NTPC Limited analyst Q&A

Thank you very much. The first question is from the line of Anuj, ICICI. Please go ahead.

I just had a couple of questions. First, if I see your stand-alone P&L, point number 5, profit before regulatory deferral account balances, that seems to have declined both on a quarter -on-quarter basis and on a Y -o-Y basis. While I understand there is point six as well, which talks about some regulatory deferral account balances, my question is, how should I be looking at the profit? Should I be looking at profit for the whole period, including regulatory deferral? And second question is, how do I project this number? Because this number has been very volatile in the last few quarters. If I see last year, it was of a loss of about INR1,750 crores, and this quarter, it is a profit of about INR1,466 crores. So that's point number one. And second question is if you can just quan tify the incentives for this quarter, given that your PAF, the plant availability factor, was down about 6%, 7% from a quarter -on-quarter perspective. So , these two questions. Thank you.

Yes. So, first question was on the stand -alone profitability, how you should be looking at the profitability? So , in fact, a mark of comparison, you should be looking at overall profitability, which is up by INR998.55 crores. The regulatory deferral, there was a peculiar thing in the last year that we had change d the methodology of accounting whereby all the sale of ash collections were accounted for under regulatory deferral. But subsequently, this was by account transfer, it was all shifted to the actual revenue. So, to that extent, there will be a variation seen. But on an overall basis, the profitability remains progressive. Coming to your next question regarding incentives. The trend of incentive is for the third quarter, it is INR124 crores. And overall, for the nine month s, the incentive is INR462 crores, which is higher compared to the last year. The trend is on an increasing trend. If you are to look at the figures of incentive for the last three years, it has grown from INR164 crores, INR354 crores, then INR424 crores and now it is INR462 crores.

Okay. Thank you. Just one clarification. This net movement in regulatory deferral would remain elevated at these levels. Would it be fair to assume that? Or should it reverse going forward in the future quarters?

No. The regulatory deferral is based on two, three components. One, it can be due to foreign currency movement. So, we can't capture that as a trend per se.

Sir, basically, you were saying that there has been some accounting difference between last year same quarter and this year this quarter. So that's why I was just asking. So, you're saying it's difficult to comment.

No, to that extent, that peculiar transaction is one-time. It will not be repeated.

Thank you.

Good afternoon, and thanks for the opportunity. Sir, my first question is, what was the under recovery in the nine months? And what was this number in H1?

Under recovery in sense of disincentive, you mean?

Yes.

Under recovery in the third quarter was close to INR256 crores. And overall, it is around INR740 crores, which we should see the reversal during the fourth quarter. This was essentially due to a more number of outages that were taken in the third quarter because it's kind of an over planning that during the first quarter of the next year, the demand is likely to be upside. So, as preparatory measures, more number of outages are taken in the third quarter. So , you should see a lot of reversals in the fourth quarter.

I think I would like to give some clarification on this. Government of India has said to the power companies that they should no t take any overhauls for the month of March onwards. So , some of the overhauls that were supposed to be taken in March, that was preponed. Similarly, in the beginning of the year up to June, we were not allowed to take any overhauls because of the prevaili ng grid conditions. So, some of these overhauls were also adjusted in these months. So, we have taken more overhauls during this period. And once these units come back on bar, you will see a lot of reversal of these under recoveries.

My second question is that the fact that the under recovery has been higher in the last five years. And one of the key reasons could be that peak, off peak, lower season, high season and in the new regulation, the lower season, high season has gone off. Do you thin k this will help materially for us to report a lower under recovery in the next tariff period if the draft regulation prevails in the final?

Yes, it could actually help the Company. In fact, with the government giving us the directions to sched ule our overhauls, we were facing some problems. And we're actually telling the government also that this high demand, low demand thing should go. And in this 24-29 regulation, that has been removed. So, to this extent, yes, the under recovery will be less. We do not have this high demand, low demand.

Just to add to what Director (Operations) said, yes, the changed regulations will give us a better latitude to manage our grid condition because earlier, whatever was the declared peak and non -peak and as compared to what was the real grid situation, so this will be a better latitude to operate.

The last question is the government is saying about adding 88 GW of coal in next 10 years. Are we revising our capacity addition target for coal-based power plant as of now? Or do you think we will revise it later?

Out of which, NTPC is going to add 16.8 GW thermal directly. And indirectly, we'll be supporting the state government utilities in awarding 7 GW.

Understood, sir. Thanks, and best of luck.

