Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Adani Power Ltd (BOM:533096, Financial) achieved a significant year-on-year growth in PLF to 78% and power dispense across all plants, aggregating to 26 billion units.
- The company reported a sharp growth of 53% in continuing EBITDA, reflecting strong operational performance.
- Adani Power Ltd (BOM:533096) successfully managed to bring down finance costs, contributing to nearly doubling the profit before tax on a recurring basis.
- The company has proactive plans for capacity expansion, including the Mahan Energen Phase 2 ultra-supercritical expansion project of 1,600 megawatts, targeted for completion by June 2027.
- Adani Power Ltd (BOM:533096) has a strong outlook for India's thermal power capacity growth, with the government revising power demand projections significantly upwards.
Negative Points
- The company recognized a comparatively smaller amount of INR 422 crore as onetime period prior period revenue on account of regulatory orders, down from INR 6,497 crore in the previous year.
- Despite strong performance, the reported profit after tax for Q1 FY25 was INR 3,912 crore, significantly lower than INR 8,759 crore for Q1 FY24 due to onetime regulatory income in the previous year.
- The import coal price reduction led to slightly lower tariff realization in some PPAs with pass-through of import coal prices.
- There is a potential risk from future carbon taxes, although the company expects these to be passed through under PPAs.
- The company faces challenges in maintaining a balance between merchant power sales and long-term PPAs, aiming to keep around 20% of capacity for merchant sales to optimize returns.
Q & A Highlights
Q: Can you provide an update on the completion timeline for the acquisition of Lanco Amarkantak and any updates on other acquisition plans such as KSK Mahanadi and Coastal Energen?
A: Both the inorganic acquisitions of Lanco and Coastal Energen are awaiting final orders, which we expect to be announced soon. KSK Mahanadi is still under bid, with the commission expected by the end of the business day.
Q: With the lowering costs of batteries and recent low tariffs in tech tenders, do you see this as a threat to the merchant thermal portfolio?
A: Renewable energy and batteries are primarily available during the daytime. We do not foresee a significant impact on our thermal portfolio, as thermal power will continue to meet base load demand during non-daytime hours. We project maintaining a PLF above 70%, which is strong for a thermal station.
Q: How are you planning to tie up PPAs for organic expansion, and which states have come out with tenders?
A: Three states—Maharashtra, Uttar Pradesh, and Rajasthan—have already issued bids totaling 6,400 megawatts. We expect more states to follow suit. These PPAs are typically for a duration of 25 years.
Q: What is the strategy for balancing risk and reward between merchant power and PPAs?
A: We aim to tie up 80% of our capacity under long-term PPAs for stable returns, while keeping 20% open for merchant sales to optimize returns from market rates.
Q: What are your thoughts on future acquisition opportunities apart from Coastal Energen and Lanco?
A: We are evaluating opportunities based on criteria such as equipment quality, plant maintenance, and proximity to resources. While we cannot disclose specific targets, we are open to acquisitions that align with our strategic objectives.
Q: How are you protecting against potential future carbon taxes? Do PPAs allow for a pass-through of such costs?
A: Any carbon tax would be considered a change in law and would be passed through under the PPAs. Similar provisions already exist for the current green cess, which is allowed as a pass-through.
Q: What is the future of electricity supply to Bangladesh, and how is the payment situation?
A: We have a 25-year PPA with Bangladesh for 1,600 megawatts. Payments have been regular, with an average arrear of 4 to 5 months, similar to the situation with Indian discoms.
Q: Can you elaborate on the green ammonia blending project at Mundra?
A: We are currently conducting a pilot study to establish the technical feasibility of co-firing green ammonia with coal. Future steps will depend on market rates and whether the costs can be passed through under PPAs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
