Tata Power Company Limited ($500400)

Ladies and gentlemen, good day, and welcome to the Tata Power Q4 and Full Year FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Dr. Praveer Sinha, CEO and Managing Director of Tata Power, for his opening remarks. Thank you, and over to you, sir.

Good evening, everyone, and thank you for joining for this call. I have with me my colleagues, Sanjeev Churiwala, the CFO; J.V. Patil, the Group Financial Controller; Kasturi, Chief Treasury; and Investor Relations, Anshul; and other colleagues from Finance and Corporate Communication. Before I share with you some of the major highlights of the Q4 performance of the year, let me just quickly share with you our understanding of the power sector in the last few months and as of now. We saw in the last quarter that the increase in demand was very modest, up 2%. And we are now seeing from April onwards that the demand has gone up by 5% to 6%. And the peak power also has touched 256 gigawatts. We do expect that in the next 1 to 2 months, this will cross about 270 gigawatts. And this is because of the heat wave that we see across the country, and also because of the prediction that we will have a severe impact because of El Nino. So we do expect that the demand will increase both in terms of peaking requirement and energy requirement. And we are already seeing in many places, Mumbai has crossed 4,600, Delhi is more than 6,500. And so also many other places, we are finding that the demand is going up. Unfortunately, in our country, our power systems are very stable. The increased demand is met mainly by our coal-based plants and hydro plants. And also renewable solar and wind is supporting them during solar hours and wind hours. We have also seen that for our imported coal-based plants, there has been no impact per se. There is adequate supply of coal that is coming. There is, of course, a small increase in the prices of coal and shipping, but those are very, very nominal increases that have been seen in the last 2 months. Coming to the financial performance, I think Tata Power has posted a very strong financial and operational performance in FY '26. This is in spite of the fact that Mundra did not operate for 9 months. And we have, for the first time, have reported a full year PAT of nearly more than INR 5,000 crores. And the EBITDA, which has also gone up by nearly 11% to INR 16,090 crores because of the strong performance of our existing businesses of generation, transmission, distribution and renewables. During the quarter also, we have seen our EBITDA has jumped by nearly 10% to INR 4,216 crores, compared to INR 3,829 crores last year. PAT has gone up by 8% to INR 1,416 crores, compared to INR 1,306 crores last year in the same quarter. This, of course, has been driven by all our businesses. I've been sharing with you that our solar cell and module manufacturing plant is doing exceedingly well. We have stabilized the operations of the plant and the yields are very good. We have seen during the year the plant has delivered a PAT of INR 857 crores, which is more than double of the previous year. Similarly, rooftop solar has done exceedingly well with doubling of the installations. And we have also seen not only in the quarter, but through the year, the performance has been exceedingly well with a PAT of nearly INR 500 crores, INR 499 crores. Odisha DISCOM has done exceedingly well. In the previous year, the whole year PAT was just INR 439 crores. This year, we have a PAT of INR 809 crores. In our utility-scale renewable, we have been able to commission a large number of projects, and in-house projects which have been commissioned have started yielding results. And we do expect that the maybe 5 gigawatt of projects which are under implementation, and these are all in-house projects, 50% of it will be completed in this financial year and the balance 50% in FY '28. So a very robust pipeline of projects, and we are on top of them in terms of implementing and start generating power from all those plants in the coming 2 years. We did have a challenge of Mundra. And because of that, we had issues about the shipping profit also. But that is a thing of the past. We have now concluded the SPPA with Gujarat, and we are in the process of finalizing it with all the other 4 states, which we expect in the next 4 to 6 weeks we will complete. They are in very advanced stage of approval in these governments. We are already operating the plant under Section 11, but with an understanding that the tariff will be as per the SPPA, and that has been accounted for in our quarterly results. And going forward, it will be accounted for in our operations. Our distribution business everywhere will continue to grow, and we will have large capital expenditure as planned in our large utility-scale projects as also in our hydro projects in Bhutan and the pumped hydro project that we are implementing in Bipuri. We have informed you that we are going to start work in our new 10 gigawatt of wafer and ingot plant in 2 phases, and that will cater to our existing operations of cell and module plant, which will require Indian wafers from 1 June 2028 onwards. So we do feel that all our businesses, which have now stabilized, will give very good performance in the coming quarters. On the balance sheet also, I find that our debt is at INR 56,000 crores. And this is in spite of a capital expenditure of nearly INR 13,000 crores in the last financial year. Our leverage ratios are very stable. Our net debt to underlying EBITDA is 3.3 and our net debt to equity is 1.2, which is very competitive for infrastructure and power industry. And we do expect that we will maintain similar discipline while going forward with our new investments in the coming years. As we have been sharing with you, we believe in growing, but the growth has to be very calibrated so that the financial discipline and the balance sheet discipline is maintained. And we are committed to enhance our generation capacity, also enhance our transmission distribution and hydro generation facilities in the country and also in Bhutan. And we will continue to perform exceedingly well in the coming quarters. With this, I will conclude my part of sharing my thoughts on the company as also on the power sector. I do look forward to hear from you and take your inputs as also take your questions and respond to them. So you can please start asking the questions.

