Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Tata Power Co Ltd (BOM:500400, Financial) has shown consistent performance with 19 consecutive quarters of capacity increase.
- The company is poised to lead in the rooftop solar market with over 1 lakh installations and plans to expand to 1 crore installations in the next three to four years.
- Tata Power Co Ltd (BOM:500400) has a strong balance sheet with a net debt to underlying EBITDA of less than 3% and net debt to equity of less than 1.1x.
- The company's 4 gigawatt cell and module plant is progressing well, with full capacity expected to be reached by the third quarter.
- Tata Power Co Ltd (BOM:500400) has secured a 600 megawatt hydro plant project in Bhutan, which will produce power for both Bhutan and India.
Negative Points
- The company has seen a delay in payments from large EPC projects, impacting working capital by INR2,500 crores.
- There is a potential constraint on transmission capacity, which could impact the execution of future renewable projects.
- The solar EPC and TP solar EBITDA has not shown significant year-on-year improvement despite the new 4 gigawatt module facility.
- The company's net debt has increased by INR4,300 crores to INR42,000 crores.
- The profitability of coal companies has been declining due to stabilized coal prices, affecting overall profitability.
Q & A Highlights
Q: As per the presentation, RE auction volumes in Q1 have been 20 gigawatt plus. You also mentioned that solar cell and module prices have been falling while auction tariffs have risen. Why has Tata Power not seen an increase in solar and hybrid RE pipeline in Q1 FY25?
A: We have more than 5 gigawatts of utility scale renewals under implementation, including enterprise orders. Additionally, there is nearly 3 gigawatts of third-party EPC under implementation. We are fully tied up for all projects for this financial year and next. We are cautious about new projects due to the longer time required for transmission lines, expected only by FY27 and '28. We will focus more on complex and hybrid projects going forward.
Q: The 3 gigawatt commissioning mentioned in FY25 and 4 gigawatts next fiscal includes both Tata Power's own projects and third-party projects?
A: Yes, the 5 gigawatts of our own projects and 2 to 2.5 gigawatts of third-party projects are included. We are ensuring that we implement these projects before bidding for new ones.
Q: On the Delhi Distribution business, we have seen an operating profit increase sharply to INR554 crores versus INR321 crores in Q1 FY24. Is there any onetime tariff order impact?
A: Yes, there is a onetime tariff order impact of INR163 crores.
Q: Can you talk about the status of approvals for pumped storage and what more is needed before starting construction?
A: Land acquisition and internal studies are complete. We have most approvals from CEA and other authorities, with one pending expected in August. Environmental and forest approvals are mostly received, with the balance expected by September or October. Construction will start this year, with completion expected in 44 to 46 months.
Q: On the Bhutan hydro project, what is the timeline for completion and Tata Power's role?
A: Execution is a joint responsibility with Druk Green Power. Civil construction work has started, and we expect to start work later this calendar year. Financial closure and power sale tie-up will be completed in the next three to four months, with project completion expected within five years.
Q: What is the status of the solar pump business and module manufacturing realizations?
A: No new solar pumps have been installed this year as new orders have not come. For module manufacturing, the plant is still stabilizing, and more details will be available by Q3.
Q: What is Tata Power's view on power distribution reforms and upcoming opportunities?
A: Some states are examining proposals, and we expect formal proposals in the next two to three months. We are prepared to submit our proposals when they are announced.
Q: Regarding the rooftop solar business, are you seeing any increase in competitive intensity?
A: There are fragmented players, but for quality products and long-term solutions, we hold a 50% to 60% market share. We are well-positioned in the rooftop solar market.
Q: What is the status of Tata Power's land bank for renewables?
A: We continuously acquire land at various locations and have a large land bank. We are focusing on hybrid solutions and will continue to add land as demand increases.
Q: What type of returns are expected from the Bhutan hydro project?
A: The returns will be comparable to what we get in CERC-regulated projects, typically for a 30-year PPA.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
