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

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Tata Power. [Operator Instructions] Please note that this conference is being recorded. We have with us today Dr. Praveer Sinha, CEO and MD, Tata Power; and Mr. Sanjeev Churiwala, CFO, Tata Power, along with other key members of the management. I now hand the conference over to Dr. Praveer Sinha -- sorry, I now hand the conference over to Dr. Praveer Sinha from Tata Power. Thank you, and over to you, sir.

Thank you, Margaret, and good evening, everyone, and thanks for joining for the Q3 analyst call. We hope all of you are doing well and safe. And it's good to see so many participants on the call, and we hope that the results and presentations provided sets off information as required by you. I'll give you a brief summary of the results and cover some of the key aspects of the business, and then we will take your questions. But before that, please let me take the opportunity to introduce my colleague, Mr. Sanjeev Churiwala, who has taken over as CFO with effect from 1st January '22. And my earlier colleague, the CFO, Mr. Ramesh Subramanyam, has moved to a group role in Tata Sons. Along with me are Mr. Anand Agarwal, Financial Controller; Mr. Kasturi and Mr. Rahul Shah from Investor Relations and a few of my other colleagues from the management. Tata Power has delivered a very strong third quarter as both the underlying EBITDA and the profits saw double-digit growth compared to last year. This was despite pressure from rising commodity prices faced by CGPL, Tata Power Solar and Tata Projects. The company has taken several bold and strategic steps be it either working on the pass-through arrangement with procurers and CGPL or focusing on sustaining margin in utility scale and rooftop EPC through robust bidding and contractual agreements. The impact of these steps is evident and visible in the results of this quarter. Similarly, we have ramped up our efforts in Odisha Discoms with a focus on growing the consumer base especially in the high load Commercial and Industrial segment and improving the billing and collections through various initiatives. You will see that all the 4 Discoms in this quarter have delivered very strong performance compared to the previous quarter and are now profitable. All our other assets have also operated at benchmark levels and have delivered another quarter of strong performance. Despite the provisions of Tata Projects and one-off order impact in Maithon Power, we have delivered a 42% growth in revenue on a year-on-year basis from INR 7,756 crores to INR 11,015 crores and a 74% growth in PAT on a year-on-year basis from INR 318 crores to INR 552 crores. Our renewable business delivered another quarter of strong performance with both RE generation portfolio and ETC portfolio delivering healthy operations. The company achieved almost 50% growth in revenue and doubling of profit from renewable business on a year-on-year basis this quarter. We have also been awarded letter of intent for a 300-megawatt of hybrid wind project along with solar from MSEDCL. We also completed commissioning of 2 projects of 100-megawatt capacity in UP in January. Our solar EPC business, namely Tata Power Solar, has registered strong performance in large-scale EPC business and Rooftop Solar business this quarter, registering almost 70% growth in quarterly revenue from INR 923 crores last year to INR 1,561 crores this year. With several initiatives to improve margins, Tata Power Solar delivered a strong operating profit of INR 150 crores and [ backed off its erosion ] this quarter. The large-scale utility, its order book continues to grow with orders worth around INR 1,800 crores in Q3, taking the total order book above INR 10,000 crores. Amongst utility-scale projects, we won 320 megawatts in this quarter and were also awarded the EPC contract for India's largest solar and battery storage projects of 100-megawatt solar and 120-megawatt battery storage for INR 945 crores at various sites in Chhattisgarh. Margins have continued to improve, and we have prepared for a higher model inputs in this quarter before the basic stub duty kicks in from 1st April this year. To prepare ourselves in both our renewable generation as well as EPC business as higher levels of duties on sales and modules get imposed from 1st April '22, the company has decided to set up the 4-gigawatt solar cell and module manufacturing capacity using state-of-the-art technology with an investment of approximately INR 3,400 crores. This capacity is expected to be fully commissioned in the next 15 to 18 months' time. We have also participated in the solar PLI scheme, which has been enhanced by government of India from earlier INR 4,500 crores to now INR 24,000 crores in this budget with a strong 3 decade experience of manufacturing of cells and modules, we believe that this expansion in the capacity with PLI benefits from government of India and the other state incentives will make us very competitive and help us to pursue growth in our utility scale, EPC and Rooftop and Solar Pump business. The Rooftop Solar business saw another successful quarter, winning orders worth more than INR 375 crores in Q3 with a strong growth from commercial and industrial customers. Our rooftop order book is now 375 -- 370 megawatts of total value more than INR 1,000 crores. We executed 118 megawatts of rooftop solar in this quarter, which was higher -- much higher than execution in Q2. We have started seeing meaningful traction under various financing schemes launched in partnership with various financial institutions and close to INR 370 crores of orders were financed through these schemes. We have recently entered into an agreement with State Bank of India for a centralized and dedicated processing office for the solar projects through this Surya Shakti Cell, which will promote faster the execution of loans for solar projects sourced from anywhere in the country. With a slew of attractive features such as smaller downtown payment -- smaller down payment, longer tenors, this partnership will help us in ensuring hassle-free financing, for the rooftop projects for our