Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adani Energy Solutions Ltd (BOM:539254, Financial) reported over 20% growth in all financial parameters, especially EBITDA.
- The company is entering a high growth period with a solid pipeline of projects in transmission, distribution, and smart metering.
- Significant progress in renewable energy integration, with 38% of renewable power in the distribution portfolio, aiming for 60% by 2027.
- Strong operational performance with transmission reliability at 99.7% and distribution reliability at 99.9%.
- Smart metering segment is expected to drive profitability and revenue, with a target of installing 50-65 lakh meters in the current year and 1 crore meters next year.
Negative Points
- The sale of the Dahanu power plant resulted in an exceptional impairment amount of INR1,500 crore.
- EBIT margins in the transmission business have declined from 67-70% to 46% in the current quarter.
- Regulatory issues and intense competition in the transmission segment have impacted profitability.
- Challenges in sourcing equipment for high-voltage platforms, which is a global issue.
- The smart metering segment faces resistance in some regions, such as BSE, affecting the pace of implementation.
Q & A Highlights
Highlights from Adani Energy Solutions Ltd (BOM:539254) Q1 FY25 Earnings Call
Q: Can you explain the status and future plans for the smart metering segment?
A: We have a pipeline of around 23 million meters with implementation already started in Assam, Bihar, and soon in Uttarakhand, Maharashtra, and Andhra Pradesh. We aim to install 50-65 lakh meters this year and reach 1 crore meters next year. (Kandarp Patel, CEO)
Q: What is the outlook for EBITDA margins in the transmission business?
A: We maintain EBITDA margins of 91-92% and expect improvement due to reduced competition intensity. The regulatory asset base for Dahanu is INR800 crores, and the sale will not impact tariffs or EBITDA. (Kandarp Patel, CEO)
Q: What are the expected returns on transmission projects compared to competitors like Power Grid?
A: We target around 15% IRR, leveraging our project implementation efficiency, especially in regions like Khavda. We expect competition to reduce, improving returns. (Kandarp Patel, CEO)
Q: How do you plan to leverage data from smart meters for future growth?
A: While data belongs to DISCOMs, we can use insights for expanding distribution business and planning investments efficiently. Post 10-year contracts, we aim to leverage our operational knowledge for future tenders. (Kandarp Patel, CEO)
Q: What is the CapEx plan for FY25 and FY26 across different segments?
A: Transmission projects will see INR7,000 crores in FY25 and INR5,000 crores in FY26. Distribution business CapEx is around INR1,500-1,700 crores annually. Smart metering will require INR5,800 per meter, with plans to install 50-60 lakh meters this year and over 1 crore next year. (Unidentified Company Representative)
Q: What is the impact of the Dahanu power plant sale on regulatory asset base and debt?
A: The sale will reduce the regulatory asset base by INR800 crores but will be offset by ongoing CapEx. Proceeds will be used to reduce AEML debt, improving cost of capital. (Kandarp Patel, CEO)
Q: How do you see the competitive intensity in the transmission segment?
A: Competition has reduced but not significantly. With a pipeline of INR90,000 crores to INR1,00,000 crores in projects, we expect competition to decrease further, improving margins. (Kandarp Patel, CEO)
Q: What are the expected financial returns from the smart metering business?
A: We have won contracts at an average tariff of INR12,000 per meter over 10 years, with margins around 85%. The initial CapEx is INR5,800 per meter, leading to an IRR of at least 25%. (Unidentified Company Representative)
Q: What is the current debt and cash balance at AEML?
A: AEML has $1.1 billion in dollar bonds and $282 million in quasi-equity from shareholders. The Dahanu sale proceeds will reduce net debt by around $100 million. (Unidentified Company Representative)
Q: What is the expected CapEx for new transmission projects?
A: We expect to spend INR6,000-7,000 crores annually over the next two years on existing projects. New projects will start contributing to CapEx from FY27 onwards. (Anupam Misra, Head Group Corporate Finance)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
