The Tata Power Company Limited (500400) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Tata Power Q3 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Praveer Sinha from Tata Power. Thank you. And over to you, sir.

Thank you very much, and good evening, and welcome to the earnings call to discuss the Q3 results for Tata Power. I have with me the CFO for Tata Power, Ramesh Subramanyam, and my senior colleagues, Kasturi, Anand and Rahul. And I'll take you through the details of the Q3 FY '20 results. The third quarter has been very fruitful for Tata Power with very strong performance in current businesses, driven by our focus on operational excellence, while we are continuing to make very good progress on our monetization agenda. In these tough conditions amidst our -- we have been able to report continuing and strong growth in operational profit of all our businesses. Our balance sheet has improved, and we have not lost sight of selective high-growth opportunity, which has led to healthy pipeline of renewable projects, closure of the first acquisition through Resurgent platform and also successfully winning the CESU distribution bid. Let me try to cover some of the important aspects. As you would have seen from our results, most of our businesses have delivered consistent performance with significant improvement coming from Mundra where losses continues to reduce. And this is supported, of course, by lower coal prices, but also because of higher blending of coal, and also better coal sourcing. The consolidated revenue has come to INR 7,171 crores compared to INR 7,900 crores of the previous year, mainly driven because of the lower fuel revenue in CGPL and also in [indiscernible] Trombay because the coal prices have come down. The second aspect is that the consolidated EBITDA has grown in this quarter by 8.2% to INR 1,970 crores compared to INR 1,820 crores in the previous year. And this, again, is because of improved performance of CGPL and renewables. Our renewables have also reported a very good growth of 11.5% in EBITDA from INR 436 crores, and this is excluding Cennergi, which is held for sale to INR 550 crores because of the 400 megawatts of solar capacity, which has been installed in last 1 year. All other subsidiaries and joint ventures have also continued to perform very well. The underlying business EBITDA has grown by approximately 5% from INR 2,051 crores in the previous year which is, of course, without Cennergi & ITPC to INR 2,150 crores this quarter. Underlying EBITDA on the YTD basis has grown by 11% to INR 6,928 crores. The company has achieved a PAT of INR 246 crores this quarter as compared to INR 220 crores in Q3 FY '19 and has achieved overall growth of 11.5%. If we take out the PAT from Cennergi & ITPC, which have been held for sale, the PAT actually grew by 24% on like-to-like basis. Third quarter of the year usually sees a lower renewable generation because of lower wind and also in a number of places the solar levels were much lower. And this has reflected in the results of this quarter. The softening of coal FOB prices by approximately $4 per tonne has happened compared to last quarter with the CGPL fuel under recovery, has reduced significantly from 51 paisa to 32 paisa, and last year, it was 93 paisa. So there has been a substantial reduction in the under-recovery for CGPL. The coal portfolio has reported a profit of INR 121 crores this quarter compared to INR 188 crores in the previous year because of the lower coal prices globally. The renewable business portfolio continues to grow, and we have commissioned 400-megawatt solar plant since last year and another 700 megawatts of solar plants are under implementation. As you would see that our renewable business profitability is continuously improving as the portfolio gained size and the projects stabilized. The return on the renewables is as per our expectations. The solar EPC business is also growing, and we have presently an order book of nearly INR 7,700 crores on large projects along with INR 550 crores for rooftop solar. A significant portion of the order book today is from non-TPREL, which demonstrates that the EPC for solar projects we completed, performance has improved tremendously. In the solar pump business also there is a very strong pipeline of orders, of 4,700 pumps, which have been installed in last quarter. And we have a large number of solar pumps order, which we will be executing in this quarter. Tata Power Solar has also recently received a letter of award of 160-megawatt NTPC [indiscernible ] [ Star ] project and 250-megawatt CPSU project, which will have domestic content. The second pillar of the turnaround for Tata Power has been deleveraging. This has been some -- and there has been some good progress in last few months. The sale of Cennergi has progressed very well, and we have received the Competition Commission approval in South Africa, and now we are awaiting the final approval from Department of Energy. We expect this transaction to close by mid-February, and the sale will fetch us about $106 million plus adjustment for current assets. The process of sale for ITPC's stake in Zambia has also moved forward. And there has been a very positive development with Government of Zambia starting discussions on the PPA and also to resolve the outstanding payment issues and other commercial terms. We expect that this will all help in the valuation and the sales process, which we expect to complete in next 1 year. Our sale of defense business has finally received the NCLT approval and application has been submitted to the Ministry of Defense for approval for novating all the contracts and all the agreements that we have with them. We expect this transaction to close in Q1 of FY '21. We are also working on monetization of certain other overseas investments, and we expect that these will happen in the next 6 to 9 months. In addition to the above divestments, we have made considerable progress in our progress to set up the growth vehicle for renewables, which can unlock significant capital for Tata Power. We hope to announce the specifics on these in the next few months after we take -- make some substantial progress. As you would have seen, we have repaid debt of nearly INR 2,250 crores in this year and approximately INR 1,900 crores of fresh debt was taken for the regulated CapEx and the renewable capacity additions that have taken place. This new CapEx will add to the bottom line in the coming quarters and will help us to improve our debt equity ratio. Because of the efforts made by us in improving our operational profitability and reducing debt, we have been able to reduce our net debt to underlying EBITDA from 5.69 [indiscernible] back to 5.12 by the end of this quarter and the debt-equity ratio from 2.21 to 2.12 in this period. Before I move to the growth opportunities, let me also update you on the progress made on HPC for Mundra. Subsequent to the last meeting called by the Ministry of Power which was on 12th of December, states have internally progressed, and we are expecting that they should be in a position to decide in the next few months on the amendment to the PPA. We expect that all the other states, apart from Gujarat, should come to a decision in near future. And we are in continuous discussion with them. We had earlier informed you that the coal mine had a DMO obligation. Of course, it has not impacted us for last 3 quarters because the coal prices have been below $70, but we understand now that the DMO obligation has been extended, and this will continue for this year also, but this depends on the price of coal, which is there in Indonesia. KPC will make an application for extension of the license next month as it can be done only 2 years before the present license expires. And we understand that the new regulations, which Indonesian government is expected to come up will help in getting the extension for the existing license for the next 10 years. Moving to Prayagraj. We have seen that in the last quarter we could take over the ownership of Prayagraj project, and we have completed the onetime settlement of the existing loan. Our immediate focus is, of course, to improve the availability of the plant and ensure that all the operational processes are taken care to improve the availability and also the operational capability of the plant. We are working with all the partners and stakeholders, vendors to complete the balance activities of the plant, so that all the 3 units can operate. Based on our turnaround plan, we are confident of improving the availability of the units to nearly 80% of the normality of the normative capacity in FY '21, and we are on path to make these changes. We are also looking at few more opportunities of stressed thermal assets and provided they meet the requirements in terms of the PPAs and the coal [ metrics ]. In December, we were selected as the successful bidder to take over 51% stake in CESU in Orissa. CESU provides a very interesting opportunity with huge potential to Tata Power to improve its regulated returns over the investment and also to achieve incentive overachievement of the AT&C loss levels. As there is this lost trajectory, which the regulatory has given, and we are confident that once we take over and provide improvement in the reliability of supply and also in the billing and collection, we'll not only be able to meet the AT&C trajectory, but also improve upon it, which will provide us the additional returns over and above the guaranteed returns that we will get under the RoE system. We are also confident that we will become -- we will be able to provide very good quality service to all the CESU consumers, and this will be the beginning of many more such takeovers that we expect in the years to come by. As we have seen the power sector in the country has been going through huge challenges, and there is a huge plan by Government of India under the ADITYA Scheme where in states will be provided an opportunity to either go for [ PTP ] structure or go for multiple franchisee structures, and we expect that Tata Power will play a very, very meaningful role in this privatization. Some of the other new initiatives that we have taken, we have been working on EV charging network in collaboration with Tata Motors, and we already have 100 charging stations in 8 cities. And our target is to install 300 charging stations by end of this financial year. And this will cover all the main cities and some of the smaller cities too. We have also launched in this quarter the TP Renewable Microgrid, which has been in collaboration with the Rockefeller Foundation to set up 10,000 micro grids over next 6 years to provide power to nearly 800 million people across India, and help eradicate the energy poverty. We expect that this will be a game changer in terms of providing not only power to the homes in these villages, but also the commercial and industrial establishments and thereby encourage the micro enterprise in the geography. As you would have seen, our efforts have been to steady the business in a very tough macroeconomic environment and delivering good results. We are confident that with our calibrated growth strategy and with targeted deleveraging, good results will come, and this will benefit all our shareholders. I now hand over the call to [indiscernible] for question and answers.

