Power Grid Corporation of India Limited (POWERGRID) Earnings Call Transcript & Summary

Good morning, everybody. Thank you for joining us. for the Q2 and H1 FY '22 post result Virtual Meeting of Power Grid Corporation of India Limited. On behalf of ICICI Securities, we would like to welcome the Power Grid senior management led by Mr. K. Sreekant, Chairman and Managing Director. Thank you, sir, for sparing your time from the senior management, along with Chairman, we have; Mr. Taj Mukarrum, Director Finance and CFO; Mr. Abhay Choudhary, Director (Projects) and other senior members of the Powergrid team. I would like to hand over the floor to CMD sir, who will give a detailed presentation, post which we can have a Q&A session. Thank you, and over to you, sir.

Thank you. Please upload the presentation. A very good morning to you all. I welcome you to the call today post our half year fiscal results, which were announced yesterday. I will take you through a brief presentation, providing comments, highlights, and the outlook. Next, please. Yes, next. As you are all aware, we are in Maharatna CPSE, government owns 51.34% of our shareholding. We have 170,000-plus circuit kilometers and -- of transmission lines and 262 substations with more than 4.5 lakh MVA transformation capacity. In terms of the interregional capacity, we have a share of more than 85%. Our interregional capacity owned by us is about 95,000 plus megawatts. Next. This half year, we have done a project execution of INR 13,275 crores. This is by far, I think, one of the largest in the first half in the recent times. Previous quarter, we did INR 5,642 crores. And this quarter, we have done INR 7,633 crores. In terms of our CapEx against a target of INR 7,500 crores for the current year, we have done INR 3,695 crores by the half year. As we speak, we have crossed more than 60% of the target. And we are trying to expedite the CapEx and reach somewhere around 90% by the December end. In terms of project commissioning, we have done 2,100 circuit kilometers of transmission lines in the half year. Several of the TBCB projects have being completed, the Vindhyachal-Varanasi transmission system has been completed, Fatehgarh transmission system. The first intrastate transmission, we have taken up Jawaharpur-Firozabad, that has also been completed. Medinipur-Jeerat system, which is being implemented in the West Bengal. Most of it is completed except for one line, which is from Jeerat to Subhashgram, which is under construction. Otherwise, the rest of the elements have been completed. Other lines include Ajmer-Bikaner for the renewables and the AC system for the Raigarh-Pugalur system, which was holding up the entire commissioning, that we are very happy to say that has been completed in this quarter. The Pugalur to , 400 kw double circuit line. And with that, we have been able to complete the entire Raigarh-Pugalur transmissions -- Pugalur-Thrissur system in this half year. In terms of the transformation capacity, the Jeerat substation has been completed, then Raigarh-Pugalur Bipole III has been completed. And Fatehgarh-II and Bhadla II transformation capacity of 3,000 MVA have been added. So all in all, we have added 3 new substations in this half year Fatehgarh and Bhadla for renewables and Jeerat for system strengthening in the Eastern region. And interregional transformation -- interregional capacity addition has been 5,700 megawatts 1 pole of Raigarh-Pugalur plus 4,200 megawatt at Vindhyachal-Varanasi system. Now in terms of project completion, I also want to add that post the half year, we have completed the Raigarh-Pugalur system. And on October 25, it has been declared commercial. And we have been able to complete the entire system of the Raigarh-Pugalur of 6,000 megawatts. Most noteworthy point is that this system has been commissioned during this pandemic period progressively overcoming many ROW and also challenges in terms of floods, and I think we -- also river crossing, we had issues in Krishna and Tungabhadra. All those have been overcome by showing very strong project execution skills and the entire 6,000 megawatt has been progressively commissioned in the last 1 year. If we now turn to the operational performance, our availability has been 99.82% in this year, half year and the trippings also are at 0.22 per line. These are in line with what has been in the past year. Now looking at the financial performance, I'll cover this very briefly for you have already got the results. And our turnover for the half year on a consolidated basis is INR 2,906 crores, up by 6% from INR 19,648 crores last year. This is the total income. PAT has been INR 9,375 crores, up from INR 5,143 in the previous half year. Next. Transmission charges income has gone up by 9%. Consultancy Services are up by 61%. I'm talking of the consolidated results. Telecom income is down, that is because of the one-off issue we had for the settlement with one large customer in the first quarter. Other income is down predominantly because of lower surcharge on the back of better realizations and dividends received and impact briefly of the monetization of 5 assets. Thus overall transmission -- I mean, total income has gone up by 6%. Operating expenses are in line, up 1% and gross margin is up 6% total EBITDA. Overall, we have the profit after tax, which is up by 85% on a stand-alone basis and 82% on a consolidated basis, primarily riding on the InvIT profits which were booked in the first quarter. But if we remove that also, I think this will be approximately 9% to 10% growth has been there in the profits. Next. Some of the key financial performance indicators. Gross block is now 243,000 (sic) [243,647] work-in-progress is about 11,195 watts, a significant reduction on the back of commissioning of Raigarh-Pugalur and many other systems. The debt equity has pared down to 64:36 and return on net worth, not annualized is 12.2%. EPS, this half year has been 