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Adani Power Ltd
Earnings Call Analysis
Q4-2024 Analysis
Adani Power Ltd
In the recently concluded quarter, Adani Power Limited (APL) showcased substantial improvements in both Plant Load Factor (PLF) and power sales volume. The PLF surged from 52% in Q4 FY '23 to a notable 72% in Q4 FY '24, indicating enhanced operational efficiency. Similarly, power sales volume increased by 55%, from 14.3 billion units to 22.1 billion units, partly due to contributions from the Godda power plant, operational since Q1 of this year. On an annual basis, APL’s PLF reached 64.7%, while power sales rose to 79.3 billion units in FY '24, up from 47.9% and 53.4 billion units, respectively, in FY '23.
Adani Power achieved remarkable financial growth over the past year. For Q4 FY '24, consolidated revenues grew by 29% to INR 13,787 crores from INR 10,664 crores in the same quarter last year. Full-year revenue for FY '24 increased by 37% to INR 50,960 crores from INR 37,268 crores. This boost was partly due to lower import coal prices affecting PPA tariffs and better fuel cost recovery under PPA tariffs. Continuing EBITDA for Q4 FY '24 saw a staggering 126% growth, reaching INR 5,273 crores from INR 2,329 crores in the previous year. The annual continuing EBITDA surged 120%, from INR 8,540 crores in FY '23 to INR 18,789 crores in FY '24. Profit before tax for Q4 FY '24 was INR 3,558 crores, a significant increase from INR 898 crores last year. For the full year, profit before tax on a continuing basis grew from INR 1,903 crores in FY '23 to INR 11,470 crores in FY '24.
Adani Power has strategically utilized its cash flow from operations and regulatory recoveries to reduce its debt, despite an increase in project finance loans for the Godda plant. Consequently, the company's consolidated finance costs for Q4 FY '24 grew only moderately. With enhanced revenue visibility, fuel security, improved profitability, and balance sheet de-risking, Adani Power’s credit rating was upgraded from A to AA-, reflecting its enhanced creditworthiness.
In terms of profitability, Adani Power reported a full-year profit after tax of INR 20,829 crores for FY '24, up 94% from INR 10,727 crores in FY '23. However, Q4 FY '24 profit after tax appeared lower at INR 2,737 crores compared to the previous year's Q4, due to significant onetime adjustments in the previous year following a merger. These adjustments included a substantial provision reversal, which inflated last year's profits.
The power sector in India is poised for significant growth, driven by rapid economic activity and rising prosperity. Adani Power, as a leading private Independent Power Producer (IPP) in India, is well-positioned to benefit from this trend. The company plans to increase its generation capacity to over 24 gigawatts through a combination of organic and inorganic growth, including new power plants and acquisitions such as Coastal Energen and Lanco Amarkantak. The company is also developing a 1,600-megawatt extension at the Mahan plant and a similar expansion at the Raigarh power plant.
Adani Power is evaluating several growth opportunities and strategic investments, aiming to leverage its core competencies to deliver value-enhancing investments. The company is actively participating in bids for long-term PPAs from thermal power projects while remaining flexible to tap into short-term and merchant markets. The emphasis is on utilizing ultra-supercritical technology to improve efficiency and reduce emissions. The company’s strategic initiatives highlight its confidence in achieving timely execution and generating sustainable growth in the coming years.
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Ladies and gentlemen, good day, and welcome to Adani Power Limited Q4 FY '24 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Dilip Jha, CFO of Adani Power. Thank you, and over to you, sir.
Yes. Thank you. So good afternoon, friends. This is the first time I'm addressing investors and analysts for Adani Power. And I must say that I'm very much excited to talk to you all.
I also have here with me my colleagues, Mr. Shailesh Sawa, Ms. Dave, and my finance team. Our CEO, Mr. S B Khyalia could not join this call due to some accident, and he conveys to you all his regards.
To give a brief introduction of myself, I have been a part of Adani since 2010, working in various roles over the years. Before taking the charge of CFO of APL, I was Finance Head of the Integrated Resource Management business of Adani Enterprise Limited.
I will now take you through the performance of the company during the recently concluded quarter and financial year. I hope you have been able to go through the analyst presentation for the quarter and last year, that we have published on our website.
Adani Power has kept a year of outstanding operational and financial performance with another strong quarter, posting excellent revenue and earnings growth. We have seen a super rebillable of PLFs in power plants based on imported coal, high level of power offtake from domestic coal-based PPAs and higher utilizers in our merchant capacity.