customers. The Solar Pump business has been a key development with ESL tender now moving forward. ESL has now set the list of empanel bidders to all the states. And the states have started the process of signing the agreement with the empanel bidder. And we are at different stages in this process with 14 states. The first set of orders have started coming in, and we have already booked orders for more than 3,000 pumps. With the launch of Tata Power branded solar pumps and our existing strong presence in many states, we expect our Pump business not only capitalize on the ESL tender but also direct sell opportunities that will come. Coming to our integrated CGPL and coal portfolio. As I mentioned, the international coal prices remains high. We were forced to reduce the supply of power from our units under the PPA terms to contain the losses. During this period, we entered into a short-term pass-through arrangement with Gujarat from 13th October to 31st December and for very short periods with Rajasthan and Punjab. As a result, our availability in this quarter was 40%. Adjusting to the various charges under the PPA, we have been able to reduce the losses in CGPL this quarter to INR 458 crores from INR 863 crores in the previous quarter. We are now working very closely with government of Gujarat to finalize the long-term arrangement, which will ensure to pass-through of the coal prices. As a result of higher coal prices, the profits from the coal company have improved, providing a hedge against the losses in CGPL. CGPL and coal integrated portfolio have generated a profit of INR 143 crores in this quarter compared to INR 16 crores in the third quarter last year. As we had mentioned last quarter, the teams in the 4 Odisha Discoms have been working continuously to reduce the AT&C losses despite of being impacted due to the double blow of both Cyclone Yaas and COVID related lockdowns. This quarter, we have seen meaningful reduction in the AT&C losses across the book. This has helped us to register profits of INR 125 crores from all these discoms compared to INR 21 crores in previous quarter. The focus in these discoms are on following factors: improvement of reliability to state-of-the-art operations with increased use of technology in various areas of operation; improvement in customer service, including offering various digital avenues for customer services; and reaching out to potential customers, especially commercial and industrial customers, to supply them quality power including better billing and collection solutions. The focus on operations and profits in all these business has helped us now to deliver 9 consecutive quarters of year-on-year profit. Consolidated revenue for YTD FY '22 increased by 33% from INR 22,860 crores to INR 30,491 crores. whereas PAT increased by 59% from INR 957 crores to INR 1,527 crores. I will now move to the topic of leverage or deleverage. Despite CapEx of around INR 1,200 crores during this quarter, net debt has largely remained the same as that in Q2 with healthy operational cash and income from JVs. Healthy growth in underlying EBITDA from business continues to improve the debt metrics. The company is working on initiatives that will help the company in maintaining a very healthy net debt to equity, which stands at 1.5x. And the net debt to underlying EBITDA of 4.12x, and these have improved compared to Q2 also. S&P Global Ratings have upgraded the company's credit rating by 2 notches to BB stable. And Moody's has upgraded the credit rating by a notch to Ba2 rating from Ba3. Our renewable monetization process has progressed very well in the last quarter and the same is in line with our internal time line. We had mentioned earlier that we are working on a renewable structure that will take care of the capital needs to meet our growth aspiration. We expect to close this shortly and once done, we will share further details to all of you. We have also started working on our transmission business opportunity. As a part of this, we have started bidding in both M&A opportunities as well as fresh bids under the government PV, CV opportunities. We have recently been awarded the LoI for the acquisition of 100% stake in the NRSS XXXVI through Resurgent Power, where we have 26% investment. Resurgent has also submitted a bid for Isolux Transmission in Uttar Pradesh under the IBC process. This process is also likely to be concluded in the next 1 month or so. And we will share more details once we get information from the resolution professional. Our EV charging business also continues to expand with nearly 1,300 public charging and 158 fast charging points installed in 31st December. Our network is now spread across more than 250 cities, making us one of the most widely present EV charging company. More importantly, we have entered into an MOU with TVS Motors to set up 2-wheeler charging points across India, which will further bolster our charging infrastructure and mark our entry into 2-wheeler charging space, where the offtake has already picked up significantly. We have also entered into partnership with many large players such as Apollo Tyres, Nayara Energy, [ BEST ], Hyderabad Metro and we will work together with them with the charging ecosystem. Our journey towards the cleaner and greener company gets further bolstered by the motivation and reputation that we keep on bidding for all of you. In the S&P Global Corporate Sustainability Assessment for 2021, we received this total score of 67 and a percentile rank of 80, which is the highest for any power utility in the country. The score is also significantly higher than the average world utility sectors score of 38. The company is working towards its transformation to Tata Power 2.0. We have started seeing significant traction in many of the identified strategic areas, and some of these initiatives will start showing results in very near future. As we always stress, our transformation will be founded on the pillars of strong balance sheet and healthy return metrics. With this, I hand over the call back to Margaret for the Q&A session. Thank you.

[Operator Instructions] The first question is from the line of Swarnim Maheshwari from Edelweiss Securities.

