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

Good afternoon, ladies and gentlemen. We welcome you all. Thank you for taking out your time from your busy schedule and being here. On behalf of Power Grid Corporation of India Limited, we welcome you to the Analyst Meet to discuss the company's performance and the way forward. On the dais, we have with us Shri R.K. Tyagiji, he is the Chairman and Managing Director; Shri G. Ravisankar, he's the Director of Finance; Shri Chetan Bansilal Kankariya, he's the Independent Director; Dr. Yatindra Dwivedi, Director Personnel; Shri Ram Naresh Tiwariji, he is the Independent Director; Shri Naveen Shrivastavji, he is the OSD Operations, Shri Burra Vamsi Rama Mohan, OSD projects. To begin the proceedings, I request my team to start the company film, the video. And please, if you can switch off the lights. [Presentation]

I now invite Shri R.K. Tyagiji to initiate the proceedings and to share the company's performance and the way forward.

Thank you, sir. Good afternoon, everyone. I'll be giving brief about Power Grid various operations. So my presentation will include agenda on overview, major highlights, performance highlights, growth outlook, then awards and recognition, what we have won. As you know that India's largest power transmission utility, Power Grid, a Maharatna company under Ministry of Power. We have been ranked first in profit after tax rank in service sector, CPSEs by PE, public enterprises and DPE. Also first position in net worth in service sector. Then cross-border interconnection, 4,750 megawatt with Nepal, Bhutan, Bangladesh and Myanmar. We have 23 countries, we have footprints and market cap is about INR 3.2 lakh crore or INR 3.2 trillion. We are -- this international credit rating and domestic ratings are good. Our transmission network is one of the largest in the world. Our transmission line is located in various parts of the country, whether it is Leh, Ladakh, Himachal Pradesh or Arunachal Pradesh or deserts of Rajasthan, Gujarat, South India, North India. In Northeast, where a lot of floods and land slides are there, we have put together 1,507 transmission lines, 177,000 circuit kilometers. Substations, we have 278 numbers. And for carrying this huge power, we have transformers with capacity of 528,000 MVA. Interregional capacity is 99,580 megawatt with 84% of the total interregional capacity of 118,740 megawatts. Interregional capacity means power generated in one corner of the country can be transmitted to any other part of the country. That is the power -- hydro power generated in Arunachal Pradesh can be transmitted to Kerala or to Leh by our transmission network. So there is no constraints in transmission of power across the country. So it is the strongest grid, the one frequency, one nation, one grid. So it -- and the power generated in Rajasthan, Gujarat or anywhere can be transmitted to other parts of the country. Our dedicated team of engineers and workman are working day and night to maintain transmission system with availability of more than 99.80%. Our reliability and the system availability has been benchmarked by UMS U.S. and we are identified or we have been classified in quadrant 1, which says that we -- our efficiency is good and cost is optimized. So we are in quarter 1, and we are comparable with best utilities in the world. We are transmitting more than 45% of India's electrical energy with 18 HVDC stations, 62 numbers of 765 kV substations and 400 kV, 167 numbers. For grid stability like voltage variations, if there is a fall, there is a disturbance in the system, for controlling those dynamic constraints or dynamic disturbances, we have SVCs and STATCOMs at 20 locations. Wherever there is a constraint of land or land scarcities there, we have GIS station to mitigate that requirement. And as on today, we have 63 numbers of GIS station at 675 kV level, 400 kV level and 220 kV level. We have more than 290,000 towers with transformers and reactors, 3,800 numbers and we are transmitting power from generating stations of -- central generating stations of thermal, hydro, nuclear, or renewable energy. And we are transmitting this power to various states to Delhi, Metro cities, and this power is further distributed by respective states. In this financial year, Q1, we have one -- we have emerged L1 bidders in 3 ISTS TBCB projects up to June with levelized tariff of INR 4,172 crores. These include Rajasthan RE power projects in Jaisalmer and Barmer area, Part B -- Phase 4 Part B and Phase 4 Part D, this is another project then Fatehpur Bhadla HVDC project Phase 3 Part I. This -- in terms of annual tariff, it is 69%. And in terms of NCT cost, it is 65% of the total project cost. And in terms of numbers, it is 50%. In July, till date, we have another three projects, which we won. One is a dynamic reactive power compensation in KPS1 and KPS 3 with NCT cost of INR 501 crores and tariff INR 107 crores. Then transmission system for interconnection of various RE parks, the Bhadla3 and Bikaner3 in Rajasthan, with NCT cost of INR 1,382 crores, tariff, INR 97 crores. Then we have RE evacuation in Khavda area of Gujarat Phase 4 Part B that includes 765 kV/400 kV station at south Olpad and south Olpad to Ahmedabad and south Olpad to, Vadodara transmission, 765 kV transmission line. And the connection at 400 kV with Gandhar transmission line of [indiscernible]. So put together out of 10 projects, we have won 6 projects. And total tariff out of -- a total tariff of INR 7,45 crores. Power Grid has won INR 4,935 crores with percentage