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Adani Energy Solutions Ltd
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Ladies and gentlemen, good day, and welcome to the Adani Energy Solutions Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Kunjal Mehta. Thank you, and over to you, sir.
Hello all. I hope I am audible. Good afternoon and our best wishes to all the participants, and thank you for joining Adani Energy Solutions Q4 results. We have released the investor materials on our website, and you must have read through it. On the very start, I would like -- I'm very pleased to share that AESL has received an ESG score of 25.3 from Sustainalytics in their recent assessment, which places the company among the top 20 global electric utilities and helped us surpass the global and the industry averages.
We are also happy to share one more another important development in our Mumbai DISCOM, which is Adani Electricity Mumbai, which is ranked -- which again got ranked #1 utility in India in the edition of the integrated ratings by all the DISCOMs through Ministry of Power conducted by McKinsey. So this is the second time in a row that the Electricity Mumbai got ranked as #1 among all the DISCOMs throughout the country.
We had a strong quarter as far as the operational results are concerned, both in the transmission as well as in the distribution sector. In terms of our performance, we achieved a system availability -- we continue to achieve system availability of close to cent percentage, which is 99.6% in our transmission business.
And that led to the normal incentive income that we always get, and we achieved an incentive income of about INR 104 crores. We are also happy to share that we operationalize 1,244 circuit kilometers and because of which our total circuit kilometers under operation now is around 20,509 circuit kilometers. So this is being very special for us, as we achieved a strategic milestone of 20,000 circuit kilometers.
This -- the company also made certain strides in completing certain important projects, the most important one being the 400 kV Kharghar Vikhroli line, which is an important line to reduce the congestion in the city of Mumbai. We added that line during the last quarter. We also added or completed the line of the Warora-Kurnool line -- 765 kV Warora-Kurnool line and the 765 Khavda Bhuj line, which will enable about 1 gigawatt of renewable power from the Khavda region.
So there are a few important projects that got completed during the last quarter. In terms of electricity, Mumbai, the number of units sold ended up being 9.4 percentage higher on a year-on-year basis. And the most important achievement the Mumbai DISCOM achieved was in terms of the distribution losses.
Last year, the distribution losses was around 5.93 percentage or lower than 6%. We further reduced it down to 5.29 percentage, which is the lowest in the history of Adani Electricity Mumbai. In terms of the financial update during the financial year 2024, the company achieved a revenue growth of 17%, and we crossed the mark of INR 14,200 crores in terms of the full year revenue based on the various lines that got completed during the financial year.
The full year operational EBITDA grew by 7 percentage and just around INR 5,695. That is the operational EBITDA that the company achieved. The comparable PAT after excluding onetime has also grown 12 percentage. If you exclude the onetime, which was received during the last year, the comparable PAT has also grown onetime to around 12 percentage.
We continue to remain strongly [indiscernible] with respect to our transmission businesses. We have an under construction project pipeline of INR 17,000 crores, which is well on track to get completed during the next financial year. And we have 1 point -- around INR 1 lakh crores of bidding pipeline, which is going to come up during this financial year, in terms of our transmission business.
In terms of the distribution business, we -- the regulated asset base of Mumbai continues to grow and -- from 5,500, which was at the time of acquisition in 2018. Currently, it has grown to 8,500 by the end of this financial year. The important business, which is the smart meter business, we have now have around -- close to around 22.8 million smart meter projects already won, which takes a total contract value of around INR 27,000 crores.
So that business is now -- now we have already started the implementation. We started the implementation of smart meters in the best regions. And there are other projects, especially the Maharashtra, the Assam, Andhra Pradesh. These are certain other important projects, which are under the implementation phase. So with that, I take a pause and happy to take certain questions, which anyone has with respect to the company or with respect to the -- any financial results of the company.
[Operator Instructions] We have our first question from the line of Apoorva Bahadur from Goldman Sachs.