13.51 stand-alone basis. Next. Some of the key numbers, which we would like to seek from us, surcharge as I mentioned, has significantly come down compared to last year from INR 220 crores to INR 89 crores, better realizations. Incentive is up INR 120 crores to INR 136 crores, consistent operational performance is the key for this. Our interest from subsidiaries and JVs are slightly down at INR 204 crores on the back of InvIT monetization. Dividends are flat from the JVs, subsidiaries lesser because the 5 operating assets are being monetized. Trade receivables are lower, and they are on a higher revenue booking tad lower. And in terms of other numbers, that's for your information. If we now turn to the segment of telecoms and consultancy, Telecom income has been lower because, as I mentioned in the first quarter, we had to book certain rebate offered to a large customer for the past year tariffs. And the network availability is 99.99%, which is indeed very, very high. And in terms of our consultancy income, there has been a significant jump because of the progress in the Northeastern projects where we are doing for the government of India consultancy assignment. So there has been a significant jump in the consultancy income. There have been many new orders and expression of interest, which are awaiting finalization. Next, present year, the commercial performance, you can see from Q1 FY '21 to Q1 FY '22 and then Q2 FY '22, there has been a significant reduction in the outstandings from INR 7,080 crores. We have come down to INR 4,953 crores from Q1 to Q2. These are roughly about 45 days of receivables. We have outstandings from J&K, Tamilnadu, Uttar Pradesh, which are significant. But otherwise, the realizations have been pretty good. Often in between, there will be some movements of accumulation. But then, by and large, the pace of realizations has been good, and we have been able to reduce our overall receivables significantly. Yes. Going forward, we have work in hand of approximately INR 27,500 crores, ongoing projects and new projects and TBCB projects, which are in different phases of execution. And we believe that there is a good potential for the new orders to come in. We got -- next. Briefly about the interstate transmission system. There are about roughly INR 26,500 crores of projects under TBCB, which are expected shortly. And we are also under the revamp distribution scheme, looking for opportunities for investment in smart metering, where the target is 25 crores meters by 2025, and [indiscernible] crores by 2023. So we are in discussions with many states in how we can get into this opportunity. There is also a distribution infrastructure augmentation. I mentioned in the last call that post this, we will be initiating discussions. Discussions are -- we have had one kind of round of discussions with many states. Significant interest has been evinced by the states and retail formulation is being discussed with them. And hopefully, by the end of this fiscal, we should have some concrete shape in this regard. We are also looking to the states for incorporating JVs, for an improvement of the [indiscernible] and above transmission system, and we see significant traction there. Another important revenue we see is the battery energy storage system, where one vendor is expected shortly for a 1 gigawatt about storage. And we are looking at it as a complementary to the transmission business and look to make a good investment opportunity there. International business, besides the consultancy, we have progressed in the -- one cooperation agreement we have signed with the Africa50 for a transmission system in Africa. That has seen some progress. There has been in-principal agreement with the country. And now we are entering into a development agreement to take this forward. Hopefully, by the end of this fiscal, there will be better clarity in terms of the final approvals and documentation. In the telecom space, we are very happy to say that because of the high availability of the network, we have received an in-principle approval for a large order from a government department to set up a network for them with 1,000 locations connecting a network, 1,000 locations, riding on our broadband capacity. And we see revenue potential of INR 750 crores over the next 10 years. We have approved investment for augmenting the network by 6 terabytes and it will be involving an expenditure of nearly INR 30 crores odd, and that will be a big investment. In addition to that, we are also looking to invest in data centers. We have already started the process, a petition is being filed with the CERC to seek approval of leasing a part of the land at some of the substations for setting of data centers, technical consultant bids are under evaluation or have been invited and we expect to invest into this business going forward. The separation of telecom business into a subsidiary, also there have been steps we will be very shortly finding the application all the -- for the registration of the company. And then the further in terms of agreements and separation of the assets through a slump sale route will take place. So by the end of this year, we expect to see the separation of the telecom business into a separate company. and then it will thereafter take up this international long-distance business as well. Next. Last slide, we got the recognition from the S&P Global Platts top 250 energy company ranking. We continue to be the fastest-growing electric utility for the 8th successive year and the 9th fastest globally. We have been shortlisted as the finalist award of excellence in power segment and also the InvIT transaction is shortlisted for the deal of the year in the financials category. Dun and Bradstreet PSU Award under the power transmission category. There are some of the notable awards we have received in this quarter. I pause here, and we look forward to your questions. Thank you so much.

