision is CERC regulation to claim shortfall of energy also. So if generation is not more than desired energy, certainly there be lots of incentive. So broadly, whatever return on equity we are earning as of now, which is broadly 16% to 16.5% and if you add on incentive that goes up to 19% to 20% also. So in case of water availability is an issue, that much return cannot be achieved, but 16.5% you can kind of insulated return you can say.

The next question is from the line of Rupesh Sankhe.

Yes. Sir, a couple of questions from my side. Firstly sir, in the last 2 quarters, our incentive income is almost nil. So how do you see the incentive incomes in the coming quarters? Because we do feel that availability factor will be lower than the last 2Q FY '23. That was the first question. . And secondly, sir, now we have a huge pipeline on the renewable energy side as well as the hydro projects, pump hydro storage. So how do you see the equity contribution? Are we comfortable position to have for the equity contribution or we need to have some equity dilution going ahead?

Yes. So first question regarding incentive, Rupesh, we have been sharing that in accounting or you can say, method of recognition of incentive has been changed. Earlier, we used to recognize the PAF incentive also on a monthly basis. So we found that in later half of the year, when PAF is basically lower than the even the trend of PAF in first 6 months, so negative numbers even goes in negative. So that does not show the true picture of the incentive number. So that is the reason we changed our accounting. Now we will start recognizing incentive income. Definitely, incentive income would be there depending upon our actual PAF. So definitely incentive income would be there, but that will come in second half year of the financial year because in first half year our focus is on recovery of capacity charges. In the same line, if you remember earlier, we used to recognize even secondary energy also simultaneously, but we changed this once desired energy achieved for a power station, then we will start recovering, what you call, secondary energy. So in the similar line now accounting for the PAF incentives also been changed. Yes, are you clear with that? Rupesh, are you...

Yes, sir. Yes, sir. On the CapEx side?

Now CapEx side, you see, as of now, our average CapEx is in the range of INR 8,000 crores to INR 10,000 crores, right? It is all consolidated basis. And in most of our projects under subsidiaries like we have already contributed 100% equity in Teesta-VI, 100% equity in Rangit-IV, 100% equity in Pakal Dul, Kiru. So going forward, our equity contribution in our subsidiary companies are not much. Even at a standalone level, if you look at the equity requirement, it will vary between INR 2,500 crores to INR 3,000 crore max. That much equity is freely available with NHPC even after having discharge obligation of repayment of loan and dividend distribution to the shareholders. So NHPC is quite comfortable so far equity component is concerned.

Okay, sir. Sir, on the pump hydro storage that JV we have formed with Andhra Pradesh, how will be the economics there in terms of return on equity?

Our return on equity will be as per hydro projects only and it will be 16.5%.

We'll move to the next question, that is from the line of [ Mohit Surana ] from Monarch Networth Capital.

My question is more general and related to realizations. In years when we have generation more than the design capacity, the extra energy that we produce does that go at the same realization at the same average selling price set by the regulator, I mean, the tariff or the tariff would be very low for the extra generation?

No, no. Second energy, which is beyond the desired energy, it goes very -- at the rate of maximum INR 1.20 per unit or the energy prices, whichever is lower. So it is not the same rate.

You said INR 1.20 per unit...

Maximum. If the energy charge is lower, then it will be at the rate of energy charges only.

Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Rupesh Sankhe for his closing comments.

Yes. So we thank NHPC management for giving us an opportunity to host this call. We also thank all the investors and the analysts for joining this call, and Happy Diwali to everyone.

Thank you. Thank you, Mr. Rupesh, and Happy Diwali to you and all the investor community. Thank you.

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