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

Yes, sir 3 questions. The first is on the Co-CEO deliberated on the fact that we are speaking to various stakeholders regarding HPC recommendation. Is there anything specific which is happening in [ all the ] states, which you can throw some light on? Secondly, on coal India, while the coal or infrastructure has done, EBITDA has been -- EBITDA is growing Y-o-Y, but PAT declined? Is there any specific reason why the PAT has declined Y-o-Y? And thirdly, sir, on the CESU. CESU, is it possible to share the AT&C loss trajectory? And secondly, on the -- there is a -- in the slide, I understand that you should be able to collect 10% incentive on collecting past arrears from live consumers and 20% incentive from permanently disconnected consumers. Would it be possible to share the past receivables to be collected from the consumers? That's it, sir.

Okay. Let me take one by one. You first asked about HPC specific movement. Well, frankly the processes that each of these states have to go and take a cabinet approval, and where the process lies is somewhere between the respective ministries and the cabinets of those states. So I think all of them are in various stages, and we are following it up. And we are hoping to get some kind of clarity as soon as possible. So I would say there's no specific progress because the next step is really that states get their respective approval, can then approach CRC, because CRC has to finally approve the amendment to this. That was on Mundra. And you asked about coal companies. You said coal company's EBITDA is better, and PAT is lower.

Lower, Slide #16 -- 15, sir.