Thank you, sir, for the detailed presentation. We will now begin the question-and-answer session. Divya from ICICI will be coordinating for us along with me. Thank you, Divya and over to you.

Thank you, Rahul. [Operator Instructions]. First question is from the line of Mohit Kumar, please go ahead Mohit.

And congratulations on a good set of numbers. First question is the first half has been pretty lukewarm in terms of bidding, I believe there's hardly any bidding. We expect all this INR 26,500 crore of bidding to happen in the next 12 to 18 months. And the related question is that does the recent modification by the mixture of power will improve the identification of transmission projects, thereby enabling a higher growth as far as industry is concerned? That is the first question, sir.

Yes. Definitely, the modifications in the approval process for the new schemes is a very welcome step. It will speed up the process to bring the bids to the market, no doubt about it. And as far as the schemes are concerned, I think they will come progressively to the [Technical Difficulty] market, and we do look forward to participation in that.

The numbers prove that the bidding activity to go up to INR 20,000 crores, INR 25,000 crores as we move into FY '24 and FY '25?

Sorry, I couldn't get your question.

Sir, my question is that do you expect the bidding activity to improve up to INR 20,000, INR 25,000 crore per annum as we move forward? Is that a fair expectation?

Yes. See, the bidding activity will significantly go up. There is a focus on building a transmission for the potential growth in the renewable capacities. So definitely, there will be a pickup in the bidding whether it will be the number you are indicating or what could be the number, I'm not able to exactly confirm that. But yes, there will be a speeding up in the bidding for renewable energy transmission systems.

Okay. Sir, secondly, sir, on the investment in distribution companies. Do we have something in the mind that how much we are willing to invest as debt or equity? And is there a number which you're looking at to invest in FY '23 or FY '24? Some broad numbers or some broad indication that the capital allocation will go towards this particular segment?

See, these are very early days to give any number. We are open to invest. And if we look at it, we had, in the past, invested approximately INR 20,000 crores to INR 22,000 crores annually on the ISTS system. And that is the kind of potential we can easily achieve and that is all we look to kind of reach those kind of levels. So if we get even INR 60,000 crores of investment opportunity in these companies, we will be able to handle it very easily. So there is a significant opportunity there, particularly in the smart metering as well as in the distribution -- I mean the intra-state transmission infrastructure. which we are trying to take up with the discounts and the state utilities and invest there. Number for our capital allocation, resource consent is not there. It is the opportunity side where we can come to an understanding with the discounts of state utilities. That is the major and concern or the criteria.

Sir, lastly, is the proposal to move the cost plus assets into the InvIT platform?

See, there is -- immediately, there is no such proposal. But we are open to evaluating that as well. In the national monetization pipeline, we have a target for INR 45,200 crores. We have already done INR 7,735 crores. Next year, we target about INR 7,500 crores. As of now, we have enough TBCB assets to do the monetization, which we believe is easier. Having said that, we are open to looking at the RTM assets if required or if there is a good opportunity to monetize.

Next question is from the line of Lavina.

Sir, just a little bit more. I just wanted to understand a little bit more on Ladakh project. Where is it at this stage? And how are you using it right now?

We have already submitted the detailed project report to the government. It is under consideration of the government.

Sir, size-wise, it remains approximately the same. What has been discussed in the past or still?

Next question is from the line of Sumit Kishore.

My first question is in the previous presentation for Q1 result, you had talked about [ INR 108 billion ] opportunity in terms of immediately upcoming projects, which have increased to INR 26,500 crores. So you had given a breakup of intrastate and interstate back then. So what is the breakup now? And what has driven the increase over the last 3 months?

Okay. I'll just get to these numbers. There has been some improvement in our renewable energy systems. I think the Khavda is one which has been now formulated. That is one addition. And the breakup between intrastate and interstate, I'll give you -- I think, I'll come back to you on this. Let us take the next question. I'll come back to you on this.

What is the size of Khavda?

Khavda is I think, 24 -- 27 gigawatts of total renewables. And potential for this is -- there are several elements in the Khavda system, okay? So I think it is [indiscernible] roughly INR 4,000 crores, INR 4,500 crores is there on Khavda system.

We will wait for the other numbers. My second question is regarding the business model that Power Grid would be following as far as margins are concerned?

Yes. Just a minute. I think this entire INR 26,500 crores which we are talking of is primarily interstate opportunity set. Okay? Intrastate is only about INR 500 crores.

Okay. So we should read that the increase which has happened in the last 3 months is mainly for the renewable and transmission project?

That is right.

And the time frame over which you get awarded is 6 months or 12 months?

There should be coming anywhere between 6 and 12 months. Some of it will be linked to the renewables also.

Okay. So my second question is regarding investment that you are planning in smart meters, what would be Power Grid's role there? And in the second element of the revamped power reform scheme, what is going to be Power Grid's role? And what is going to be [Technical Difficulty]?

