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

Ladies and gentlemen, good day, and welcome to Tata Power Q4 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us today on the call Dr. Praveer Sinha, CEO and MD, Tata Power; and Mr. Sanjeev Churiwala, CFO, Tata Power. I now hand the conference over to Dr. Praveer Sinha. Thank you, and over to you, Doctor.

Thank you, Aman. Good evening to everyone, and thanks for joining the call. I hope all of you are doing fine and taking care of yourself. I'm joined today in the call by my colleagues, Sanjeev Churiwala, CFO; Anand Agarwal, Financial Controller, Mr. Kasturi and Mr. Rahul Shah from the Investor Relations and some other colleagues from the finance department. In the last quarter of FY '22, we have seen unprecedented volatility in the commodity cycles, which has put a huge amount of pressure on the power situation in India. Because of the higher power demand as also the Indian economy has moved to the next level of utilization, leading to much higher power consumption. Tata Power as a responsible stakeholder has strived to provide best services across its operation to help the country to meet its power demand. This quarter has been very eventful in many ways for Tata Power as we have progressed very well on many of these strategic initiatives. And I will share with you a brief summary of the results and cover some of the key strategic initiatives and thereafter take questions from you. Tata Power has delivered a strong fourth quarter as both the underlying EBITDA and the profits have seen significant growth compared to last year. Operations across the board have been very strong with addition of rates and discoms and higher profit in the renewable business. And this is the 10th consecutive quarter in which we have been able to show a profit growth. The company has moved closer to strengthening the fundamentals of our Mundra and coal business as we completed the merger of CGPL into Tata Power and also secured the extension of the mining lease in KPC for 10 years with a proviso to extend by another 10 years. We are also in very advanced stages of finalizing the supplementary PPA with Gujarat and the same will become the template for other discoms, too. And as per that, we have already started supplying power to Gujarat from first January 22. And at present, we supply 1,805 megawatt to Gujarat and 760 megawatts to Maharashtra. This approved compensatory framework would then become the basis, based on which we will finalize with the other 3 states also. As we had announced last month, Tata Power has signed the binding agreement with the consortium of BlackRock and Mubadala to raise INR 4,000 crores for our renewable platform, which will create the most comprehensive renewables platform with the utility scale businesses like large solar capacities, EPC and manufacturing, customer-centric businesses like rooftop solar, solar pumps and EV charging business. The funds raised will be used exclusively for the growth of a green company and will allow us to scale up this platform. All our assets have continued to operate at benchmark levels and the performance across our generation, distribution, transmission and renewable businesses has been very robust in the last quarter. The coal mine operations were, however, impacted in the last quarter due to certain local issues, which was relating to the supply of coal to the local plants in Indonesia, as also was impacted because of heavy rains in Indonesia during the period January to March. Our 2 EPC businesses, Tata Projects and Tata Power Solar also saw a lot of pressure from high commodity prices. As a result, the profitability of existing projects were hit and the appropriate provisions have been made in this quarter, especially for Tata projects. Despite these commodity pressures and lower profits in coal company, we delivered 16% year-on-year growth in revenue this quarter from INR 10,379 crores in Q4 of FY '21 to INR 12,085 crores. Similarly, the reported EBITDA rose by more than 35% to INR 2,253 crores and PAT before exceptional items saw a huge growth of 76% from INR 440 crores to INR 775 crores. Our renewable business delivered very strong execution during the last quarter as Tata Power Solar commissioned 55-megawatt AC solar capacity for its customers, which includes 44-megawatt of AC solar capacity for our own utility-scale projects. The EPC business continued its #1 position, securing a single largest contract of 1 gigawatt worth INR 5,500 crores pursuant to the LOA, which has been issued by SJVN under the CPSU scheme. This is one of the largest single projects awarded to TPSSL, reinforcing TPSSL's strong execution capabilities. With this win, the company has 1.5 gigawatt of 1 project and 3 gigawatt of total large-scale EPC contracts to execute, which will be targeted for completion in the next 12 to 18 months. The rooftop solar business saw another successful quarter of project execution, reaching a revenue of INR 687 crores, which is almost 80% higher than Q3. We also saw 172 megawatts of new orders won in this quarter for rooftop projects, helping the order book to grow to a level of INR 516 crores. Our marketing outreach and setting up of the centralized and dedicated loans processing branch through SBI Surya Shakti Cell is providing push to retail offtake of rooftop, and we are excited with the opportunities for Tata Power in this field. The solar pump business also has seen a good offtake as the orders pursuant to the ESL management has now started converting with almost INR 250 crores of orders booked in Q4. With strong execution, revenue increased to INR 243 crores last quarter compared to only INR 86 crores in Q3. With the launch of Tata Power branded solar pumps and our existing strong presence in the state, we expect that our pump business is well geared to capitalize on the ESL tender. We have also started opening up for direct retail segment with more than 150 pump orders already received in this quarter. Coming to our integrated Mundra and coal portfolio. As