NTPC Limited (NTPC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to the NTPC Limited Q2 FY '23 (sic) [ '24 ] Earnings Conference Call, hosted by B&K Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajesh Majumdar from B&K Securities. Thank you. And over to you, sir.

Thank you and good evening, everyone. We are presenting today the Q2 FY '24 conference of NTPC Limited. The company is represented by Shri Jaikumar Srinivasan, Director, Finance; Shri Dillip Kumar Patel, Director, Human Resources; Shri Ramesh Babu V., Director, Operations; Shri Ujjwal Kanti Bhattacharya, Director, Projects; and Shri Shivam Srivastava, Director, Fuel. Congratulations, sir, on a good set of numbers. So without much ado, let us start with the opening comments from the management. Over to you, sir.

Thank you. A very good evening to all the participants. On behalf of NTPC, I, Jaikumar Srinivasan, Director, Finance, welcome all of you to the Q2 FY '24 con call of NTPC Limited. I repeat: I have with me Shri Dillip Kumar Patel, Director, Human Resource; Shri Ramesh Babu, Director, Operations; Shri Ujjwal Kanti Bhattacharya, Director, Projects; and Shri Shivam Srivastava, Director, Fuel. I also have with me other key members of NTPC's team. Today, the company has announced unaudited financial results for Q2 FY '24 along with half yearly results of financial year '24. The key performance highlights for the quarter and the half year ended 30th September '23 have already been disclosed [indiscernible].

[indiscernible]