[Operator Instructions] Your first question comes from the line of Sumit Kishore from Axis Capital.

You mentioned in your opening remarks that the CapEx for the financial year has been INR 130 billion, meaningfully below the guidance that you had given to us in November in Odisha, which was INR 250 billion. So what really led to that guidance with 4 months remaining in the fiscal seeing such a sharp decline? And what is your guidance, realistic guidance, for FY '27? And what will it comprise in terms of the end of projects? That's my first question.

Yes, Sumit, so I agree that our guidance was -- I don't think INR 25,000 crores, but it was, I think, about INR 22,000 crores. We have fallen short because some of the projects that we were planning to execute in the last quarter could not happen. And these projects are typically relating to the large utility-scale projects, solar projects or wind projects or the transmission line projects. Many of the places, the right of way got delayed. Many of the places, the transmission system was to be done by someone else under the TBCB. We were supposed to use that transmission system for evacuating. That got delayed. And you have seen there have been a large number of reports of many TBCB projects, especially ISTS projects getting delayed. We are now in this quarter trying to complete some of the projects, around 600 megawatts of large utility scale. Similarly, in the pipeline are some of the transmission projects that we are executing as the ROW issues are resolved. So these are not that these will not come, it's just that the phasing has got impacted. And those which we missed out in the last year, we will complete all of them in this financial year. So that's why our target of yearly investment continues to be the same. And there may be certain deferment by a quarter or 2. But otherwise, we are very much on track.

Sure. Sir, I was referring to the slide in your presentation, which shows INR 25,000 crores of CapEx the. The second question is on the Delhi distribution business where in the last 2 quarters, there have been regulatory -- favorable prior-period regulatory orders [indiscernible] was INR 4.6 billion in Q3, it was INR 3.2 billion in Q4 [indiscernible]. So can you -- or can Mr. Sanjeev sort of clarify, what is the entire benefit that you have taken because of prior-period regulatory orders [indiscernible] profit level in FY '26 and FY '25? How much is expected, or it's very difficult to predict, but what sort of [indiscernible] do you think are rightfully yours which are yet to materialize because these are meaningful deltas in the quarterly results. So let us say for FY '27, is there any expectation that we should have or we should budget for a decline in reported numbers for Delhi distribution?

Yes. I think what you're saying is relevant, but it needs a little context to that. The good part is whenever you see that regulatory upside, those are pertaining to matters a few years back, either those regulatory approvals were denied or deferred. So as a result, we are very happy that many of those past regulatory clearances are now coming in. And this is not the first time that we are getting the clearances. This happens every year. In fact, if you look at F '25, we had about INR 333 crores of regulatory approvals coming in. This year, as you rightly picked up, INR 783 crores is reflected. Next year too, we will have something. But to quantify at this stage, it might be very, very difficult because there are a pipeline of regulatory assets that we're kind of contesting and discussing. And as you are aware, it's very difficult to predict an outcome on a regulatory settlement or regulatory clearances. But yes, we would expect some amount to materialize. Now whether that is lower or higher, I think today is very difficult. But my sense is as and when every quarter passes on, we should be able to give you a better understanding on that.

Sure. Just one last bookkeeping question. What is the IPP RE capacity that you expect to add in FY '27? What will be the phasing of that capacity? And would it be right to expect that for the solar component there is the module and cell would be supplied from Tata Power's own manufacturing unit? That's it from my side.