Slide 15.

Q3 FY '19, was it Q3 FY '20?

Yes, I am just looking at it. Are you looking at YTD? No, you are looking at quarter.

Sure, quarterly, quarterly. EBITDA is up, while the PAT is lower.

Okay. So I think it has to do also with the previous year, I think we had a tax-related reversal. You just check that out. We can supply you separately the information. Otherwise, it's actually directly in trend with the coal price drop. This is only one-off items which is causing this. We'll give you the data.

The other question you asked was on CESU -- sorry, can you repeat the CESU question?

Sir, I was just trying to figure out if it will be able to -- for you to share the AT&C loss trajectory, which you have agreed on with the regulator? And secondly, the -- in one of the slides, you mentioned that you will be able to -- you are eligible for incentive of 10% for collecting past arrears from live consumers and 20% from permanently disconnected consumers. My question was, what is the past receivables due from all the consumers?

So first is that right now we have data only based on RFP documents, okay. So the RFP documents is, I am told, not public, but then that mentioned a loss of 30%. Now your question on the specifics of the recovery -- past recovery, I think those things are still being collated and validated when we finalize what is called the listing agreement, and we are handed over the company. At that time, the final position will be known. So right now, I think it will be too premature to share the numbers. We had taken some numbers based on the RFP, but I don't think that's the right thing to talk about now because it's over a year now as we have been bidding.

And they have already appointed an auditor, who is doing the audit and will be providing us the details as of 31st March for us to take over and that will become the benchmark.

So I think I just want to clarify. I think there are some queries, which we have been receiving on the whole economics of this CESU. The fact is quite clear. There is an opening AT&C loss, and there is a concern in the market that you know, okay, whether these AT&C losses are going to be more or not. I think we are very clear about what range it is. We have factored that into the bid. And the next question is that, is there going to be losses in this? The answer is that depending on the trajectory, which actually we land up with, there could be initial years of less profits because the fact that we have taken all the effort to release the AT&C and we're kind of investing a lot, but that's part of the bid itself, we modeled it in the budget. That in the earlier time when we kind of take couple of years to achieve that. And thereafter, we beat the trajectory which is there in the RFP and in the bid. So therefore, there is a very clear approach here that you make the returns on the improvement over the trajectory. You make returns on the fresh regulatory CapEx. We have a CapEx plan today, which is roughly INR 2,000 crores over the next 3 years. And we also would expect from the past recoveries, which you said, those are the other incentives [ which are enablers ]. So I think we are well on track based on what we bid. So we need to really see the final transition numbers, which we are going to likely to freeze in the next couple of months.

The next question is from the line of Atul Tiwari from Citigroup.

Sir, one of the slides mentioned that there was some surrender of power by the buyers in Maithon project. So what was the quantum? And what was this about?

So this was more about the fact that there is a new -- as you know, there is a scheme called RRAS, under which if the units based on their merit order are asked to back down in case you are more expensive or increase your capacity, if you are less expensive. But in turn, you are compensated because, remember, these are all regulated projects, while the surrender may happen, but you are also given some part back as part of that RRAS mechanism where the sharing of profit is done by the central utility, which handles the load dispatch. So this scheme has, in fact, earned the company a decent amount this quarter. So while it may look as if there is lower generation, it is compensated.

Okay. So the plant continues to earn its fixed cost based on the full availability, and over and above that, you get a share of the profit?

Yes.

Yes.

Okay. Okay. And sir, on your renewal portfolio, in this quarter, if I look at, say, Slide #22, the PAT is about INR 29 crores compared to the net worth of about INR 7,750 crores. So even if you analyze the PAT, it's like 2% ROE, while obviously, the company is investing more in renewables. And obviously, a lot of renewable portfolio, a large part is now pretty seasoned. So what is the thought process behind putting in more money when the current ROEs appear to be on the lower side, much lower than 11%, 12%, which one would normally hope for?

So I think that you'll have to remember one thing that these numbers which you are seeing, I don't know if you have seen the Slide 21, right? So you're looking at the...

Yes, Slide 21. Yes.

Your 2% ROE, where -- what did you get along, 6,000 -- where did you get that?

29...

Oh, on the net worth. Okay. So I think you have to look at the invested capital, okay. The net worth would also not reflect the fact that at a consolidated level there is an investment in WREL, correct? So I think it would take on invested capital, then I think the number is much, much higher in terms of ROE.

Sorry, sir. I didn't get that point. How the net worth needs to be adjusted?

So out of the INR 7,700 crores, there is an elimination when you come to the consolidated number of INR 2,064 crores, which is an intercompany between TPREL and WREL. So if we adjust that...

But there is a note #2 read that consolidated net worth excludes intercompany investments, isn't that...

No, it's not. That includes dividend. If there is a dividend flow, it is excluded.

Okay. So how much we should remove from the...

The consolidated number is what?

INR 5,938 crores.

INR 5,938 crores. INR 7,000 crores minus 6 - so INR 6,000 crores -- there is TPSSL as well, so what's the number he is asking about?