NTPC had yet another remarkable quarter with a strong operational and financial performance. We have made significant progress on various strategic initiatives, including renewables. Regarding the operational highlights for Q2 and H1 financial year '23. During H1 financial year '24, NTPC has added 1,570-megawatt commercial capacity to its portfolio, out of which a capacity of 110 megawatts was added from the renewable sources. As on 30th September '23, the commercial capacity of NTPC stands at 57,838 megawatts on a stand-alone basis and 73,824 megawatts for the group as a whole. NTPC Group generated 212 billion units in H1 FY '24 as compared to 204 billion units in H1 financial year '23, an increase of 4%. NTPC's stand-alone gross generation in H1 financial year '24 is 179 billion units as compared to 176 billion units in corresponding previous period. During H1 FY '24, PLF of the coal stations of NTPC was 76.62%, as against a national average of 68.75%. For H1 financial year '24, 3 coal stations of NTPC Group, which are Rihand, Singrauli and Bhilai, were among the top 10 performing stations in the country in terms of plant load factor. During the H1 financial year '24, there has been lower generation, due to grid restrictions, of [ 46 billion units against 40 billion units ] in the corresponding previous year. There was a negligible generation last year [ to ] fuel supply, against 2 billion units in the corresponding period of the previous year. Regarding the status of fuel supply. During H1 FY '24, materialization of coal against annual contracted quantity, ACQ, was 95.80% as against 99.93% in the corresponding previous period. Coal supply during H1 financial year '24 was 113 million metric ton, including 4 million metric ton of import coal. The coal supply during the corresponding previous period was 112 million metric ton, including 10 MMT of imported coal. NTPC has registered highest-ever coal production of 16.06 million metric ton in H1 FY '24, with growth of over 83% as against 8.76 MMT in H1 FY '23. Cumulative expenditure of 10,095.34 crores has been incurred on the development of coal mines till 30th September 2023. Now I will update some of the financial activities of the company. Total income for Q2 financial year '24 is INR 41,517.87 crores as against INR 41,810.96 crores in the corresponding quarter of the previous year. On a half yearly basis, the total income in H1 FY '24 is INR 81,198.56 crores as compared to 81,536.63 crores (sic) [ INR 82,536.63 ] in H1 financial year '23. Profit after tax for Q2 FY '24 is INR 3,885.01 crores as against INR 3,331.20 crores in the corresponding quarter of previous year, registering an increase of 16.62%. On a half yearly basis, PAT is INR 7,951.05 crores as against INR 7,048.16 crores in H1 FY '23, registering an increase of 12.81%. Total income of the group for H1 financial year '24 is INR 88,774.66 crores as against INR 88,242.22 crores in the corresponding previous period. Profit after tax for group for H1 FY '24 is INR 9,633.53 crores as against the corresponding period -- previous period of -- PAT of INR 7,395.44 crores, registering an increase of 30.26%. During H1 FY '24, our subsidiaries have earned a profit of 1,117.36 crores as compared to 867.65 crores in the corresponding period of previous year, registering an increase of 28.78%. NTPC's share of profit in JVs has increased from INR 120.57 crores in H1 FY '23 to INR 1,082.25 crores in H1 FY '24. During H1 FY '24, we have accounted dividend income of INR 549.98 crores as against INR 640.94 crores during H1 FY '23. The regulated equity of NTPC as on 30th September 2023 was 81,498 crores on a stand-alone basis and 98,050 crores on a group basis. As regards funds normalization, in the current quarter, NTPC has signed term loan agreement of INR 5,000 crores with HDFC Bank. Average cost of borrowings during H1 FY '24 is 6.67% as compared to 6.22% in H1 FY '23. Regarding capital expenditure. In H1 FY '24, we have incurred a group CapEx of 13,203.60 crores as compared to 16,664.19 crores in the corresponding previous period. The capital outlay of NTPC standalone has been estimated at 22,454 crores for financial year '24. I would like to highlight a few other important issues. NTPC Group has a strong commitment towards renewable energy. We have already commissioned 3,314 megawatt of RE projects. Presently, 7,258 megawatt of RE projects are under construction. Furthermore, we have secured tender and bilateral tie-ups for another 10 gigawatt of renewable capacity, creating a visible pipeline of more than 20 gigawatt in the near term. MoU has been signed between NTPC Green and UPRVUNL for the development of RE projects in Uttar Pradesh. Similar MoU was also signed with HPCL-Mittal Energy Limited for the development of RE projects and green hydrogen derivatives. MoU was also signed with ONGC and OIL, Oil India Limited, for renewable energy projects to explore collaboration in areas of renewable energy, green hydrogen and its derivatives, geothermal, et cetera. As part of our overall energy security plans, we are actively considering awarding thermal capacity of 11.2 gigawatt by next fiscal. This is in addition to the 10-gigawatt thermal capacity already under construction for the group. Furthermore, to have greater fuel security, we are enhancing our coal mining capacity as well. A business transfer agreement for transferring mining assets from NTPC to NTPC Mining Limited, a wholly owned subsidiary of NTPC, was signed on 17th August '23 at New Delhi. Also NML [ participated in the ] auction process of commercial coal blocks notified by Ministry of Coal and was declared as preferred bidder for North Dhadu East coal mines having an estimated geological reserve of 439 million tonnes. Going higher on generation, lowering GHG intensity remain our motto for environment management and drives our efforts to comply with new environmental norms. We have taken significant steps to control SOx and NOx emissions. Over the next 3 years, we have planned to commission FGD systems for our entire operational and under-construction capacity, ensuring a substantial reduction in SOx emissions. With respect to ash utilization. 10 NTPC and JV station achieved 100% ash utilization. NTPC average ash utilization is 77.86%. [ 2,700 million tons ] of ash was transported in containers on BLC rakes from Khargone, which is the first of its kind in India for ash transportation. Lastly, as a CSR initiative, NTPC has adopted archery sports in India, with an objective of scouting for talent in remote part of India and nurturing them through coaching camps to enhance India's presence in the sports internationally. The Indian Archers have bagged 9 medals, 5 gold, 2 silver, 2 bronze, in the recently held 19th Asian [indiscernible]. Also the India archers shot their way to second rank by bagging 4 medals, 2 gold, 1 silver, 1 bronze, in the archery world cup stage held in Antalya from 18th to 23rd April '23. NTPC has been recognized as one of the world's best employer 2023 in the Forbes world best employer list 2023. It ranked 261 out of the top 700 companies in the world ranking and is the only Indian PSU [indiscernible].

[indiscernible]

NTPC Limited has been conferred with Asia's best employer brand award 2023 at the Asian -- Asia's best employer brand award held on 17th August 2023 [indiscernible]. NTPC bagged 5 awards at the fifth edition of CII digital transformation awards hosted by CII-Tata Communications Centre for Digital Transformation. NTPC has been awarded technology transfer award 2022 in generation sector by Electric Power Research Institute, EPRI, U.S. for incorporating assessment and benchmarking tool for flexible operations. These are -- these were some of the key highlights I wanted to share before we begin the question-and-answer session, so -- and I now hand over to B&K Securities for further proceedings [indiscernible].