share of 70%. Other highlights, this MoU was signed with ISRO to create a Spatial Decision Support System for transmission tower management, especially on hills, on river side where land slides are there or river course is getting changed or forest, the trees growth is very high. So to manage this transmission line, we are having this MoU. So by use of satellite, the application being developed, especially for monitoring of our transmission system. This project is going to help us in a big way. With the help of IIT Kanpur, we have developed substation inspection robot, presently being used at Kanpur for inspection of transformers, breakers, CT, CVTs. And with this monitoring system, with artificial intelligence and machine learning, the efficiency of our transmission system will be improved in future. And based on this, we will be having -- using these similar robots at other station also. Then in performance highlights, I will give a brief about project execution, operational performance, then financial performance, other businesses and commercial performance. In CapEx, in Q1, we have on consol basis, INR 4,615 crores, standalone, that is RTM it is INR 1,711 crores. In capitalization, put together on a consolidated basis, it is INR 2,320 crores and standalone INR 1,348 crores. Our operational performance is good. We are maintaining availability more than 99.80%. At 99.75% our incentive as per CERC regulation is capped. So we have been maintaining transmission system availability better than 99.75%. In Q1, this is 99.80%. And in the last 5 years, it has been 99.85%, 99.82%, 99.83%, 99.82%. So it has been pretty good, and we have been receiving incentive at maximum level. Reliability of our transmission network is also good. It is one of the best, as I told initially that our systems, our operational performance is being benchmarked by UMS U.S. and we are in quadrant 1. That means our reliability and availability is also good. And cost is also optimized by use of various technological use, like various techniques we have. In quarter 1, trippings per line is 0.09. And in last financial year, it was 0.28. Before that, it was 0.27, trippings per line. That means one line trips in 4 years. So that is a pretty good reliability of a transmission system. In Q1 financial year '25, our Revenue is -- income is INR 11,280 crores. And the profit after tax is INR 3,724 crores. These are the details of our financial performance. Total income has increased from INR 11,258 crores to INR 11,280. And profit has increased from INR 3,597 crores to INR 3,724 crores with increase of about 4% in profit. On standalone basis, these are the figures for various areas like transmission charges, consultancy and other income. And expenditure in various heads. If we talk of our gross fixed asset or gross block, today, on 30th June, we have INR 277,000 crores gross fixed assets. Work in progress is around INR 21,758 crores. We have debt of INR 123,465 crores. And net worth is INR 90,913 crores. Earnings per share, INR 4 per share. Book value of share is about INR 97.75. Debt-to-equity ratio is 58:42 against 59:41 last year. Return on net worth is 4.10% for considering only for Q1. These are some other key financial information on income for previous periods in interest on differential tariff and these are various details, equity in TBCB, short-term loan comparison with respect to Q1 of '24 and Q1 of '25. Average cost of borrowing is 7.76% in Q1 of FY '25. In telecom, we have added about 35 numbers, new customers in quarter 1 of FY '25. As always, our backbone availability of telecom link is 100%. And network capacity enhancement, we have added 1.8 terabyte per second. In terms of income, it is for Q1, INR 219 crores against INR 191 crores in last financial year or Q1 of last financial year. We got some appreciation letters from NIT Bhopal, IIITDM Jabalpur and Narmada Control Authority for providing satisfactory telecom services to these customers. Our commercial performance realization with 91.87% with billing of INR 9,262 crores and realization INR 8,509 crores. Outstanding is about -- last year, in Q1, it was INR 7,140 crores. This year, it is INR 5,548 crores. Then sectoral outlook, business outlook and works in hand. I will briefly touch upon these areas. The sectoral outlook, what are the growth drivers, as you know, that India is poised to become USD 5 trillion economy by year 2030. And that requires rapid industrialization, urbanization and e-mobility, et cetera. Then we are committed for non-fossil capacity addition of 500 gigawatt by 2030. Green hydrogen mission of Government of India, that requires transmission capacity for evacuation of about 125 gigawatt for producing green hydrogen. Then energy storage to meet the peak demand or demand during evening hours. Battery storage, pumped storage. So they are also be connected through transmission system. Then international connection for on one sun, one world, one grid that requires interconnection between various countries. So India is also getting ready for international interconnection with various countries like Sri Lanka, Myanmar, then Gulf countries and Bangladesh, Nepal and other countries. So one sun, one world, one grid, also, it is one of the major driver for growth of Power Grid also. If we see business outlook of Power Grid, as of now, what we see that INR 207,500 crores, it can be -- it will be still more. But as of now, what we are seeing that it will be around INR 207,500 crores, out of which INR 190,500 crores will be mainly in transmission business. With