Sir, in the renewal -- I mean the smart meters, the business model is one of TOTEX where we will be doing the investment and also operation of the system for the next 7 years or 8 years. And we intend to invest into the entire smart metering system, the metering data management system and provide those services to the utilities on a per meter per month payment basis. So this is the business model we would like to explore.

And what is the expected return?

These are yet to be -- because some of them can be under the TBCB model, and some will be hopefully through an understanding with the utilities on MoU basis. We are exploring both the opportunities. And the returns will be, I mean, when we would like to target what is there in the MoU route and RTM basis, but it will again depend on the final negotiations we will have with the utilities.

I would request participants who have asked their questions to or put their hands down so that we can assess the question queue. Next question is from the line of Subhadip Mitra.

So my question is with regard to the TBCB pipeline. So while we are looking at about INR 26,000-odd crores of projects which are currently in the bidding stage, how do you look at the landscape, let's say, over the next 2 to 3 years? So is there a basket of maybe INR 40,000 crores, INR 50,000 crores more projects which can potentially come to the TBCB pipeline, whether it's for renewable connectivity or otherwise?

Look beyond this, I think the schemes are still under formulation and deliberation . So it will be very difficult to kind of give a number at this point of time.

Understood. But is there any ballpark figure which is currently under evaluation?

No, there is a discussion around preparing a long-term road map for the completion to take it up from current levels to the level of 500 gigawatts by 2030 or 450 gigawatts as previously. So when that kind of a scheme is formulated, we will be able to come to a more clear assessment. But if we look at the infrastructure, particularly national infrastructure, talks of about investment in the transmission sector by 2025. And both inter-state as well as intrastate. And beyond that, I think schemes are still under formulation. There will be -- looking to the growth in renewables and also kind of setting the pace of growth of renewables. So it is a -- and it will be too early to hazard a case at this point in time.

Understood. Understood. So on this point, what you mentioned that there is a INR 3 lakh crore investment in transmission expected by FY '25. So roughly how much of this would have already gotten spent out of this INR 3 lakh crores in your estimate?

See, I can tell as far as Power Grid is concerned, because the rest of it is -- I don't have that number. Power Grid planned for INR 65,500 crores. And up to this point, we were to spend roughly INR 35,000 crores, and we are on track for the end of FY '21.

Okay. Understood. Secondly, the investments and partnership with the states, whether it's on smart meters or infrastructure. Would it be possible to again get a sense of what would be the rough bifurcation between the CapEx on smart meters and other infrastructure that you would be looking at?

Smart meters, we are very, I mean, contemplating to come out with some large bids to get a sense of the market and be in a position to offer competitive prices to the discoms. Roughly INR 5,000 to INR 6,000 per meter is the kind of investment. So we would be interested to target at least 2 crore meters in the next, say, 4 years. Out of the 25 crore meters we thought of, but we would like to target at least INR 2 crores, and that would require investment of say INR 10,000 crores to INR 12,000 crores over the next 3 years or so. So that is the kind of, I mean, ballpark number, I can say. But again, it is a function of the acceleration in the process by discoms and adoption issues. Otherwise, we are very keen to do this business.

Understood. Understood. And barring smart meters on the rest of the infrastructure build up where you would be talking to discoms. Would there again be a similar ballpark number that you're targeting?

Yes.

So assume another INR 10,000 crores to INR 12,000 crores that could potentially come from that?

Yes, it should potentially come from that. Because there are many schemes and then we kind of growth renewable capacity or the conventional capacity takes place. To absorb that, there needs to be a significant investment even in the intrastate or the distribution infrastructure. So we believe there is an opportunity out there. We have already initiated a dialogue, and we will take this up much vigorously in the ending part of the half year.

Next question is from the line of Puneet Gulati.

Yes. First question is with respect to the INR 7,500 crore CapEx that you talked about in FY '22, how should one think about this CapEx number going into FY '23?

Similar or maybe with a slight upward bias. Maybe we can think of INR 7,500 crores to INR 10,000 crores.

But I think this INR 7,500 is largely for RTM project, right? We are expecting more RTM projects?

No, it is not so.

Understood. And second, when you talk about the smart meter opportunity, is it something similar to what probably ESL JV is also partner?

That's right. The ESL, where we have increased our stake to 33% as a joint venture where it has a 49% stake. They are doing smart metering into smart. That currently, the implementation partner for the ESL, but on their own also they are participating in bids. But the opportunity set out there is so large that there is space for both the ESL joint venture as well as Powergrid to do the business.

And on the battery storage side what kind of opportunities you see and how large tender do you foresee?

We would be interested in large tenders. We have created a separate group within the company to evaluate these battery storage systems and participate in tender. CEA has also given, I think, 27 gigawatt kind of a storage capacity requirement going forward. And more renewables will require investment in storage also to optimize the transmission network created. And therefore, we believe there is an opportunity there for significant investments.