During the recently concluded quarter, APL reported a handsome growth in PLF and power sales volume. PLF improved from 52% in Q4 FY '23 to 72% in Q4 FY '24. Power sales volume grew by 55% from 14.3 billion units to 22.1 billion units in this period. This figure for FY '24 include the contribution of Godda power plant, which was commissioned in Q1 of this year.
On a full year basis, APL achieved PLF of 64.7% and power sales of 79.3 billion units for FY '24. In comparison to 47.9% and 53.4 billion units, respectively, for FY '23.
Our import coal-based plant at Mundra and Udupi have benefited from moderate and in [indiscernible] full prices, which improves their merit order for [indiscernible]. As you may be aware, we now have [indiscernible] fuel cost recovery in PPAs with Gujarat.
Our plan, based on domestic coal, also operated with high PLFs, both in case of PPAs and merchant capacity due to continuous demand growth being witnessed across India. The locational advantages big plants enjoyed gives them a competitive [indiscernible] in this market. Needless to say, we have also maintained very high uptime of our power plants across the board.
Now coming to the financial performance. Previously, we used to report a good portion of revenues in the form of prior period regulatory item. However, we have moved past that phase after satisfactory conclusion of major regulatory meters in '23 '24. Now there is very little impact of prior period revenue recognition on the revenues for fourth quarter. So what we see in the quarterly figure is pretty much a steady state performance. However, to remove A&E ambiguity, today, we will focus on continuing revenue and continuing EBITDA to evaluate core earnings.
On a purely continuing basis, consolidated revenues posted by [ FPL ] grew by 29% to INR 13,787 crores for Q4 FY '24 as compared to INR 10,664 crores for the corresponding quarter of FY '23. There is an effect of lower import coal prices on the PPA tariffs realized during this quarter. Similarly, continuing consolidated revenues for FY '24 were higher by 37% at INR 50,960 crores as compared to [ INR 37,268 ] crores.
Fuel costs for the fourth quarter of FY '24 was 2% lower the cost for the corresponding quarter of FY '23 due to lower import prices. At the same time, there is an improvement in fuel cost recovery under PPA tariffs with the regulatory approvals we have received.
As a result, the continuing EBITDA for Q4 FY '24 grew impressively by 126% to INR 5,273 crores as compared to INR 2,329 crores in FY '23. Similarly, the continuing EBITDA for full year FY '24 is higher by 120% at INR 18,789 crores in comparison to the continuing EBITDA of INR 8,540 crores for FY '23.
We have judiciously used the cash flow from operations and from regulatory recovery to reduce debt for repayment. As a result, even though the increase on the project finance loan for Godda is now being tied to P&L., consolidated finance cost for Q4 FY '24 grew only moderately.
The company's credit worthiness have improved softly as marked by credit rating upgrades from A to AA family, that is AA-. Factors behind these are a high degree of revenue visibility and fuel security and a lasting improvement in profitability, which is coupled with derisking of the balance sheet due to our deleveraging exercise.
The profit before tax reported for the quarter achieved is striking growth to reach INR 3,558 crores as compared to INR 898 crores achieved last year. After considering onetime item, the reported profit before tax for FY '24 is INR 20,792 crores as compared to INR 7,675 crores for FY '23. On the continuing basis also, FY '24 PBT is INR 11,470 crores as compared to INR 1,903 crores for FY '23.
During the previous year, that is FY '23, we had certain reversal consequent to the scheme of [ amalgamism ] becoming effective [indiscernible] said enhance our already healthy profit after tax. Some of these adjustments were made during Q4 FY '23.
Now due to this, even though PAT reported for Q4 FY '24 looks optically lower at INR 2,737 crores, I'm sure you all will agree that it is a very healthy figure. For full year FY '24, the PAT is INR 20,829 crores as compared to PAT of INR 10,727 crores for full year FY '23. We [indiscernible] a strong 94% right.
The company has ended the [ fifth ] year on a strong note, with much higher net worth and low liberate with set by state for which growth plan. It is now solidly profitable and [indiscernible] power producer with high liquidity, a modern and efficient fleet and low risk.
I will also talk briefly about the outlook of the power sector and our growth plan. All of you have seen on the pulse of the economy, and you understand its growth dynamics and potential very well. India power demand is also rising rapidly as economy activity and prosperity grow.
In fact, as you can see now, the demand is set to rise faster than the government outlook that was probably later than 2 years ago. Fleet power demand is expected to reach [ 260 ] gigawatts this summer, 260 gigawatts. Even while renewable power capacities are growing, India will need more thermal power to meet this rising demand.