[ Minus 6 of INR 5,700 crores. ]

INR 5,700 crores. Nearly INR 5,700 crores.

INR 5,682 crores to be precise.

INR 5,683 crores to be precise.

Okay. So sir, it's still, I mean, from, say, 1.5% ROE to go to 2.1%. So...

I think you have to look at one important issue. Q3 has been down by about INR 55 crores to INR 60 crores in terms of lower generation than normal generation because of the weather being bad across the board, across the country, solar and wind both have underperformed. Okay. This is more weather related. So when you see on a YTD basis, this number would look much better. And we'll provide you the YTD numbers to give you an idea. This quarter has especially been bad. And the YTD number, for your information, is how much -- just I'll give you the YTD numbers that will give you a clarity.

INR 282 crores.

INR 282 crores. So which is what? PAT. All put together, all our renewables put together.

Okay. And then my last one is on this Cennergi sale proceeds. So you said $106 million you will get for the deal.

Yes.

Okay. And this is versus how much investment made total so far in that business?

$60 million was the investment. In fact, we are -- $106 million is the base value, then we will get working capital adjustments, about $10 million more, so $120 million. And remember, this is after dividends have been paid out of the past period. So when you want to calculate, the return on investment is much higher. Right now, based on the current distribution, which has already happened, we are still going to receive about $120 million roughly gross, including working capital, $106 million is the base value.

Okay. And sir, for the defense business, how much we should expect the proceeds to the company once it is finalized in a few months' time?

So look, in the defense business, as you know, there are 2 components. One is the deferred payouts and one is the upfront payouts. The upfront payout is about INR 1,000 crores, and of that, INR 600 crores is debt component, balance is to be received, depending on when the timing of that sale is because till that time, the losses, et cetera, has to be absorbed by us. So at least the upfront payment, we are likely to be closer to that at least. Future payouts, we can't say because those are depending on all the orders coming through in the coming years. So about INR 600 crores to INR 1,000 crores is the range at which realizations certainly will happen.

The next question is from the line of Puneet Gulati from HSBC.

Just if you can clarify a bit more on CESU. Thanks so much for a lot of details here. But since the loss trajectory is driven by the document, is it already finalized or is that still subject to negotiation based on what you get from the audited numbers?

Right now, it is given as per the RFP document. And this is subject to what finally gets audited and pro rata increase or reduction to that extent will take place. And as Ramesh mentioned, there are 3 revenue streams in the CESU business. One is that you will get whatever is your O&M cost based on actuals. The second is the CapEx that you would incur, you will get the return on equity. And the third is the incentive that you will get. Now the incentive component one is relating to the loss reduction. So the trajectory that has been given, if you do better than that, for every 1% improvement, there is an incentive that you will get on pro rata basis. The second is on the collection part of it. So every old payment that you collect, you will get a incentive. So 3 revenue streams are there. And the target is that we will do much better than what has been given in the trajectory by the regulator, and we should be able to get a much better return once we stabilize the operation in 1 -- 12 months to 18 months. Perfect.

And ROE will still be 15.5% right, standard.

On the regulated CapEx that will be done, ROE will be based on it.

Okay. Okay. Second is a bit more on your financials there. I'm surprised, there has been a bit of a restatement for Q3 FY '19. Wondering what has -- how has that happened? What is responsible for that restatement?

Where is it achieved?

[indiscernible]

Reported EBITDA alone was last time reported INR 1,480 crores, now reported EBITDA for Q3 FY '19 is a much higher number than '18.

Yes, 2 things. INR 272 crores goes up to revenue because of change in accounting standard [indiscernible] and another is perpetual tax.

There are 2 accounting adjustments here. It's not restatement. The change in accounting standards. One is the recognition of the regulated related tax where you have to recognize both revenue as well as the tax rate, so it's grossing up the kind of the -- it doesn't affect tax, but it changes the EBITDA number, it changes the tax number, okay. That's INR 272 crores. And the other one was?

Perpetual debentures.

On perpetual debentures, the accounting was earlier that interest was not lower.

Used for the tax, now it goes directly.

Yes, the interest was reduced from the tax portion, right? That's an issue. And now it is...

Directed to the equity.

Directly going to -- as if it's an equity. So both are accounting, the tax on the interest. The tax reduction on the interest is also considered as part of equity given the nature of the instrument.

Okay. So earlier the tax was...

Due to accounting treatment, not due to any commercial difference.

So the tax reduction that you were allowed earlier is not allowed anymore on the inventory?

Yes. Yes. While we are cleaning in the tax returns et cetera and -- I think that -- based on some recent judgment et cetera, maybe this criterion has been taken.

Okay. Okay. Good. Lastly, on Prayagraj. What is the progress? Where do you go from here? Have you started work in terms of running the plant and all?