What kind of technology are you going to adopt for this battery storage? Is that finalized yet?

No. We are not, I mean, specific on any particular technology, but I think the lithium-ion battery storage system is most common and well accepted for large systems. So that is what most likely to be considered. But we are not having any particular preference.

Next question is from the line of Anuj Upadhyay.

Sir, need one clarity. In your opening remarks, you mentioned that Power Grid signed close to INR 60,000 crores of investment opportunities in smart metering and intrastate distribution network development. But while answering to one of the earlier questions, you mentioned that in the smart metering, we are eyeing INR 10,000 crores to INR 12,000 crores of investment and similar level of investment in the distribution network as well. So what about the balance thing, sir?

No, I don't think I said the number in my initial remarks. This is the number which I have given you are the kind of investment sets which we can look for as far as market is concerned.

It is a size you said in [3 lakh].

[3 lakh] was -- of which we are eyeing INR 60,000 crores is what you had mentioned.

INR 65,500 crores.

INR 65,500 crores is the NIP number, which I mentioned. In reference to smart meters, I have not said. See in the presentation also, we have shown 25 crore meters, which will require an investment of roughly INR 1.5 lakh crores.

So overall INR [3 lakh] okay. Fair enough.

That's right.

So we are ring some around INR 20,000 crores, INR 25,000 crores of total investment across both the distribution network and smart metering. Is that correct, sir? Over the next 3 to 4 years?

Over next, yes, 3 years. Yes.

Fair enough Sir. Sir could you throw some light on the issues related to the power evacuation in Rajasthan because of the GIB issue? What is the current status -- And what quantum of project actually has been stuck because of the same as of date?

The -- we won 5 projects last year. Of the 5, we got licenses for 2, the other 3 licenses are yet to be received. The issue came up because of the GIP order. There has been a committee constituted with the Supreme Court, which is to recommend overhead lines after considering the technical issues and all. Our lines are primarily 765 kV banks, and these are not possible to be underground. So we have made a representation to this committee. And the committee is currently deliberating this and it will be, I hope, very quickly resolved. Because 765 kV AC transmission, there is no way it can be done through underground cabling, -- So we expect a resolution very quickly. And I think roughly INR 5000 crores to INR 6000 crores projects are currently held up because of this.

This INR 5000 crores to INR 6000 crores is our project, sir?

Yeah, TBCB projects. We are progressing in terms of supplies, engineering, although it is taking place, but execution on the ground will pick up once these issues are clear.

Right, sir. And these are part of our work in hand, the INR 26,500 crores readymade?

That's right. But I believe this will be very quickly settled because it is not possible that such a large area of -- none of these lines are going through the critical areas. These are all potential areas. It is not part of the priority area also. So I don't think there should be any issue there.

Fair enough. Sir, lastly, on the capitalization target for the year, current year?

We stand by what we have told in the last call as well. It will be somewhere between INR 17,000 to INR 20,000 crores. We have done, I think, nearly INR 16,000 crores plus already post September if we included. So we stick to that number.

Next question is from the line of [Suveen Tan].

I'd like to ask about the inventory storage project. I understand that globally actually LCOS is not at parity yet. So I'd like to understand how you plan -- what is your cost base and how you plan to make a return from that? Are these projects under some form of a regulated return? Or will they be kind of TBCB and therefore, what do you expect of the tariffs and your costs?

See, the -- you are very right. The costs are not yet settled, and they have to make economic sense when viewed in totality. Typically, these are going to be invested to make renewable power kind of round the clock path, so -- and better set the transmission system. And therefore, overall economics will drive the investment in this area. And most of it, we believe, will come through TBCB route. So it will have to be seen what kind of competition, what kind of -- because a large number of players are interested in this. And battery storage is one which is of interest to a wide variety of segments: Generation, distribution, transmission, and even outside the current electricity value chain, they are also looking at this. So we expect a very strong competition. And it is too early days to talk in terms of what kind of investment potential and what kind of returns we can see there.

Next question is from the line of Ajinkya Bhat.

Sir, 2,3 questions from my side. And number one, on the renewables evacuation capacity, you mentioned Khavda location where you mentioned 27 gigawatts of evacuation and INR 4,500 crores potential investment requirement. If I apply the same benchmark to the total INR 26,000 crores of projects that use opportunities that you see as of now, that can potentially take care of evacuation worth about 160 gigawatts, which probably could be sufficient for next 5 or 6 years. Would that be the right assessment, that once these projects are ordered out, we might not see another bout of investments for another 5, 6 years for renewables evacuation?

I don't think that is a very fair assessment because I don't see how you reach to this conclusion?

Sir, you mentioned 27 gigawatt of [indiscernible] INR 4,500 crores...