I mentioned earlier, we saw 2 significant events getting completed. The first one was the merger of CGPL into Tata Power and the second is the extension of KPC's mining lease. The merger of CGPL into Tata Power helps us to streamline the operation and have a more efficient utilization of capital across the various businesses in the stand-alone entity besides other financial synergies. As we had indicated earlier, the extension of the mining license has been now given for 10 years, which is further extendable as per the regulations. There has been some tweaks to the royalty and corporate tax rates and a profit sharing has been included. However, on a combined basis, we see profits from coal mines to remain at similar levels. It is also worthwhile to touch upon the current quarter's coal mine results. As you are aware, Indonesia had imposed an export ban in January to replenish their depleting stock prior to the monsoon as a result of which coal mines sold their production in India at a capped price of $70 per tonne. However, this local sales will be counted towards the DMO obligations for the full year. And February and March operations were also hit by rains, which are common during this time of the year in Indonesia. As a result of these 2 events, we have seen reduced profit from coal mines, but we expect that this will be recovered in the subsequent quarters as the coal prices continue to remain at very elevated levels. With continued high coal prices, we operated only 1 unit for the most of the last quarter in Mundra. However, subsequent to the discussions with GUVNL on the supplementary PPA to implement the compensatory tariff. The same has progressed very well. And Government of India has also come out with many regulations, which is supporting the operations of imported coal-based plants on a cost-plus basis. GUVNL has requested us to continue supply of power under this arrangement since first January 2022. As a result, we have accounted for supply of power to GUVNL under this supplementary arrangement. We expect to conclude the negotiations shortly post which similar framework will be used with other procured states. The focused operations across the 4 Odisha DISCOMs is leading to continuous improvements as various technical, commercial and customer-related initiatives have held the discoms to reduce the technical losses. We had experienced receivables going up in early part of FY '22 due to COVID second wave and then this third wave. However, in the last 2 quarters, we have been able to collect a significant portion of the past dues in all the 4 discoms. In addition, these discoms, through their efforts have been able to recover the past payment of nearly INR 470 crores of arrear before the takeover in FY '22. As a result of various such initiatives, which has given us the incentives also, we have registered a profit of INR 109 crores in Q4 from all these 4 discoms put together. On a full year basis, we have delivered 28% growth in our consolidated revenue from INR 33,239 crores last year to INR 42,576 crores in FY '22. And PAT before exceptional items increased by 61% from INR 1,424 crores to INR 2,298 crores in FY '22. Moving to the balance sheet. We have been able to maintain the net debt similar to the Q3 level at around INR 39,700 crores, while undertaking CapEx of almost INR 2,700 crores during this quarter. Healthy growth in underlying EBITDA from businesses continues to help us to improve our debt to underlying EBITDA from 4.12 in Q3 FY '22 to 3.92 this quarter. Our net debt to equity stands at a healthy 1.53 compared to 1.58 in the previous quarter. Improvements in domestic as well as international credit ratings will further assist us in optimizing our interest costs. As mentioned earlier, we expect to receive the first tranche of INR 2,000 crores through our renewable business platform in June. Certain regulatory approvals and transfer of businesses are under process before conclusion of the first tranche in the future. Thereafter, the second tranche of INR 2,000 crores will be infused in 6 months' time through securities, which will be converted into equity post the financial results of FY '23. The funds raised through this transaction will help us to further our [ EV ] growth ambitions and scale up our green platform. Our growth pursuit in transmission business is also starting to materialize with the second stress project now run through the Resurgent platform. Resurgent has been awarded the LOI for acquisition of 100% stake in South East UP Power Transmission Limited under the IBC project. This project has approximately 1,500 kilometers of transmission lines and 5 numbers of 400 kV substation. We also completed the acquisition of 100% of stake in NRSS XXXVI Transmission lines on April 4 through the Resurgent platform. Both these projects taken together have a combined EV of about INR 6,500 crores and an annual revenue of around INR 900 crores. Our EV charger business also continues to expand with more than 2,000 public charging and 200 bus charging points installed [ till ] March end. Our network is now spread across more than 350 cities, making us one of the most widely present EV charging companies. We have also recently entered into MOUs with NAREDCO and Rustomjee Group, which will help us to expand our charging infrastructure in commercial and residential properties across Mumbai and in other parts of the country, too, along with opportunities to enhance it along the highways and also within the cities. We continue to work on expanding our partnership, which will help us with access to best of the real estate spaces and customers. The company has already concluded many of the strategic initiatives over the last 2 years. With this, the focus now shares to complete and execute and we expect your support in this journey towards Tata Power 2.0. As we have always stressed, our transformation will be founded on the pillars of strong balance sheets and healthy return metrics. With this, I hand over the call back to Aman for the question-and-answer session.