Yes. Congratulations for a good set of numbers. I have 2 questions over here. The first one is, if you look at the EPC margins, they are at almost about all-time high at about 10%. So what has led to the margin -- strong margin profile? And also about the sustainability of the same, if you can give some sort of color over there.

So this depends on how many projects and what type of projects are executed. There is a cycle of execution of projects. And in the last quarter, we could execute many of the projects for which the material was sourced during the previous quarter. And also, we could get better margins in them because of the way the material sourcing and the optimization in engineering was done. So I think it demonstrates that over a period of time, the supply chain management has improved, as also our project execution capabilities and engineering capabilities. And all the learnings that we are now getting we are implementing it in the various projects. And you would see that these type of margins will sustain in the future.

Right. So basically, this was better-than-expected cost realization. Is that right?

Yes, this was a little more than the normal. And this -- as I mentioned to you, this is dependent on the sourcing. It's not only just the sourcing of the cells and modules but also the sourcing for the structures and the balance of plant. So we do a better sourcing and better planning. We are always in a good position to get better margins.

Okay. Right. Sir, my second question is, you have announced about this setting up of 4-gigawatt integrated cell and manufacturing -- module manufacturing capacity. So have we already identified the land equipment supplier since you have given a time line of about 15 to 18 months from now?

Yes. We have identified the land, and the land has all the necessary infrastructure available and including water and electricity. And we are in the process of finalizing the equipment. Since we have been running a plant with cell and modules, we know from exactly where the shipments have to be sourced. And the consultants are working on it to finalize the orders next 3 months' time.

The next question is from the line of Sumit Kishore from Axis Capital.

My first question is, again, on the cell and module manufacturing capacity. Could you help us understand the breakup of the INR 34 billion CapEx into cells and modules? What technology are you going for at this point and what could be the saving of this capacity expansion? So in Phase 1, will it come up in less than a year, for instance? Also with the PLI benefit and the duty implementation starting 1st of April, broadly, what is your expectation on the EBITDA margin profile of the cell equipment manufacturing?

So the cell and module factory of 4 gigawatt will come in 1 phase only. We expect to commission the module line in about 13 to 14 months, while the cell line will take another 4 months. So in 18 months total, we should be having both the cell and the module lines. The cell equipment, most of them comes from Europe. It's a high-end technology and the latest technology, which is the p-type cells. And also the [ Mono PERC ] are the ones that we will be using. The module equipment, many of them come from China and other places. And have zeroed down on where we will be sourcing these equipment. We expect that whatever we will be producing, majorly, it will get consumed internally. We have a large plant for setting up our own utility scale plus the EPC orders that we will have plus the rooftop and the solar pumps. So virtually everything that we will produce will get entirely consumable for the various solar and renewable products that we will be carrying out.

Okay. My second question is regarding the state of progress on monetization of strategic stake in your RE portfolio. I mean there have been various new verticals coming up. So what is the state of progress? And on the Mundra merger, where is it going to happen before end of this business?

So we are in discussions with the various strategic investors in our renewable business, and we should be in a position to finalize that soon. The discussions are in very advanced stage. Secondly, as far as the Mundra merger is concerned, the process is on, the last phase of gearing and NCLT should happen. And we do expect that within this financial year, we get the order.

The next question is from the line of Mohit Kumar from DAM Capital Advisors.

Congratulations on a very, very good quarter, reaching the milestone of 1000 EV charging points. So the first question, sir, have you finalized the way to monetize the renewables portfolio? Does it include the -- your solar EPC, solar manufacturing and charging, solar rooftop? Is it everything under one umbrella? Or can you please share some insight?

Yes. So our renewable portfolio consists of all the renewable business that we have. So starting from manufacturing to EPC, to our own utility-scale renewable projects that we've done, to rooftop solar, to solar pumps and EV charging. So all this, which is the so-called clean and green business that we are doing, will get covered under this new platform. And that is the area that we are discussing with some of the investors.

Secondly, sir, has the PPA for CGPL, which was short term, has it been extended for fourth quarter? And what is the way forward for CGPL over the next 6 to 12 months? And of course, we're talking to Gujarat, but are the other procurers on board?

As you know, Gujarat is the major procurer, and it was felt that we should first finalize the Gujarat and with the same template with the other procurers. So right now, our discussions are in very advanced stage with Gujarat to see to it that it is finalized with the overall boundary condition that the cost of coal should be reimbursed so that it becomes sustainable in the long term. And that is the given structure within which we are discussing with Gujarat government. We hope to finalize that very soon.

So lastly, the coal mine production was slightly lower in the quarter. And what is the status of the concession agreement was supposed to be extended by, I think, we have the cost agreement was about to expire, right, for KPC?