No, no, these are being prepared in phases, okay? So I don't think this is -- your estimate is not right because it is not that for the entire 27 gigawatts this has been prepared. And as far as the -- I think these are the schemes which are being envisaged for the next 2, 3 years, generation, which is likely to come up -- It's not that after this -- or the next 5 years there will be a holiday. No, it's not like that.

Okay. Okay. Sir, and secondly, as I understand, especially for these large locations like solar parks, the evacuation infrastructure is -- basically, there is a common evacuation infrastructure and then multiple land parcels are given out or after capacity auction to various bidders. So from an incremental perspective, once these -- the current common evacuation infrastructure is in place, do you think that the incremental investment from your side would be linearly proportionate to the actual capacity addition -- Or would that be a drop in that incremental investment requirement?

See when the transmission planning is done, it is done for a certain potential. So for example, when you talk about Rajasthan, the next block is about 20 gigawatts in Rajasthan, which is under consideration. So for the next 20 gigawatts once these corridors have been built, so long as it is within the 20 gigawatt, it will not require much investment. But after that, again, you have to plan for another 20 gigawatt, certain gigawatts depending on the next level of potential and -- it is not -- I mean, what I would like to say is that these are all built for a certain capacity. Once that capacity is reached, you have to again invest into it in a big way to take it up for the next incremental capacity plan.

Okay. Okay. Understood. Sir, and final question from my side. The investment in the smart meters and related programs, you mentioned that you will invest your money plus you will also do O&M for 7 or 8 years. Now does Power Grid plan to undertake this O&M in-house? Do you have that kind of experience or would it rather be an outsourcing to the actual equipment provider, say, the likes of Siemens from whom you might source some of the smart meters, 1 of the players in the industry. So would that be the model? Because if that is going to be the case, then there is core role of Powergrid again reduces to just as a provider of capital rather than operational contribution. I just wanted to understand that this way. That's it from my side.

See, in the smart meters, there are 2, 3 components. One is meter manufacturers setting up the meters, installation. There is also a big room for the system integration and maintenance of the system. So Powergrid will definitely provide the capital, but it's technical inputs are in terms of system integration and subsequent operations. As far as the O&M is concerned, -- Some part of it will have to be sourced from the meter manufacturers because we don't have the kind of spare parts or the servicing abilities -- But as far as the data analytics and meta data management system and other things go, we will definitely be playing the role there. So it is not just a provision of capital, but it is also the system integration and maintenance where Power Grid will have a role to play.

Question from the line of Bhavin VIthlani, Bhavin please go ahead.

Could you help us with the expected commissional target for the next financial FY '23?

Next year commissioning target will be between INR 12,000 crore to INR 15,000 crores.

Sure. And in the INR 26,000 crore pipeline, that you highlighted for the next 6 to 12 months. Would it be possible to share what could be the annualized opportunity set for the FY '23 and '24?

No, I think most of it will be once they are out in 6 months, they will have a commissioning target of 18 months, 18 to 24 months will be the final targets.

Let me rephrase. So the opportunity bidding pipeline, which is INR 26,500 crores over the next 6 to 12 months. What would be that number on an annualized basis for the next 3 years?

You are asking how much is the bidding likely to come in the next 3 years?

Yes, please. Yes.

I would not like to hazard a guess there. It is, again, a function of how much RV potential is identified and expected to come. So we have a large RV target to be met. So significant investment opportunities will arise, as I mentioned initially, but I would not like to put a number there.

And on the Ladakh process. Any clarification from the government whether it will be a regulated model or TBCB model?

No, not yet.

Just last question. Last question. On the data centers, if you could help us -- you had earlier mentioned that we have some surplus lands in our existing substations. So if you could just give us some detail opportunity-wise and expected time lines on that?

See, we have already floated out a tender for a technical consultant for one data center at Manesar. And hyperscale data centers, we are again engaging another for the hyperscale data center, technical specs and models. We have gone to the CERC as we speak either today or tomorrow, the application should have been filed for seeking permission to lease out land because under Section 17 of the act, we need the approval of the CERC to release land. So the permission to lease land for the data center business to our subsidiary will be sought by this petition. All in all, we effect the first data center to come, say, between 18 to 24 months from now, and the kind of investment where we look at it is maybe INR 1,000 crores in the next year, year-and-a-half.

We've got the next question from Aniket Mittal from SBI. Aniket you can go ahead. Just a second sir, I am just trying to figure out unmute, just bear with me for a moment. Sir, till the time Divya relogs in, there was some network issue. I will just ask a couple of questions which were there on the chat. There was a question from Dipika Mundra. The guidance for INR 7,500 crore to INR 10,500 crores CapEx next year includes smart metering distribution -- those together will be INR 5,000 crores each year. Is this correct?

As of now, the INR 7,500 crores, which we talked does not include any significant investment in terms of smart meters or distribution.

Divya, are you back?