Looking at this, the government has issued directors to ensure adequate fuel supply for thermal power plants and to maximize their uptime. It has also raised its project for incremental thermal power installation from [ 50 ] gigawatt to more than 80 gigawatts.
Adani Power, as India's foremost private IPP, is very well placed to benefit from the long-term power demand outlook. Various DISCOMs have already announced their intent entering by bit for long-term PPAs from thermal power projects. We will look to take into these opportunities, so ground [ selection ] of our existing power plants on a selective basis. All new capacity to be set up by us will utilize ultra supercritical technology to improve efficiency and reduce anything.
As you are aware, we are already executing 1,600-megawatt extension project at the Mahan plant at [indiscernible]. We have recently initiated the development process for extension of the Raigarh power plant, which we plan to set up 1,600 megawatt thermal power capacity in [indiscernible].
We are also evaluating several inorganic growth opportunity, and we have announced progress in 2 of them. That is Coastal Energen and Lanco Amarkantak. We expect to receive NCLT approvals for these 2 companies soon.
Taking the growth and inorganic opportunities together, we plan to take our generation capacity to over 24 gigawatts in the coming years. We are highly confident of achieving timely execution and turnaround by leveraging our core [indiscernible] and delivering value-enhancing investments to our stakeholders. I look forward to sharing and discussing our progress in detail with you all in the years to come.
Thank you. And now over to your moderator for question-and-answer.
[Operator Instructions] The first question is from the line of [ Puneet Gulati ] from HSBC.
Congratulations on good numbers. My question is on new capacity. Can you talk about how existing capacity you already have which is not tied up with [indiscernible]? And what is the plan for new capacity commissioning in terms of time lines, which is without [indiscernible]?
I just could not follow your complete question, but let me just [indiscernible] in case something remains unanswered, you can ask a question.
The current operating capacity is 15.25 gigawatts. And as Mr. Dilip Jha mentioned, we currently 1.6 gigawatt capacity at Mahan is under construction and which is to get commissioned, say, by FY '27, '28.
Now you have a PPA [indiscernible]? 1.6?
Yes, this has PPA. Yes, it has a PPA for about close to about 83% of the total capacity of 2 and [ 2 ] [indiscernible] gigawatt.
Now another plan which CFO spoke about is Raigarh Brownfield expansion. There, as he also mentioned briefly in his speech that some DISCOMs have -- [indiscernible] and we are -- DISCOMs. So I'm sure when we -- our plants are really certified, I'm sure some PPAs will come and will [indiscernible] this quarter.
And if at all, we are not successful bidder, we have -- as you know, the open and merchant spot market has been very strong, and we expect the 2 options in the spot market, merchant market or we can tie those capacity also in the short term or medium term TCS.
But what would be your preference to long-term PT or a medium-term PT?
We'll keep a balance, but largely, it has to be a long-term PT.
Understood. And can you talk about which all discounts have expressed interest and bring in timing Herman power PTs?
You can search Google and you will find that out.
Okay. And just following up on this, if I may. NTPC, for example, already has some old signed PPAs, which it will revive, and Coal India also is not talking about new [indiscernible] plants. Do you think there is enough demand for non-coal India, non-NTPC kind of DISCOMs who will sign PPA? Is there enough demand for thermal side?
Absolutely, Mr. [indiscernible] spoke about the thermal capacity to go up to [ 8 85 ] gigawatts. And I think there is enough scope for the absorption of the capacity which will get added.
Understood. That's helpful.
The next question is from the line of [ Nikhil ] from Bernstein.
My first question is, I think, firstly, good set of numbers, good to see that. In terms of merchant capacity expansion, it seems like an excellent strategy for the coming few years. But beyond that, do you see a risk of a limited offtake as a battery pick up [indiscernible] comes online and excess solar generation is there in the [indiscernible]?
We don't see... [Technical Difficulty]
Ladies and gentlemen, we have lost management line connection. Please stay connected while we reconnect them.
Hello?
Yes, we are here. Apologies, ladies and gentlemen, we had connection issues, I think, got sorted now.
Nikhil, sir, you can ask your question again.
Sure, sure. I'll repeat my question. So my question was that the merchant capacity expansion seemed like a good strategy for the near term. But in the medium to longer term, do you see a risk given the [indiscernible] pump coming online and excess sold in [indiscernible].