Interstate transmission system, Intrastate, Cross Border and International projects put together, we will have like INR 190,000 crores. And on other business areas like Smart Metering, Data Center and Solar Generation, we will have around INR 17,000 crores. As of today, we have about INR 114,139 crores work in hand. Out of which INR 10,318 crore worth RTM projects are ongoing. And new RTM projects like Leh to Kaithal HVDC 5 gigawatt HVDC link. And offshore wind projects in Gujarat and Tamil Nadu, and other projects, TBCB projects and other projects like meter, solar generation and data center. Put together, we have about INR 66,811 crores. For this financial year, we have CapEx plan of INR 18,000 crores against what we discussed last time, INR 15,000 crores. So we now see about INR 18,000 crores CapEx plan for FY '25. With RTM INR 5,000 crores and other projects at INR 13,000 crores. In Sustainability, CSR and Awards. So sustainability, what are the aspirations of Power Grid and how we are working for corporate social responsibility area, what awards and recognition Power Grid has won. So we are committed towards sustainability with 50% electricity consumption from RE generation by 2025. Net water positive organization by 2030. Zero waste to landfill status by 2030. And net zero by 2047. We have main challenge of replacing SF6 gas by green gas. So there are innovations going on worldwide. So once we get some alternative to SF6 gas, so our journey towards net zero will become simpler. So today, we have a challenge of replacement of SF6 gas. Because SF6 gas, it is almost 23,000x harmful as compared to CO2. So that means 1 kg of SF6 gas, if it goes to atmosphere, it is equivalent to 23,000x of CO2. And it remains in environment for almost 3,000 years. So it is very, very harmful gas for the environment. So we have to look for alternative to this SF6 gas. In the CSR, we have -- this our flagship projects of Vishram Sadans, adjacent to various hospitals. Recently one Vishram Sadan of Ranchi was dedicated by our Honorable Union Minister of Power and Housing on 9th July 2024 at RIMS, Ranchi. This is a 5-floor, 310 bedded Vishram Sadan with cost of about INR 17.82 crores. Similar to this, we have also established Vishram Sadan at AIMS New Delhi with 302 beds, INR 32 crores project cost. It was handed over on 18th January 2018. And Vishram Sadan at Darbhanga 260 beds, completion cost was around INR 14 crores, handed over on 20th October 2022. Then Vishram Sadan at Guwahati with 153 beds, completion cost, INR 14.40 crores. It was handed over on 31, 8 or 31st August 2022. Then Vishram Sadan at Bengaluru, Vishram Sadan at Lucknow, Vishram Sadan at Patna. And around seven projects of Vishram Sadan at Banaras, Gorakhpur, then Jhansi, then Berhampur in Orissa. So around six, seven projects are going on for development of this Vishram Sadan adjacent to various hospitals, which will be very -- which are very useful for patients and relatives of patients, who are coming from various villages or from remote areas. So these are very useful for various local areas or villagers. We have supplied some cancer treatment equipments to various hospitals. In Navi Mumbai, modular operation theater complex we have developed. Then operation theater at Navi Mumbai in Tata Memorial. Then Ring Gantry Linear Accelerator, we have given to Thiruvananthapuram in Kerala. So like that, we are giving services for health area to poor and needy people, so that our social responsibilities are taken care. And we are trying to help each and every needy person. We have participated in Namami Gange and integrated River conservation mission of INR 7 crores. Then construction of boulder revetment on right Bank of Mahananda river at Barahmasia Village, Kochadham block, Kishanganj. Then integrated watershed management in Kurnool, Kudgi and it is Kudgi's in Karnataka and Kalahandi in Odisha. Then rejuvenation of pond at village Daulatabad in Haryana. Then works for rural development and revitalization of water bodies, the pharma-centric integrated watershed management then at villages near Power Grid Kurnool and Kudgi substation through M/s ICRISAT at cost of about INR 18 crores. This has improved rural livelyhood through integrated watershed management at Japatna Block, Kalahandi District. And cost of project was INR 402 crores. We have won projects, the awards and recognition, Silver Award in adoption of artificial intelligence, data analytics and predictive technologies and skilled development and capacity building. Categories at ET Government PSU Leadership and Excellence Awards 2024. The artificial intelligence, as I was referring, that robot -- through use of robot, through use of drones, through use of helicopters we are taking readings or we are taking the details of transmission system and automatically through our engine, Artificial intelligence and machine learning engine, these details are getting analyzed automatically through artificial intelligence, logic. And we are getting the maintenance report prepared automatically and which is sent to maintenance engineer for taking corrective and rectification action. So we got the award for this particular application by ET Government PSU leadership and excellence Awards. Then we were conferred outlook business, editorial choice, sustainability champion for sustainable development initiatives. The Power Grid has been honored with prestigious Platts Global Energy awards 2023, in corporate impact. targeted program, category four flagship CSR project in Odisha. Yes. Thank you. Thank you very much.

