NLC India Limited (513683) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to NLC India Limited's Q3 FY '20 Post Results Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rahul Modi from ICICI Securities. Thank you, and over to you, sir.

Thank you, Stephen. Good afternoon, everybody. On behalf of ICICI Securities, we welcome you to the Q3 FY '22 Results Conference Call of NLC India Limited. We would like to thank the management for giving ICICI Securities the opportunity to host this call. We have with us from the management, Mr. Rakesh Kumar, Chairman and Managing Director, with the other functional directors and senior management of the company. I would like to hand over the call to Mr. Kumar for the opening remarks, post which we can have a Q&A session. Thank you, and over to you, sir.

Thank you very much, Rahulji, for hosting this investor call. And I would like to share this as an opportunity to interact with NLCIL's stakeholders and also reply to their queries on the financial results for the quarter and 9 months ended 31st December 2021. I am Rakesh Kumar, CMD, NLC India Limited; along with Shri Shaji John, Director, Power; and Shri Jaikumar Srinivasan, Director, Finance; and along with the senior officers of NLCIL. I welcome you all for this conference call. And I would like to mention some of the performance highlights of NLCIL for the 9 months period ended 31st December 2021. Power generation on a stand-alone basis for the period is 18,485 million units as against 13,743 million units in the corresponding period of the previous year, registering a growth of 34.51%. Consolidated power generation for the period is 21,740 million units as against 17,604 million units in the corresponding period of the previous year, registering a growth of 23.49%. The company has achieved thermal PLF of 70.20% as against the national average of 57.16%. Consolidated total income of the group during the period is INR 9,381 crore as against INR 8,198 crore in the corresponding period of the previous year, registering a growth of 14.40%. Consolidated profit after tax for the period is INR 784 crore as against INR 589 crore in the corresponding period of the previous year with a growth of 33.28%. Stand-alone total income of the company for the period is INR 7,887 crore as against INR 6,211 crore in the corresponding period of the previous year, registering a growth of 29.06%. Earnings before interest, tax, depreciation and amortization before exceptional items for the period is INR 3,344 crore as against INR 2,397 crore in the corresponding period of the previous year, registering a growth of 39.51%. Stand-alone profit after tax for the period is INR 797 crore as against INR 387 crore in the corresponding period of the previous year, registering a growth of 105.96%. With this, I look forward for the interactions with the stakeholders.

[Operator Instructions] The first question is from the line of Rahul Modi from ICICI Securities.

So just sort of taking the first question, sir, can you elaborate more on -- sir, more on a structural question in terms of our targets in the renewable space? What are the activities that we're looking forward to? And what is our targets that we are looking at in terms of both solar and wind going forward and the upcoming opportunity size for us in that?

Yes. Sure. So in the renewable segment, we have achieved an installed capacity of 1,421 megawatt of renewable projects, in which 51 megawatts is wind and balance is solar. Most of it is in Tamil Nadu, except for 20-megawatt solar plant in Andaman. And we want to ramp-up this capacity. Recently, we have got 150-megawatt hybrid project and 510 megawatts of solar from SECI and IREDA bridge. And we are targeting more of such tenders. And we want to ramp up our capacity in solar to the extent of 4,000 megawatt-plus. Yes, any specific question on that, I welcome.

Sir, that would be all. Sir, just one number I would need in terms of, sir, for the 9 months, what has been our EBITDA and revenue from the renewable segment? And what is the level of gross block and the debt levels for the renewable capacity?

Yes. EBITDA from the renewable is INR 552.35 crore. And we have got profit to the extent of INR 185.86 crore from renewable projects.

[Operator Instructions] The next question is from the line of Anshuman Ashit from ICICI Securities.

Sir, just continuing on the projects, so can you please update us on the status of the Ghatampur project and Talabira mines as well?

Yes. Sure. So our Ghatampur project, which started with the GOI sanction in 2016 with an estimated cost of INR 17,237.80 crore, up until now or up to December, we have spent more than INR 12,700 crore on the CapEx front. And we have achieved physical progress of more than 77% and financial progress is more than 75%. So although we are facing some issues on GA3 package because of the financial difficulties being faced by the GA3 package contractor, however, we are catching up. We are trying to resolve the issues and -- but at the same time, this has resulted in some delay. So -- but our commissioning activity for the first unit is on. And the expected commissioning for the first unit is October 2022. And we are targeting second and third unit 4 months thereafter each unit.