I think the coal mine production was about 15 million tons per quarter, which is the average production in the coal mines every quarter, give or take some small quantity depending upon if they are very heavy rains during the quarter. But otherwise, the coal mining operations was very, very sustainable. Secondly, the coal mine license is under, again, finalization by government of Odisha. They have -- those license expired on 31st of December. They have in the interim informed that you can continue with the mining until such time the new license and the new terms of the license are finalized. We expect in next 1 month the decision on this will be taken.

The next question is from the line of Deepika Mundra from JPMorgan.

Sir, just on the initiative that you had started on selling noncore assets, could you kindly give an update on that as to some of the overseas plants, et cetera, any update on their monetization?

The monetization process got slowed during the COVID period. We are very much in the market for monetizing the Odisha plant and also the Zambia plant. The Zambia plant, they have a feud also with the government over there in ZESCO in regards to the payment that is received from us -- by us from the supply of power from the ITPC plant. We are trying to get that resolved, but the parallel action of divestment continues to be there. Similarly, in Georgia, there were certain issues about the operation of the plant, especially the water availability was a little reduced. That has been -- to a large extent, has been taken care with better rain and also better snowfall leading to a lot of water that is coming during the winter months. So we do expect that once the plant operation restabilizes, we get better value when we do the divestment from this plant.

If you could just add about Tata Projects to that, I think you were planning to sell off your stake as well over there?

So Tata Projects, about 3 years back, we had kept it for sale. But since they did not do the IPO and there was a lot of restructuring that this was being done by Tata Project, wherein they wanted to focus on certain types of orders in certain areas, that was withdrawn. That proposal was withdrawn. And right now, there is a huge amount of consolidation that is taking place especially considering that in the last few years, they've got very good orders, and these are marquee orders that they have received for various workers in the country. We see a lot of future for that company, and we do hope that as and when the divestment takes place and they go for an IPO or the pre-IPO, we will be able to get better value for us as shareholders.

One last question, sir, how are you seeing the bid environment change for renewable projects with interest rates rising? Are you seeing funding cost for renewables going up? And is it impact -- and your thoughts in just your and your peers' activity in this space?

So I think the renewable prices, which has gone up to INR 2, are now back in the 240 and 250 range primarily because the cost of cells and modules have gone up. Secondly, the funding costs have also risen a little bit. But the impact of higher cost of import of cells and modules is directly felt in a higher tariff at which people are bidding. So I think that this will stabilize around that range considering that from 1st April we'll have the BCD. So we do expect the direct impact of it will be by way of the higher cost for renewable projects.

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

My first question is a clarification. So when you were budding your renewable entity, so upcoming solar manufacturing will also be a part of that entity. Is that understanding right?

Absolutely right.

Okay. Second is on your solar rooftop model, where you have 370 megawatts of orders worth INR 1,050 crores, are these all CapEx orders? Or is there some OpEx orders on it? Will you earn any annuity income or you will just do it and get over with it?

It's a mix of 3 types of orders. One is pure orders where it is same orders that we have. The second one is under RESCO supply whereby supply them at cost. And the third is the group captive orders. So all the 3 are there. If you want the breakup, that can be provided to you separately.

Okay. That's right. And you also talked about the SBI loan scheme, which is collateral free. So would you be taking the risk? Or will the risk be on the end user?

So these are loans which are taken by the end users, so we are not providing any collateral in this. So it's a relationship between the bank and the consumer.

Okay. So you don't have to guarantee anything, right?

No, no guarantee from our side.

Understood. And on the EV charging business, you talked about this new tie-up with TVS. In your current 1,200 or 1,300 EV charging stations, what would be the mix between 4-wheeler and 2-wheelers?

Right now, there is no 2-wheeler. This is a very new arrangement that we have tied up. These are all 4-wheelers public chargers. So this also excludes the bus chargers, which is separate.

Understood. Understood. And in the 1.95 gigawatts of solar project pipeline, how many is already signed for PPA and what is still awaited?

I beg your pardon?

In the 1.95 gigawatt of solar project pipeline?

Everything in the PPA has been signed. We do not consider any project take it on our books until and unless we have from PPA and any approval from the regulatory [ process ].

So even the MSEDCL hybrid, also PPAs signed, the last one?

Yes. So PPA is signed and the regulatory approval is there.

Okay, understood. That's very helpful. And lastly, if you can talk a bit on the Kusum Scheme. This quarter was slightly slow. What is changing? And how do you think it will help?

So the Kusum Scheme -- under the Kusum Scheme A, B or C, it is run through a bidding process by ESL, whereby they select bidders based on the bidding process. And over here, once they are selected, they inform the states of the various shortlisted bidders. Unfortunately, for a certain period of time, the bidding process was delayed. And also, there was a court case, due to which they could not finalize that order. The order was finalized in the month of October. And thereafter, they have started informing all the concern states. We expect, again, in November, December, because of COVID, many of the states had been impacted by that. So now we -- the orders have started flowing in.

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

Sir, just one clarification on CGPL. So as of now, how many units are operational pending this finalization of agreements with Gujarat government?