Sir, I wanted to check with you regarding the 1.1 trillion pipeline that you just mentioned for bidding. First of all, how much did it used to be? I mean, has there been any positive movement over the last 1 year or 6 months so?
Secondly, does it also include the 3 HVDC projects, which CTUIL had identified as a part of the 500 gigawatt renewable plan? Or I mean those clients will be sort of added later.
So with respect to your first -- your first question was with respect to whether this 1.1 includes the HVDC lines?
Yes, the 3 HVDC lines.
Yes, yes. So 1.1 includes the 3 HVDC lines. So those are part of this. So we believe that in the next 2, 3 months, all these projects will get started for bidding. I think post the elections once, all the bids would get open up.
Okay. And how much did this 1.1 trillion used to be, say, 6 months back or 1 year back? Are we seeing any positive movement over here?
So this used to be around 50,000 or 40,000 to 50,000 about a year back or probably even less than that. But now the things would start moving much more faster, and we would see more projects coming up into the pipeline.
Okay. Even beyond the 1.1 trillion?
There could be a possibility of even beyond 1.1. Currently, we have a strong visibility of 1.1, primarily on account of the 3 -- the HVDC projects, which itself comprises of around INR 50,000-odd crores.
Okay. And sir, what's the update on your Mumbai HVDC line? How far have we processed, and when do we expect the commissioning?
So the HVDC project, the implementation, the construction is going on. We are looking to complete the project during, say, Q1 or Q2 of the next financial year.
FY '26?
Yes. In the Q1 of FY '26 -- Q1, Q2 of FY '26.
Understood. Understood. Also just wanted to check on the global -- I mean, so globally, we are seeing that there's a transmission equipment shortage, especially on the transformer side. So are you seeing anything on this in India? And if it's, then how are we sort of factoring that in our plans? Or can be manufacturing capacity we run up quickly?
So you are right, because of the significant bids which are coming up and the huge demand across the transmission and the distribution sector, there is a constraint, and there are challenges with respect to supply chain. But because of the tie-up and the long-term tie-up, which we generally have with most of our large key players, we do not see significant challenge over there with respect to the key components [indiscernible].
So therefore, in certain most of the key projects or key components that we have, we have, what we call, already tied up with almost a large player for all the projects that we currently have in hand.
So key components would be your transformer, substations?
Correct. Correct.
[Operator Instructions] We have our next question from the line of Nikhil from Bernstein.
My first question is on the pipeline and under construction CapEx. So I wanted to understand from a pipeline of INR 1.1 lakh crores, what is the typical market share you think which should be achievable for Adani Energy Solutions? And secondly, even in terms of ballpark CapEx for the transmission business, what should we pencil in, in the coming years for the transmission business?
So we generally are targeting of this INR 1 lakh crores. Our share would be in the range of around 20-odd percentage, that is what we are looking. And most importantly, we are looking at those projects, which are very critical for the Khavda renewable sector for the evacuation of the renewable power at the Khavda region. So those are the projects which we are looking towards, which would take our share in the region of around 20-odd percentage.
In terms of the CapEx guidance, for the next financial year looking at in the range of around INR 6,000-odd crores, which includes around INR 1,200 crores to INR 1,500-odd crores for the distribution business, which is the Mumbai distribution, rest could be for the transmission sector. But as the smart meter project is also underway, there could be an addition on account of smart meters as and when the CapEx gets -- I mean, as and when we start deploying the smart meters in a full-fledged basis.
Got it. That's helpful. The second question I had was regarding the competitive intensity in TBCB projects. So last year, there was higher intensity in terms of competition for bidding for those projects. Do you see any of that easing, improving returns on ongoing tenders? Do you see that happening?
No, certainly. So the competition continues to be there, but the most important part is there are very few players in the market who can do certain types of the project or certain high-value projects, especially certain niche projects like HVDC. And given that background, in certain types of the projects, there are very few players who actually bid for these types of projects.