[Operator Instructions]

Yes, but there are some interceptions. We could hear some discussions. Can you -- it happened last time also. There is a lot of disturbance. Somebody is talking in-between. Can you just check it?

Yes, sir. I'll check on that. [Operator Instructions] Excuse me, sir. There is some background disturbance from the management line.

Management line.

Yes, sir.

[indiscernible]

Okay. We'll have to deal with this. Okay, fine. Carry on. Are you not able to hear that?

Okay, sir -- sir, we can hear, but -- we are able to hear it.

[ Yes ]. Okay.

The first question is from the line of Mohit Kumar from ICICI Securities.

My first question is on the thermal coal pipeline. So you just mentioned that you are looking to award 11.2 gigawatt. How much is coming in standalone? How much is coming in [indiscernible]? And are we looking to award -- and how much you're looking to award in this fiscal. And if you can name those power plants, it will -- very helpful.

Yes, 11.2 gigawatt which we mentioned. I'll just name the projects. This will be Singrauli 3, 1,600 megawatt, which is expected to be tendered out in the Q3 of the current fiscal; Sipat 3, again the same period, 800 megawatt; Darlipali Unit 1...

[indiscernible]. In fact, we are along -- we are going to add 11,200 megawatt awards by financial year '24, '25, Q3. And 50% will be standalone and 50% will be [indiscernible]...

And does this include Lara, [ by any chance ], sir?

Sorry to interrupt, sir. We will reconnect your line, as there is a lot of background noise coming [ from you ]. [Technical Difficulty]

Yes. I'll just respond to this question about the new thermal capacity being planned. Out of the total 11.2 gigawatt that is planned, 50% will be coming from NTPC standalone. And the remaining 50% would be through joint ventures, subsidiary. And this will be tendered out progressively over the next 12 months, we can say.

Sir, does this include Lara, or is it excluding Lara?

Lara has been awarded. Lara [indiscernible] awarded already [ thus far ].

Understood, sir. My second question is, sir, how do -- H1 was slightly bit muted in terms of renewal bidding. How do you see the renewal bidding pipeline and opportunity which [ probably ] will conclude in H2 and provide us -- a greater opportunity, yes, for us?

Mr. Mohit Bhargava, our ED RE and NGEL CEO, will take this question.

I'm not very clear what you want to know because the pipeline has already been disclosed by Director, Finance.

Sir, my question was, I guess, sir, on the bidding pipeline. So because, the H1, I think bidding was slightly muted for renewables by the -- all the agencies. My question is how is the pipeline looking like at this point of time. And how do you expect this to -- the -- in terms of gigawatt, to close by end of fiscal?

So as far as the bidding pipeline and directed by the Government of India is concerned, I think about [indiscernible] have already been announced by the agencies, including about 5 gigawatts from NTPC. And the target is that all the 50 gigawatt would be -- bid completion will be done by the end of March. So that's how the things stand. Because now all the various guidelines, bid document guidelines, the pooling guidelines and all of those, have been issued.

Understood, sir. My last question: Sir, what was the regulated equity at the end of H1 for the standalone and consol?

The regulated equity at the end of last quarter was 81,498 crores on a stand-alone basis.

Anything of consol, sir? Is it available or...

Consol is 98,050 crores.

The next question is from the line of Apoorva Bahadur from Goldman Sachs.

Sir, can you share the fixed costs under-recovery figures for 1H and Q2?

The fixed cost under-recovery -- for Q2 you want -- or Q2 is 381 crores.

[ Okay, fair enough. I think that's confirmed ]. Sir, I wanted to understand the position of coal inventory. I mean what we can see from CEA data is that it is a bit tight. How do you see this panning out going ahead for the rest of the year?

You'll have to repeat. I -- probably the line is not very clear. We are struggling to hear you a little bit.

Sorry. I hope I am audible now.

Slightly better, yes.

Yes, sir. Can -- I wanted to inquire about the coal inventory at power plants. There has been some tightness, as per the CEA data. How do you see the rest of the year panning out, especially for our non-pithead power plants?