Thank you. The next question is from the line of Ravikanth from Tara Capital. Please go ahead.

Thanks for the opportunity. Ravikanth Desai. This is my one small question. Is there any planning of merger of THDC and NEEPCO in NTPC?

No, to our information, there is no such and whatever is there, it can just be a speculative kind of thing. Officially, there is nothing with us.

Okay. Thank you.

Thank you. The next question is from the line of Atul Tiwari from Citi. Please go ahead.

Yes. Sir, what was the recurring PAT in the quarter, if you could share that number? Normally, you adjust for some one-off, etc.

Yes. See, if you are referring to what can you term as adjusted profit, our adjusted profit for the current Q3, it was INR4,468 crores as compared to INR4,424 crores in the previous Q3. If you talk of a nine -month basis, our adjusted profit is INR11,760 crores, which compares favourably with previous year, it was INR11,418 crores.

This would be Singrauli 3, 1,600 MW; Sipat 3, 800 MW; Darlipalli, 800 MW. So, this would be typically in the Q1, Q2 tendering for the forthcoming year. There is one more, Meja, 2,400 MW; and Nabinagar 2, 2,400 MW; Telangana 2, 2,400 MW. So besides this, there will be Gadarwara, Anpara, Obra, Patratu. So, totalling to 16.8 GW. So out of this, 9.6 GW would be on a stand-alone NTPC, and 7.2 GW would be implemented through the JV/subsidiary.

Okay, Sir. Thank you.

Thank you. The next question is from the line of Puneet Gulati from HSBC. Please go ahead.

Thank you so much. Sir, basically, out of the 16.8, the breakup is the 9.6 and 7 GW, right? That's how one should read in terms of this?

Yes, 9.6 and 7.2 is the breakup between stand-alone and the JV/subsidiary.

And what is the timeline of the award for all of this , and which one will be the first one to go?

5600 MW should be tendered out in the Q1 and Q2 of next year and 6,400 MW should be up to Q2 of FY26, and 4,800 MW could be there in FY27.

Yes. So, for the first 5.6 GW, what are the stages of approval that you need to cross and where are you on those?

In case of Singrauli, there is no need for studies. All studies have been completed. For Sipat, we are waiting for the EC and for Darlipalli, we need certain amount of land acquisition as well as EC. Meja, certain amount of land for is required. However, as committed, we'll be able to award it by next six months.

Okay. So, you're expecting EC and land acquisition also to get completed and in Singrauli, you have EC already in place?

Yes, we have the EC.

See, the breakup of dividend would be that the dividend from subsidiaries, INR190 crores, and the dividend from JVs would be INR463 crores. The gross will be INR662 crores. What was your other question?

Yes, and then there will be surcharge income, etc., right?

Surcharge for nine months is INR186 crores comp ared to INR459 crores last year. So, the surcharge is on a reduction trend because of the good collection efficiency now.

Right. Understood. My last question is on your renewable capacity that's still about 3.3 GW. You're sitting on 3 GW quite a bit. Are you happy with the pace of commissioning? Or do you expect that pace of commissioning to change in the year ahead? You have 4 GW of pipeline already.

We have a commissioned capacity of 3.3 GW, but we are gearing up, as I was telling in my initial remarks that 7.8 GW is already under execution with PPA available, construction contracts are all awarded. Another 11.9 GW is in the pipeline where we have won the bid either or the LOA has been recei ved, PPA has been signed. Some of them are through JVs, so JVA has been signed. Term sheet and some consents received. So, these are under well state of preparation, so under execution also. But nevertheless, I'll request my CEO of NGEL to elaborate on this, Mr. Mohit Bhargava.

And also on the 7,800 MW, which is under construction, what should be the timeline of commissioning for FY25 and FY26 and if at all anything more can come in FY26?

Yes. Good afternoon. First things first, n o, we are not happy with the pace of execution, but these are things which are not in our control and now hopefully, we are back on track. The major issue, of course, was the module supply. So, we started receiving the supplies now. Out of the 7.8 GW, which is already awarded, progressively, we hope to commission them over the next 24 months. But about 1 gigawatt definitely will come by March. That's what our target is because of what is going on. Then another of course, the idea is to have close to another 3 GW next year and balance thereafter.

Just wanted to check again on this slower pace of execution. Outside of receipt of modules, is there anything on the land acquisition side or certain other fronts maybe delaying the execution? Just wanted a perspective that your three -year target is in place, your '25-'26 target?