The second question is very clear forward. That's the whole purpose why we have put up the cell and module manufacturing. And I think that we are kind of quite integrated that we are able to kind of have the entire line of cell modules locked in for all the pipeline. And as you can see, we have about 5 gigawatts of pipeline as we speak. And a lot of things will start materializing this time around from quarter 1 onwards. So from a CapEx phasing point of view, I think we will see in the current year a lot of consistency coming in.

Also, Sumit, last year, we did a huge amount of third-party projects. This year, we don't have third party. So everything that we will do will be in-house. And last year, we did about 2,500 megawatt of total project implementation. So you can imagine that 2,500 will be virtually internal that we will carry out and maybe a little more.

So if you deliver, for instance, 2 gigawatts of solar projects, can the requirement of module cell will be [indiscernible] the multiplying factor, about 2.8 out of your capacity will go into -- in this example, it will go into your own capacity addition. Is that the right understanding?

Absolutely. And then we have rooftop, so whatever we are going to manufacture, we are actually going to [indiscernible].

[indiscernible] should basically reflect that in FY '27?

Yes. And largely around the RPT compliance in terms of the margins, but are very, very consistent. So that should not be posing a problem for you to kind of do your modeling as well. But I think you kind of alluded to the 2 gigawatt of commissioning next year, which is kind of a ballpark number that we're also looking at. And if everything goes well, maybe it could be slightly higher than that.

No. But everything is not solar.

Solar and wind combined.

Yes. So solar and wind is there. So solar would be about 1.5 to 1.8. It will not be [indiscernible].

[Operator Instructions] Your next question comes from the line of Puneet Gulati from HSBC.

Congrats on good performance. My first question is on Odisha. You've been giving phenomenal performance year after year. Do you still see room for more efficiencies? Or should we sort of pencil in future growth more from regulated equity growth?

We get to see much better than this in the next financial year. And I think next financial year possibly will be the best year because many of the initiatives that we had taken in the last few years have started showing results. Some of the initiatives were taken last year. And the impact of it, you will see in this year. I think Odisha performance next year should possibly peak in terms of the type of results you see.

Okay. That's very interesting. And second is on the hydro side. You started taking large exposures to hydro now. And is the PPA already in place? Or would you be looking to sign PPA some time?

It is in advanced stage of approval. As you know that while the PPA is agreed, it has to go through a regulatory approval process. And that process is under final stages, and we do expect in next few months that approval will come in.

Understood. And lastly, if you can comment on the regulatory asset wind down in Delhi DIO. Supreme Court had indicated an intention to wind this down. Any progress there?

Yes. So both the Supreme Court and [ Aptel ] are monitoring that. And the regulatory commission has promised that this will be amortized over 6 years up to 2032. And we are closely monitoring that. They have already given an affidavit under which they will amortize it. And we expect that it will get implemented as per the affidavit that they have provided.

Your next question comes from the line of Apoorva Bahadur from IIFL Capital.

Can you provide some color on the Gujarat SPPA? What is the agreement over there, if you are sacrificing any profit -- sharing any profitability on coal, what's the quantum?

So Gujarat SPPA details we have already shared. And since it is also under discussion with the other 4 procurers, more details, finally, what is agreed we'll share once everyone signs on the dotted line.

Okay, sir. In your disclosure for renewable business, we see that the PLF for solar is lower due to lower resource availability and also there's a comment on curtailment. Can you quantify the impact of curtailment in FY '26 and your expectation in FY '27?

So the curtailments are happening in a few places. That also is not on a continuous basis. So very difficult for us to say that -- how much of curtailment will happen. Also some of the lines have been commissioned. So it is not that there is full curtailment part of -- so in some cases, at least 60%, they are allowed to evacuate; in some places, they are allowed 0%. In some places, it is at 20%, 25%. So it's a moving target, which is there. And we continue to work with the transmission company and city to ensure that the curtailment is reduced, and we are able to evacuate all the power. In cases where we have the G&A and curtailment takes place, there, of course, we have reimbursed the cost on the supply base.

And sir, for next year, FY '27, the target we have for adding solar capacity, do we have permanent [indiscernible] for all those substations or some of it is still on temporary G&A?

So now we are being extra careful, and that is why some of our CapEx which we had planned last year got deferred, because we do not want to set up the plant and be on temporary G&A. So we have been very cautious now and we are only commissioning or completing the project if we have certainty on the transmission line and the [indiscernible] happening. So that action has been taken down.