Okay, sir. And sir, the Talabira project?

Yes. Talabira project is already commissioned. And against the target of 4 million tonne this year, we have already achieved more than 5 million tonne by 31st December. Coal mines?

Yes, sir.

Yes, so -- and we are going to target our Talabira mines for much more production in the next year.

Okay. Sir, in our presentation, we have mentioned quite a few projects through our Vision 2025. So could you please give us some clarity on what can be our capacity by the end of '25? Because we have mentioned about 15 gigawatt of addition. But just on the next slide, the growth plan over 3 years is 2.6 gigawatt. So could you please give us some clarity on that?

Yes. Actually, we had lined up -- we had planned in our corporate plan, the thermal capacity addition by way of 2,400-megawatt Talabira pithead power plant in the first phase, which is followed by another 800 megawatt by another unit, and 1,980-megawatt Ghatampur. And we also envisage TS-II second expansion, Phase 1 and Phase 2, 1,320 each. However, this TS-II second expansion Phase 1, Phase 2 may not come up because we are facing some difficulties in the financial viability of the project. But at the same time, we have our plans for whatever we envisaged for the solar and renewable project to the extent of 2,830 megawatts, which we want to ramp up beyond 4,000 megawatt. And power assets acquisition, which we planned for 3,000 megawatt, so far, we have not made much progress. Depending upon the opportunity and the time to come, we will take a call. And at the same time, the Rajasthan projects, 2 mines and 2 small power plants of 250 megawatts each, those are on hold. And already, we have concluded the contract with Reliance. And we are going to arbitration for settling the claim.

Sir, how much have we spent on those projects?

This project in Rajasthan, we have spent to the extent of INR 288 crore in Bithnok and BTPSE is INR 102.92 crores. The total expenditure incurred so far is INR 390.92 crore.

Okay. And sir, so with the projects in RE space that we haven't had, so we can reach 4 gigawatt by FY '25, is it?

Yes. With the pace with which we are going, we are hopeful that we will be able to win over the tenders. And the cumulative capacity, we will reach 4,000-plus.

Okay. Sir, the next question is on the receivables front. So could you please give us the number -- the receivables at the end of 9 months FY '22?

Yes, sure. So the total receivable as on 31st December 2021 is INR 4,580.82 crore as against last year, corresponding figure is INR 8,746.17 crore. So we have been able to reduce our dues to the extent of INR 4,165.34 crore.

Okay. And sir, finally, the regulated equity at the end of 9 months before I come back in the queue.

Yes, sure. The regulated equity for mines is INR 2,830.78 crore and thermal is INR 3,762.41 crore. And profit, which was from the regulated equity of mines, is INR 415.53 crore and thermal is INR 553.61 crore. Total regulated equity is INR 6,593.19 crore and for thermal is INR 970.14 crore for the 9 months. And if we see the reconciliation, the thermal capacity charges loss is -- under-recovery is INR 445.75 crore. There is no under-recovery on mine side. And net income from regulated business is INR 524.39 crore. And there are some adjustments which are there. Interest on excess equity is INR 113.42 crore. And interest on working capital and other income, and there are other reasons, which is totaling up to INR 2,111.31 crore.

The next question is from the line of Apoorva Bahadur from Investec.

Yes. Am I audible?

Yes, you are audible.

Sir, I wanted to know your thoughts if there has been any progress on the monetization plan, I think, which we discussed a couple of quarters ago and the -- which government also highlighted in the pipeline, National Monetisation Pipeline.

Yes, sure. And I will just request the finance to throw more light on this aspect.

Yes. As regards monetization plan, broadly in the domain of the Coal Ministry, there were two types of projects that were identified. One is on the coal mining side. And what was regarded as monetization was in terms of the expenditure that has been prioritized in the sense that wherever we have outsourced the mining through the MDO route and the expenditure on that side. But going ahead, for an integrated entity like NLC, which is into mining as well as power plants, having into the power business. Additionally, based on the vision of the government, the renewable as well as hydro assets were identified for monetization. So since we are into renewable, solar predominantly, so we have worked on this solar listing. We proposed to monetize this, subject to the feasibility. And we have done all the proprietary works and the connections. We have -- we are also envisaging, subject to government approval, a solar arm through which the monetization, either in the form of a stake sale or in terms of InvIT, so the necessary advisory advice is being taken, and we are working on that. So soon, we will be taking an in-principal approval once the permission is coming from the government.