Thank you, sir. That was a very nice round up of things that are happening at Power Grid. We now open the session for questions and answers. A general reminder to kindly identify yourself and the company that you represent. And then you could raise your hand in the interest of time. We are going to not repeat the questions that have already been answered.

I can start?

Yes, you can.

My name is Sharat Chandra, I'm an investment adviser. I have a couple of questions but I'll ask only one now, they are slightly longest questions. The question which comes to my mind is that in our country, there are huge opportunities in the power sector, whether it is renewable, whether it's distribution, whether it's generation. The question is that your profitability is about INR 15,000 crores. The CapEx is only about INR 18,000 crores. Why can't this be double. Your payout ratio is very high. In a growth industry, why do you have to pay out. Obviously, there are some government regulations. But I think you are beyond that and you are paying more than what is required. So I see in Tier 2, Tier 3 cities, there are inverters, which are used because power is not available 24/7. Has also seen in so many places, there is fuel-based what's called generators, which cost INR 15 per unit. So obviously, there's a problem. So if this problem cannot be fixed by big companies like you which have such high profitability and such, what's called dividend payout. And you can also increase your debt equity, you're only 1.5x. You're in a very stable business and there's not much competition. So you can go to 2x debt equity. So that's a question which comes to my mind. I've been seeing power sector reforms since [indiscernible] times? And I think some of the things have still not been fixed. And that's part of the my second question, which I'll come later on it.