For smaller projects, I mean, in the range of around INR 500-odd crores, where we generally do not tend to participate. There could be higher competition. But as the projects become more deeper, more wider, more niche, then you have very few players currently in the industry.
Understood. Any indicative returns you could guide on equity IRRs that one can expect in these kind of projects?
So we benchmark ourselves in the range of, say, around 15-odd percentage when we start for bidding to protect our returns, to protect our margins. So those are certain benchmarks that we use for transmission projects, and that's true even for smart meter businesses. So there are certain benchmarks IRR, which we target for both these businesses, beyond which we do not participate into new projects.
Got it. That's helpful. A couple of more questions. One is on any traction on intrastate transmission TBCB projects? Or is there still some type of way?
Not much we have seen as far as intrastate is concerned. I mean not that very large or very significant.
Got it. And then last question, if I may squeeze in. Regarding transmission equipment, as we discussed earlier, would you say transformers, especially, higher voltage transformer, is that the key or the biggest bottleneck in executing projects faster? Or is it some of the recruitment?
No. So both transformers and the substations are the -- continues to be the key important factor in our supply chain management. So yes, there are those supply chain management issues around because of the huge demand, which is there in the transmission, certain spike in the demand in the transmission sector. And that we will continue to see. But how you manage those supply chain, that's the critical aspect that we have been able to do in all our projects.
We have our next question from the line of Shivang Chauhan from Barclays.
My first question is on the status of Dahanu thermal power plant. So it was like carving out from the AEML, if you could provide some light on that?
So as we've indicated earlier, the intention of the company is to carve out ASAP. There are processes involved. And once those processes are completed, we will then be able to make the necessary announcement with respect to the Dahanu power plant.
Got it. Got it. Another one would be really to bonds. So any further plans on tenders after [indiscernible] exercise?
So that depends on the liquidity position of the company and post the CapEx and the business requirement of AEML. Once -- and the last one was on account of the liquidation of the regulatory -- past regulatory receipts that the company had, because of which the company was able to do the bonds. But once the -- once we have, again, liquidity available, then we will not shy away from doing the bonds, if necessary -- if available.
Okay. Okay. Also, any funding plans for the USD market for either of the subsidiaries?
So I would put it slightly differently. I would say -- I mean, Adani Energy Solutions has access to both the dollar bond market as well as the rupee market and as well as the bank market, which it uses for its either projects under construction projects or for its CapEx requirement. So at the right time, we tap these markets for our capital requirements. So if there could be a need in rupee bond, we would tap the rupee bonds, and if the need is in the dollar bonds, we could tap the dollar bond.
We have our next question from the line of Puneet Gulati from HSBC. Please go ahead. Mr. Puneet?
Yes, can you hear me?
Yes, sir, we can hear you.
Congrats on good numbers. My first question is on the opportunity that you talked about 1.1 trillion. How much of that is towards Khavda side?
Khavda would be in the region of, say, around INR 30,000-odd crores.
And do you expect the entire 1.1 trillion to be tendered out over next 1 year? Or do you foresee any risk of slippage there?
Any risk of?
Slippages and tendering out the entire quantum?
Yes. So this is the pipeline which we have identified. I mean, this is over the next 1 year, which we think. I mean, there could be a possibility that 12 months could extend to, say, 15 months or around that. And the key important thing is the event which we are looking is once the elections are completed. Then, the state central government and CRC would be more comfortable coming out with the bids.
Right. But from a full year perspective, if you look at 12 months from June 2024, do you think the entire 1.1 trillion is a fair bit of probability of being tendered out?
So I would say -- you can say 12 to 15 months would be a fair estimate to complete it.
[Operator Instructions] We have a next question from the line of [ Qingdao Hui Bai ] from Bearings.
Sorry, my question has been asked. I have no more questions for now. Thank you.
We have our next question from the line of Koundinya Nimmagadda from Jefferies.
