SJVN Limited (SJVN) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the SJVN Limited Q4 FY '23 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rupesh Sankhe from Elara Securities Private Limited. Thank you, and over to you, sir.

Good morning, everyone. On behalf of Elara Securities, we welcome you all for the Q4 FY '23 conference call of SJVN. I take this opportunity to welcome the management of SJVN represented by Mr. NL Sharma sir, Chairman and Managing Director; Mr. Akhil Singh, Director, Finance. So we will begin the call with a brief overview by the management followed by Q&A session. I will now hand over the call to Mr. NL Sharma for his opening remarks. Over to you, sir.

Yes. Good morning to one and all. We are here from SJVN side to present the FY '23 annual accounts and Q4 of FY '23. Let me briefly tell that, as of now, we have 7 generation projects and 1 transmission project, total 8 projects under operation. And we have about 16 projects under construction. And last year, the CapEx incurred by SJVN was the highest ever. It was INR 8,240 crores against the target set by government of India of INR 8,000 crores. If you see our growth for the last 6 years in the FY '18, the CapEx was INR 407 crores and increased from INR 407 crores year-by-year to INR 8,240 crores, and it registered 70% compound growth rate over the period of 6 years. So that is the story of CapEx that means the expansion of SJVN and its projects under construction and like that. Last year's generation also increased by over 1%. The generation of SJVN from all projects from its subsidiaries as well as main project, it was 9,335 million units against 9,208 million units last year. Similarly, we have record turnover, highest ever turnover for the FY '23, it is INR 3,298 crores. It is the highest ever. Now I'm coming to the annual results. Revenue from operations. Revenue from operations adjusted an increase of over 21%. In the FY '23, the revenue from operations was INR 2,935 crore as against INR 2,421 crore. Similarly, total revenue, which I already mentioned that there was increase of more than 25%, INR 3,298 crores turnover in the FY '23 against INR 2,625 crores last year. If we come to the profit before tax, the profit before tax registered an increase of about 29%. It is INR 1,732 crores against INR 1,343 crores. PAT, profit after tax registered an increase of about 40%. The PAT this year FY '23 is INR 1,363 crore against INR 977 crores last year. Similarly, the earnings per share, it increased from INR 2.49 to INR 3.47. Net worth also registered an increase of over 5%. Now net worth at the end of financial year '23 was INR 13,822 crore. And generation, I have already mentioned the generation. The generation total consolidated generation from all the projection whether of SJVN or subsidiaries is 9,335 million units against 9,207 million units last year. Similarly, we are continuing to be the efficient operation of our projects, hydro projects, particularly. The plant availability sector of our both the projected Nathpa Jhakri and Rampur hydro power station. The annual plot availability sector is around 106.65 in case of Rampur and 106.22 in case of Rampur. Previously, this figure was for Nathpa Jhakri. If we talk of the incentive, which we earned from various sources that the capacity incentives, UI and secondary energy or RECs, the total incentives also increased by 2.2%. This year, total incentives are INR 305 crore against INR 298 crores last year. And for the quarter, the trend of precipitation of the discharge in the River or Sunshine or wind velocity in the solar and wind projects, last -- out the 4 quarters, the quarter 1 was a better one in terms of discharge in the river and the generation thereof. But the remaining 3 quarters, the precipitation as well as the discharge in the rivers was very less as compared to the last year. This is climate change or like that there was very lesser snowfall in the vicinity, in the catchment area and the monsoon was also not evenly spread during some monsoon months, the range may be very high, but the discharge was over -- Design discharge, the waste water of no use. But during the other months, the discharge in the river was very, very less. The similar trend or even worst trend is being observed this year also in the month of April and till now also the discharge and generation is as low as 50% to 55% as compared to last year. So during the quarter, the revenue as total income increased by about 50%, but the PAT, Profit After Tax, there is a marginal increase. Last year, it was negative, but this year is only INR 13.61 crores so far as this Q4 is concerned. Similarly, there is a decrease in the generation also. Generation decreased by 7%. Last year, it was 886 million units this year only 824 million units generation during the Q4 also. So that is the -- these are the figures for the Q4 and FY '23 accounts. Now we are open to questions of the analysts and other persons connected through the teleconference.

[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.

Congratulation on a very decent year, especially a good work on the CapEx. So my first question is on the NTPC for your SJVN Green. What is the capacity right now under the SJVN Green which you've transferred and capacity under construction, which you want to transfer? And is there any pipeline which you have over and above this?