No, the major challenge was module only because there has been a change in what the regulations have been put in place by the government. So , this is what delayed the module procurement. Other than that, I would say these are routine issues. Land and execution challenges through the EPC contractors are always there, but that's our job to take care of those. So , we don't perceive anything specific, which is out of hand there.

Okay. So, your 2025-26 target would be in place, right, what you'll have in mind, what you have been guiding for?

Yes.

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

Sir, my first question belongs to the under recovery, which you mentioned in nine months, we had around INR740 crores of under recovery, and we target to bring it down. Any number you want to put or where we would like to end up FY24 figures for the under recovery?

It would be around INR400 crores to INR450 crores.

INR400 crores to INR450 crores. Okay. Second is on the capacity addition, sir. So, while the renewable target has been mentioned, how about the conventional things? So, like year-to-date, we have added close to 1.6 gigawatt of capacity. And if I'm correct, we had given a consolidated target of adding somewhere close to 6 to 7 GW on an annual basis, of which roughly 3 gigawatt was renewable. So how are the balance 4 GW of conventional capacity panning out? Are we sticking to the timeline for FY24, FY25, FY26 numbers? Or there is some kind of a change we expect?

The current year target was 3580 MW in conventional, which we will be able to achieve. North Karanpura Unit 2 , Telangana Unit 2 and Maitree Unit 2 in Bangladesh are pending. These three are on track. They are expected to be commissioned by the month of February.

Okay. So, they have been synchronized, Sir, right?

North Karanpura has achieved full load also. Telangana as well is going to achieve full load in two to three days. Maitree was not able to go to trial operation because of coal issues. Now they are also starting.

Fine, Sir and for FY25 & FY26?

For FY25, we have a target of around 4 GW and for FY26 around 2.7 GW plus.

All right, Sir and the PPA and FSA are all in place for this capacity, which are likely to come up by FY26, right, sir?

Yes.

Okay and only for the new projects which we have announced, 16.8 gigawatt, we need to seek the approval for the PPA and FSA?

Yes. It's on the cards, no issue.

Okay and lastly, on the cash flow front, so factoring the thing that we are adding close to 6-7 gigawatt on an annual basis, how would our cash flow be placed so that we can meet the equity capex for this capacity? If you can throw some light on this, it would be helpful, sir.

We have a comfortable projection, depending on all the capacity additions, and better regulated equity, we will keep on adding. So, our cash flow projection is comfortable and would be able to take care of our 30% equity for all this requirement.

The next question is from the line of Satyadeep Jain from AMBIT Capital.

First question on renewable energy. On the 7.8 GW that you're looking at for the next two odd years, given we've seen correction in module prices, and you've finally secured modules, any idea the IRR on these projects that you're looking at? Would it be better than the projects you already have executed, or could it be better than the existing projects? That's the first one.

If the module prices remain corrected and maybe go down further, definitely, there will be better IRR.

When you are biddings for RE projects, what is the IRR you're looking at right now?

See, the renewable side is a competitive arena, and the IRR is something which I can only give you a range. I cannot be very specific about this. So , we are looking for a very healthy IRR, which would be comparable with what we are earning in the cost-plus segment. I cannot be more specific.

Okay. On the 16.8 GW of capacity for coal you mentioned, any idea how much of that could be pithead and how much non-pithead?

Singrauli is pithead , Sipat is also pithead , Darlipalli is pithead , Meja is non - pithead, Telangana is pithead , Gadarwara is non-pithead, Nabinagar is non pithead, Patratu is pithead. Obra and Anpara are pithead, so we can tally it up and on a ballpark basis, 60% to 65% is on a pithead basis, and remaining 35% is non-pithead.

Okay. Just one clarification on the capacity expansions. You mentioned 4 gigawatt for FY24. Is it largely on time when we lo ok at Telangana and North Karanpura? Can you maybe just talk about how much are you looking at commissioning in the first half of FY25?

The next year you are talking, first half?

Yes.

First half, it will be Barh and North Karanpura. Telangana will be commissioned in this year itself. Telangana, North Karanpura Unit 2 by this year itself. Next year, it will be 1 unit of North Karanpura, 1 unit of Barh, 1 unit of Patratu and 1 unit of THDC Khurja.

The next question is from the line of Nikhil from Bernstein.

My first question is on pumped storage project. Last time, we had announced that there's about 14 GW of opportunities under various stages of discussion. I wanted to check, what is the status on that? Any progress that has been made on those pumped storage opportunities?