So during the month of January, there were 2 to 3 units which we're operating. Right now, of course, 1 unit is operating. And you would have been aware, month of January, the export of coal was banned by Indonesia, so whatever coal we had, we ran the units and then units. And now that the coal supply has recommenced from 20th of January, we expect that we will ramp up all 3 units in next few days.

Okay. And the current generation is happening as per the earlier long-term PPA and not the new short-term PPA, right?

It is going to happen as of the new arrangement, which is under finalization.

Okay. So as of now, the power that you are supplying, how are you billing for that power? Or did it kind of pass through for the coal cost or?

Yes, it's a pass-through for the coal cost, and it's an interim arrangement, but it will get regularized once the final agreement is signed.

Okay. Okay. Great. And sir, just one question on this manufacturing unit. So what about the backward integration, polysilicon and wafers, some of the other players who have entered the industry in India, we're talking about manufacturing that as well. So are you looking at that? Or is it a part of your plans? Or do you think it doesn't make sense to have that capacity?

Yes, we are looking at that, but it has a different technology requirement. So we are looking for some global players who have the experience in this type of technology. It's a very complicated, very difficult technology on polysilicon. And so once we finalize that, secondly, at this stage, is the BCD is only for the cell and modules. There is no BCD on the polysilicon or on wafer. So at this stage, we are going to import them without any duties. But at some stage, we will definitely be looking at upstream manufacturers.

Okay. So in the interim, the import will most likely be from China only, right? I mean is there other options?

Yes. We have added a huge capacity and also some of the other places. But majority of the supply will happen from China.

Next question is from the line of Apoorva Bahadur from Investec.

Sir, on this -- continuing on this 4-gigawatts module, cell and module plant, so I wanted to know on this PLI extension. So will this be -- the further subsidy be on the bids which were earlier placed? Or do you expect any change in terms and conditions over there? And accordingly, what percentage of our capital cost would be offset by the incentive if we are eligible for it?

So based on the earlier bids, they had through a bucket filling arrangement they had given to 3 people who had come up with proposals for integrated manufacturing facility right from polysilicon to modules. There were a large number of other bids which could not be covered in that because the amount was just INR 4,500 crores, which was utilized in the [ EBITDA ]. Now that new scheme has come with the next INR 19,500 crores of additional amount. This will cover all the others also, including those who are only in cell and module. Based on our initial analysis, we find that we will be entitled for something like INR 1,500 crores of PLI over a period of 5 years. So this is based on every year how much we produce, and the incentive will be linked to that.

Okay. Very useful, sir. Sir, secondly, my question is on the transmission opportunity, which I believe now you have become very keen on, I think, from the last 2 or 3 quarters, it's been repeatedly featured in your commentary. So sir, how large do you see this opportunity? Or -- and how long do you think will it take to start [ fortifying ]?

So the opportunity is very large in the country especially considering that government plan is to add 350 gigawatt in the next 9 years. And the evacuation arrangement has to be made for that 350 gigawatt. Some calculations which we have seen from the government side and some of the consultants are talking about something like INR 30 lakh crores will be required in the renewable as well as in the power evacuation and distribution space. That leaves -- that gives nearly INR 3 lakh crores every year that will be required. So there's a huge opportunity one has to implement and meet and keep the obligation of clean energy.

Fair enough. Sir, also on our module or on the EPC business, like you said that we have been benefiting from the positive side of the execution cycle, right? Now given that the module prices have gone up, so the orders which we have won almost like just prior to the price increase. Do you foresee provisioning or requirement of provisioning over there? And if yes, how large will that be? And lastly, on the battery orders or storage orders which we are winning, will we also be supplying or procuring the battery? Or that's completely the cost of that will be a pass-through? Just wanted to understand if there is something we are open on that end as well.

So the price of cells and modules started going up more than a year back. So all the orders that we have got in last 1 year we have accounted for the higher prices of modules. In fact, what we are now seeing is that the prices are coming down. And possibly, we may get an upside on that if some of those comes in this quarter. So we have accounted for all the -- all these cells and modules which have to be imported. And whatever we had received in the past 2, 3 quarters, those were on the earlier prices. And there we were hedged because of our long-term order placement that we have done. As far as the batteries are concerned, batteries will be procured like any other equipment. And I mean we get -- because of the scale at which we operate, we are able to do a much better negotiation and a long-term supplier arrangements with many of them. In the last quarter, I had mentioned to you that we had 150 gigawatt -- 50-megawatt hour battery for Ladakh-Leh along with the 50-megawatt solar facility. This is a 100-megawatt solar with 120-megawatt hour of storage. So considering a large number of orders that we will be placing, we are able to leverage that and get much better terms and conditions.

Sure, sir. Sir, just one last bookkeeping question from my side, and this is on the INR 60 crore provisioning in coal business. Can you highlight what is that regarding? And also for Mundra, have we accounted for all the fixed costs under recoveries in this quarter? Or there's something -- I mean, there's a possibility of some more in the following quarter as well?

I couldn't get it.