Yes. Next question is from the line of Aniket Mittal.

Yes. Just a couple of clarifications. Firstly, on this INR 26,500 crores pipeline. This would largely be the projects under the original 66.5 gigawatt that were envisaged right. I mean there's no new projects that have been added to this pipeline as such right?

Yes, it is largely the renewables for which it is being built.

So out of the original 66.5 gigawatts?

Yes, it is part of the entire set of 175-megawatt.

Just to understand more from a learning or execution perspective. Like you said, some of these projects in Khavda or in Rajasthan or something that are being planned but we are not yet coming on board. And in earlier thought was that whenever we lay these transmission lines, those need to be matched with an appropriate generation capacity. So just to get an idea, is it because the corresponding foundation capacity is yet to be found up. That is why we are seeing some delay? Or is it the issue of that's come up wherein we now have to relook at some of the transmission systems. So from a planning point given that you are operate as C2 as well, if you can give lay out some thoughts as to what is taking up some of the new schemes coming up onboard?

See, renewable generation and transmission are very intrinsically linked, right? And you always have a chicken and egg situation that until the transmission visibility is there, renewables are not keen to invest. And if we go on waiting for the renewables to come up, firmed up, then transmission will get delayed or rather the renewals will come -- will not be able to establish themselves in less than a year and transmission takes more time. So the thought has kind of been that we should set up the transmission ahead of the generation. And therefore, the system of approvals has been streamlined significantly. So more likely that following the -- our rules notified by the ministry for the transmission system planning and all, there is going to be speeded up process for this scheme approvals. And definitely, they will be set up ahead of the generation. But it will be planning these to ensuring that there is not a significant gap between the transmission and generation is a big challenge. But now I believe that transmission will be set up ahead of the generation so that it is also able to create the demand in addition to supposing the growth of the renewables. So in that sense, we can see more transmission to come going forward.

.

Without LTA applications and sanction, transmission systems were not being taken up. So that committee is being now dispensed with. So transmission systems will be built ahead of the generation. But definitely, depending on the response and all the next level of investment in transmission will be made.

Sure. And just one of the comments you made, you said that around [ INR 75 million ] of assets are something that you're looking to monetize next year as well again. So if you could let us know which are these assets that you will be looking to transfer to the InvIT, let's say, in FY in this year or next year?.

There, I said INR 7,500 crores. That is the target for next year. Mostly, these will be TBCB assets. And also the residual 26% in few assets, which we will have to transfer as per the agreement.

In terms of [Technical Difficulty] focusing?

That is a major one, which is under consideration.

And just one last question. This quarter's number. So if I were to do certain adjustments for the NPS income that you've earned this quarter. And the dividend that you've received, the number on a quarterly basis seems pretty high. So if I adjust.

You are not audible.

Sure. Can you hear me now? It's better.

Better, better.

Sir, just one question on the quarterly number. If I look at your numbers, if I adjust for the NPS income for this quarter and next year's quarter, the number seems pretty high. That's almost a core base is almost a [ INR 5 billion ] jump in the profitability. So is there some other one-off that I'm missing out?

Which NPS income, I couldn't understand what is NPS income?

[Technical Difficulty]

Okay. Yes. See, significant increase is because of the additional CapEx. Commissioning of assets. Otherwise, in the whole half year, there is a INR 300-odd crores increase compared to the previous -- due to these onetime orders which have been received from the CERC. Other than I don't know. I mean, there is nothing onetime or anything.

Sorry, onetime orders are part of your prior year sales?

Pardon me?

So these are part of the prior period income that you gave in your notes ?

That is right. That's what I'm telling you from the notes only.

Next question is from the line of Murtuza Arsiwalla.

Just wanted to check on the quarterly numbers. The movement in regulatory deferral account had a INR 500 crore positive contribution in the previous quarter, INR 339 crores negative in the current quarter. If you could just highlight which are the key components, both in the last quarter and the current quarter, which has caused that difference?

Basically because of the deferred tax.

Next question is from the line of Swarnim.

Sir, 2 set of questions. First, I just wanted to better understand on the smart meeting opportunity. Now is there something like an embedded orders over here where you have to -- in order to actually take those system integration and system contract orders or the O&M orders, you have to invest also -- Or is it possible that you can actually do that on a stand-alone basis also for a third party?

Embedded system is, I couldn't get you. What exactly you meant by it?

So basically, sir, one is about the investment in the smart meters that we are talking about. And second is the services that you're likely to provide, right, for the system integration or the O&M.

No, no. It is entire one combined package. It cannot be just put the smart meter and - no. We have to set up the smart meter, do the head-end system, communication systems and the meter data management systems, the whole works have to be done. And then output to the utility has to be provided in terms of analytics and also billing information, so that they can raise the bills.

Right. So that means that it is embedded and you cannot do it for any third party also, right?

Any third-party means?

