SJVN Limited (SJVN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '24 Earnings Conference Call of SJVN Limited 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. Thank you, and over to you.

Yes. Good afternoon, everyone. On behalf of Elara Securities, we welcome you all for the Q3 FY '24 conference call of SJVN. I take this opportunity to welcome the management of SJVN, represented by Geeta Kapur madam. She has taken the additional charge for Chairman and Managing Director, she is also Director of Personnel; and Mr. Akhil Singh, Director of 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 Geeta madam for opening remarks. Over to you, madam.

Thank you. A very good evening to all of you present here. In addition, we are also accompanied by Shri Sushil Sharma, Director of Projects. I'm extremely happy to share that now our installed capacity is 2,227 megawatts with the addition of 2 projects. In the recent past, we have commissioned one 75-megawatt Gurhah Solar Project in the state of Uttar Pradesh with capacity to generate 160 million units of energy per annum. The power from this solar project is being sold to Uttar Pradesh Power Corporation. We have also commissioned 60-megawatt Naitwar Mori Hydro Project in the state of Uttarakhand with capacity to produce 337 million units of energy per annum. As on date, the power is being sold through Power Exchange. Thus, in terms of latest addition, 135 megawatts more power has been added, resultantly adding approximately INR 270 crores to our revenue per year. In the quarter ending March 2023-'24, we are further looking at adding 240 megawatts of renewable energy projects, 3 projects, namely: 50-megawatt Gujrai Solar Power Project in the state of UP; 100-megawatt Raghanesda Solar Project in the state of Gujarat; 90-megawatt Omkareshwar floating solar project in the state of MP, all these 3 will be commissioned within this quarter. As you are already aware that presently, the largest operating hydro project, Nathpa Jhakri hydropower station in Himachal Pradesh, is owned by us, SJVN. Tomorrow, the country's largest hydro project, 3,097-megawatt Etalin hydroelectric project in the state of Arunachal Pradesh, will also be constructed by SJVN. As far as the progress of Etalin hydroelectric project is concerned, our manpower has already joined the project site, DPR has been revalidated, land acquisition, R&R awards finalized and forest diversion cases likely to be finalized soon. SJVN has been allotted 5,097 megawatts in total 5 projects in Dibang Valley of Arunachal Pradesh. Giving you a brief of our projects, as on date, 9 projects of 2,227-megawatt and 2 transmission lines are under operation. Four hydro projects of 1,558 megawatts and 7 solar projects of 1,425 megawatts are under construction. We are excited to inform you that Government of India has approved our proposals for formation of 2 joint ventures, one with Assam Power Distribution Company Limited for execution of initially 1,000-megawatt renewable energy projects in Assam; and the other joint venture is with MAHAGENCO, which is Maharashtra State Power Generation Company Limited, for execution of 5,000 megawatts of renewable energy projects. I'm happy to inform that SJVN has been certified as a great place to work by the Great Place to Work Institute after rigorous review of our organization. The 2 main parameters for the assessment are trust and innovation, and SJVN has scored very high on both. In addition, SJVN has secured INR 10,000 crores construction finance facility for its upcoming renewable energy projects from a group of leading domestic and international financial institutions. SJVN is the first PSU to enter into such an arrangement for financing. Recognizing the technical expertise of SJVN of working in fragile Himalayan geology, National Highway Authority of India has entered into an agreement with us for monitoring and review of their design services and construction works focusing on slope stabilization. Regarding the third quarter results, generation from our main 2 hydro projects decreased by 13.36% and 12.79%, that is NJHPS and RHPS, respectively, as compared to the same period last year. This was mainly due to low precipitation in the catchment areas and subsequently low discharge in river Satluj. Our newly commissioned Naitwar Mori hydropower station started generation and has produced 24 million units, and recently commissioned Gurhah Solar Power Station has generated 9 million units till now. The generation from our renewable energy projects has increased by 13.50% this year. Revenue for operations decreased by 2.7% over the same period last year because of lesser generation from the hydro projects. Profit after tax decreased by INR 155.64 crores compared to third quarter over the last year, mainly due to lesser generation and slight decrease in capacity incentives. However, net worth has increased marginally by INR 163 crores. You may kindly refer to the speech of Honorable Finance Minister, Shrimati Nirmala Sitharaman, while presenting the interim budget for the year 2024-'25. As per the scheme announced by Honorable Finance Minister under Pradhan Mantri Suryoday Yojana, 40 gigawatts of electricity will be added by rooftop solar by the year 2025-'26. We are extremely happy to share that SJVN has [ risen ] as one of the key players among the CPSCs. SJVN has been allotted 3 states, Himachal Pradesh, Punjab and Arunachal Pradesh. As envisaged in the scheme, 10 million beneficiaries will get 300 units free electricity every month. This will result into savings of INR 15,000 to INR 18,000 per annum for them. Subsidy has also been raised from 40% to 60%. In this interim budget, allocation of INR 10,000 crores have been done for rooftop solar scheme. It is said that infrastructure and energy are 2 crucial enablers of economic progress. Rate of growth of consumption of energy is directly related to the rate of economic growth. It is said that in order to have 8% of growth in GDP, growth in power sector needs to be around 12%. As per the budget speech of Honorable Finance Minister, for the year '24-'25, the estimated growth in GDP is 7.3%, thus corresponding growth in energy required is 10% to 11%. As on date, maximum growth achieved was 8.89% for the year '22-'23. Thus, it may kindly be appreciated that to keep the momentum of GDP, growth in energy is still evolving and there is a lot of scope to be added. India per capita energy consumption is 1,300 kilowatt hour, whereas world averages 3,300 kilowatt hour. You must already be aware that SJVN has been listed as one of the renewable energy implementation agencies by Ministry of New and Renewable Energy to meet out the 500-gigawatt target by 2030. As on date, solar projects, firm and dispatchable part, 2,368 megawatts has already been awarded by SJVN. Further tenders of 4,500 megawatts are under finalization and likely to be awarded within this quarter. I once again reiterate that SJVN has a clear vision of installing 25,000-megawatt portfolio in operation by 2030 and 50,000 megawatts by 2040. With the present rate, we will not only achieve the target, but may surpass them. As you all may be aware, today, my project portfolio stands at 54,370 megawatts. Let's open for any questions, please.

