SJVN Limited analyst Q&A

Thank you. The first question is from the line of Apoova Bahadur from Goldman Sachs. Please go ahead.

Hi, sir. Thank you for the opportunity. Sir, I wanted to understand this RIA business opportunity. What or how would the payment security be determined over here? Who will sort of provide the security? Will the liability lie on us?

Yes, Apoova. About this REIA, R-E-I-A, or we can call it R-E-I-A or REIA, as I told that the government has designated four REIA agencies in the country, SEKI, NTPC, NSECE, and SGVN. We collect the demand from the states or DISCOMs approach designated agency for the arrangement of energy for them. So this REIA per se. And the scheme which government of India has approved, that designated agency REIA, they'll get INR0.07 per unit as an arranger or the commission or like that, will get. So we got demand worth 1,500 megawatt capacity from different DISCOMs or we are in discussion with them also. So we floated the tenders for RTC, round the clock power, RE power. We got response from many developers, including TATA, ECMA, ReNew and all these agencies. O2 extra, there were nine bidders in that and they bid for 1,184 megawatt capacity, 1,450 megawatts, 38 megawatts was done. Allotment of 1,138 megawatts was done. And when the energy generated and supplied to the DISCOMS, energy will be generated by these developers. Five developers are getting the allotments, some 300 megawatts, some 200 megawatts, or 180 megawatts. So whatever energy will be supplied to the DISCOMs and the revenue will be realized and we will get INR0.07 per unit.

That's very clear. What I want to understand is that historically, I think SECI used to be this intermediary and SECI would provide a payment security as well. So in case the DISCOM did not pay or there was a delay in payment from the discom to the renewable developers, SECI would sort of step in and make good the difference for the time period. I want to understand whether SJVN will also have to perform a similar activity under this in case there's a delay in payment from the discom.

That SJVN will be doing the same responsibility activity.

How will we derisk ourselves in this case? Is there a back-to-back agreement with the DISCOM or is it covered under the Tripartite agreement or are we creating a payment security fund? How do we intend to do that?

Yes, we will be creating the payment security fund also and the agreement will be tripartite.

So in case the discom does not pay to the developer, we can directly approach the ministry and ask?

Okay, okay. So that risk of default will not lie on us?

Yes, that will not be.

Okay, sir. Understood. Very helpful. Can you also provide the breakup for incentives for the capacity incentive in UI?

Yes, I will. Breakup for the quarter for incentives. This capacity incentives were to the tune of INR51.25 crores. So out of this INR51.25 crores, Nathpa Jhakri project INR29.85 crores and Rampur project INR21.45 crores. So total INR51.25 crores capacity incentives. Then UI or DSM, what we call now DSM is INR8.18 crores. So out of this INR8.18 crores, INR3.53 crores from Nathpa Jhakri and INR4.65 crores from Rampur project. And REC very negligible about INR0.1 crores.

Understood, sir. Thank you so much. I'll join the queue again.

Thank you. The next question is on the line of Rupesh Sankhe. Please go ahead.

Yes, sir. A couple of questions, sir. Firstly, we are expecting our capacity to increase from 2000 megawatt to 12,000 megawatt in the next two to three years. So what will be the equity once we get the 12,000 megawatt capacity in operation? That is the first question. And second question is, sir, what is the status of Arun-3 and Buxar? Are they on a track to on the track?