For someone who is installing smart meter, can you actually provide a system integration solution or something like that, that's not possible, right?

Yes, yes. You get all these components separately also, you get them together. I mean there is -- otherwise, there has to be some value addition from Power Grid also, otherwise what is the point. As someone mentioned we will only be capital providers no?. No that is not the model we are looking at.

Right. And sir, secondly, just wanted your thoughts on the recent guidelines, which actually talks about the change in the planning. Now the planning is -- what we understand is now given to the national committee of transmission. So is this what according to you are likely to expedite the transmission lines rollout -- And also, sir, now the load system evolution, that will drive the planning rather than the generation base. So ultimately, is this likely to expedite the overall transmission framework. Your thoughts on that?

Definitely. See, it is not that the planning process has been changed on the entire thing. What has been done is that a certain degree of delegation has been provided to the CTU and to the MCT also to approve schemes. Previously, one size was fit all for any level of investment, be it addition of one transformer of INR 50 crores or large scheme of INR 10,000 crores, all were being dealt with the same yardstick and process. Now the CTU has been given the power to approve up to INR 100 crores and the NCP up to INR 500 crores, beyond which the government will approve. So this will definitely speed up the process. You want to transformer to be added in a substation because the load has increased, and the investment is only a few crores. Then it need not go through the entire process. The RPC will do and tend the CEA will plan, take it to the RPC, and then it will be approved by the CTU. So in that sense, it will definitely speed up the process. And the fundamental shift is that to achieve the larger goal of 500 gigawatts, we have to do planning and implementation of transmission ahead of generation, so that there is a signal for the renewables that, okay, in such instance, location transmission is being built, we can plan for the renewable there. So that will support the growth of renewables also. And definitely, it will speed up the process of investment in the transmission sector.

Thank you. Next question is from the line of [Dharani V], please go ahead.

So first question on the CapEx for this smart meter, you assume about INR 5,000 crores of CapEx over and above the.

You are not very clear. Can you please come closer to the mic or speak

Is it better now?

Yes, definitely.

Yes. Sorry. So the question on the smart meter CapEx of about INR 5,000 crores, should we assume this over and above the INR 10,000 crores of CapEx in transmission from FY '23?

We said INR 7,500 crore to INR 10,000 crores. So INR 7,500 is definitely out of our traditional business. On top of it is what we are looking from the smart metering and distribution opportunities.

Right. And this CapEx in smart metering will also happen in the 30, 70 equity debt kind of a mix? Or how will it be?

Depends on how we conclude with the utilities or if we say TBCB then we may have to be more aggressive levered.

Got it. And one of your observations was that earlier we used to do close to INR 22,000 crores to INR 25,000 crores of yearly CapEx, and we could really achieve that in the future. Any ballpark time line where we can get to this number by FY '24 or '25?

There is no ballpark, it is our continuous striving to reach there again you know, because all the investors are very keen that our growth and investment cycle picks up again. But as I mentioned, it is a function of the opportunity set, we are continuously exploring and trying to reach to the adjacent businesses in terms of smart metering or interest payment or distribution infrastructure. To put a time frame for that will be very difficult at this point.

Appreciate it. Appreciate this. So final question. So usually, we have this big process coordinators this PFC, REC, who give out these TBCB projects. Where the data of the big outcome is given. So for the projects in Khavda, Ladakh also the process coordinated would be the same?

I don't know.

Right. No trying to understand where to monitor the progress on awarding these projects TBCB projects.

Maybe opportunity -- I mean possibility.

So you're telling PFC and REC are not the big process coordinators?

I am not saying that. I'm not saying that. I'm saying I'm not the one to answer this question. I don't have that input.

That was the last question. So I'll just -- there is one question which has been posted and then we'll conclude the meeting. The question is from Mr. Devanshu. He's asking, can you share some more details on the Africa project, the Envisage investments and some more clarity on the plans for the international projects going ahead?

I think it is not -- I don't think it is right to share at this point the details. It is an investment opportunity of about INR 2,000 crores where we are planning to sign the development agreement and then take it forward. So when more certainty is there, we will definitely share the details. And we are looking for more opportunities where our investment is outside. But we are not very aggressive as of now in international investments.

Right, sir. Sir, that was the last question. With that, I would like to thank you and the entire senior management of Power Grid Corporation for the extensive discussion that we've had today and your time. Thank you. For your concluding remarks, handing over to you. Thank you very much.

Thank you very much, Rahul. I think I can only say that there is a significant opportunity for the investment in the transmission segment and also in the smart metering and this interest rate infrastructure segment, and the recent changes in the procedures for approval of transmission teams will definitely accelerate the flow of projects into the segment. And Power Grid is in a position to capitalize on them and look forward to your continued support. Thank you.

Thank you very much.

Thank you all the participants for joining us today. Thank you, sir. Have a great day.

Thank you.