[Operator Instructions] First question is from the line of Swarnim Maheshwari from Edelweiss.

A couple of questions. First, you have been in discussions with JV NL for Mundra, Ataris hike and everything. But like just today, the Section 11 was invoked where it has been ordered to restart the imported transit full capacity. So I mean, how do we understand this? What are the implications for this order for us?

See, Swarnim, we are already operating 4 units, and we are supplying to Gujarat 1,805 megawatts and to Maharashtra 760. So whether the Section 11 order comes or not, we have been supplying to them. The order of government says that whatever is the coal cost pass-through, you have to be given with certain returns or you can mutually negotiate and finalize. We are at this present state, mutually negotiating with them and finalizing an arrangement, which is acceptable to both the parties, and we hope to conclude this in next maybe 2 weeks' time.

Okay. Because, sir, in the Q4 results, we were operating at 25% PLF at Mundra. So just wanted to understand, have we actually increased the PLF in Q1 FY '23?

Ye, Absolutely. I mentioned to you that we are now -- we were initially operating 3 units from 1st of April. And some time back, we started the 4th unit. So right now, 4 units are there. So we will definitely be having much higher PLF going forward.

All right. All right. Sir, my second question is on TPSSL. So I think on the volatility side, like you have mentioned, but just looking at we have done one of the highest ever revenues in the quarter, but if you just look at from the margins perspective, it's like something-odd percent. So if -- some sort of guidance, I mean when this is likely to stabilize, not even talking when do we expect 7%, 8% margins, but some sort of assemblance on the margin side would be really helpful.

So as we have shared earlier, that last year was an unprecedented year. One was, of course, the COVID and the second is the war between Ukraine and Russia and that has a huge impact on the commodity prices. And this was not something which was anticipated. Similarly, the Chinese prices of cell and modules have gone up tremendously in last 1 year. To take care of that, we have now started getting contract manufacturing done in India. So we will make the cell from China, which has a lower customs duty compared to the modules, get them made over here into modules, and we will be using. So to that extent, our margins will improve a lot because of this arrangement. So today, we are very well positioned to take care of our future margins because whatever cost increases which have taken place, those have now been incorporated in our new bids. And all our new bids, which we have recently won or which we are executing, will have much better margins because whatever were the anticipated losses in the existing projects also we have considered it in the last quarter. So going forward, I do expect that there will be a much better margin in all our EPC projects that we do through Tata Power Solar.