Sir, my first question is on the big pipeline, the INR 1.1 lakh crore that you spoke of. I'm assuming all of this is approved by NCT, please correct me if I'm wrong on that. And specific to that also on the HVDC projects, if I -- my understanding is correct, the first HVDC project was supposed to be bid out about in September last year and it keeps getting pushed out every time. So any specific reason that you would like to highlight here on the visibility part as well?
No. So as I told earlier, this is, of course, delayed. It was to plan to get completed in September. It got pushed to financial year-end. We were looking that to get completed by March. Thereafter, these events of election got announced and therefore, it has got delayed because of these 2 months now. There cannot be any project bidding with start. So we strongly expect that by around July, August, the strong bidding pipeline will again get started to bid out in an aggressive manner, especially the HVDC or the important one of the HVDC part.
Okay. And for specific to the company, we all understand that last year [ competition ] has been a bit higher, and therefore, your market share has come off a touch. So I mean you did allude to the fact that you were targeting 20% share. So do you see any risks or any challenges in achieving this year because the share has topped a bit over the past year. So just trying to understand what is your outlook on that front?
Outlook in the sense of winning those bids or...
Yes, within those bids. I mean, how confident are you? Or do you still prefer IRRs forward market share? I mean, what is the thought process?
Yes, yes. So you are right. We will continue to benchmark our bidding process purely on the basis of IRR. And that's the key thing, which we will look into any of these bids unless those bids comes at those IRR so we would not aggressively participate into it.
But at the same time, it is very important for us to understand is that these HVDC projects are high-return assets, especially given the nature of projects and the complexities involved and especially the size of these projects. So therefore, we are also, at the same time, confident of the 20% share, which we have projected on that.
Sure, sir. Sir, my second question is on the smart metering business. So of the INR 27,000 crores CapEx, what is the potential top line that you can see? And what is the outlook? I mean how do you think it will pan out maybe over the next 2, 3 years, if you can give some color on that, please?
So this INR 27,000 crores of -- that is the contract value itself. Now that -- it would be spread out over -- as you know, the entire listing is spread out over a period of 10 years. So the project value is over -- spread out over the entire 10-year period.
The CapEx for that would get incurred during the next, say, 25 to 30 months or so. So in that region, it would be spread out. And INR 27,000 crores would be recognized over the next 90 months or the 9, 10 years over which the contract would be done.
Understood, sir. And sir, what is the kind of -- what are the kind of IRRs you are seeing here? And also if you can throw some color on how that execution around -- because we understand that it's a bit manpower intensive. So if you can speak a little bit about that trend on the resource availability as well?
So on smart meter business, the key components are, of course, the meters. And then the important part is the communication and the networking infrastructure that has to be laid or to be deployed along with the infrastructure. So as that -- in case of smart meter, what we have done is that we have tied up with almost all the key components in terms of the meters, in terms of the lease lines, in terms of the communication lines.
We have tied up with a company called [indiscernible] which is a market leader in the networking and the infrastructure of this whole electronic smart metering thing is concerned. They have experience of doing this in regions -- other regions in India. We have a tie-up with them. We have a tie-up with Airtel for our communication infrastructure. We have long-term tie-up for our cybersecurity as well as tie-up for the cloud part.
So the supply part of it has now been fully completed and fully integrated. Now we are looking -- during the next 12 to 18 months, we would aggressively look to start deploying all these meters for the contracts that we have won. So that's how this thing is worked. Most important is that Adani Electricity or Adani Energy Solutions is the only company currently in India or the private payer in India, which has an experience of running a distribution company and actually installing smart meters and making those smart meters.
In our Mumbai DISCOM, we currently have around 5 lakh meters, which are fully installed and operational. And therefore, we are very confident of that same thing getting replicated. There are very few players in the country, who are actually doing the business of distribution and being able to deploy those smart meters. So that same efficiency and the same knowledge that the company has -- the expertise and experience that the company has in the Mumbai DISCOM would be used for deploying these smart meters that the company has already done.