No, we are not going too aggressively. Currently, we know that there are some capacities, some PPAs -- bids will be invited for some PPAs and are being invited, I'm sorry, and we are in the state of repayment.
And it's not that the entire capacity we'll be building in the new merchant. So we'll go step-by-step. We'll have priority, and then we'll go further on that.
But as we speak right now, besides Mahan here, PPA is already in place for 84% of capacity. Right, [indiscernible]?
Yes.
We are looking at the positives, and we'll try to tie up the capacity in the long-term PPA. But for some [indiscernible] doesn't have as CFO mentioned in his speech that we have options to go in the open market as well as short-term or medium-term market.
Understood.
[indiscernible] the PPA.
Got it. The second question I had was good to see the realization in the merchant market above INR 6 for the Jan to March quarter. But when you look at the pricing of power exchange for Jan to March, they were quite a bit lower than that.
Would it be fair to assume that a bulk of the sale in the merchant or the short-term market have to do bilateral agreements rather than the exchange? And is it a similar expectation for the April to June quarter as well?
As far as Q4 is concerned, yes, your assumption is right. But in Q1, we'll have to see.
Got it. That's helpful. And the third question I had was regarding the inorganic opportunities that you are referring to, cost to [indiscernible]. Would the company be looking to explore other big ones like KSK [indiscernible] et cetera, as well if the process for them moves?
Yes, we do -- we do keep evaluating the various [indiscernible] which we are coming in the market and based on our analysis and the price at which they are available, we'll go for it, but nothing specific about any project. The opportunities from we evaluate and then take a call whether to go for it or not.
The next question is from the line of [ Akhilesh Bhandari ] from Millennium Capital.
Sir, firstly, on the fuel cost. So the average fuel cost period was 3.33 per unit. Considering the current spot prices as well as the inventory which you already have at the plant, is there a scope for further reduction as compared to this level? Or is it expected to broadly remain the same?
See, we have 3 sources of coal actually. One is under the long-term assets, what we have against the PPAs; secondly, e-auctions; and third is the cost of imported fuel, imported coal actually. These are 3 sources.
So as far as [indiscernible] long-term [indiscernible] is concerned in that the price is grown by CI and [indiscernible] in few years, they do have escalation, but we don't see any steep increase in that.
Auction coal depends on the -- it's based on basically demand and supply. And as far as imported coal is concerned, as we have seen the prices softening up in the last 15 months or so, and we believe that it will eventually settle at $90, $100 a [ tonne ]. So don't expect any significant [indiscernible] for the reduction in this.
And even the substantial large amount of our PPAs where we have a coal cost part through. So to some merchant does not really affect us in case there are any movement in the fuel price.
Yes. I was just trying to understand for the merchant profitability standpoint. Sir, second, what about the [indiscernible] revenue...
Working further as far as [indiscernible] goes, most of our plants are near the [indiscernible], right? So we have a substantial saving in the transportation cost, and that gives us a good advantage.
Sir, from looking at the prior period revenue, so how much of the prior year revenue which we have booked till now, how much of that has already -- the cash is already coming from the DISCOMs, how much is left? And is there any matter which has been referred to the higher authorities or everything you've now done?
Okay. As far as FY '23, '24 is concerned, the onetime amount that was recognized is INR 9,322 crores. And over a period of time, whatever amount has been recognized in the books of accounts has by and large been realized. And we don't expect any large amount other to be received or to be recognized in the books of accounts.
And there are a few issues which are currently under various regulatory programs, but I don't see that affecting us plus/minus whatever in any manner, significant with others.
But the cash has already been received, right? That would be a fair...
Yes. Yes, we don't have any large amount outstanding from any of the discounts in terms of the -- any cost regulatory receivables.
And sir, sorry if I missed this if you had mentioned this earlier. But currently, what is the capacity [indiscernible] not tied up on the long-term PPA? And if you can give some color on the -- any short-term contracts which you have -- which are already ongoing for the next maybe couple of quarters or for the summer quarter.
We don't generally share this information because we go out [indiscernible] the entire integrated revenue model. And some bit has been already given in the PPT which was uploaded on the website.
And sir, last question. When is the...
Open capacity right now, which is [indiscernible], it's about 2.1 gigawatt.
Okay. And sir, when is the supply expected to begin under the PPA which we have tied up with Reliance?
Maybe sometime in this month or -- most likely in this month itself.
Okay.
3 to 4 [ days ].
[Operator Instructions] Next question is from the line of Nikhil Abhyankar from ICICI Securities.