Okay. Sir, by when can that be expected, the permission?

It's -- I mean, it's just an estimate. But should be in the next 2 months, the permission should be in place. We are expecting that.

Fair enough. That's very useful. Sir, secondly, on our clean energy plants as well, I think as of now, our focus has been largely towards renewable capacity addition. I wanted to know if there are any plans on going into other direct clean energy derivatives as well, say, like power storage or green hydrogen or anything of that sort. If you could throw some light over there, it would be very useful.

So far, we have not explored on power storage. But of course, we have shown some interest in hydrogen, in clean hydrogen and green hydrogen. But no firmed-up plan or discussions have taken place that we can share any results or any plan on the business. In the meantime, our new Director, P&P, has joined, by Mr. Mohan Reddy. He has joined the conference call.

Good afternoon to all of you. And myself, Mohan Reddy, so mining and thermal background, has joined as Director, Planning & Projects.

So we are hopeful that with his joining, the impetus on the addition on more projects and development on ongoing projects will take place.

[Operator Instructions] The next question is a follow-up from the line of Anshuman Ashit from ICICI Securities.

Sir, could you please tell us how much late payment surcharge have we booked for 9 months FY '22?

Get the figure before me. The charge income that is for the late payment surcharge, which we billed to the beneficiary of power for the 9 months '21/'22 is INR 296 crores. Now obviously, there is a tradeoff between your surcharge income as well as the collection efficiency. So the collection efficiency, the trend of collection has been fairly robust in the last 1.5 years. So the kind of revenue from -- in terms of the charge will be on the reduction. That will -- the other part is that your reliance on borrowed money will also be less to that extent, so there's a tradeoff. So there's better liquidity. However, with excess liquidity, this revenue would be more on the lesser side, I would say.

Okay, sir. Sir, there was one issue which we had raised with CERC with regards to a coal mining cost approval. Could you tell us the status of the same? And is there any impact on our profits regarding?

Yes, sure. Although the notification for pricing of coal and lignite was issued by CERC on 13th of September 2021, and we were given 2 months period for filing the petition, so we sought extension for the same. Because the pricing of coal and lignite, especially lignite, will be based on the truing-up of our earlier tariff period of '14-'19, which has not yet been finalized. So CERC has accepted our request. And they have given us the extension up to 2 months from the date of the order, which will be issued for truing-up of 2014-'19 period, so -- but in the meantime, we are preparing for filing the petition simultaneously. And we are charging a provisional price of INR 477 for NTPL until such time this is finalized. And after filing the petition and decision of CERC thereon, we will be able to know the impact of pricing on profitability.

And sir, by when do you expect that order to be given to us?

We are expediting. But since CERC has to decide on the truing-up, we can't force them. But at the same time, we are requesting them to expedite. But we are expecting soon now.

Okay, sir. And sir, regarding dividend policy, so are we looking at maintaining what we have? And on the payout as well, so will we be paying any interim? And how many payouts are we looking for regarding our dividend? Can you please give some clarification on that?

Yes, sure. See, DIPAM has already issued the guidelines on the payment of minimum dividend, which is 30% of PAT or 5% of net worth, whichever is higher. So we will be guided by that. But at the same time, depending upon the profitability, the profit levels which we achieve, and the CapEx plan which we are pursuing, appropriately, we will be deciding on dividend, and from time to time, we will be intimating.

The next question is from the line of Pawan Bansal from Altius.

Sir, my question is on coal mine. What is our target of production for next year?

Yes. Thank you, Pawanji, for your question. Our coal mine this year, we are -- we have already crossed 5 million tonnes against our plan of 4 million tonnes. And next year, we are going to ramp up. Depending upon the enablement, there are two, three concerns, which we have -- on which we are working. Based on the resolution of those concerns, we will be able to ramp up the production. Right now, we don't have any firmed-up figure. But we may like to go out to the maximum capacity, a normative level of 20 million tonnes.

Sir, that will take time, 20 million tonnes. So it cannot happen next...

It all depends on the resolution of some of the issues on which we are working. And we are hopeful that we will be able to resolve within a short period of time.

And sir, my second question is that is coal we are using in-house or they are selling in the market?