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

So sir, just trying to understand the Mundra supplementary PPA in a bit of detail. So in the fourth quarter, the fuel cost underrecovery was about INR 1. So should we assume that once all the PPA, supplementary PPAs are signed, et cetera, we should look at like INR 1 kind of underrecovery? Or is it likely to reduce? How -- just if you can throw some light on this?

Yes. See, as I mentioned to you, we are still finalizing. So we had only done a provisional booking as far as the Mundra losses. We are there in terms of underrecovery in this last quarter. Once we are able to finalize it and get clarity on it, there will be much better and much lower underrecovery that we expect. And as you are aware that this has been under discussion and now government of India also has come that there should be a pass-through and there should not be too much of underrecovery. So we hope that going forward, we'll be in a much better condition.

Okay. And sir, what is the tenure of these supplementary PPAs? I mean how long we are talking about? Is it for rest of the life of the plant? Or does it terminate somewhere in between.

So see, we already have a PPA. This is an interim arrangement that is being made because of the high cost of coal. So we will have to wait and see until what time the cost of coal remains high. And until such time, the cost of coal remains high and does not come to the pre-COVID level. this arrangement with continue.

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

A couple of clarifications. The core profit has been muted in this quarter. Is the profit booked under new extension terms? And are the operations normalized in the month of April?

So the profit is muted, not because of the change in the taxes and duties because they are virtually taking care of each other. So just to give you an idea, the corporate tax over there, which was 45% has reduced to 22% or 24%. But the royalty, which was something like 13.5% has gone up to the 24% -- 27%. So I think what you need to look at it, and there is a slide on that we have shared, 28 -- Slide 28, which provides that. So the net impact is not going to be very large. The very reason that it got impacted was during the period of January to March, we could not sell coal outside because of the restriction where exports were banned. Whatever was sold locally was sold at a local price of 78 -- USD 70 while the market was much higher at that time. Thirdly, during that period, in most of the months, we were mining less than 4 million tonnes. In fact, it was around 3.4, 3.5 where normally, we used to mine 5 million tonnes because of very heavy rain and flooding of the coal mines. So now that the monsoon is over, we expect that in future months, there will be a catch up.

Secondly, sir, what is the status of the 4 gigawatt solar sale and model manufacturing capacity? Is it on hold? And till we -- till the new PLI manufacturing, as the [ chem ] gets announced and the bidding happens, is that the rise in the channel?

It is not at all on hold. The work is going on. We are in the process of now placing the orders for the main equipment. The engineering work has been carried out. Site-related work will start sometime in June. And we expect that by next year, May, June, in 12 months, we will be able to complete the module line. And by October, we will complete the cell line. So it's very much on track. It will be completed as was planned and then we passed in our proposal.

Have you heard anything on the PLI scheme, sir? Because I guess this...

PLI scheme is parallel activity which is going on. But notwithstanding that, we are still going ahead with this project.

The last one is supplementary PPA on Mundra. Is there any chance that there could be long-term supplementary PPAs still get signed according to the High Power Committee report?

So that is one of the options. So a lot of options are being discussed. And once it gets finalized, we'll get a much better clarity as to what sort of arrangement ultimately is decided.

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

And it's very heartening to see that fund progress on Mundra. My first question is actually on Indonesia. So on a normalized basis, what kind of gap should we see from the HBA price to your FOB price.

There is no gap. HBA price is HBA price. That is the price at which you buy coal, so there is no gap between that.

The Indonesia part, right, for example, you talked about 183.5, but [ some sort of ] revenue derived is 98, which is, to some extent, you said it's impacted by domestic obligation as well. But if that were not to be the case, would it -- what kind of FOB revenue on a per tonne basis can you realize.