Your voice was not clear. Can you repeat that question?

Sir, I wanted to know this INR 60 crore provisioning in coal business, which we have done this quarter, what was this about? And also on the fixed cost under recovery, which we have provided for a CGPL in this quarter, INR 233 crores, is that for the entire FY '22? Or should we expect something more in Q4 as well?

So this was basically for last year when there was a write-off onetime for our part investment, the mines in Russia we're exploring, and the other was additional taxes in our Indonesian mines.

Okay. And sir, for the CGPL under recovery?

That we are accounting for every quarter.

[Operator Instructions] The next question is from the line of Rajesh Aynor ITI Long Short Equity Fund.

Yes, I am on the handset mode. Am I audible?

Yes.

Yes. Sir, most of my questions have been answered. Just one thing on the medium and longer-term targets for us for carbon neutrality. Because we are operating in 2 segments. One is where the carbon is actually used in power generation business as well as coal mining which we operate. And the other one is the RE and the new energy businesses, where basically, we can get sort of an offset. So is there any sort of time line when we will turn carbon neutral? And what are our plans for -- internally the plans for reducing the carbon footprint? I mean is it -- will it be a gross reduction or will it be like we'll have more and more RE, so anyway, the carbon heavy part at the net level will get reduced?

So I think in our earlier presentations also, we have shared that, right now, 32% of our generation by capacity is renewable or non-carbon, and 68% is the carbon generation. We had said that by 2025, it will become 50% -- sorry, 40%. And by 2030, it will be some 60%. We have also said that we will become net zero carbon by 2050, which subsequently we had proved that set by 2045. As we have existing PPAs and the PPAs will have a certain time period to which we are committed to supply power, those PPAs have to be exercised. And only after those PPAs expire, we can come out of the supply of the coal based power. So we are working on these lines. Our new investments are only going to be renewable. We are not making any fresh investments. And in fact, we are the only company in the power sector 2 years back took a stand in the country that no more new investment in coal and only new capacity additions will be renewables. So we are committed to that.

Okay. And sir, just one question. Do we have any assessment of what is our current carbon footprint of that 65-plus percent business, which is [indiscernible]?

That I think Rahul and his team will be able to clear it.

[indiscernible] separately.

The next question is from the line of Rajesh Majumdar from B&K Securities.

So my question are already answered. I had a couple of questions. One is on the equity IRR you're getting on the RE projects now. What is your current cost of debt for the RE projects? And what is the equity IRR you are realizing on the new tenders you are bidding on the PV, CV side?

We normally don't share the equity IRR number, but it's a very healthy team number that we have. And that's what we do. Like in our regulated business, there are certain returns. Similarly, in renewable business, we don't do anything which is less than what we do in regulated. Secondly -- the second question was immediately of interest, cost of interest.

The average cost of debt in RE business?

Yes, so it keeps on changing, but it's in the range of 7 to 7.5 depending upon when we go and get the disbursement.

This is including foreign currency debt and hedging costs, et cetera, right?

Yes, everything put together.

Okay. Okay. Sir, next question was we have a return on equity on the fixed regulated equity business. And depending on what we are able to increase -- get from the solar side, should we see an overall return on equity profile actually coming down until and unless we get a sharp jump in the regulated equity depending on the projects that we have talked about on the Mumbai side -- and on the Mumbai side, et cetera? How do we look at the return on equity of the firm going forward 2, 3, 4 years down the line given the fact that the solar business is much more competitive than the equity business?

See, return on equity is a good metric for regulated business. For renewable projects, it's differently structured. So where the return on equity is not the correct metric because it's a much longer period because of the tax reasons that initially we have a very strong depreciation benefit. So return on equity for the renewable project will not be a correct metric.

What I meant to say is that, sir, basically, you see a lot of profits now coming from the coal business, which is something which may not be sustainable in the long run. So without these profits, if you look at the stand-alone business, it is not showing any major increase on a Y-o-Y basis. So how do we see the overall business profile going forward?

It's not like the coal business is going away immediately. We have PPAs which are going to be there for the next 20 years. So it's not that big coal business will not give returns for the next few years. So I don't think that, that's a correct statement.

I think coal prices are lower, our CGPL losses will be lower, yes. It's more of a hedge for us.

Right. Would you just kindly tell me the status of the investments we have planned in the regulated business side in Mumbai, what is the status of those T&D projects?

So every year, we do about INR 500 crores to INR 600 crores of investment in our transmission project, about INR 150 crores in our distribution business in Mumbai. Similarly, we do our investments in Delhi distribution as well as in the Odisha distribution. And these investments are based on the requirement of improving the network, customer service, technology upgradation. And these are all approved by the regulator before carrying out any of such investments. And these all barriers requested date of return.

But we are planning to have a significant CapEx on the Mumbai side of, I think, INR 5,000 crores, INR 6,000 crores on one particular project. What is the status of that?