Makes sense, sir. Sir, lastly, if you can provide some color on the Indonesian coal prices, especially after the [indiscernible] the index is backward looking. So what's your take there how the prices should move this year, as well as there was some news flow around potential tax imposition by the Indonesian government on coal mining, so if we can have some view on that as well, it will be helpful.

So one is on the coal prices, that there has not been too much of movement. And we expect that prices stay within plus/minus 5%, in that same [indiscernible]. We're not expecting too much of a deviation. The second is that we are hearing that there will be some more taxes that will be imposed on export of coal. But this has been under discussion for last many months, so let's see what eventually gets decided.

We have shared some details on the thermal coal prices, also including Indonesian coal prices in Slide 24 of the analyst presentation, which is uploaded. You can have a look at that if you want.

Virtually flat for Indonesian coal.

Sure. Sure, sir. Sir, lastly, if I may just squeeze in one more. In your cash flow statement, there's an item of movement in balance related to service concession agreement. So what is this regarding? Because we see it has been a drag on cash flow for this year.

[indiscernible] TBCB project. It is related to the TBCB project. It is there in the [indiscernible].

So it's a drag because revenues have not been recognized?

It is related to CapEx spend on the service concession arrangement. It's onetime of CapEx, which is shown in the CapEx in the presentation of the -- investor presentation.

[indiscernible] should be added to CapEx. Understood.

The next question comes from the line of Ketan Jain from Avendus Spark.

So my first question is on the Mundra plant. Is the entire plant operating under the supplementary PPA terms? Or is it only the Gujarat part? Is the rest under [indiscernible] level?

The full plant is operating all the 5 units. The Section 11 is to facilitate the operation of the plant and give time to the procurers to get the necessary approval. The building is being done as per the SPPA as per the overall understanding that has been reached with them as well as with the Ministry of [ Power ].

Understood. So my next question is on the key growth drivers, which segments do you see to contribute most in the coming 2 years for EBITDA growth?

Key growth drivers for the next 2 years. I've explained to you all these businesses will give good profit, good returns. So generation, transmission, distribution, renewable, manufacturing, rooftop, utility-scale. So each of these businesses are doing very good. We had a drag on Mundra that also is behind us. So you will see excellent performance going forward.

Your next question comes from the line of Satyadeep Jain from Ambit Capital.

First question on your supplementary PPA in the coal mines. In the past, I think we were meant to understand that once you sign the supplementary PPA, then maybe you look to monetize the coal assets. Is that thought process still intact? And let's say, if you sign these supplementary PPA in the next few months with other states, would you look to start the sale process sometime this year? Just trying to understand where you are on monetization.

It also depends what sort of opportunities there, what sort of valuation we'll get. If the coal market is good and we get a good valuation, we can just look at that. It's a little premature. Let us first sign with everyone and then see how the market is there. And at the right time, we'll take the decision which is benefiting us.

Okay. Fair enough. On the [ asset], just a clarification on the RE captive use of modules [indiscernible] as per the order, any new tender after first September the developers have to use domestic cell? But there is no mandate before that. So given the tariffs that you [indiscernible] won't reflect that domestic cell requirement. Why would you look to use [indiscernible] in your FY '27 commissioning given, I believe this year, you would be commissioning projects that were awarded before September '27? Just trying to understand that. And secondly would be solar rooftop. So you executed 1.7 gigawatts, which means almost 20% market share. Is that something you're looking at in terms of FY '27 also, that market share has remained intact despite competition? Just trying to understand what is the opportunity you're looking at next year and what's the market share you're targeting.

We are definitely looking to enhance our market share. And our target is that in next 3 years, we will be [indiscernible] 20%. And having said that, we expect our rooftop business, you have seen last year it has grown by 100%. And I definitely expect in this year also, it will grow substantially more than what is expected from the market at this time. So I do expect that in FY '27, the rooftop market -- the rooftop business will grow, if not by 100%, at least by 50%, 60%. So you will see exceedingly good performance from rooftop business going forward. I also expect that most of our rooftop, and you know that for rooftop, if you have to get the government subsidy, then it has to use Indian-made cell and module. So that will be catered from our existing manufacturing plant. Also in going forward, effective 1 June 2026, you have to use only Indian-made cell. And many of the projects are not grandfathered. So some of the projects which will get implemented in FY '27 will require Indian-made cells and module. So I think our manufacturing plant is very well positioned to cater to large utility-scale as well as rooftop solar.