See what happens is all these coal companies have a requirement to supply 25% of their production to the local power company over their PLM. And the [ talent ] 75%, they sell at HBF. In some cases, they sell at HBFs especially very high CV coals, they sell at HBA-plus. But nothing can be sold lower than HBA. So -- and this is linked to the GCV. So HVA is linked to a GCV of 6322 depending upon the quality of coal, the HBA price or the sales price gets indexed to that on pro rata basis.

And the Q4 number reflects the new royalty taxation norms, et cetera, right?

Yes.

Okay. The second question is on the renewable business. Now that there is a decent amount of equity infusion, how are you looking at growth in the renewable business? Are you likely to bid more aggressively, take larger bids? Or should we largely think of your similarly prudent way, the way you've been operating in the past?

Can you come again?

I think post the equity infusion, you will have a significant amount of equity capital, which can be deployed for renewable projects. Would you look to take larger bids on the renewable side? Or will the typical bid or the renewable development capacity that you intend to add every year would be similar to what you've done in the past?

We'll do much bigger. This year, we have plans to do nearly 3 gigawatts, and we have shared with you earlier that by 2027, we will become 20-gigawatt company from our present 5. As of yesterday only we won the bid of 600 megawatts. This is -- we have never won a bit of such large capacity. And so we definitely are going big in renewable now that we have got the tie-up of funds.

Understood. That's great. Lastly, on the Odisha DISCOMs. There is a bit of disconnect between the technical losses, actual AT&C losses and the target APMC losses. Is it fair to say that the reported accounts are not capturing the full AT&C losses, they're capturing only the technical part of it?

So they also captured the AT&C losses. And what do we need to see is that our actual losses, what we have got this year is much better than what we had internally as the company decided to do. So our performance has been very good compared to our own internal targets. And it has, of course, been much better than what it was when we took over. And the loss trajectory that we have given to the regulator, it is better than that also. So I think we have done quite well in our Odisha DISCOMs in terms of reducing of losses.

And you don't foresee any collection issues.

No, there are collection issues, but we have been able to do very good collection during the last quarter.

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

So 2, 3 questions from my side. Firstly, on the Indonesian front. There has been some news about chances of DMO going up. So is there any visibility on your part in terms of whether BMO is going to get further restricted?

I'm not aware of any DMO going up. So whatever is the official information is that 25% continues to be there. Of course, they will enforce that. Earlier, they were not enforcing it. And many of the coal companies were not supplying their obligation. But I don't think they have any plans to increase the Indian [ coal charge ].

Okay. Understood. Secondly, on the UMPP numbers that are reported for the fourth quarter. So while the losses have gone up, am I to understand that these have been accounted without any pass-through of coal unlike what we had seen in 31st of December where there was some pass-through of coal?

Yes, absolutely. So we are still working out an arrangement. So this was -- that arrangement has not been accounted for India.

Okay. So the entire loss has been booked into your fourth quarter.

Yes.

Understood. So with regard to the supplementary PPA that you are negotiating as of now, would this be on the controls of the High Power Committee recommendation where we were looking at fixing the UMPP loss to a particular number? And after adjusting for the share of profits in coal.

Yes. So that is one of the arrangements that is being discussed, but it's still not finalized. So this is work in progress. And once it gets finalized, we'll share the details.

Okay. Okay. Lastly, with regard to the Odisha numbers that have been reported, I see in your PPT, you've mentioned that, I think, close to INR 500 crores of arrears have been collected and booked in FY '22. So do these profit numbers include the arrears which have been booked in as revenue? And if so, excluding these arrears, what would be the reported PAT numbers, if that's available?

So what happens is it's not -- it does not get added to the revenue, but it gets added to the PAT. So whatever we collect, which are before when we took over, we get 10% in the 3 discounts and in the South, we get 20% of whatever we collect, the incentive payment. So that has been accounted for.

Okay. So then I would request the IR team to kind of help us with the breakoff of these areas so that we can understand what the missing PAT number would look like.

It's there, I think I'll tell you that it is on Slide 13, you can see there.

[Operator Instructions] The next question is from the line of Murtuza Arsiwalla from Kotak Securities.