Right now the coal stock is around 8.5 days at NTPC stations, although the pithead is -- non-pithead stations, the coal stock is less. Going forward, the -- generally, [ coal receipts would ] increase from now onwards. So yes, it is a little tight, but as -- we expect the coal stocks to pick up from end of this month onwards [indiscernible].

Yes.

Go ahead.

And sir, sorry. The scheduled maintenances for all our coal plants have be done. Or something is due in Q3 as well.

Yes, something will be due in Q3 and Q4 also because we have a lot of units. So we -- except for the government directive not to take [ units under overhauling ] in the month of April and mid of May, we have started taking overhauling every month. And it's going up.

Okay, sir. So by the end of the year, the total fixed cost under-recovery [ should reverse some ]...

We should be near around 200 crores.

The next question is from the line of Nikhil Nigania from AllianceBernstein.

My question is on the renewables side, wanted to understand if there is any update on the investment envisaged in the renewable business and plans to list the renewal business separately.

Do you want the projected investment in the renewables?

No, sir. Sir, there was a plan to get an investor, separate investor, into the renewable portfolio; and then list the renewable business separately as an entity. If there's any update on that.

See we have broadly some plans for unlocking some value either by way of a stake sale or an IPO route. However -- we are working towards that, but as you know, that we have a pipeline of renewable projects. [ 3 ] is already operational. [ 6.2 ] is under construction, and another 11 gigawatt is under different stages. So we'll be working on that, and by 1.5 years or 2 years, there should be a substantial capacity on ground. So when we reach a certain critical mass, we will time it. So right now we are working towards that, but we'll be exploring the market, looking at the conditions and deciding on the timing.

Got it. Understood, sir. Sir, the second question I had was storage, on storage. There is a lot of news around plans to set up pump storage, and the government is keen as well. Wanted to understand if there is any update on the storage front. There was a tender out by NTPC as well on storage, so any updates you can share on plans on pump storage or otherwise?

On the pump storage, I will give you a snapshot. Government had identified, government of India, last year, 11,550 megawatts and across Maharashtra, Andhra, Tamil Nadu and Karnataka; and identified NTPC as possible developer, subject to government of that particular state [ agreeing to ]. Out of that 11,550, we have gone into the PFR and also gone for acceptance or dropping some of the units. So we are now targeting half of that, 5,300. Meanwhile, we have self identified other 8,500 megawatt of capacity, Gujarat, Himachal, [ Meghalaya ] and Chhattisgarh and Madhya Pradesh. And feasible capacity is 100% of that, so if we add together, today we have around 14,000 megawatt of pump storage capacity ready to be signed with the state governments at different stages; and we'll immediately start building up.

That's helpful, sir. Sir, any visibility on time line? How long does this take, [ when there will be ] approvals and then construction? So how long would we start seeing on-ground progress on this tentatively?

I can tell you for a typical pump storage it typically takes 2 to 3 years for the initial work because, like any hydro, there are a lot of studies to be carried out. And the construction time will be on the order of -- it can be 3.5 to 4.5 years, depending on the site and depending on the [ availabilities of ] off river or on the river et cetera. So from today, if you take a most conservative view, it will be on the order of, say, 7 to 8 years. And if it is most optimistic, it can be on the order of, say, 6 years. That's the position.

The next question is from the line of Abhishek Maheshwari from SkyRidge Wealth Management.

Am I audible?

Yes.

Yes. So just I have only one question. It's regarding understanding your debt, your borrowing strategy. So sir, as we understand it, currently you're getting more than enough cash to sufficiently pay off all your CapEx expenses. And I understand that all the power projects are formulate basis -- or PPAs are signed on formulate basis, so a mix of debt and equity, but is it necessary for you to take that debt to finance your project? Or can you finance it through your internal accruals also? So just wanted to understand. Do you have a planned peak debt for your books, or is it something that will keep coming on as you take new projects?

So right now the company's debt-equity ratio is very comfortable. And as long as we are -- we keep investing on thermal side, which is still a regulated business on a cost-plus basis, it benefits us to put 30% permissible equity over there because it will fetch us a 15.5% returns, isn't it, but as far as other business, nonregulated business is concerned, that will depend on the resource position. Generally on the renewables side, we go for 80-20 [ combination ], but fact remains that in a regulated business, even if you put more equity, it is -- it will be treated as a notional debt. And you'll be getting only the weighted average rate of borrowings, so it doesn't pay you to put more equity into the regulated business.