The next question comes from the line of Atul Tiwari from JPMorgan.

Yes. Sir, I missed the FY '27 CapEx guidance rate [indiscernible].

In the same range, it's about INR 25,000 crores. That is what we are expecting. As I mentioned to you, those projects which we missed out last year, we'll ensure that those get completed in this financial year. And these are a range of projects. These are not just large utility-scale, but it is also including the distribution projects and the transmission projects and the hydro projects we are working, going on.

The next question comes from the line of Mohit Kumar from ICICI Securities.

My first question [indiscernible] on the Note #5 of the consolidated P&L. There is an amount we mentioned of INR 250 crore deferred tax asset. Can you clarify whether we need to adjust or increase the taxes by INR 250 crores to arrive at the profit for the quarter?

So as you are aware, this is a deferred tax noncash. So basically, given our future profitability predictions, so I think that will give you some genesis as to where it is coming from. We had, of course, carryforward losses. And of course, when you look at the standalone books, everything has to be [indiscernible] to fully recognize this. We have better visibility of profits in the subsequent years now. And we feel that some of the carryforward losses can now be utilized within the [indiscernible]. And as such, from a statutory purposes, we have to recognize the deferred tax in the books, which we have done in quarter 4 now.

So this has impacted our consol also, right, consol profit?

Yes. Of course.

Understood. My second question is the Tata Projects. It has been making losses for -- it was making losses prior to FY 2024, I guess, '24 was the first year I think we started making profit. You have '26 again, I think that you lost -- F '25, they were lost, F '26 again they lost. What is your outlook on the same for FY '27 and FY '28? Do you think the losses will get restricted now?

So what has happened in Tata Projects is that they had legacy projects, such as the dedicated Great Corridor project from the [indiscernible] project in [ Barmen ] and some other projects which are there. Fortunately, all those projects have now been completed and very little of it is left. And we expect that those legacy projects' impact will be very minimal going forward. The subsequent projects that Tata Projects have got have good margins. And I do expect that in FY '27, it will [indiscernible] and it will start making profit from FY '27.

One more question, if I can squeeze in. We haven't seen accretion to our underdevelopment RE portfolio for a long time. How are you thinking about bidding for new assets for renewables given the, of course, the structural headwinds right now? Do you want to remain on pause? Or do you think we can start adding to the portfolio from FY '27 onwards?

Yes. So as we mentioned to you that many of the places, there were 2 challenges. One was the transmission lines have got delayed and there is no point in taking a project and not able to implement it because the transmission system or the power evacuation system is not ready. Secondly, we have now come up with unique solutions where we can offer renewable projects along with the storage project, the [indiscernible] project. And going forward, we are looking for that sort of arrangement. These types of arrangements are not only with utilities, but also with large C&I customers, steel companies. We are in discussions with Tata Steel and some of the other large data centers which are coming up. And we do expect that going forward, we will not do pure solar or pure wind, but it will be hybrid with storage. And those will be much attractive in terms of the returns compared to the type of projects which have been bid out in last 2 years.

Your next question comes from the line of Vishal from PL Capital. .

Yes. Sir, in terms of commissioning, you have mentioned -- sorry. Yes, sorry. So in terms of commissioning, I think you mentioned we'll be adding 2.5 gigawatts this year and 2.5 gigawatts, similar number next year, and further like 1.5 to 1.7 gigawatts solar. But if I look at the pipeline, then solar number is [indiscernible] small, like 600-odd megawatts only. Is this -- I mean, like are we adding FDRE or complex FDRE? I think if you can give color or maybe a breakup of 2.5 gigawatts [indiscernible].

So those details are there. In which slide it is there?

77 -- 7.

In Slide 7, we have given the breakup. And those are the type of projects that you would see, which will be a combination of solar and wind. I agree that there are a large number of wind projects which are there and that we have already tied up all the wind turbines which have to go, and we have -- we need to implement all those wind projects apart from the solar projects. But these are all hybrid projects. These are not stand-alone solar or standalone wind, but these are all part of the hybrid FDRE projects that we are [indiscernible].