No, not on one particular set. They are large enough. Every year, we are doing about INR 600 crores. So we have a plan that in the next 7 to 8 years, we'll do about INR 5,000 crores to INR 6,000 crores.

So the moderate CapEx every year, is that you mentioned?

Yes.

Okay. So no onetime jump in terms of CapEx either on the T&D side or from the GD side or from any such project.

It depends if we get more distribution locations. We go get more of transmission projects where we are assured of a good return. We can look at those investments. But otherwise, in routine, we will have about INR 1,500 crores of investment in these service comps in the year, about INR 600 crores to INR 700 crores. So that's sort of investment will continue to get us on the 30% equity that we put in.

[Operator Instructions] The next question is from the line of Aniket Mittal from SBI Mutual Fund.

Just a couple of questions on the renewable front. Firstly, if I was to go back to your -- the targets that you've set for renewable, we've set a target of almost 15 gigawatts of renewables by FY '25. And as things stand and the competition intensity that there is within the market, do you -- are you still confident of reaching the targets? And if so, could you throw some light how do you plan to reach that?

See, I had shared with you earlier also that the potential of adding 300 gigawatt in next 9 years to meet the 500 gigawatt commitment that India has made in COP26. Now that means that the next 9 years, we'll have more than 30 gigawatts coming every year. Now there are not many players who have the capability and resources to execute this sort of quantity. Our 2 gigawatts is a very small percentage of the total 30 gigawatt. And we are very confident of meeting that. We have also shared with you that we are not just doing pure solar projects. We do solar and wind. We do solar, wind and hydro. We do solar, wind and storage. So there are a large number of solutions that we are coming, and that gives us a much more edge compared to the competitors and the value-added services that we can provide. So we are very confident of that number. And incidentally, we are looking at something like 1,200 to 1,500 megawatts of rooftop solar every year, about 400 to 600 megawatts of solar pumps every year. So there's a huge quantum of capacity addition that will happen apart from the utility scale vectors we will be setting up.

Okay. Because the number looks fairly steep from here on. Sir, another question was on the execution front. So if I go back to the start of the year, I think you were guiding for almost 1 gigawatt of your portfolio to be executed during the year. But as things stand, we've commissioned in the 300, 350 megawatts. Just to understand, are there any issues that we are facing on the execution front? So why is there a pushback in the commissioning of our renewal projects? And for the balance 1.9 gigawatts, if you could help us how would that phase out over the next few years.

Yes. So this year, there has been very peculiar year starting from April when we had the COVID second wave. So nearly 3 months, work could not be carried out at any of the sites. And it was only in the month of July that start the work. There were also issues about the high cost of modules. And also shipping constraints which was there from China. So all this put together with, again, the third wave coming in December, January has impacted the project. We are trying to catch up, and many of the projects are lined up for execution in this quarter. And hopefully, in this quarter, we'll be able to add a huge amount of capacity which got delayed. In fact, in January first week itself, we commissioned 100 megawatts, and we are confident that more capacity will get added in this quarter.

So could you provide as how that 1.9 gigawatt phase up, let's say, how much are you targeting in FY '23?

Details Rahul will give you separately.

Okay. And just one last bookkeeping question. Could you tell me what are the total receivables at your Odisha Discoms of the 4 discoms combined?

Total receivables of Odisha Discoms. So Rahul will give you. I think that's part of the tech presentation that has been shared with you. He'll give you the exact number.

The next question is from the line of Subhadip Mitra from JM Financial.

So my first question was with regard to your renewable addition targets. You mentioned 2 gigawatt per annum. So if I understand this correctly, you're sticking to your target of 1 gigawatt of addition on your own -- through your own utility scale, and the balance 1 gigawatt being EPC mode. Am I right in understanding that?

No, no. 2 gigawatt is utility scale which we will develop ourselves, and 1 gigawatt will be the outside EPC. So that is the number that we have.

Understood. Understood. So sir, on this run rate of this 2-gigawatt utility scale, how have you set so far in FY '22, are we more or less another target number in terms of incremental order wins? And do you see power sale agreement signing becoming a hindrance in this basket?

So we have right now something like 1,900 megawatt of order which is under execution. And this year, we have got 900 megawatts. This year, the run rate has been a little low because many of the projects which were supposed to be bid out have got delayed. Now we expect that these projects will get bid out especially considering the COP26 commitment that the government has made. So the government is now coming up with a large, large number of projects which have to be executed, not just plain renewal but along with storage. Also, the RPO obligation, which was earlier just 20%, it is expected to be increased to something like 40% to 45% on a graded basis over the next 9 years. And also, we are finding that there will be a large amount of foots on rooftops and open access supply. So we do expect that if we have to meet the 300 gigawatt target, there will be a large number of bids which will be coming in the next coming year, and we should be in a position to bid and win many of that. Infinitely, our percentage is about 20%. So wherever we did, we, of course, don't bid in all the states. Some of the states we don't bid because of their track record in payment and not. But wherever we build, our success rate is 20% to 25%.