Just a few simple questions from my end. Is it fair that the coal profitability, the drop in gross margins sort of gets fully offset by the reduction in corporate tax, number one? If you could give us some more counters of the supplementary power agreement, which is being signed, what are the terms as well? And the third is on the Mundra merger. By when should we see the impact of it on the financials and the taxation given effective for [ stable ]? So what else needs to be done before we start seeing that in the numbers?

Already done, the Mundra merger benefit has already been accounted for from the 1st of April 2020. So it's already there in this year.

There in the current financials. So the current financials reported have the impact of the merger and the resulting tax reduction?

Absolutely right. Secondly, on the whole company, as I mentioned to you, the lower profit in that -- in the last quarter is primarily because of the export ban, local DMO obligation where you had to sell at $70. And the third is because of heavy rains, lower production and lower sales of. So considering that now they will be able to produce at full capacity in this catch-up plan. And also, the higher prices of coal in future quarters, you will definitely see a much better result from that. As far as the Mundra thing is concerned, there are a lot of things which are being discussed in terms of how to adequately compensate to the company. Now whether it is the HTC formula or the new methodology where it will be on a cost-plus basis. All those are being discussed. The objective is how to make this plant sustainable in the Mundra.

And for now, the SPA that is being signed is -- does it come open-ended in the sense of up to when it's effective? Seeing that where I'm till...

It will be effective first January from the time that we have been supplying them.

Yes. But in terms of the end date, does it come with a finite life? Or it...

Those are being discussed and seeing that how this can be done so that it becomes the long term. And also considering that there is acute shortage of power in the country and this is not going to go away very quickly, how this can be done so that it guarantees a certain amount of supply which have enough -- which are the beneficiary states.

[Operator Instructions] The next question is from the line of Anupam Goswami from B&K Securities.

So my first question on the SPPA. You mentioned about the SPPA being valid for -- till the full cost remaining high. So what -- at what threshold price of full cost are we thinking that, that level of hike will justify? And my second question is on the PLI benefit of the module and 4 gigawatts that we are extending. So what is the PLI benefit in that?

So the PLI benefit will depend on what is the new policy of PLI comes. So the earlier one, we had applied and there was a wait list, but I think Ministry is now working on a new arrangement. So we need to see that and then we'll be able to get an idea as to what sort of benefit will come. Secondly, the -- the arrangement that will come with Mundra is that -- how it can be a long-term arrangement and especially considering that the shortage of power will be there in the subsequent years also, how to ensure that ring fences the supply to the beneficiary states. Also, the prices which was pre-COVID was something like $65 and odd. We are definitely looking that only if it comes to that level, they can go for the earlier arrangement. But till such time, that does not come through the -- the cost through pass-through arrangement has to do with that.

As far I remember, sir, even at 65, you were making some losses in Mundra. Only...

So the arrangement at that time and has always been that all the stakeholders have to contribute. And if you remember at that time, there was an arrangement with the lenders were also there apart from the developer and procurer. And everyone was supposed to take some sort of contribution to come to an amicable arrangement. So I think something similar to that has to be worked out.

Okay. Okay, sir. Sir, is there any other states also stocks are going on?

No, we are trying to sort out first with Mundra before we go to the others.

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

Sir, I just wanted to understand a bit on the distribution privatization opportunity. Are you seeing after this union territory bids that happened, any significant progress with some of the states? And in that respect, your target of expanding that portfolio, where are you adding in terms of your 5-year target?

So there are 2 aspects of this. One is the change in the electricity act, which was talking about delicensing. So that has not happened, and we are expecting that maybe in the monsoon session of parliament that might get passed. So that will then give an opportunity for these failed discoms and the state governments to delicense it and get multiple players. The other is the typical PPP arrangement or the franchisee arrangement. I expect that some of the other states and some of the bigger states which have recently completed their elections, they may possibly go further something like this as we have seen what happened in Odisha. So we are very confident that there will be large opportunities which will be coming, considering that many of the discoms are in financial stress and for them to sustain operation and supply quality power, they will be required to bring private investment.