In case you are only referring to the -- and looking at [indiscernible] you also look at FDRE and hybrid, they will also have component of solar as well. .

Okay. Okay. But is it fair to say that a large part of [indiscernible] like 1.6, 1.7 gigawatt will be FDRE in this commissioning?

This will be a combination of all of this, but larger chunks would be for hybrid and FDRE.

Okay. Got it. And then in terms of commissioning, I think last year for our business, you added the [indiscernible] gigawatt. And now we are seeing like probably a pickup for us. So I mean, is it fair to say probably the issues on transmission and other infra related issues that are kind of behind us and probably things are much better?

Not everything is behind us. But yes, some of the areas where it had got delayed. They are now coming up, those projects are coming up, and we should be in a position to match our project implementation will be power evacuation time line.

Okay. And maybe one last thing. Anything that we can share that we are doing at Tata Power for nuclear as such? And anything that you're seeing any traction that is happening on the ground? That's my last question, sir.

So on nuclear, we have shared with you that we have -- working with 3 state governments. We have identified the land. We have also taken out for water allocation, for which necessary approvals have been given to us and some are in pipeline. We are also carrying out detailed geotechnical studies of each of these and the nuclear plants require different types of new technical studies. Those are under progress. We are now doing detailed DPR of projects to be set up. And this will be done in collaboration with NPCIL. These are small modular [ 2 into 220-megawatt ] plants. And we do expect that some of them, especially in some of the states, we will be able to do a proper DPR in the 6 months' time. And we are also parallelly working on some of the other aspects which needs to be finalized with the nuclear power plants. And so quite detailed discussions, but it will take some more time for us to finalize the arrangement.

Okay. When you say -- I mean, DPR, so probably in terms of megawatt and all, it's still not -- it's still kind of WIP as of now, that is.

I told you 2 into 220 megawatts...

The next question comes from the line of Nikhil Nigania from Bernstein.

I had just one question. I know the company has taken a stance to not add any new coal-based generation capacity. Wanted to check if there is any change in that given so many states are coming up with coal-fired power plant tenders?

We are dampening that. If there is a good opportunity and we find that the tariff is attractive and it's a bankable PPA, we'll definitely look at those.

Understood. And if I may ask just one more question. I think an earlier question on the use of domestic cells you are producing. I understand the use for the rooftop solar segment. But on the utility-scale side, most of your tenders are pre the 2025 days. So I believe they should not be needing DCR cells. So anything I'm missing there?

I think some of them do require domestic. So we are working on that because they will bid under those conditions that you will be using domestic cell and module. So out of the projects that we have, we find that majority are with domestic cells and module.

Your next question comes from the line of Rajesh Majumdar from 360 ONE Capital.

I had a couple of questions. On your Slide 7, the current operation capacity is 16.7 gigawatts and including pipeline is 26.3 gigawatts, which means an addition of 10 gigawatts. So is this the FY '30 figure, 26.3 gigawatts, or how should we take this figure? That was the first question.

This would be, I would say, FY...

Current pipeline, which will go...

Yes. So this is the current pipeline. So this includes the 2,800 megawatts from hydro at [ Sirota ], where the work will start in this financial year. And all the existing, that means the Bhutan -- hydro 600 plus 1,125 where we have already signed the financing arrangement with World Bank. So this takes care of all. Some of them will come up in 2031, '22. That is the 1,125 Bhutan project will come in that year. Some will come in 2031. But of course, all these solar and wind projects will come by 2030.

And sir, your CapEx figure of INR 25,000 crores, if you take an addition of 2 gigawatts per annum, then the CapEx is roughly about, say, on the higher side, maybe INR 12,000 to INR 15,000 crores. Does this mean that INR 10,000 crores of regulated CapEx will happen in FY '27?

I think it's not about regulated CapEx, but a combination of all the CapExs that Dr. Sinha spoke about. Of course, that 0.5 gigawatt of only solar and wind, that as we said, that was 15,000. But then you have CapEx coming up in [indiscernible] stages, CapEx coming up in our hydro. So a combination of all of this -- transmission as well. So I think a combination of all of this, next year is INR 25,000 crores, our sense is probably going forward also we'll have a similar kind of capital outlay.

For FY '28 as well, you're saying?

Yes.