Yes, Rupesh. Capacity is 2000 to 12,000 megawatt. You have asked about the equity. Out of this additional 10,000-megawatt capacity, our 4,500-megawatt projects are already under construction. And in most of the projects, we have used equity upfront. More than 90% equity has been used upfront. So for this capacity, 4,500-megawatt equity has already been infused. But whereas the equity for the rest of the 5,500-megawatt capacity projects. So equity requirement, the total investment will be around, say, INR35,000 crores. So out of INR35,000 crores, we'll be requiring about INR7,000 crores, 20% equity, INR7,000 crores to INR8,000 crores equity will be required. So that we are comfortable for that. So there is no issue of equity arrangement. You have asked about the status of Arun-3 and Buxar project. You know that in hydro projects, problems are there. But our team at site and other locations, they are able to tackle the situation. In the Arun-3 project, there were floods in the early season, early monsoon season also. There was some shape of giving of diversion tunnel. Now that cavity has already been treated and we are through. Now heading has been completed. Now benching, most of the benching is also complete. So we will be, we are through that cavity of that diversion tunnel. Now we expect that by mid of December, this diversion tunnel will be back in shape and water will be diverted through that and we will be able to start the concreting work of the dam also. On the other front, this HRT headless tunnel, it is about 11.84 kilometer. So we are left with only what 400 meters excavation heading. So there's no issue of HRT. In powerhouse and transformer hall, we are already in advantage stage. So we expect that in the financial year, of next financial year, we'll be able to commission the project Arun-3. And Buxar also, there were some issues of acquisition of additional land for railway siding and water corridor. There were some objections regarding compensation from the farmer. So that issue has been raised to the appellate court for enhancement of the compensation and we are almost near to completion of the process and that land is handed over. So there are little delays also. The first unit, which was expected by the end of this financial year, will be able to commission the first unit of Buxar Sarma project by next September, October 24th.

Yes. So on the roadstock account, point number seven, you have mentioned three projects which are under construction, Luhri, Sidney and the Dolasin. There is some mutual agreed implementation is pending. So can you throw some light on that and tell me what is that?

Yes. The MOU was signed in 2019 and there was a condition that implementation agreement will be signed between SJVN and the government of Himachal Pradesh on mutual agreement basis, subsequent to the signing of MOU. But because of the reasons that took some time to come on this mutual agreement stage and that agreement was mutually agreed by the two parties by August 22. So we requested the state government to sign the implementation agreement, but that was the period of transition period, elections were very close. So that could not be signed. And after the change of the government in December 22, the government put the condition that we need to revise the old terms and condition in terms of free power or SGST reimbursement like that. So we requested them that these are the MOUs signed back in 2019 and all the projects appraised and approved by the competent authority by government of India up to the cabinet committee on economic affairs on those terms and conditions. If we revise these terms and conditions, the projects will not be viable then. So there is some, we are again talking to each other on different methods of settlement are underway. But the work on these projects is going on as such. There is no stoppage of work.

Thank you.

Thank you. The next question is on the line of Dhruv Muchhal from HDFC AMC. Please go ahead.

Yes, sir. Thank you so much. So, with the VR model, you have concluded 1500 megawatt already, right, sir? Yes. One tender is done. So you have received interest from DISCOMS for the whole capacity or you are in works to complete the process?

We have received consent for 1500 megawatt capacity.

So the DISCOMS are ready to sign. We have the DISCOMS who will sign the PPA.

They are ready to sign.

How does the process work? Do you go to the DISCOMS first and get interest from them and then do the tender or you do the tender and then go to the DISCOMS to see if they are keen to buy at that price or not?

It is both ways. It is both ways. We also approach the DISCOMS or the state governments. Our team studies the energy requirement in every state. What is their RP obligations, their deficit of this renewable energy or like that. So we also approach them, the governments also approach us also. Now, with the successful conclusion of this tender, now it's a very reasonable rate, INR4.38 RTC. So now we are getting, receiving queries from the various DISCOMS or the state governments also. They are also keen to tie up power with us. So it's both ways. We contact them or they also contact us.

Okay. Okay. And how comfortable, because 10 gigawatt is a very big number. I mean, India as overall has never done more than 10 gigawatt. But we're never able to find PPS for that. So how confident are you that this 10 gigawatt annually can be done?

We are very much optimistic because the energy, the capacity addition, which has to take place in the near future, depending upon the demand, because now we are heading for an era when the energy demand is increasing. On the other hand, other than renewable energy, thermal and hydro, hydro projects take a lot of time for the construction. So this model of exclusive solar, exclusive wind or hybrid solar wind or RTC, this backed by battery energy storage system. So this is the best model for the state. This is the RTC power. It's the best model for the state. They need not to go to every year that we need power for the daytime, we need power for the peaking time, we need power for some industry purposes. They, if they get this assured power around the clock, then they get solution at a single point. So this model, which we are going to adopt, so will be very, very catchy and will suit to all the discourse.