Understood. And is while on the supplementary PPAs, et cetera, are under negotiation. What is your confidence level on being able to maintain the receivables from discoms at fairly elevated cost of power being supplied?

You know that there is a huge shortage of power. And for them, it's very important that they pay for the power that we will supply, so that we can continue to supply to that. So our confidence level is 100% on this, that they will pay us.

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

I had a general question. I was just noticing on your PLF in renewables -- it's come down a tad from Q4 last year from 27% to 24%, whereas we were under the impression that PLF renewable actually is going up in soon. So what is the kind of PLF that we are foreseeing in renewables in the near future?

See, you know renewable projects are cyclic. So like from June to October, you will have very good wind months, in the winter and the early part of...

I was talking about solar only, the solar part.

Similarly, solar also, it's a cycle. So starting from March till June, you have very good solar. And then during the -- some of the winter months, you don't have that good solar intensity. So I think one needs to look at it from the perspective of how -- what sort of solar intensity are there. Also what happens is that there has been freak rains during certain periods of the year. And we have seen that happening also in last quarter. So these are the weather pattern changes which are happening, which we had not anticipated. And because of that, there's the impact. But otherwise, if you see our solar projects, their availability has improved a lot. From our 21 locations, I think 17 locations are at 100% of ability. And the balance for are at 99.9% level. So the ability of the plants are there. It's unfortunate that this solar intensity during those periods are hindered. But it's usually 100% on most of the case.

So my second question is basically, again, a general question. With the kind of peak load shortages we are already seeing and with the kind of [ wind or even ] solar power, as you correctly highlighted in terms of the seasonal patterns, et cetera, do we foresee a rethink on coal-based assets? And we have already seen linkage of imported coal-based plants as an emergency measure. So do we see a rethink on the government's part in terms of coal-based assets? And will the company do rethink on this to some extent?

We have no plans to go back to coal. And we strongly believe that going forward, coal -- the renewable investment will only increase, and there are very good solutions which are available, which can supply available power, not only during the period they are producing, but also in the periods that we are not producing, through a combination of storage solutions and doing a hybrid with ISO and other. So we strongly believe that renewable is the way forward to meet the future power requirement.

So you foresee battery storage to basically take care of these kind of discrepancies in the near future? Or is it going to be faster than what we're anticipating in terms of -- because we don't see the kind of additions in renewables last year to the extent that the government predicted like we are looking at 30, 35 gigs per annum, but we only got about 15. So if that is the rate going forward, we are going to have a serious situation 5 years down the line.

Yes. So the speed and the pace of renewables, which has to come has to increase, so that we are able to meet the future requirements of power.

So you're expecting a jump in the addition, basically?

Yes, absolutely.

The next question is from the line of Apoorva Bahadur from Investec.

Sir, I wanted some clarity on these new mining regulations in Indonesia, especially for turning to [ the LP ]. So I'm seeing in this quarter, we have almost a 28% rate of royalty despite having a larger share of DMO sales. So is it that the rate of royalty has increased for DMO sales as well?

Yes. So the rate of royalty has increased for all types of those. So for DMO, it has, I think, become 20%. And for the export, it is 24%. So it's graded on the quality of coal and the taxes -- the corporate tax, which was 45% has been now brought down to 22%, yes. So that's the difference that has come. You can see the Slide 7 that we have shared with you.

Okay, sir. And there is a profit sharing element as well now?

Yes. So from 45% to 22%, is 23% reduction, and then they have increased the royalty. So it's virtually coming [ to fix it ].

Okay. So net-net, it's almost similar. And sir, on the Mundra supplemental PPA, will there -- will it entail some profit sharing from coal business as well?

Those details are being worked out to see that how it becomes fair and equitable for all the stakeholders.

The next question is from the line of Gopal Nawandhar from SBI Life Insurance.

Sir, can you just help us understand on what this is -- we have done accounting for Mundra. You have written INR 1 fuel cost underrecovery. So -- and in the compound section, we have written fixed cost underrecovery and some sharing of profit. So can you just explain what exactly we have accounted under Mundra?