[Operator Instructions] We have a first question from the line of Mohit Kumar from ICICI Securities.

My first question is on the renewable portfolio. Is it possible for you to let us know what is the total renewable portfolio under construction? And how much of the capacity where we are L1?

Our total renewable portfolio is approximately -- total, I said, was 54. But under construction, we have a total renewable of 2060, 11 projects. And if you want, I would like to name the projects, which we hope to commission in the year 2024: Bagodara Solar Power Project, Gujarat, installed capacity is 70; Bikaner Solar Power Project, Rajasthan, 1,000, we are expecting to commission by June 2024; Gujrai Solar Power Project, UP, 50, February 2024; Raghanesda Solar Power Project, Gujarat, 100 megawatts, we propos to commission by February 2024; Omkareshwar floating solar power project in the state of Madhya Pradesh, 90 megawatts, we propose to commission by February 2024. In Punjab, we propose to commission 100 megawatts by June 2024; floating solar power project at Nangal, BBMB, that is Nangal dam, 15 megawatts, May 2024; then we have GUVNL Phase 8 SPP project, that is solar power project, Gujarat, 100 megawatts by March 2025; Gujarat, again, Phase 4 solar power project, 250 megawatts, again, by March 2025; Phase 7 Khavda Solar Project, Gujarat, 200 megawatts by March 2025; Jamui Solar Power Project in Bihar, 75 megawatts by March 2025. So it's 2,050, that is 2,050 megawatts in the coming year and by March '25.

So my question was, madam, you have won a fair amount of projects in this fiscal year, FY '24. And many of them, we want to receive the LOA. Could you please quantify that number where we are L1 and we haven't received the LOA?

I would request Director of Finance to brief.

So just where we are L1?

Yes. But I'm trying to figure out 2,060 is under construction. Is there any capacity which can come up for under construction in the next 2, 3 months?

Yes. 5.2 gigawatts is under total portfolio we have owned. We'll provide you the list separately because...

Understood, sir. Understood. Sir, my second question is on the Nepal hydro project, have you signed the PPA? What is the status? Do we intend to sell in the exchanges? Is it a fair right assumption?

For the project in Nepal, we have signed an agreement with PTC for sale of power. That is Arun-3.

But that's for the short term, right? Is it -- does the PTC have a long-term back-to-back contract?

See, we signed the PPA -- agreement with the MOU with PTC and renewed power.

And back to back here.

And renewed power also. And we are expecting 50% amount -- PPA for 50% of the power will be signed within a month. And balance will be for -- with power, we are going to issue tender.

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

So wanted -- ma'am, what are your thoughts on the HP water cess issue? We have been hearing that the Cabinet is considering taking back certain projects, which are executing or increasing the cess. So may be some...

Yes. As far as the HP water cess issue is concerned, the matter is subjudice in the Honorable High Court of HP. And even arguments have been completed, and we are expecting the judgment very soon. And yes, I would say that we are very hopeful that this will not be levered as -- this tax is not as per the [ stature ] as on date.

Understood. And for both the projects which are under construction, large ones, Buxar and Arun-3, would you like to share the time lines now by when do we expect commissioning?