After going through all the studies and analysis and the interaction, ri ght now, we are aiming at 7 GW, out of which Tamil Nadu contributes 3 GW, and the MOU is at the last stage. Maharashtra, 800 MW, MOU has been signed yesterday. Chhattisgarh, around 1,200 MW; Gujarat, 1,000 MW; Meghalaya, 1,000 MW are the probable customers for us. It's around 7 gigawatts we are aiming at now. Out of which, Maharashtra has materialized. Rest are in different stages. Tamil Nadu we will get it very soon. Meghalaya, Chhattisgarh and Gujarat, we're following it up. Just one update on Maharashtra . Maharashtra is actually 2 GW. That's what we signed yesterday.

So overall, 8 GW, which are under active stages?

Yes.

Understood and in terms of timeline, what should we expect to see?

Generally, the time taken is two years for DPR and construction period is between five to six years. Totalling, around seven, eight.

Got it. Understood. My second question is on the renewable front. So , I had a couple of clarifications there. Just firstly, on FY26, just wanted to clarify what number are we then targeting? Is it about 15 GW of renewable by FY26, which we had communicated in the last call? Or if that number revised downwards now in terms of total operating capacity by FY26 end?

No, no. We are still in that ballpark.

Got it and second question on renewable there is on transmission front. Is transmission a reason for delay or which could potentially delay our aspirations on the renewable front?

Difficult to say upfront, but yes, the transmission is a challenge for actually all the developers, and the government and the transmission basically are focusing on that. Most of the power projects have connectivity in place, but yes, in a few of them probably, there might be minor delay in connectivity, but we don't anticipate that to materially impact us.

Got it. That's helpful. Maybe one last question from my side. On the module price question, which came up earlier as well, given the crash in module prices, as you said, should benefit us, the 7.8 GW, which is under construction on renewables, for them, am I correct to understand it's typically on a turnkey basis, where the module price is already locked?

No. In fact, most of that is in the 2 -package mode where we are procuring modules directly.

Understood and would the orders have been placed already on the module front as well?

No, not for all. We have placed order for about 2.5 GW.

The next question is from the line of Swati Jhunjhunwala from BOB Capital.

First question is on the coal mining. So , for 9 months, we have done 20 MMT against our target of 34 millio n tons for the entire year. So , is that target still intact or are we revising it?

25.36 million is 9 months, and right now, we are at 27 million.

Got it. So, the 34 million ton is intact? This will be achieved by the end of the year.

Absolutely. Yes.

Okay. Got it. And second question is on the renewable front. So, we're planning to commission around about 15 gigawatt by FY26. But the pumped storage capacities that are coming up for 8 gigawatt, as you said, will take another 6 to 7 years. So, the kind of PPA that you are signing, is it on an RTC basis or is it on a project-to-project basis?

No, the PPAs which we have signed also include RTC power, but for those RTC PPAs, we are not looking at our own pumped storage as of now. In fact, as we had mentioned last time also, we've already tied up for a 500-megawatt pumped storage, and we have another 1,500 MW storage bid in the market. So, we'll be using that capacity for meeting our PPA requirements.

All right. Understood and last question on the 16.8 GW thermal capacity. So, of this, is the entire 16.8 under RTM or is only the 9.6 that is the stand-alone part is under the regulators?

No. The entire capacity would be predominantly on a cost-plus basis.

On a cost-plus basis. All right. Okay.

Thank you. The next question is from the line of Dhruv from HDFC AMC.

Sir, 10 gigawatt of thermal capacities are already under construction, and 16.8 gigawatt we have to tender in the next 2, 3 years. That's over and above about 10 gigawatt. Sir, any status on this 16.8 in terms of the PPAs, the states which are coming up to sign PPAs? Is there a willingness or just some status there?

We have PPAs for some of them, like Darlipalli, Singrauli, and we'll be signing PPAs for others like Sipat and Telangana 2 and other projects.

But the states are coming forward to sign PPAs, is it or I mean, where are we right now in terms of their willingness to sign PPAs?

Yes, yes, they are willing to sign PPAs.

Okay. Got it. And sir, the other thing, a small point was what was the PAF under recovery, the fixed charge under recovery in the last year same quarter, 3Q FY23?

Okay. Last year, Q3 was INR168 crores.

Fixed charge under recovery?

Last year was improvement, not under recovery. It was an improvement.

INR168 crores. Got it.

The next question is from the line of Akshat Vyas from Reliance Nippon Life Insurance.