I'll request Director of Finance to...

Thank you. Regarding payout, yes, we have a profit of INR 15,000 crores. But if you see the minimum, the requirement is only 30% of the PAT or 5% of the net worth, whichever is higher. So we almost 30% of the PAT is almost equivalent to 5% of our net worth. Now it's almost matching. This -- why we pay 67%, 2/3 as dividend is that the balance, INR 5,000 crores is sufficient to fund the CapEx because we put like 80-20 in the TBCB projects and regulated. We used to put a mandate really 30% because we can get a return of 15%. Still we are able to fund the CapEx of something in the range of 20,000 very easily. And we have a shareholders' approval of INR 1.8 trillion of that debt, but still, we are sitting at only INR 1.2 trillion because this -- the debt has come down primarily because of the lower CapEx in the previous years. If you see in the last 2, 3 years, the CapEx was only INR 9,200 crore, INR 9,000 crore, INR 8,000. And last year, some of it has gone to INR 12,200 crores. But still we had scheduled repayments of in the range of like 12,000, 13,000. That's why it has come down. Otherwise, once the CapEx picks up, then naturally the repayment will be lesser than what we are going to borrow. So again, there is a chance of, again, going up the debt equity ratio will go up. I think I've answered this. Yes next one.

This is Apoorva Bahadur from Goldman Sachs. Sir, my question is regarding the recent offshore wind order that has been given to us on a cost-plus basis. I think that's a large order, INR 13,000 crores for 1 gigawatt of capacity. So just wanted to understand whether this includes only. I mean, the capacity to be built only for this 1 gigawatt or does it include like future planning for more evacuation?

It includes only this 1,000 megawatt ,500-megawatt at Gujarat and 500 at Tamil Nadu. So one is around INR 6,900 crores, and other is INR 6,200 crores.

So in that case, I mean, if we -- if sort of the country proceeds with offshore wind, do you see that the cost benchmark over here holds true for future projects as well?

Yes. Actually, in India, this offshore power evacuation system is yet to be developed. So this will be basically a first project of its kind. So based on this, we will have a benchmark for cost and technology. So further cost can be optimized later on. So first project, maybe it may have more cost as compared to the non-routine projects.

Sir, this is Sumit Kishore from Axis Capital. So in your opening remarks, you spoke about the wins that had happened in TBCB in Q1 and July. Could you please specify what is the total NCT project cost of wins in Q1 and in July so far? And the other part of the question is that the -- what is the ratio of NCT project cost to levelized tariff for projects that were won in Q1 and July? And does this compare to FY '24?

Okay. So in terms of Q1, as I told that levelized tariff is INR 4,172 crores. And these three projects, which we have won NCT cost of one project was INR 3,279 crores. Other project of Part D. It was INR 2,227 crores. Then HVDC, it is INR 12,700 crores. And the projects which we have won in July, dynamic creative compensation at Khavda with NCT cost of INR 501 crores, tariff of INR 107 crores. And Bhadla 3 and Bikaner 3 with NCT cost of INR 1,382 crores and tariff INR 97.97 crores. Then Part B, which includes South Olpad station of 765 kV voltage level, NCT cost INR 4,766 crores and tariff of INR 556 crores. So as I told that put together NCT cost is INR 37,064 crores. Power Grid share is INR 24,855 crores. In terms of tariff, it is out of INR 745 crores, Power Grid share is INR 4,935, which makes it 70%.

Has the ratio of NCT project costs to the tariff...

Yes, I got your question. Actually, Sumit, we can't have a like NCT cost is only a guidance. So we have another cost, which naturally you will come to know once we commission, we are publishing it. So at least I think even hold on for a year or two, it will come into the public domain. And you're also aware of that. That is the only thing, which we keep with us. So let us keep that.

Because that invariably feeds into the IRR of the project as you execute.

IRR will be good. Otherwise, I can win all the 100%. So be sure that we have uncertain [indiscernible] rate within the board and then we take a call cautiously. We don't play blind and then win all the projects.

Sure. Second question is -- how should we think about dividend distribution by TBCB subsidiaries to the standalone? Because see, what has happened is this quarter, you had consolidated profit growth of 3.5% in terms of prior period items and the dividend distribution. There was a decline in the standalone profit. I don't know the right ways to look at the consolidated, but still, if you could tell us how the [indiscernible] works?

Naturally, like last time, what happened is, like in FY '23, in the last quarter, we didn't draw everything, so we could draw something in the FY '24 in the first quarter. Whereas -- so if you compare that, that's why you were showing a declining trend of dividend, which we have drawn in the FY '25 in the first quarter. Ultimately, that's lying in other pocket only. So it's on a console basis only as you say, we have to see that. And then -- maybe after that, since the Board meetings will be ore by the SPVs, we will draw the amount. And before Q2, I think all this -- again, it will be -- there is no purpose of keeping any money in SPVs.

Fair enough. Just last question. The 5 million tonne green hydrogen plant requests 125 gigawatt RE. What proportion of this 125 gigawatt would be grid-connected RE capacity? What is the plan now?

It will be mostly connected to the grid, maybe whether it is interest -- ISTS or intrastate. So far, I don't think we have planned for this.

Was NEPCA plan did not include -- it was Grid requirement of 125. Can this be like a number over and above the NEPCA plan until 2030 -- whatever 2027 was specified?

NEPC plan was not there. So we can get you the details. I think as of now, we are not having the details. We can share with you later. Yes, go ahead.

This is Manish Oswal from [indiscernible] Securities. Sir, my question on your comment for the upgrade of INR 15,000 crores to INR 18,000 crores of capitalization. So reason for the upgrade. And the second is your comment of the availability of utility -- so 99.75% we have. So can you share your experience with respect to the -- how is our performance vis-a-vis the largest utilities companies operating in China, Europe and U.S., that will be grateful to us.

Yes. Last time, we told that our CapEx plan is, say, INR 15,000 crores. But in between, we got more projects like when we are saying these projects, six projects which we have won. So the completion schedule for these projects is 18 months to 21 months. So in this financial year, we had to spend money. So the automatically CapEx of these new projects will be added into the CapEx plan, which was there earlier in -- when we discuss INR 15,000 crores. So that makes INR 18,000 crores as of now. So maybe if we win more projects in this financial year, so INR 18,000 crore also can become more because we had to spend some money in this financial year. So that is reply to your question of INR 18,000 crores. As far as our transmission system availability and reliability and performance is concerned, as I told that our transmission system is being benchmarked internationally with various world utilities since 2010. So 2010 -- every 2 years, we get our transmission system performance benchmarked by independent agency in U.S. And our availability of 99.80% is best in -- as compared to other utilities, whether it is [indiscernible],China or it is [indiscernible] USA or [indiscernible] Brazil or [indiscernible] South Africa or NGC U.K. The best one is U.S. NERC US, it is 99.50%. NGC U.K. 95% and like that, other countries. So 99.80% is one of the best basically, the data shared by the international benchmarking agency, it says that Power Grid transmission system availability is best. And as far as other performance like if you consider transformer failure rate. Our transformer failure rate is 0.46% as compared to international average 1%. Our breaker failure rate is about 0.05% as compared to 0.2% internationally. Our instrument transformer failure rate is also very low as compared to international average as data published by various agencies. So that is why we say our O&M performance, O&M benchmarking is one of the best in the world.

So my first question is, how do you think about the CapEx and commissioning in FY '26, given the current pipeline, current pipeline of projects you have.