Understood. And sir, with regards to the issue on PSAs because I think there were some numbers that we were looking at and at least appear to us that 40% to 50% of solar tenders which have happened, let's say, from 2019 until date, probably don't still have PSAs, including the domestic manufacturing one and others. So any sense on that? Do you see that as a challenge?

No. But we only -- all our PPAs are with the state discoms. So there is no agreement through SECI. So there's no bid that we have done through SECI. All of them are through state discoms, and we have the PPAs there.

Okay. Okay. That is an interesting point. Sir, secondly, on the coal business, I just wanted to get some clarity that, optically, it appears that the coal profit numbers, if I go to the deck that you have sent, the Q-o-Q number is quite flattish despite the realization is being higher. So would this largely be because of the penalties on the ban of imports, et cetera, that came in? If you can just throw some light on that.

This penalty import has only come in the month of January, this is for the last quarter, the prices in the last quarter were very high. They were in the range of $160 to $200. And now also the prices are very high, again, in the range of $160 to $190. So I don't think we have any issue as far as the export is concerned. They had a requirement of domestic supply, which has always been there. And the supply -- KPC has been supplying 25% of their production locally to [ PMI ], so they meet their local obligation otherwise also. Generally, in the last quarter, whatever the shortfall is there, and hence, there is no loan bump-up on the drop. Yes.

So that would impact fourth quarter, right? But the domestic obligation would be met in fourth quarter?

No. For that will be December ending.

Oh, I see. Okay. Okay. Okay. I understand. Let's see why [ this ]. Okay. So then hopefully, the benefit of the higher coal price should be now visible in the fourth quarter of the fiscal for us?

Yes.

Okay. Understood. Sir, last question is on Orissa (sic) [ Odisha ]. Naturally, the current quarter's profit numbers are very healthy and the great Y-o-Y growth. Just wanted to understand what can be the normalized quarterly trend that we can see?

So as I mentioned, the performance will improve every quarter because our billing efficiency and collection efficiency is improving. Last quarter, again, we had a challenge of collection especially in the month of December because of COVID. Hopefully, this quarter, we would be able to take care of that. Similarly, our billing efficiency will also improve because large industrial and commercial consumers have come back to us, and they are very happy with the quality of supply that we are giving. We are also seeing that the places where the metering was not happening or proper metering was not there, provisional billing was taking place. That is all getting muted. So you will see the amount of improvement in the coming quarters.

Understood. So the current quarter's profit number is more like a sustainable number with some growth elements?

It will be much better than this.

[Operator Instructions] The next question is from the line of Anuj Upadhyay from HDFC Securities.

Congratulations on a good set of numbers. So could you just mention about the CapEx which would go in for the expansion of the module and cell manufacturing for the 4-gigawatt capacity?

So the CapEx is INR 3,400 crores. And we would, of course, be getting some PLI benefit which will be on an annual basis, and also some state government subsidy and some concession. So all that will be taken care when we are executing that.

Okay. So probably it would be INR 3,400 crore minus this benefit on a CapEx trend for a period of time. Okay. Second, sir, on the equity dilution side, I mean, especially on the amortization of the renewable assets, so would that platform includes our EPC business as well? Or it would be only the renewable assets across the [ Volga ] and the set of our renewable?

It will be everything, everything in renewable, including EPC, including manufacturing, including new manufacturers.

Fair enough. And lastly, sir, on the Mundra. Sir, if at all we find some kind of resonation with Gujarat, then how much units we plan to run for the Mundra going ahead?

As per the PPA, Gujarat is entitled to receive 1,805 megawatts. So the 3 units will run for their requirements.

And it would be fuel cost would be a part, I mean, as per the results expected?

Yes.

The next question is from the line of Swarnim Maheshwari from Edelweiss Securities.

Sir, what's the current carbon inventory for us? And any plans to monetize it?

Yes, we have definitely plans to monetize them. The documentation, in other words, the progress, it's a huge amount of detailing and invoicing details, metering details, all that has -- it's a cumbersome process but definitely under discussion and finalization.

Is it possible to quantify with the current realization trend and all? What could be the sum that could be monetized?

Yes, sure enough. I think Rahul will be able to provide you all the details because this is from a retrospective effect from 2014 and 2016 onwards.

All right. All right. And sir, just one clarification. So now we are bidding for Isolux and all the other transmission projects. So fair to say that all transmission projects will be bid through Resurgent platform, right? Nothing will be under...

Not at all. See, the Resurgent platform was created with a specific mandate and a specific amount to be invested. The INR 450 million that was set for that was used for Prayagraj and the 2 Resurgent bids for transmission that we have done. With that, the total amount gets fully exhausted. So all future bids will be under Tata Company.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to Dr. Sinha for closing comments.

So once again, thank you to all for joining for the analyst call. Whatever questions you have in future you can always send across to my colleague Rahul and Kasturi and we'll be happy to provide you the necessary information in detail. All of you, take care of yourselves and good night.

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