See, the surplus coal -- yes, as per the approval accorded by Ministry of Coal for a period of next -- this year and 4 more years, to the extent of 67.5 million tonnes to be sold through auction or any other means. So we are signing the MoU with NTPC primarily. Up to December, we have sold 1.2 million tonnes of -- NTPC, sorry, where we have sold 0.67 million tonnes to -- yes, 1.2 million tonnes, we have already sold to NTPC. And e-auction, we have already sold 2.2 million tonnes. And as we progress, we will be resorting to more sales as excess sales.

As e-auction or to NTPC? Because NTPC must be paying Coal India prices only.

NTPC, up to December, we have signed an MoU with a rate of -- Coal India, we have base price only. But in the time to come, we will try to have better pricing with NTPC.

Because e-auction prices are much, much higher than the Coal India prices.

As of now, yes, you are right. We are getting better pricing. But at the same time, since these mines are allotted for power generation sectors, primarily for end-use plants. And it is only a temporary agreement that whatever excess coal is available that we are selling either to NTPC or to through e-auction mode. So depending upon the priority for country, we resort to selling of our coal to NTPC first and then balance available to other than power sector.

[Operator Instructions] The next question is from the line of Dhruv Muchhal from HDFC AMC.

Apologies, I joined a bit late, so it could be a repeat. Sir, on the Ghatampur project, any update if you can give on the timeline of commissioning of the plant?

Yes, sure. As I shared earlier also that Ghatampur power plant progress is going on. We have achieved 77 -- more than 77% of the physical progress. And actual expenditure, capital expenditure is more than INR 12,700 crore. But you are right that there is a concern that because of the -- some problems being faced by package contractors, GA3, we are trying to resolve the issues. But it has resulted in delay, and we are trying to catch up. As of now, we envisage that the first unit of Ghatampur plant may be likely to be commissioned by October 2022. And the other units, 4 months thereafter each unit.

Got it. Sir, the total project, I believe, is about INR 19,000 crore, right, sir, total project cost?

INR 17,237.80 crore is the sanctioned cost. But it is likely to increase further because of the -- now we are expecting that FGD tender will be finalized, which may result in more costs. So we will get the picture after getting the finalized offer of FGD for the plant.

Got it. Sure, sir. So we are expecting finalizing by October? Because I think in terms of spending, we have covered about 70% of the total spending, it seems.

Yes. The financial progress is more than 75%, yes.

Got it. And sir, any critical areas that we should be looking for? Like if this gets resolved, you expect the commissioning then to pick up quickly?

Yes. Package 1 and package 2 are going well. L&T and GE both are performing well. However, this balance-of-plant package contractor, BGR, we have to resolve some of the issues. We are discussing day and night and finalizing and firming up the revised action plan in consultation with their team also. And we are trying to take all of the stakeholders onboard to take some bold decisions.

Got it. Sure, sir. And sir, until then, you can sell the coal from your coal mine to -- in the outside market because we have surplus capacity until then for coal?

Actually, this Ghatampur project is linked to South Pachwara coal mine. And there also, we have just completed the Phase 1 exploration early. And it is expected that we may start the mining of coal in South Pachwara by '23/'24. And we may start getting coal from there by that time. But in the meantime, we are getting bridge linkage. And we are trying to secure coal for commissioning and beyond for the intermittent period from other places. And Talabira is also one of the options.

Got it. And sir, last question, again, sorry, if it could be a repeat. Sir, last year -- last time in the call, you mentioned that you had some pending finalization of the lignite transfer price. And as such, there were some under-recoveries with some of your state discounts. I believe Kerala had filed a petition against the lignite price determination. So sir, any update on that? And is there any financial impact on -- in our quarterly numbers because of that still?

Yes, sure. See, the notification of CERC on the pricing of lignite and coal has been issued on 30th September 2021, in which the period allowed for filing the petition was mentioned as 2 months. But because the petition can be filed only after getting the truing-up order, therefore, we have applied for extension citing this reason. And CERC has acknowledged our reason. And therefore, they have allowed us to file the petition 2 months after getting the order of truing-up. And this truing-up order is expected soon. And after that, we will be filing up our petition. At the same time, in the meantime, we are adopting a provisional lignite price of INR 1,950, which is taking care of the Kerala order also. And for coal, we are having a provisional transfer price of INR 477 per tonne. And after the filing of petition, we will be adjusting these accordingly.

Got it. And sir, because of the provisional lignite price of INR 1,950, is there any under-recovery currently which is hitting our numbers? And once the order is passed, we could see -- what could be the recovery there? I mean, what could be the annual impact?