The one that we have accounted for is on a conservative basis given that you're still discussing the supplementary agreement with the government. I'm understanding is that the core will be a complete pass-through. But even there are various elements, which are still under discussion, the number that you see on the recon of INR 1, actually could be a much lower amount as soon as we progress on those discussions. But we have done an accounting on a [ reconciliation ] basis.

So basically, is it right to assume that in any given situation or the options which we are discussing, the losses or underrecovery will not be more than what we have accounted for?

Yes, that's the expectation, it should be lower.

Yes. And the second question is margins for solar EPC business and data projects. So there has been volatile and sometimes 10%, sometimes 4%, 5%. So what should be the steady state margin for the next year given the current order book and the kind of prices, which we have built in and the current commodity prices?

No. I think we have a very steady order book. And very recently, we also won 1 gigawatt of which is in Karnataka for the SEC. And it's almost INR 5,500 crores with a good PAT margins. So we're kind of very comfortable that next year, which will be able to start recovering on the PAT margins. As Dr. Sinha in his opening comments mentioned that we have seen a very volatile corporate prices. And of course, the sale in the module prices were very high. And to that extent, some of the projects we have done that group under cost to replace that through profitability. And that's why you see the quarter 4 for the margins being lower, but we are very confident that next year, with very healthy projects in the pipeline plus the contract manufacturing that we're looking at that were kind of only importing cells and doing the module here locally, should be able to help us get back on track gradually.

7%, 8% margin should be a reasonable estimate for next year?

Sorry, you were talking about the EPC, right? You were talking about EPC.

EPC and Tata projects I was talking about before Tata projects are also in-between...

Tata projects. We kind of do have one-line accounting. And basically, Tata projects also as an EPC had gone through a similar [indiscernible] this year. And to that extent, they've also booked losses similar to what we have done in our [ APC ] businesses, but hopefully, they're kind of recovering well and they do also have a very healthy pipeline of projects going forward.

Right. So is it fair to assume that whatever anticipated losses on the current order book would have already been accounted for? And unless otherwise, the prices go up further, there should not be any hiccup in the margins going ahead?

So the market is very volatile, but we do plan with what we said in terms of being contract manufacturing and having a very healthy project pipeline with good margins, hopefully, we should be able to sell through.

Sure, sir. And sir, lastly that recently, there was an order in AP about payment of receivables and all. So can you share any update what is the kind of receivables we have with the AP government on the distributed PPAs? And what is the status? Are we getting the payment on time now?

So as per the court order, the payment was to be released in 6 weeks' time. That could not -- the AP discounts have not given. So we have filed a contempt petition against them. And we will hit up in the high court to see that whatever is the order of the high court gets implemented, and we get the money from them.

And what will be the receivables, sir, distributed receivable as of 31st March?

I think it's about 400-odd hertz.

400-odd. Okay, okay. And sir, in terms of our debt, what is the breakup between NCDs and the term loan?

We can provide you separately, but we do have a proper mix of long term and short term in order to deliver a very optimal finance cost, but we can share with you separately.

We'll take the last question from the line of Subhadip Mitra from JM Financial.

Just wanted to understand that with AL and then now being in place, do we see any restriction or threats to the existing EC order book or to the IPP order book, where the modules have now got to be procured locally instead of importing? And how do you see that panning out?

So we have tied up all our requirements based on the ALM requirement. So we don't see any challenges. And whatever was required to be done before 31st March, we have done. We had received the material and those have been executed. So this is all planned out and we will not have an issue going forward.

Okay. So am I to then understand that any future order inflow will require domestic procurement of modules? And then those you will have to look at new arrangements?

Yes.

Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Dr. Sinha for closing comments. Thank you, and over to you.

Thank you very much to all of you for joining for this call. And if you have any other queries, our Investor Relations team will be happy to connect with you and take it forward. Thank you. Thank you very much, and take care.

Thank you. Bye-bye.

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