Okay. And sir, my last question is we have signed a PPA with Gujarat, of course. But now if by there is an export duty or royalty which comes from Indonesia, then how does that work with the SPPA? And how does it impact the negotiations with the other states going forward?

Full cost is a pass-through. So whatever is the cost of coal will be paid for. So that's the type of arrangement that we have.

Including a major royalty change?

When it's a coal cost, it has to be passed through, whatever is included in that.

The next question comes from the line of Anuj Upadhyay from Investec.

Sir, need one clarification on how should we read Slide 7 and Slide 32 together. Because Slide 7 where we have highlighted 5 gigawatt of renewable capacity, of which, I guess, 1 gigawatt is a combination of blend wind and solar capacity, whereas we have 4 gigawatt combination of, I guess, 2.5 of FDRE and rest the hybrid project that [indiscernible]. But if I see your FY '32 slides, where we have highlighted the time line of the FDRE and hybrid getting commissioned, the contracted capacity comes only to the tune of 1,200-megawatt. So does the 500,000 gigawatt of renewable capacity is the actual installed capacity or the contracted installed capacity? Because to the prior question, you have mentioned that we'll be adding 2.5 gigawatt each of IPP projects. So this is the contracted 2.5 or the actual capacity?

This is the installed capacity. Contracted for [indiscernible]. Installed capacity is given in the slide [indiscernible].

Sorry?

So on Slide 32, Anuj, we have given the installed capacity and the heading gives the contracted capacity. So contracted will be loaded [indiscernible] installed. When we give the guidance, we gave it on the installed capacity.

Exactly. So until the new -- well, we have mentioned that 4 gigawatt of hybrid and FDRE. So does that translate to around 1,200 megawatts of contracted capacity? Is my understanding correct? Or we are -- there are a few more capacity for which the details are not here because the PPO of the approval yet to be received?

You're right [indiscernible].

Okay. And my second question belongs to your [ Orissa ] project. Again, to a prior question, you mentioned that next year probably will be peaking out in terms of the performance. So apart from Northern Circle, I believe other areas still hover in the range of 18% kind of in [ AT&C]. So what kind of loss reduction trajectory we can assume for the other 3 circles and to what level it can go? I mean like [ North Orissa ] is already at around 10%, whereas others are already at 18%. So to what level we can expect the loss to further go down and by what time line, sir?

Well, there is a category that has been agreed with the [ Orissa ] regulator. And based on that, we do expect that all of them will come in 12% to 13% range in the next 4 to 5 years. So you can expect that we will reduce about 2% every year. So that sort of reduction will be ballpark.

Okay. You mentioned about 4 to 5 years, right, sir?

Yes.

The next follow-up question comes from the line of Apoorva Bahadur from IIFL Capital.

Sir, I had a bookkeeping question. In your Q4 profitability for IEL, we see an increase of almost INR 63 crores. And then similarly for Mumbai transmission as well of around INR 50 crores. Given the regulatory nature of these businesses, is it safe to assume that there was a significant asset capitalization, or are there any one-offs?

This is more the deferred tax part, right? One of the plants were commissioned. Okay. So it's an asset which has been added because of that. .

In IEL?

Yes. I mean the transitional...

Okay. So this increases [indiscernible] for transmission business?

No, that depends upon the asset capitalization timing and the deferred tax that is created because of that. So yes, I think it's not a yearly phenomena, but it depends upon the asset capitalization and the profitability of that particular plant.

Okay. And same thing in IEL as well?

I'm talking about IEL.

Okay. Okay. And [indiscernible] Mumbai transmission?

Based on CapEx.

Yes, that is also CapEx. .

That is based on CapEx, pure CapEx. It is recurring.

Mumbai transmission adds every year INR 1,000 crores of CapEx. So on a 70-30, you will have a return on equity on 30%. So that's what you need to consider, plus certain O&M benefits and all.

Thank you. Ladies and gentlemen, we will take that as a last question for today. I now hand the conference over to the management for closing comments.

Thank you, everyone. And if you have any other questions, please connect with Kasturi and Anshul, and we'll be more than happy to respond to them. Also, if you have any suggestions on improving the quality of presentation or any more details are required, please reach out, we'll try to take it more analyst-friendly in terms of giving you more information and data. Thank you. Thank you to all of you, and take care.

Thank you. On behalf of Tata Power, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines.