As of now, we have commissioned only two renewable energy projects, one 50 megawatt solar project and another 50 megawatt wind power project We are in the process of construction of 1,000 megawatt solar project as of now at our own balance sheet and 65 megawatt is being developed in one of our subsidiary companies, i .e. Bundelkhand Saur Urja Limited . Another 88 megawatt is being developed in another subsidiary, i.e. NHDC. And we have just won a bid for 200 megawatt in Gujarat. So this is our portfolio as of now, which is under construction in the renewable sphere. And we are not much aggressive on renewable energy front. We are basically a hydro company. But keeping at least 12% ROE, we will be taking solar or wind projects. Otherwise, we will not take up solar or wind project.
NHPC Limited analyst Q&A
Thank you. The next question is on the line of Krishna Duttar, an individual investor. Please go ahead.
My question is regarding the dip in revenue in this quarter. Can you please explain?
Dip in revenue?
Yes.
Our generation during this quarter was 9,010 million units against 10,138 million units in corresponding previous quarter. So it was down by 1,128 million units. That is why our revenue was lower in the current quarter – second quarter of current year.
The next question is from the line of Marsal Lewis, an individual investor. Please go ahead.
Yes, sir. Can you please advise regarding our portfolio of hydro, how much capacity is already live, how much capacity we are in the execution mode, and how much is, for example, in the pipeline for which the project is not yet awarded? And then can you also give, for example, what is the cost of project or cost of funds? Sorry, like total project cost, how much? And then whether everything is tied up or not?
Mr. Lewis, we have already commissioned 6,971 me gawatt in hydro and we are likely to commission our Parbati-II of 800 megawatt and Rangit-IV 120 megawatt in FY’24-25 and 2,000 megawatt will be added in FY25 -26 by commissioning our Subansiri Lower Project 2,000 megawatt with 624 Kiru Project also in FY’25-26. In FY’26-27, we will be commissioning Pakal D ul 1,000 megawatt, Kwar 540 megawatt, Ratle 850 megawatt, and Teesta-VI 500 megawatt. And thereafter in hydro, we will commission our Dibang Project of 2,880 megawatt in 2031-32. So by end of 31-32, our total installed capacity in hydro will be 16,285 megawatt.
And sir, how much is the existing capacity?
Existing is 6,971 megawatt of hydro.
And how much we are going to install during the current year, FY23-24, and FY’24-25? Remaining like you can say, remaining two quarters and FY’24- 25?
By March end, we will be commissioning two units of Subansiri but revenue will come in next year.
No problem. I just want to know about t he megawatt. So how much more megawatt you will commission during this year?
By end of March 24, we will be commissioning 500 megawatt in respect of Subansiri Lower Project and rest units will come in FY’25-26.
So 24-25, how much you will commission 24-25?
By end of 24-25, we will be commissioning around 2,500 megawatt.
So means, no, like other than this for 25 -26, you said 200 0 one and 644 one. So that is separate?
This comes in 800 megawatt Parbati-II, Rangit-IV 120 megawatt, and 6 units of Subansiri. 6 units means 1,500 megawatt. So 1,500, 800 and 120, it will be around 2,420 megawatt.
Okay, sir. And then, sir, what about this, the cost of funds, like the entire funding is tied up or like do you see any, for example, okay, let me take one more question. So for example, the project under execution, which will be commissioned during 2023 -2024, 2024-2025, 2025-2026, whether the entire required project cost has been funded, has been sanctioned?
As per CERC regulation, our funding pattern is 70 -30. 70% is Debt and 30% from our internal accruals, equity part. So, we raise loans on our balance sheet strength and there is no issue of financing. We have complete tied up for loan part, and we have sufficient internal accruals for infussing equity part. So, there is no issue of funding.
So, sir, like rega rding, because see now we need to go very, like, you know, fine-tune our cost. So since you have got many projects in the hand, so are you able to secure some better interest rate like for the new loan you are getting?
We are raising loans at the cheapest rate. Recently we have raised Rs. 2,000 Crore loan at the rate of 7.54% per year, and that is variable. And we are keeping cl ause regarding prepayment at any time without any repayment charges. So, we are able to raise the loan at the cheapest rate in the market.
What rate did you say, sir? Like, a little bit of a disturbance, I couldn't hear. What was the interest rate?
Interest rate is 7.54%.
Oh, very good, very good, very good, beautiful, beautiful. And then this, other than this, any cost escalation? Any cost escalation? Just like, let me finish, let me finish, one second.
Cost escalation is generally pass through in the tariff.
Okay, very good, sir, very good. So like one suggestion , sir, your PPT is not available in the stock exchange. Since you are such a big company having thousands of megawatts of like power projects, I think PPT, if you can give, we can get all information with PPT, sir.
Yes, so basically PPT is available at our website, nhpc.co.in. Even for 10 years, you can access those PPT.
Sir, I tried, every time we are trying, Yes, it's not very user -friendly also. So what is the harm if you can send one PPT copy?
Yes, Yes, Yes, we have been…
No issue. We have been sharing with BSE, NSE also and this time also we'll share, don't worry.
No, no, I'm saying please share this before the commencement of
We have noted your suggestion and it will be done.
Immediately after con-call, we’ll share our PPT.
Not after con-call, you should -- you must do before it, so that we can read it and then we can ask only basis of that.
Okay, noted.
Thank you. The next question is from the line of Dhruv Machal from HDFC, AMC. Please go ahead.
Yes, sir. Thank you so much. Sir, the first question is, the levelized tariff for two projects have increased marginally although, but have increased despite the project cost remaining the same versus what you were communicating last two quarters. So what's causing this increase?
So basically, you see, Parbati-II, it was earlier 6.14. It has been decreased now to coming around Rs. 6.09. So there is slight reduction in the capital cost of Parbati-II.
Okay. 6.09. I thought it is 6.9. It is 6.09.
6.09. And Subansiri, we have been sharing at the same level. So , there is not much change in Subansiri, per se.
And sir, the second question is the unfortunate thing with Teesta VI, I think now. So you have already spent Rs. 2,900 Crore and I think a large part of that will, you'll have to reconstruct is what our basic understanding is. So do you get the whole amount from insurance company or how does this work?
Mr. Dhruv, there is no loss to our already constructed part of the project. Only loss is in shape of filling up debris in our reservoir, our tunnel and washing out of our one of the stores. So there is no much loss. We estimate the loss at around Rs. 250 Crore and it is fully insured through our Contractors All Risk Policy.
Okay. So the loss of Rs. 250 is insured and you will recover that amount?
Yes.
And sir, the last question is on the MAT credit. So you have a negat ive tax amount this quarter. So, does it lead to a benefit on PAT or it becomes a pass- through in tariffs?
No. It will be in the benefit through PAT. MAT pertains to NHPC only. It is not a pass-through to beneficiaries.
Okay. But I thought whatever tax impact you have to ultimately get effective tax, it does not become a pass-through in tariffs?
Generally, MAT credit or any tax item is pass -through in the tariff. But the tariff period for 9-14, there was a clause that whatever tax you have taken, that is final. So in 9-14 period, we had paid higher tax for MAT. That's why we are able to recognize MAT credit and taking benefit of that.
Okay. Probably, I will understand this better, sir, from you later. Thank you so much and all the best. Thanks.
Thank you. The next question is from the line of Abhishek Khanna from Kotak Securities. Please go ahead.
My all questions answered. It was on the MAT credit only. It's been answered. Thank you.
Thank you, sir. The next question is from the line of Abhineet Anand from Kriti Investments. Please go ahead.
On the pump storage hydro, any of the projects where elementary study has been done and what tariff does it imply?
We have prepared our PFR for Indira Sagar and Omkareshwar Project and the tentative tariff for generation, it is coming around Rs. 5 per unit and the pumping cost will be additional.
What that number could be, sir?
So, effectively, the overall tariff will be anywhere like Rs. 8. And this is for what period, sir? I mean for four hours, is there something like that count?
Six hours.
Six hours of peaking?
Yes.
Okay. Thanks. That was my question.
Thank you. The next question is from the line of Bhavesh Patel from Patel Investments. Please go ahead.
Thank you for the opportunity and good performance. My question is about confirmation on our cost of equity. We expect in terms of the return on the equity around 12% or so. And the sec ond part is overall general La Nina condition, do we expect similar situation even next year? And will that impact our generation? In case you can answer, that will be good. Thank you.