We took over the plant in the first week of December. And thereafter, we have been trying to stabilize the operation. Right now, 2 units are under operation. And they have reached -- from 50% of ability when we took over, they have reached ability of 70%. There is one unit, which is down because one of the circuit breakers had got damaged. And this got damaged many months back, but because we came into -- when we took over, we said that we need to get this done quickly. The spare part has been airlifted from Paris and has reached site, and we are expecting that by mid of February, the third unit will also start operating. So we expect that this year, we will close with a cumulative of ability of about 70%, which is the highest because this plant had never operated more than 50% of ability in past 4 years. And in fact in the last year, it was 49%, and previous to that was 35%. We expect next year we will have the full of ability of the plant at 80%. And the plant parameters, operational parameters are being stabilized, the coal linkage also is being tied up to see that there's enough coal for all the 3 units. Also the railway line work, which has got stranded for many months has started. And we expect that the railway line work will also get completed by March end. And we should have all the railway links working right. So I think it's a very good progress that is going on, and we expect that in the next financial year, we'll meet all the operational parameters, and the plant will be operating at full capacity.

Okay. That's great. That's good. Last year, there was some news, which keeps on coming that you will stop operating CGPL if the sale doesn't happen. Is it something that you would consider?

See now what happened that there was a meeting taken in Ministry of Power, which the Union Power Secretary had taken. And in the meeting, he had told all the 5 states that there is a sense of urgency in finalizing the HPC recommendation, and he had given them time till end -- till mid-January that they should complete, if the plan continues to be under stress, if you cannot be in a position to operate from first week of March. Based on that, the states are working to meet the timeline, and we expect that they will come up with their decision on the PPA amendment before the March timeline. And that's what -- and we may not have to clearly go for that if all the states come on with it.

But if the states miss the time line, would you actually stop power?

We'll have to examine. And we expect that all the states are in active discussion, and they should be able to resolve this, because at the end of the day, even with the revision in tariff, they will continue to get the power at one of the lowest tariffs in merit order, and it is in their interest to see that the operation of the plant continues.

The next question is from the line of Abhishek Puri from Axis Capital.

I understand, for CESU, you're not providing the loss reduction trajectory. But from a 3-year or a 5-year perspective, what would be the target from the current 30.5% that is there in the PPT?

So in the RFP, Abhishek. This is because it is a government issued RFP that we can share with you. In the RFP, it was supposed to go over a 10-year period to 14% so...

14?

Yes. That's what...

Over 10 years.

Over 10 years. So that's why there's a trajectory there.

In 3 years, it is supposed to be 23...

23.5%.

Yes.

23.7%.

Yes. So we'll do much better than that.

Okay. Has that been reduced or eased out because I was going through some of the clarifications of previous RFP document that the other bidders quoting that first couple of years can be high loss years?

That is still under active discussion, as Mr. Sinha just said, we are still -- there is a document, which is a final document based on all the audit and baselining, and then in that, this also will be considered.

Okay. Okay. Great. And secondly, on Mundra. Now the current fuel cost under recovery is about 32 paise. Based on the current formula that has been discussed with Gujarat and Punjab, what -- would this be entirely offset if you get the supplementary PPA you have signed up under these 2 agreements? Or -- I'm just trying to see that there is no pull back formula that minimum 20 paise that was there as a offset. So if fuel costs go under this level, current level, there will be no pullback, which will be required from your side?

Well, certain things are not fully pitched up in that sense on the operating part because CRC will put a final stance to it, Abhishek, but broadly, this 20 paise and the 15 paise applied. But remember that this 32 paise is also based on certain coal -- type of coal, et cetera, which was purchased in HPC. There is a different formula because only Indonesia is allowed, no other country is allowed. So there is a -- there would be -- there are other conditions around it. So as of now, that clearly -- our understanding clearly is that we may not have to give back, because only what is there at the minimum.

Right. Fair enough. Thirdly, sir, on the standalone results, why are the numbers so weak? I'm unable to understand the impact.

Look, generally, these -- so when it comes from the operating profit or the operating assets is absolutely stable. When it comes to the standalone, it's -- we normally have an operating profit about INR 600 crores quarter-on-quarter plus minus any adjustment on account of the orders, regulatory orders. So that is absolutely stable. And I think the only difference is differential dividends, which we bring in from our subsidiaries like timing often. If there's no dividend, you still have the interest cost which is there, which are used to fund Mundra from the corporate loans that always remain. So Q3 also is one of the weaker quarters for some of the assets. So therefore -- previous year had, you said...

Yes, INR 52 crores.

Yes, that was also there. So -- but otherwise, it's a normal quarter. The dividend is a completely -- as you know, gets eliminated when it comes to consol.

Right. Fair enough. But in terms of operating profit, I mean, the profit is down INR 292 crores, whereas INR 272 crores was because of this deferred tax asset?

No, no. You have to look at the profit. The profit is INR 855 crores last year for the quarter operating profit against INR 563 crores this quarter. So if you remove the INR 272 crores from the INR 855 crores, you are at the INR 600 crore level, INR 580 crore level.

So broadly, this INR 20 crore decline is largely attributed to the tightened operating parameters?

Yes, sometimes it's tightened, sometimes the -- also, it has wind in the -- standalone also there is some wind which has underperformed. So the combination of small, small items.

Fair enough. If I may ask one more on the renewable monetization plan. Given these ROE -- these renewable projects have been ROE dilutive in the initial years, is there any -- we've heard about the InvIT earlier in the press, what are the plans on that side?

No. We are exploring various options. We are also waiting for the budget because there is, I think, items around the infrastructure and tax released this last year would be available, so we're just watching this space too so that we can take a -- but suffice to say that we're looking at both these options very, very intensely and closely. I think you will hear very soon on what finally we finalized, very soon we'll be going for it.

And was this a part of that $1 billion in 4 quarters that was being talked about earlier?

No.

No.

The next question is from the line of Aniket Mittal from Motilal Oswal.

Sir, firstly, on the Arutmin mine...

Excuse, sir. This is the operator. I'm sorry interrupt. Sir, may we request to use your handset please?

Yes. Sure. So on the Arutmin mine, so what is the amount that we've received so far? And given the fact that I believe that the mine would be up for renewal this year, could that hamper the proceeds going ahead?

No. First of all, we have received about $205-odd million so far. And also the mine particularly doesn't really matter because it's been paid by the shareholder who was not by the mine. So therefore, whether the mine renewal happens or not, frankly for us receivable doesn't get affected.

Okay. And how do we see is there median amount coming in?

Yes, so amounts are trickling in as per the plan, because remember that it is just like a typical restructured asset where the lenders typically ensure that there is a regular payout, similar arrangement to this. So we are regularly getting fair payouts. It would have helped if the coal prices were higher for the mine, but still we're receiving enough this quarter again, we get about 5 or -- how much?

Mostly $17 million.

About $15 million we progressed from the last quarter.

And monthly, it is about $5 million -- $17 million actually.

Yes $17 million in first quarter. So that's $5 million to $6 million per month is the amount that we get.

Okay. Secondly, actually on the receivables front, could you let me know what's the receivable situation on the renewable business? Specifically, are there any receivables which, I think, had shot up? Are there any recoveries you're picking on it?

No. So I think barring 2 states, we are comfortable. These 2 states, as you know, it's not very difficult to get these states there and -- but there also we made some good progress. We've been doing, in some states some factories, some states bill discounting. And also, there's been improvement even in Andhra, now we have started to receive payments, so...

Based on the court order.

Based on the court order, which asked them to release initial amount. I think on an overall, we are below 3 months on a consolidated basis. And I think, in some states, we are lagging behind.

So what will be the total amount of receivables within the new receivables?

We will give you separately. If you don't mind, we will give you. [ We are just reconfirming it. ]

And just one last question. I'm sorry to harp here again on CESU. But I'm just trying to understand, when I have a look at the tariff order for FY '19 and '20, there's a big revenue gap over there, roughly of around INR 700-odd crores. And the approved AT&C by the regulator for both those years is around 24% or so. So if there's a change in this, would this imply that the regulator would have to approve certain tariff hike for us to -- there is change in normative AT&C, which means the power purchase cost would have to go up? And similarly, how do we -- if you want to reduce the gap between, let's say, what's approved and what we actually believe the ARR should be. So...

So -- yes, so I think the understanding here is we are receiving a fresh balance sheet taking over the company. Any tariff adjustments of the past, the regulator has to deal with it in the manner they have already deal, which is that they have to create a regulatory asset and recover over these. And that's the call they will take. So as we are concerned, we start with a AT&C loss number which will be validated, and from there we have to take on. So simply in our understanding, the past doesn't come to us as a hit or something, the tariff adjustments has to be taken -- looked after by the regulator.

Yes. And if there is any tariff hike that is required, they will be taking care and that will come as a part of the vesting order, wherein, as a normal factor, they will revise the tariff.

All right. And just one last question. I may have missed on this, but what's the past arrears for CESU? You've just made a line saying that there's an incentive that you will earn.

I don't have the latest number because we won't have -- the government would have not given us the latest number. We're waiting for that. I think maybe in the next call, I will be able to share.

Not that earlier.

They will be soon clearer, so just hold on to that. Wait for month or so before we get the clarity.

The next question is from the line of Anshuman Atri from PremjiInvest.

My question is regarding renewables. There have been few news items talking about some InvIT structure which could be possible and deleverage Tata Power. And there have been other news where Tata Power had said that it wants to become a pure play renewable company. So both of them are a bit contradictory. So I just want to understand whether you will have InvIT for renewable or you will remove the thermal assets and become a pure play renewable?

What we have been saying in public is that we want to be as carbon friendly as possible as a company, although we have presence in thermal. We have a plan of reducing our thermal footprint, which is why we have started a thermal platform. So that is part of our strategy to reduce the exposure to thermal. Now what it means is, automatically, the ratio of thermal comes down in the overall scheme of things, but we can't eliminate it because a city with [ 7,000-megawatt ] of thermal power apart from what we have done through the Resurgent platform. But yes, on the renewable side, yes, we're very -- we are keen and we are going to aggressively expand renewables. And whether it is InvIT, which is one structure we are evaluating. And we are evaluating certain other structures also depending on which is more friendly. And maybe in this current budget also, we would be looking for some clues on what -- how the government wants to encourage it and take a call quickly and move on, because we are very clear that we want to build our renewable portfolio into a very large portfolio.

Okay. And sir, secondly, on the discoms, if there is a reform announcement in Aditya as part of Aditya. Sir, what is the potential for you? How many services or states can you -- what is the bandwidth of the company to take on?

I think that in distribution space, there are very few players in the country who have the experience and domain understanding and also the bandwidth. Fortunately, in Tata Power, because of its presence in Delhi, Ajmer and Mumbai, has built huge capabilities in-house for taking up this responsibility. And apart from this, whenever you take up a distribution company, the employees come along with them. So it is not that the employees in those companies do not have understanding, it's just that the exposure and experience is there. So the typical arrangement is that at certain specific senior level or certain specialized areas we send people from Tata Power, the rest of the people are utilized from there only and they are retrained so that they are conversing with the new technologies and its usage. So we have huge appetite. We are definitely looking at playing a very important role whenever the privatization of the franchisee arrangement happens. And based on the merit of each of these opportunities, we will be bidding and taking over. So this is a big play for Tata Power along with the renewables that we have been discussing about.

Okay. And sir, lastly, on the Mundra asset. So in the last 1 year, we have been hoping that other states will also comply and go the Gujarat route, but we have not heard much from them. I guess, even when the 15th January deadline was given, not many states have responded. So suppose in the next 6 months we do not see much progress there, then what is the plan of action going forward?

See, the -- we need to look at it under 2 separate scenarios. One is that notwithstanding the HPC, we have been able to reduce our cost. And you have seen in this quarter, we have been able to reduce the under recovery to 32 paise, which is more or less what we would have got under the HPC. So that's one part. The second is that the states are working on it. It is not that, even in the meeting in Ministry of Power or subsequent to that, they have not been -- you know that the new government in Maharashtra, the minister has been appointed just a month back. And they have been discussing about it, and there is genuine intention by all these states to resolve this. And -- but they have to go through a process whereby it needs to go to various departments for their consent. So this is definitely work in progress which is happening, and we are continuously following up with all the states. And all of them are on board, but they require this power, and they would like to come up with a solution, which gets accepted by all.

The next question is from the line of Sumit Kishore from JPMorgan.

My first question is, has there been any development around legislation governing renewal of coal mining license in Indonesia?

Yes, there is development in the sense that the government of the new cabinet respond. There have been active deliberations between government and industry. Also, the Governor of Indonesia has decided to also relook at several other laws along with the coal mining law, which they are trying to put something like, call an omnibus legal, I would say, statute. And we are -- and the government has appointed a group of ministers to finalize this in a very short timeline. I think they have given some deadline for coming out with the final recommendations and the law itself. And apparently, the progress is very fast. So we should be hearing in the next few months about the -- that guideline for renewal being announced. So it's a good progress, I would say, considering that there was election last year and then it took time for them to settle down.

Got it. My second question is, if I look at the regulated equity base from Mumbai operations, it has reduced by about 2.5% or so since, say, the Q4 of FY '19. What sort of adjustments -- downward adjustments are happening to the regulated equity base?

So one is that we have decommissioned one unit. That was one reason why it had come down. And -- one minute, I'll just remember that. There were small factors because of its actuaries. It's only because of decommissioning that the actuaries has come down. But in the forward-looking view, correct view -- what's the one more reason -- so I think, in general view, one main reason, but we can give you the exact later.

Just to understand this better, looking at this 1-year forward because you would be aware of what is going to get decommissioned going forward. Is there anything in generation or transmission that you should be aware of that is getting decommissioned?

Yes. No, decommissioned we have nothing...

There is no decommissioning. In fact, there is large investment that is happening in the transmission sector. And also in Tata Power Delhi Distribution. So there is actually...

So we'll have -- approximately at least in the regulated businesses, we would have at least INR 1,000 crores from transmission, distribution of Delhi and Mumbai together, and some in the Maithon. So totally that would be the range normally we find. And I'm saying going forward, okay. And...

INR 1000 crores is the CapEx?

Yes, CapEx, CapEx. This does not include renewables. Okay? So...

Regulated business CapEx?

Yes, regulated business CapEx. And the other question which you asked is reduction of base equity, that's also because the decommissioning -- or rather the one of the assets in the defense business is one of the regulatory assets has been deregulated. And that's the other reason, some building or land.

Okay. Okay. And if I look at Prayagraj, what is the current landed fuel cost at Prayagraj? And if you could give us a sense around the net station heat rate?

We can provide you the details, but I think the heat rate is still stabilizing. Whatever we had bid for it, or originally the promoters had bid for it, we should be able to reach that by April. So I don't think that there will be any under-recovery as far as the heat rate is concerned. On the fuel cost, the details can be published to you because it is...

Right now, I think the first month is yet to be over. So we have numbers -- estimated numbers, but we don't have yet firm number to give you right now given that so many things we have moving there.

Got it. Got it. And finally, on this Odisha. If we were to look at this as an ongoing operation, what would be the equivalent regulated equity base for that operation in Odisha currently?