Because most of your RTC bids are RTC power, so I'm just wondering, and RTC has to be designed for that particular state's demand. For example, the 1500 I think was designed for Punjab and Madhya Pradesh, if I'm not wrong, based on their demand requirement. So you might be working, before the tender is issued, you have to work with the state. Is that understanding right? And you're very sure that when the tariff, when the bidding is done, the tariff will be adopted and PPA will be signed. Is that a fair understanding, sir?

It's a customized model. It's a customized model. Some states are customizing or some states are managing at their, or planning at their own level. They know that they have this hydropower, they have the thermal power, now they need only solar power. Or at some places, they don't have that capacity. They ask the agency only for that whole solution, just you go for it. They need not to worry for that. And we are responsible to supply power RTC to them. So it depends on the state to state. Some states are planning and managing at their own level, and they are giving requirements exclusively, maybe solar or wind or some states are giving us a requirement for the RTC also.

Thank you. The next question is on the line of Rupesh Sankhe, please go ahead.

Yes, sir. What is the status of signing PPA for this [Nathparamodi] or Arun-3? Because it's not near to completion. So what is the status over there, sir? And the second question is related to water sales, that charges as imposed by the government of Himachal Pradesh. It's close to INR138 crores. So is it going to be recurring or every time we have to pay the charges?

Yes, Rupesh, regarding the PPA, [Nathparamodi] we are commissioning just in this month by itself. So we are tying up with the, we are in discussion with the different utilities also for the selling of this power. On the other hand, initially we are eyeing for a good option, good option. So if we are not getting a good option, we are free to sell it. We will plan to sell it in the exchange, initially exchange also. So we will wait for the right opportunity of right tariff, right agreement to sell this power. We are in discussion with the government of India is also helping us or which are other, J&K, Uttarakhand and other states, they are interested in it. That initially NDMC was also interested. So it is a question of rate, what rate we are getting, we will be getting. And we will sign our PPA accordingly for what period, for five years, 10 years or 15 years. We will not go for long-term PPA, long-term PPA, say 35 years or 40 years. We will go for, say, five years, 10 years, 15 years, depending on the price that we get. So this is regarding the PPA. Arun-3 also we are in discussion with the various parties. They have already signed MOU with PTP, then renew also for the purchase of power. So other state governments are also interested. But whatever the commercially beneficial rate, which we will be getting, we are all for that. Regarding the water sale, government of Himachal Pradesh has levied water sale and that is already sub Judi in the high court also. So right now we are not paying it. And there is direction that government of India has decided that CPSC will wait for the decision of the court also. So government of India has issued the directions, some clarification, who is competent to levy the taxes. So the matter is in the court. There were one or two hearings in that. And next hearing is in the month of December now, in the month of December. So we will wait for the decision of the court.

Thank you so much, sir.

Thank you. The next question is in the line of Mohit Surana from Monarch Networth Capital Limited. Please go ahead.

Sir, a couple of questions. Regarding RIA, the PPAs that we enter into, will those be long-term PPAs or just for two to three years? And secondly, in the RIA model, is it only renewables that we can supply or it will be a mix of renewables and hydro? And can we supply our own generation under this model?

First, regarding the PPA, that will be for 25 years. It is for the 25 years. And regarding the mix of energy, but we have actually studied that is solar, wind, plus battery energy storage. These are the three components.

Sir, if you can also talk about the capex target for this year and next year as well, and how much we have achieved for this year?

Capex target this year was INR10,000 crores. And right now we have achieved INR3,800 crores. But the first two quarters, quarter one, they were in quarter two also some floods and some disruptions in the works also. And most of the capital expenditure which is planned and expected is in the quarter three or mostly in the quarter four. So the module which we are going to procure for the solar project, which are under construction 15 megawatt project, so most of the module will be supplied in the quarter three and or quarter four. So we are hopeful that this INR10,000 crores will be achieved.

So for the first half it is INR3,800 crores that is what we have spent?

Can you repeat?

For the first half we have spent INR3,800 crores?

Yes, INR3,800 crores.

And how much is the target for next year?

Next year will be around INR12,000 crores.

Thank you, sir.

Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Mr. Rupesh Sankar for his closing comments.

Yes, so we thank N. L. Sharma sir 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. Happy Diwali to all.

Thank you. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.