For Arun-3, it will be by February 2025. And for Buxar, it will be due -- first unit in June '25 and -- '24, sorry, and next unit in September '24.

I believe there's some delay in Arun-3 from our previous guidance? Buxar, although we have...

Here, I would like to inform you that as per the power development or PDA signed with Nepal government, the commissioning date was even earlier scheduled in February. Though for our own purpose, we had squeezed the schedule, but we are very hopeful of commissioning it by, as per the PDA, in February 2025.

Okay. Another question, we see that the snowfall has been quite poor this year, especially in the Himalayan region. So I wanted to check with you what impact do you see, especially for your hydro generation given that this year itself, generation seems to be quite poor.

You're right, there is an over shortfall of -- overall shortfall of 452.57 million units as against our design energy of 8964.49 million units. But I would like to inform you that this is a part and parcel of hydro projects. Even in the year 2018 and '19, we were not able to meet our design energy. But this year, again, we've had reasonable snowfall, and so we are hopeful of making it up in next year.

Okay, ma'am. And for this year, whatever revenue under recoveries happened in Q1 and Q3, will that be recouped in Q4?

Not necessarily because the generation in Q4 will be also same -- are in the same pattern. Already, February is on the way and the generation is similar to that, slightly lesser, we can say. So overall, there is a 10% lesser generation, 10% to 12%.

I mean the peak months for generation are generally June to September. So that is very -- it is really not possible to make up in this quarter because it's -- the snow does not melt in this quarter. It is only when the temperature rises, the snow melts.

Right. And what I wanted to say is that I believe, as per the regulation, half of our fixed cost gets converted to variable cost for hydro projects, right? So in a way, it was fixed cost itself and because the design energy was poor, right -- I mean the generation was poor, hence, should not the design energy also change by the regulator? And...

No. Actually, the design energy is only an indication of the energy for which the project has been installed that the machines can deliver.

Let me clarify you. In fact, currently, in this year, we are not going to meet the design energy generation. And for that, we'll be getting -- we'll be claiming compensation through CRC, and we are hopeful that we will get some amount.

Okay. I understood, sir. And now you're saying the snowfall has been adequate? Or -- because we saw that it was quite delayed till January, there was no snowfall and...

It was delayed, but we've had reasonable snowfall in India.

In fact, there was impact of less snowfall also. There was -- during summer, this time, the rain were more and the temperature rise was less in comparison to last year or any other year. There was no -- in fact, in May, June, there was no much heat in the atmosphere, therefore, the melting was less. It was not due to less snow. It was due to the rise in the temperature. So...

Less rise.

Less rise in the temperature. So hopefully, it will not repeat.

Generally, it does not get repeated. For example, I will tell you that it was in the year 2018, '19, but then we picked up again. And so generally, the same temperature variations do not get repeated.

It is cyclic only.

It is cyclic.

Understood. Ma'am, lastly, if you can provide the breakup for incentive income in this quarter?

Incentive, right. The incentive this quarter has been 7.54, and 8.42 was the figure for the same quarter in last year. So there is a difference of about 10%.

Okay. Ma'am, can you provide the breakup of incentive between UI and data part, capacity sizes?

The breakup between capacity?

UI and capacity.

UI and capacity, right. Right. For this quarter 3, '23-'24, the capacity charges of 42.24 as against 63.47 for the previous year. And UI, as I already mentioned, was 7.54 this quarter as against 8.42 for the year '22-'23. And RAC, 1.4 for '23-'24 third quarter as against 0.04 last year. So in totality, it is 51.18 this quarter as against 71.93 last year.

We have a next question from the line of Abhineet Anand from 3P Investment Managers.

Just on Buxar and Arun-3, what are the revised project costs?

What are the revised project costs?

In Buxar, there is no change in the project cost.

What is the number, sir?

Escalation will be there. But in Arun-3, there will be slightly change, higher side. And we are expecting that the entire project, including transmission line, will be completed within INR 9,000 crores. It's between INR 8,500 crores to INR 9,000 crores.

And Buxar, so what is the project cost for Buxar, sir?

Buxar project cost is INR 10,400 crores. With some escalation, my -- general escalation, it will be closed within INR 11,000 crores.

Okay. And for Arun-3, you said that presently, there is no PPA, right? 50%...

Presently, there's no PPA.

So I mean 50% PPA, you're saying within a month can be turned and rest, you will go for tender and all.

Yes. We are very hopeful within a month, we will sign PPA for 50%.

So what do you have with PTC and renew power? There is an MOU.

It's an MOU.

MOU. We have finalized some rates also. The PPA is under -- terms and condition, the PPA is under finalization. It is legally [ awaiting to be approved ].