The standalone capex for next year would be close to INR22,700 crores and for FY26, it could be close to INR26,300 crores.

And sir, how the fund raising would be done?

Debt, equity, 70-30.

Debt, equity, 70-30. Okay, Sir.

That's the normative as far as the cost-plus projects are concerned, but renewable, it could be slightly different. We can go for higher leveraging, if possible.

The next question is from the line of Falguni Dutta from Man Sarovar Financial.

I just have one question. So , what's your view on the overall demand supply in power for the next 2 years, let's say, if we even include the renewable capacity therein?

When you talk about demand supply, I presume you're talking at the country level?

For country, yes.

Okay. Now I'll give you two projections. So , one is by the end of 2026-27, the overall electricity demand in terms of peak demand, it would be 277 GW and on an energy basis, it would be 1,908 billion units.

Okay sir.

And if you take a projection up to 2031-32, the peak demand is estimated at 366 gigawatts, and the energy demand would be 2,474 billion units.

Sir, again, for FY '27 I just wanted to know, how are we placed for the country, will the demand overshoot the supply, I just wanted to take a view in terms of merchant power rates and thereabout?

I can only share that right now, 27 GW of coal capacity is already under construction and another 31 GW, close to that, is under advanced stage of planning, and another 18 GW is required to be planned. So that would essentially mean that the coal capacity would be closer to 283 GW by the end of 2032. These are broad numbers available at the planning stage.

No, sir, just with your last statement, were all for coal you mentioned, right?

That's right. All for coal, on all India basis and the estimated closing capacity at the end 2032 should be closer to 283 GW. This would factor some amount of retirement, possible retirement depending on the health of the plants. So, we have factored around 2 GW of retirement as well in this. On the renewable side or we can say on non-fossil fuel side, solar target addition would be 246 GW, wind around 46 GW and from other non-fossil fuel sources of 52 GW. So, the total addition targeted for the country as a whole is 343 GW. So, this should take the overall RE capacity considering the existing capacity to 530 GW by the end of 2032. On aggregate basis, the total target capacity at the end o f FY32 would be 838 GW. Total of 412 GW would be the target addition, considering the conventional as well as RE side.

So, 412 GW is the target addition till 2032?

That's right.

Okay. Sir, you don't think that with more solar coming in, I mean, what we hear is various companies putting up solar capacity. So, is there a case that the thermal capacity demand comes off a little bit, it gets offset with solar and therefore, we see some lesser demand for thermal, I mean, do you see such a situation?

Madam, one of your questions was we'll be able to supply the demand. See, as of now, the current additions in the renewable sector and the thermal, there is no issue of meeting the demand during solar hours. Probably during non-solar hours, the short time, there could be some crunch. But even that, provided all the thermal units on bar, that's not an issue. If thermal units are under maintenance more than the required, then there's an issue. That is what is the demands of the situation.

Sir, any colour on the green hydrogen? There was an announcement yesterday that government of Maharashtra will be putting some INR80,000 crores investment in NTPC Green Energy. So, how should we see this green hydrogen space shaping up in future?

Yes, I think there's one correction upfront. Maharashtra government does not intend to invest anything in NTPC. The MOU which has been signed says that we will be investing up to INR80,000 crores in Maharashtra for setting up green hydrogen projects backed by renewable and pumped storage and so on. So that is the broad objective in the MoU and the broad timeline is to do it within the next 5 years. Maharashtra recently came out with a new hydrogen policy, and this is broadly an outcome of that NTPC Green has committed to take up. On a more generic note, gree n hydrogen is still evolving, and all the IPPs, including NTPC, are looking at off-take agreements. Meanwhile, the government is also looking at putting up mandates for the domestic companies. So, once all these things happen, demand will be created because there are a lot of people who are willing to set up hydrogen projects , ammonia projects, but ultimately without off-take, this may not be easy to get off the ground.

As that was the last question, I would now hand the conference over to Mr. Harsh Dole from IIFL Securities Limited for closing comments.

Thank you. On behalf of IIFL Securities, I'd like to thank all the participants. And I'd also like to thank NTPC management for giving us an opportunity to host this call. Really appreciate, Sir. Before we conclude the call, would you like to extend any last message?

I would on behalf of the management of NTPC to thank all the participants for their very well-informed questions and if there are any remaining queries, which are yet to be answered, we will be supplementing it through a direct reply to that. So, thank you once again. Thank you very much.

Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. ***********************************