Yes. That's why I was asking. I meant it majorly for renewables only because that's the strategy going forward, right? So it's like the bulk of expense, bulk of our CapEx will be going into renewables only. When -- does it make sense to finance it through your own selves rather than relying on debt...

Not very clear. Can you distance yourself from the mic a bit? Because it's still echoing.

Okay. I'm sorry. So I'm [ saying ] I was majorly talking about renewables only because -- since bulk of the CapEx is going to go into renewables, then does it make sense to finance your renewable projects through your own internal accruals only rather than relying on the debt? Because you're generating enough cash as it is, right? And you're not looking at regulated businesses going ahead, right, regulated business.

No. We will have a judicious mix of that, debt, equity. Nobody will ever finance projects only through equity, so -- because we have other commitments also. We have other subsidiaries, JVs also. We'll be looking at new businesses, so from that point of view, whatever [ is debt-equity ] healthy mix, we will go for a healthy debt-equity ratio.

The next question is from the line of Subhadip Mitra from Nuvama.

I got disconnected from the call earlier [indiscernible] already answered this. Will you please help us with the adjusted PAT number both for standalone and consolidated for the quarter?

Yes, we'll share with you the adjusted PAT. Adjusted PAT for Q2 financial year '24 is 3,497 crores, which was 3,601 crores in the last financial Q2.

So this is for the standalone.

This is for the standalone. Consolidated is not ready with me right now. Probably our team will share it with you [ later on ].

Understood. Secondly, with regard to the ordering of the thermal plants which are currently in the pipeline post Lara, if you can help us with the schedule of how much and which projects you anticipate to get ordered out on the BTG side, let's say, over the next 6 to 8 months or a year.

[Indiscernible]

Yes, sir, the BTG awards, the awarding...

[indiscernible] Singrauli 1,600 megawatt and Sipat 800 megawatt, Singrauli by December '23. And Sipat is by January or, maximum, February '24. And Sipat's is slightly delayed because of [ election ] which has been announced, and everything is on standstill there. Otherwise, we would have completed in December itself. For next phase is Darlipali 800 megawatts. That will come in June '24. And then Meja 2,400 will come in September '24. Telangana...

Meja, by when, sir? Sorry. I missed that.

September '24.

[ Okay ], sir.

And we have another 5,600-megawatt capacity lined up: Telangana Phase 2 [indiscernible] megawatt. Obra D expansion, 1,600 megawatt, that will be done by NTPC through Meja Urja Nigam Limited, our JV with UP. And Anpara, another 1,600-megawatt expansion which will also be done through our JV with UP, Meja Urja Nigam Limited. These will be done progressively in '24, '25; and definitely by H1 of fiscal '26. That's our target.

Okay. Perfect. That's very helpful. Lastly, on the renewables side given that we have been able to expand our portfolio so well to 20 gigawatts over the last few months. Is there any target of what kind of numbers you would like to reach in terms of a closing portfolio, let's say, by end of this fiscal or next year?

Presently, we have 3.3 gigawatt commissioned capacity by -- based on projects on hand which have been awarded, so by financial year '26, we are expecting to have 15 gigawatts. And we have a long-term target of 60 gigawatt by the end of financial year '32.

Understood. So what you mean is that you are expecting to commission 15 gigawatt of renewables by FY '26. Is that correct?

That is right because around 11 gigawatt is under construction. 9 to 11 gigawatt is under construction...

I understand. And in terms of growing the portfolio, sir, beyond the 20 gigawatt, would you have any rough target, let's say, by end of FY '24 or '25, that you are anticipating the 20 gigawatt to maybe grow to, let's say, 30 gigawatt by end of next year or something like that? Any such target?

What do you want to know, Subhadip?

Sorry...

What do you want to know, Subhadip? You already know there's a bidding pipeline of close to 50 gigawatts going to happen every year. So we'll obviously try to win some bids there. We're also talking to a couple of [ C&I guys ], but obviously we can't give you a number right now...

Understood, sir. That answers [ the questions ].

The next question is from the line of Gaurav Lohiya from Bowhead India Fund. The line for Lohiya is disconnected. The next question is from the line of Nikhil Abhyankar from ICICI Securities.