Understood. If I may ask one last question. If you can provide some color on the current status of the parallel licensing that you are working on pre-circuits please?
So currently, we have made applications to the respective state governments for the parallel licensing, one in the Navi Mumbai region, and the other is in the Gautam Buddha Nagar, near Noida or near Delhi. Both are under evaluation by the respective state departments or the state governments listing.
And then at the right time, the licensing processes would be awarded to us. So it is still some time away before the entire process gets completed and before the license is actually gets awarded to us. There's a long process under the Electricity Act. And so both are under evaluation stage right now.
Sir, correct me if I'm wrong. I think there's also one more on the Mundra that you're looking at, right? Can you provide us a status on Mundra as well, please?
So Mundra, we are already operating as a distribution business in the SEZ area, where we are operating, providing distribution of the power to the units, which are operating in the SEZ unit. We have also applied for expanding the entire license area to cover the entire district of Mumbai.
The most important part in case of Mundra District is to provide most reliable and competitive power to the industrial units, which are coming up in the Mundra region. So that those regions can get uninterruptive, very competitive power through Mundra.
And Mundra Utility will also again follow the same model as Adani Electricity Mumbai that is [indiscernible] model. And the entire revenue would be dependent on the asset base as and when it gets increased. All the other costs will be passed through to the consumers under the tariff or under the regulatory mechanism.
[Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Anil Sardana for closing comments. Over to you, sir.
Manav, we have 2 questions in the question queue, can you please take those?
Okay, sir. We have a next question from the line of Anderson Dong from PIMCO. Please go ahead.
Can you please share the CapEx guidance on a consolidated basis for fiscal 2025 and also break it down by segments, including transmission, distribution, HVDC and smart meter?
So the -- Dong, the AEML Mumbai would have a CapEx plan of around INR 1,500-odd crores, which is in line with what we have been doing in the last few years. Transmission, based on the projects which are currently under operational and based on the project which we will win, it would be in the range of around INR 5,000-odd crores.
Smart meters would take additional CapEx requirement based on the meters it would get deployed. But it would be fair to be that -- we would incur at least around INR 1,000 cores, INR 2,000-odd crores in case of smart meters, in the next financial year.
And how about the funding plan for those projects?
Sure. So as you know that AEML will be funded directly through its own internal approval. There is no requirement to raise any debt in case of Mumbai. There has been no requirement to raise debt since last 2 years. And we do not expect any fresh borrowing in case of AEML in the next financial year.
In case of transmission or -- and even in case of smart meter, it would be a mix of debt and equity. And of course -- and the equity component would be funded largely through its own surpluses that the company has been generating. And the necessary debt will be availed at the right time for the transmission projects.
And last question, can you share the progress of any aggregating plan?
Any what plan?
Aggregating plan at AEML -- sorry, at Adani Energy Solutions level?
So there are no immediate plans to do that, but as and when there could be a further requirement or fresh requirements beyond to raise our -- opportunity to raise our growth listing beyond what we currently have at that point in time, the company would look to raise equity at the right time, at the right process.
We have our next question from the line of Shivang Chauhan from Barclays.
You have mentioned HVDC Mumbai project would be completed in the first quarter FY '26. So just wanted to know if you could share how much is in the state so far?
So this project, roughly, as you know, would cost us around INR 6,000-odd crores in the next 12 to 15 months and around -- currently out of which around INR 1,200 crores to INR 1,500 crores has already been incurred. So the balance would be incurred over the next 15 months or so.
As there are no further questions, I would now like to hand the conference over to Mr. Anil Sardana for closing comments. Over to you, sir.
I would just like to thank all the participants who attended this call. And in case you have any further questions, happy to connect with you separately, can reach out to us or to our Investor Relations team, Vijil. And thank you again for participation in the call.
Thank you. On behalf of Adani Energy Solutions, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.