So the projected CapEx in the next 2 years is approximately INR 2,000 crores, and it could be probably front ended. And all of this will get regulated returns because they are part of the normal kind of regulation. But I think that is not enough to compute the income because you have past distribution-related incentives or past recovery-related incentives and any savings on the trajectory of AT&C will be added to this.

No, I get that for the future. But I'm saying that, if this operation as is where is when you got it, what is the equivalent regulated equity base for the investments already made there?

I don't have a ready number. I'll give you -- which is basically, you're saying -- see, we are going to taking over a clean company, okay, at what you call depreciated value. We are not really even going to file the ARR for the assets so to speak of [ past ], right. So we'll give you that number. We'll have that number and send it around, just to give you an idea that what's the asset size, and therefore what is the regulated equity involved in that assets.

Yes, regulated equity. That could be useful because it will give us a very good starting point as to what the size of the business would be.

Yes. I'm told it's around INR 3,000 crores.

No. INR 300 crores equity.

That's not what he is asking. No. He's asking what is the rate -- asset base...

No, regulated equity base. I'm asking the regulated equity base.

Correct, correct. Regulated equity base, which is on the investing assets, what CESU is filing today per ARR. So I don't think we have the number right now.

No, we don't have.

We'll give you separately.

Sure. Last question, 700-megawatt of solar projects under implementation. What is the phase out in terms of execution on the ground and in terms of commissioning?

Yes, we have some of them planned in the second quarter of FY '21, some in the third quarter and some in the last quarter of FY '21. So most of them will get commissioned within the next financial year.

700-megawatt in FY '21.

The next question is from the line of Mohit Kumar from IDFC Securities.

So I have only one question regarding Prayagraj. So the enterprise value which you mentioned in the slide is INR 7,000 crore. And I believe, INR 6,000 crore is onetime settlement. So does it mean that for 70%, 77% stake, which we have acquired from the lenders, we had paid roughly around INR 770-odd crores?

So we paid INR 6,000 crores. That's right.

But that is partly debt and partly equity.

The number that we have finally -- we brought in about 12 -- INR 1,300 crores as equity and INR 4,700 crores as refinanced debt to put this INR 6,000 crores. Now what was your question?

Sir, the slide says the enterprise value is INR 7,000 crores. Where is the additional INR 1,000 crores?

Maybe, you're talking about working capital, including working capital, but that's not the case. We haven't given any INR 7,000 crore number.

No, you just have it on one of the slides, I'll just...

Okay. Which sheet number?

Total assets. So maybe including gross current assets. The INR 600 crores is definitely better there. So maybe we're looking at the number. We will have it verified. Which slide is it?

I'll get back, sir. [ I just forgot, but it is there. ]

So later.

So INR 6,000 crore has been funded by INR 1,300 crore of equity and INR 4,700 crore of debt, am I right?

Yes.

The next question is from the line of Atul Tiwari from Citigroup.

Sir, my question has been answered.

All right.

The next question is from the line of Deepak Krishnan from Goldman Sachs.

Sir, this is Pulkit from Goldman. Just one question from my side. Sir, as we look at CESU, we look at Prayagraj and the renewable portion, can you guide us what will be the consolidated CapEx plan for the company for the next 2 years?

Prayagraj...

Prayagraj is on the platform.

Prayagraj is on the platform. So I hope you're not considering it consolidated, but you will probably use it for calculating the property. But if you remember one thing, Prayagraj is not a regulated CapEx. It is a bid out project. Any CapEx has got no relevance, it is just -- it's not cultured for return, okay. So just in case you want to clarify that clearly. Renewables, depending on the bids, the ongoing 700-megawatt clearly would be in the range of INR 3,000 crores CapEx and the rest is all -- the rest of the regulatory, which is Mumbai, Delhi, others which is another INR 1,000 crores. That's our baseline. Now if we win more bids then the CapEx will, of course, increase in the renewable side, especially.

Sure, sir. So the total number for the next couple of years would be about INR 3,000 crores?

So one that I did not mention. You've got 2 pieces here. The CESU alone, depending on finally how we start, the plan is INR 2,000 crores in the first 3 years. It could be early. So first year could be -- even half of that could be in the first year also. But that will come out in the next few months, we'll be more clearer about it. So that is CESU. And then there is Maithon, which I did not mention, we have a railway project.

Railway project and the FGD.

FGD. So those are significant amounts. I think INR 600 crores CapEx on FGD, INR 400 crores CapEx on railways we're going to capitalize. So that's INR 1,000 crores separately.

And this and plus renewables?

Yes, this plus renewables.

Do you have any further questions?

No, that's it. Thank you.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

So thank you very much for all the questions. And if there any other queries that the analysts have, they can get in touch with the management, our team of Kasturi and Rahul Shah will be able to provide all the details. We have also noted down all the other details which were asked for, and we'll furnish the same to the concerned analysts. And we thank you all for joining us in the call.

Thank you very much, sir. Ladies and gentlemen, on behalf of the Tata Power, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.