Yes, Mohit. The solar projects, which were earlier with SJVN now have been transferred to SGEL. These are 5 projects: One is Bikaner 1,000 megawatt. Then Parasan, Parasan is in Uttar Pradesh, Gurah and Gujrai again Uttar Pradesh and Raghanesda in Gujarat. These 5 projects have already been transferred to SGEL. And the purchase consideration is around INR 1,282 crores, which we incurred by SJVN, now its transferred to SGEL. And all other projects, which are now in the pipeline, we will be transferring these to SGEL. These are -- if we talk about the projects under construction, we have around one is Bagodara, 70-megawatt project in Gujarat, this is under construction, Omkareshwar also, Omkareshwar is a floating solar project 90-megawatt in Madhya Pradesh. Then we have 2 projects, one project in Punjab, 100-megawatt and one is a 15-megawatt project in Nangal with [ VMD ], these are under construction. We will be transferring these to SGEL also in the coming time. And then we have around 1, 2, 3, 4, 5, 6, 7, 8, 9 projects, which are under preconstruction, they will be likely to be put under construction in the coming period. So the capacity of this project is around 1,183 megawatts. The projects which -- solar projects, which are under construction, the capacity is 1,500 megawatt and which are likely to be put into construction is 1,183 megawatts. So total capacity will be 2,758-megawatt, total solar capacity.

Sir, 2,758 megawatts is total capacity, out of which, how much is your other operation right now?

Operation is 179 megawatt operation.

179 megawatt on operation and 1,183-megawatt is under pipeline and the balance is under construction.

Yes.

And any color on the EBITDA revenue of the SGEL in FY '23 also net worth and gross block?

Yes, net worth has already so INR 13,822 crore is the net worth.

No, no. Sir, I am asking for the SJVN Green Energy, the subsidiary?

Can you repeat your question?

I'm asking for the net worth of the SJVN Green Energy that -- your subsidiary.

SJVN net worth. It is around INR 2,500 crores, but we'll let you know the figure, exact figure when we get it.

And sir, secondly, on the other construction project of Buxar and Nepal, what are the revised time lines and how much you spend till date? And what's your final capital expenditure?

Yes, in Buxar we have already spent around INR 7,500 crores. And in Nepal, INR 4,200 crores. These are the expenses -- so far incurred CapEx for incurred on this project. The revised time line for Buxar, we are still expecting that -- there were some issues regarding the land and local unrest but we are still trying that first unit will be commissioned by March '24 and second unit by June '24. Similarly, for Nepal project, there were some geological issues, geological problems at dam side, but we are still hoping that by the -- the project will be commissioned between March '24 to September '24.

Is there any color on the PPA for the Nepal, sir?

PPA, we are having discussions with the different discounts or the different models. So that is under process.

Is it a different model? Does it mean that it's a fixed tariff or I'm assuming that all this will be longer term PPA, right?

Yes. That fixed tariff may be there, but we will not go for long-term PPA because it has been seen that the need of hydro, the necessity of hydro is going to be there in the times to come with the increase in the intermittent energy from solar and wind projects. So even the discounts or utilities are not favoring long-term PPA, not the initial cost of hydro projects is quite high. What we are thinking of the model like RTC, round the clock power. So by bundling it with the solar and wind or other unallocated power from the other projects, so we will give you a complete solution to the discount that we have to supply RTC power to them. So these hydro projects, whether it's in Nepal or in Himachal Pradesh, we are also thinking of the model of bundling hydro with the solar and wind projects.

Some clarification, can you sell the power or the exchanges from the Nepal, is it possible?

Can you repeat your question?

Can you sell the power of these changes the power exchanges of India?

Yes, that we are free to sell through power exchange also. And it has been seen that rates of power during the peaking period also were very high to the extent of INR 10 to INR 11 per kilowatt hour also. So because we have the peaking potentially, peaking capacity in these hydro projects. So these rates will be beneficial to the SJVN also.

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

Sir, I wanted some clarity on this water cess that has been imposed by Himachal government, I can see that we have taken a stand of probably going against it, but at the same time, what could be its impact and also from a regulation point of view, will it be allowed as a pass-through?

Definitely the pass-through item, the PPAs which we have signed with the discount, the entities, disclosed there that such change in law will be pass-through item. The impact will be the increase in the tariff. So that's why the various durbar, they have approached the state government also, they have approached -- going to the court also to question this water cess -- imposition of water cess. SJVN has also approached the high court also. And Government of India has also written to the state, not only Himachal but all these states, those who have levied such duties or cess on the generation of power that these imposition of water cess or levy is unconstitutional and beyond the scope of powers of the state because this is ultimately an additional taxation. So far the taxation issue is concerned, that is with the Government of India on such issues. These are the interstate river and the impact of imposition of such -- some duty or cess, the consumers of other states are impacted. So that is the impact ranges from INR 0.02, say, INR 0.50 to INR 0.60 in a project to around INR 2 to INR 3 per unit in some other projects because cess is head and discharge linked. So in some projects, the discharge is more, but head it is less. So the impact of cess will be more for unit of energy.

Sir, secondly, on the PPA for Naitwar Mori as well, will -- are we targeting something similar to Arun-3 at this -- probably blending more RTC part or do we hope to stand along with them?

We're also open to that, but we are in discussion and discussions are at the final stage. That is one of the entities for distribution of power. And we are entering into MOU for -- PPA for 5 years.

So we'll be going with a 5-year PPA for your entire capacity?

Yes.

Sir, you gave some color on the discharge this year till date, which has been significantly lower year-on-year. What's your expectation for the full year? Do you expect it to pick up? Or based on the reservoir levels and probably snowfall less expected to be weaker this time?

Yes, we have projects which are ROR, run of the river project. So the storage capacity is to the extent of picking power all this is 3 to 4 hours. We have the 2 projects Nathpa Jhakri and Rampur project, we don't have that much storage. Rampur is, of course, a tender project. So the pattern of discharge in the river and the generation of energy has different connotations. Pre-monsoon, pre-monsoon we are already at 50% of the generation as compared to last year, about 50%. But monsoon, monsoon period of around 3 months, say, end of May or mid of June to mid of September, there is a full flow season. So there will be no impact. I think the discharge is not going to increase. It will exceed our Design discharge. So there will be no impact on generation of power. But subsequent to monsoon season, what is the climatic impact or temperature or in the hills like that. Because last year, there was very less snowfall on the hills. So similarly, and after the winter season, the winter were prolonged, they were raised in the entire another reason, the temperature in the hilly region was very less, snow melt was very less. So that's why the discharge in the river is very less. So that is the trend. Now we have to see if the same trend as it was observed last year, continues on the overall, say, generation from hydro projects will be reduced by at least 300 million unit. Maybe all that is, say, 5% to 10% or 5% -- to the extent of 5%. So it depends on the subsequent fluctuations, changes in the climatic or weather pattern in the coming times.

Sir, last question from my side. If you can please give the breakup for the incentives as in UI, secondary and capacity?

Yes, definitely. Total incentive this year was INR 305 crores. And out of this INR 305 crores, INR 210 crore comes from the capacity. Capacity means, the normative capacity fixed by TRC for 1 project is 90% and the other project is 85%. And we achieved, the plant ability factor of 106-plus percent. So total incentive from a capacity is INR 210 crores. UI that DSM, deviation settlement mechanism was INR 43.60 crores. It is almost equal to that of last year. Though DSM guidelines were very, very stringent this year. And then through secondary energy, the incentives come INR 50.67 crores and REC is INR 0.74 crores, so total INR 305 crores. If you talk about the project, then capacity incentives from Nathpa Jhakri projects were INR 126 crores, Rampur project INR 84 crore. UI from NJD, Nathpa Jhakri INR 25.78 crore and Rampur INR 17.85 crores. And secondary energy from Nathpa Jhakri project is about INR 46 crores, Rampur was INR 4.73 crores. So this is a breakup incentive.

The next question is from the line of Divya Daga from Vijit Global Services Securities Private Limited.

I have 2 questions related to solar projects. My first question is, is there any specific tariff revision period by CERC or the solar project tariff is fixed?

Okay. Solar tariff is fixed to a competitive bidding. It is a market discovery of tariffs through competitive bidding in the market. And that tariff is fixed. CRC has nothing to do with this tariff.

Okay. And during the life cycle of the project, when is the [ value period of ] funding received. Is it used for loan repayment or for general corporate purpose?

The VGFR, this is only for the scheme, which is under CPSC scheme, whereas for the other projects, there is no viability gap funding. So for the CPSC scheme, the money is received during the period of construction. For example, SJVN is executing 1,000 megawatt under CPSC scheme, that is in Rajasthan, Bikaner. So we'll be receiving the viability funding during the course of construction.

Okay. And where do we use that amount?

That mostly used for the construction of that, particular project, that Bikaner project.

Okay, okay. What is the minimum cost the company incurring setting up of SPP?

On the setting of....

Of solar power plant?

Yes. So that arises from INR 5 crore to INR 6 crore.

And what will be the realization per megawatt?

Realization -- per megawatt actually it is in terms of energy. How much is the capacity utilization factor and the tariff which we will be getting. So return on equity ranges from 10% to say, 12% to 13%.

Okay. I just have 1 more question. How long does it take for solar projects to reach a breakeven point?

Breakeven point is right from the beginning, we work out the tariff. Because we have loans, also we have invested the equity also -- on equity, we are getting around 10% to 12% return on equity. The loan, it is our efficiency or our prudence at which rate of interest we get the loans. And the tariff is cordially worked out, how much is the expenditure or interest-bearing construction. So breakeven, we can't say that. It is totally planned for 25 years -- 25 years the profit which we're getting in terms of ROE. So our efficiency or prudence lies in front of how efficiently or how economically we construct the project, how we avoid the IDC interest during construction, or how cheaper we get the loans.

The next question is from the line of Aniket Mittal from SBI Mutual Fund.

So 1 was just to understand on the hydro projects pipeline that you have. And I understand there's a lot of projects both in Arunachal and Himachal that you have under clearance. So if you could just throw some light on that, where are we in terms of getting the approvals for them? Have most of the DPRs been prepared, are there certain ECFCs that are required?

Hydro projects, we have already 2 hydro projects under operation. These are the 2 flex that was happening at Rampur. And the hydro projects, which are under construction. We have 5 hydro projects under construction, 3 in Himachal, 1 in Uttarakhand and 1 in Nepal. So these are 5 projects under construction -- hydro projects under construction. And in pipeline, we have around, say, more than 10 hydro projects in the pipeline, in Himachal, in Arunachal Pradesh, and in Nepal also. If we include -- because projects in Arunachal Pradesh are yet to be allotted by the government of Arunachal Pradesh, these are under allotment. So when these will be allotted, the trigger will go beyond 15 also. So 5 projects under construction, and 1 project, which is likely to become under construction is in Nepal. This 669-megawatt project, Lower Arun project in Nepal, the investment is -- DPR has already been cleared by both the Indian and Nepali's authorities, concerned authorities. And the investment approval has to be called by Government of India that is through Cabinet GTA. And the process is on -- the PIB meeting has already taken place. Now the matter will be placed for the capital in the coming couple of months. So we are sure that in the month or 2, we will get the capital approval -- this investment approval. This is 669-megawatt project. Projects -- other projects in Himachal, Arunachal Pradesh, these are under survey and investigation. We are in the process of preparation of DPRs, though there are many problems. There is distance on the part of the people also against the hydro project. But survey investigation process, it will take or DPR preparation, then will take at least 2 to 3 years, minimum 2 to 3 years we have to take seasonal data for hydro, we got at least 2 projective seasons like that. So the pipeline is there, more than 15 projects, but the speed of completion of the DPR that depends upon how difficult the project is, some projects are not approachable, even there is no connectivity, there is no rule also. In Arunachal Pradesh, we haven't indicated 5 projects. Out of these 5 projects, 1 project is of 3,097 megawatt Italian project. That is under discussion with the Government of Arunachal Pradesh. So we are targeting further that this project seems to be doable. DPR is already in place, slight modification has to be done. So these are the projects in Himachal, Arunachal or Nepal. Nepal, we are eying more projects. We have already 1 project under construction, one DPR is already placed and investment approval is under process. And 1 more project, around 4 projects has already been allotted by Government of Nepal. We are targeting 2 or 3 more projects in Nepal. So pipeline is long. But so far as hydro projects are concerned, the speed and the progress has constraints.

Okay. The other question was on Buxar. So on Buxar, has the land acquisition issue being sorted? Have we been able to get that 230 acres of land?

Yes. That is still under process. People have some objections regarding the rate of compensation. The rate of compensation that has been challenged with the Lara Court and Lara Court is in process of issuing notices to the people to receive the payment. And we have told them whatever compensation will be abide by the competent authority, we will be giving it to the people. So there -- on the other hand, we are also in touch with the public also if they allow -- because they are of this opinion that we will not allow work to be started if compensation is not paid to them -- [indiscernible] compensation. But we have the limitation that and as compensation can only be given to them, which is -- which ever is decided by the competent court or authority. But at the same time, we are working on it, and we are successful also on the alternate arrangement of coal supply to the project. We have already discussed with the railway side, they are constructing the alternate line also, which will be around 3 kilometers from our project side. If this normal course of railway side is not completed, we can bring coal to the project nearer to the 3 kilometers of the site. And from that core can be transported by the truck to the normal road also. But we are hopeful that things will be in line soon.

Fair. Just 2 small questions. One is the FY '23 CapEx of INR 8,200 crores, could you break that up between hydro and renewables?