INR 1,950, we don't envisage any under-recovery.

Okay. So there is no under-recovery as such, even if the order -- okay, perfect. Sure. And sir, one quick last question is on the other income. The other income has declined. I believe this should be largely to do with the LPS, the LPS has come down.

Yes. The surcharge income has come down from INR 838.02 crore to INR 296.57 crore in the 9 months of the current year as against the corresponding period last year.

Got it. And going forward, we should expect a lower LPS now?

Yes, yes, yes. And that should give more financial health to the company. At the same time, there will be a corresponding decline in the working capital interest. And these 9 months, we have already got the dividend from NTPL to the extent of INR 194.74 crore.

[Operator Instructions] The next question is a follow-up from the line of Rahul Modi from ICICI Securities.

Just a couple of more questions. With regard to the amount of money spent in the Talabira coal mines, if you could help with that. And also, sir, what is the cost of production that we are currently booking in the mine following closing? Yes.

The capital expenditure, which has been incurred so far up to December, is INR 918 crore against the sanctioned project cost of INR 2,401.07 crore. And in the current year 9 months, we have spent INR 125.43 crore out of this INR 918 crore. And debt/equity is 70-30. And your next question was that how much...

Cost of production.

Cost of production. So from Talabira mines, we have got a profit of around INR 260 crore during the 9 month. Yes.

Sir, how much? Sir, can you repeat what?

The -- see, ultimately, the transfer pricing will all be decided by the CERC. But right now, as far as the cost of production is concerned, it is close to INR 700 crores.

INR 700 per tonne?

INR 700 per tonne, sorry.

Okay. This is the cost of production. And what are you building at the same rate? What are you building at, sir?

Basically, we have sold the surplus coal. And our auction 1, we sold it at the rate of INR 998 to the extent of 1.57 lakh tonne. And auction 2 in May 2021, we got the price of INR 998, which we got for 19 lakh tonne. And third auction, we conducted in November 2021 for 5 lakh tonne, for which we got the pricing of INR 1,834 to INR 1,884.

Okay. The pricing has increased almost 100% over one-offs. And that's quite encouraging. So sir, how is the -- I mean, just to understand, until your plant starts, so what will be the typical business model in this? So obviously, there is a particular auction rate that you are selling at. And there is a rate at which you are -- there's a cost attached to it. So how do we see in terms of understanding the numbers better, in terms of revenue, cost...

In the long run, we will have to see how our end-use plant requirement is met and they come up and how we are selling the coal, to what extent. And based on the guidelines issued by CERC, we will be filing our petition. And based on the decision made by CERC, we will be able to arrive at the final numbers.

And sir, what about the profit that we are booking currently that we reduced from the cost, is it?

I think provisionally, we can consider these numbers because end-use requirement is to the extent of 2.5 million tonne only during the current year. And against that, we have been able to use only 0.67 million tonne for NTPL. So there are provisions which give us a room to book some profit also. So depending upon that, we are working on that. These are provisional figures. And we will be able to get a clear picture after filing the petition.

Okay. And sir, what about the progress on the Talabira power plant? Any progress has happened there?

Yes. I would like Director, Power to share his...

Thank you. Am I audible? I'm Shaji John, Director, Power.

Yes, sir, loud and clear.

Yes. So the Talabira project, right now, the tendering process have started. So on EPC mode, we have property tenders and [indiscernible] with the bid opening dates are fixed. So on the other hand, once the bids are open, we will be seeing further. Depending upon the -- some negotiation or some discussions, this may take some more time to finalize this. Meanwhile, we are in the discussion with the district authorities, the state authorities for [indiscernible] decision also. However, the power purchase agreement needs to be firmed up, which we are expecting shortly with beneficiaries like TANGEDCO and Puducherry. They have almost confirmed. So this is the timelines now for the progress on the Talabira project now.

And sir, the FGD orders for our current thermal, sir, for Ghatampur, which you mentioned, so when are we expected to issue the tender?

Yes, it is expected to be reissued very shortly. It should not take much time.

[Operator Instructions] As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you, sir.

Yes. So we have progressed in these 9 months as compared with last year, which last year was a setback because of the incidents. But as against the last 2, last year, we have made some reasonable growth also. And in the time to come, we are hopeful to achieve our targets, internal targets set for lignite and coal and power generation. And we are hopeful that we will be able to meet the expectations of the stakeholders. Thank you very much.

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