Yes, certainly. So, you see, if you look at the cost of equity of the company, so that is basically your perspective, how much what you call the market rate of return. If you take 10 years, 15 years, accordingly it will vary. Accordingly, if you consider five years beta or one year beta, so accordingly it will vary. But broadly, I can share with you the cost of equity, you can consider about 12%.
Okay. Thank you. And about La Nina condition, because people are expecting that even next year, the water or the rain might be lesser. So, will that impact our generation like it has done this year?
Yes. So, if you look at the design energy, it is designed in such a way that if in any particular financial year, we are not able to achieve the design energy, there is a provision in CERC regulation to claim shortfall of energy also. So, if generation is not more than design energy, certainly there will be loss of incentive. So, broadly, whatever return on equity we are earning as of now, which is broadly 16% to 16.5% and if you add on incentive, that goes up to 19% to 20% also. So, in case of water availability is an issue, that much return cannot be achieved, but 16.5% kind of insulated return you can.
Sure.
Thank you. The next question is in the line of Rupesh Sankhe. Please go ahead.
Yes. Sir, couple of questions from my side. Firstly, in the last two quarters, our incentive income is almost nil. So, how do we see the incentive incomes in the coming quarters? Because we do see that availability factor will be lower than the last 2Q FY23. That was the first question. And secondly, sir, now we have a huge pipeline on the renewable energy side, as well as the hydro projects, pump hydro storage. So, how do we see the equity contribution? Are we comfortable position to have for equity contribution? Or we need to have some equity dilution going right?
Yes. So, first question regarding incentive, Rupesh, we have been sharing that the accounting or method of recognition of incentive has been changed. Earlier, we used to recognize the P AF incentive also on monthly basis. So, we found that in later half of the year, when P AF is basically lower than even the trend of PAF in first six months, So negative numbers even goes in negative. So, that does not show the true picture of the incentive number. That is the reason we changed our accounting. Now, we will start recognizing incentive income. Definitely, incentive income would be there depending upon our actual PAF. But that will come in second half year of the financial year. Because in first half year, our focus is on recovery of capacity charges. In the same line, if you remember earlier, we used to recognize even secondary energy also simultaneously but we changed it. Once design energy achieved for a power station, then we started recovering secondary energy. So, in the similar line, now accounting for PAF incentives also has been changed. Are you clear with that?
Yes, sir. On the capex side? Yes.
Now, capex side, you see, as of now, our average capex is in the range of Rs. 8,000 to Rs. 10,000 Crore, right? It is on consolidated basis. And in most of our projects under subsidiaries, like we have already contributed 100% equity in Teesta-VI, 100% equity in Rangit-IVs, 100% equity in Pakal Dul, Kiru. So, going forward, our equity contribution in our subsidiary companies are not much. Even at a standalone level, if you look at the equity requirement, it will vary between Rs. 2,500 to Rs. 3,000 Crore max. That much equity is freely available with NHPC even after havin g discharge obligation of repayment of loan and dividend distribution to the shareholder. So, NHPC is quite comfortable so far equity component is concerned.
Okay, sir. On the pump hydro storage that JV we have formed with Andhra Pradesh, how it will be the economics there in terms of return on equity?
Return on equity will be as per hydro projects only, and it will be 16.5%.
Okay, thank you, sir.
Thank you. We will move to the next question that is on the line of Mohit Surana from Monarch Networth Capital. Please go ahead.
Hello, sir. My question is more general and related to realizations. In years when we have generation more than the design capacity, the extra energy that we produce, does that go at the same realization at the same average selling price set by the regulator? I mean, the tariff or the tariff would be very low for the extra generation.
No, no, secondary energy, which is beyond the design energy, it goes at the rate of maximum Rs. 1.20 per unit or the energy charges, whichever is lower. So, it is not the same rate.
You said Rs. 1.20 per unit.
Maximum. If the energy charges are low, then it will be at the rate of energy charges only.
Understood. Thank you.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Rupesh Sankhe for his closing comments.
Yes. So, we thank NHPC management for giving us an opportunity to host this call. We also thank all the investors and the analysts for joining this call. And happy Diwali to everyone.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Elara Securities, that conclude this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.
Thank you so much.