Nikhil?
Hello. Yes.
Yes, go ahead.
Yes. So sir, we have witnessed a new -- so you just had a new tariff order in FY '24. So are there any benefits in terms of cost savings? And if there are any, then what is the quantum of it?
Restocking, which quarter you're talking about?
So the tariff order, the CRC tariff order.
Nikhil, I'm sorry, are you talking about the 5-year [indiscernible], right?
Yes. Yes. Correct.
So that actually is the order for the tariff control period, right?
Right.
And what was your question regarding that?
So are there any opportunities for increased cost savings as per the new regulations? And if there are any, what is the quantum of it, if you have any are estimate?
No, there are no such any implication [indiscernible]. Nikhil, we only have the Udupi [indiscernible], which is 1,080 megawatts, that is [indiscernible] [ 2 ] to which this applies. And there, we are still actually in the previous tariff control period. The 2 are related, the work is yet to be done. And after that, the current period application will start.
Okay. And sir, you mentioned about the capacity targets of around 24 gigawatts. So what is the time line for this target?
See, this has 2 components: greenfield for organic and inorganic growth. As far as inorganic growth is concerned, as you know, the process of NCLT order a new port coming in, maybe about some Coastal and our contract is already -- we got already the LOI, and we are expecting the court order and CT orders soon now.
So these are already within this thing. And the brownfield expansion [indiscernible], which is currently -- we just started working on it and on Phase 2, where the implementation already started about a couple of months, 3 months back. So that [indiscernible] take about 3.5 years or so. So I'm sure in the next 3.5 years or so, we'll [indiscernible] the capacity.
Okay. And the [ Mahan 2 ], what is the total CapEx for this project?
Mahan total capacity, it is already financial close and CapEx is around INR 12,200 crores.
INR 12,200 crores.
1, 2.
Yes.
One second, please. Sorry, I stand corrected. INR 13,500 crores.
INR 13,500 crores. Okay. And sir, all the ordering for this plant is done?
Yes, major packages have been ordered, including BTG with [indiscernible].
Right. Okay. And sir, you mentioned that the Godda receivables have substantially reduced after the stabilization. So if you can mention the exact actual number?
Yes. It's now selling at a range about [indiscernible] just over 3.5 or 4 months, close to about 4 months. And the current outstanding, which we have about close to around $400 million or so.
And in fact, happy to inform you that in the last 2 months, we have received substantial amount and the receivables have come down significantly. In this month alone, we have received $33 million as a [indiscernible] or monthly [ bidding ] of $90 million.
[indiscernible] of $90 million.
Excuse me? Sorry.
33, we have [indiscernible] against the [ bidding ] of 90? Of 19?
No, no. On an average, monthly bidding is about $90 million. In this month alone, we received about [ $100 million, $106 million ]. And the inflow has gained momentum now because initially, they have to set up certain processes and other procedures and taking these to the approvals.
Now that SOP's in place [indiscernible] going forward, we don't expect this amount to further pile up.
The next follow-up question is from the line of [ Puneet Gulati ] from HSBC Company.
My question is on this new [indiscernible] that you've done with [indiscernible]. How should I think about the economics of the same? Is it a fixed ROE kind of project for you? Or is there a room to make higher margins in certain circumstances? Can you talk about that, please?
Let it get [indiscernible], really get sorted by the end of [indiscernible] so in Q1, we should give you the complete details about it.
[Operator Instructions] The next question is from the line of [ Bhavya Ghandi ] from [indiscernible].
Congrats for a good set of numbers. One [indiscernible] is requiring that. What is our CapEx plan for FGD in the current year?
See, the order for our all capacities has been placed now. And the time line to complete this -- still that is being debated is June, December '26. And depending upon the requirement of the EPC contractor, the forms will be released. But also, it is very important that we have a full clarity about this.
About the cost recovery.
About cost recovery. But that is independent of that. We are all ready to complete it by December '26. CapEx requirement will be as per the progress made by the EPC contractor. And in terms of our contract team, he is -- are required to deliver the entire -- to deliver the entire order by June '26 or in the quarter of Q2 of FY '26, '27.
Okay. And sir, any ballpark CapEx for 1 megawatt? Any ballpark number for it?
See, it depends on project to project, and it has a huge range actually. So it will be misleading if I say [ INR 60 lakh ] per megawatt or INR 39 crores megawatt or [ INR 1 crore 10 lakh ] per megawatt. So it depends on the project to project. Yes.
[Operator Instructions]
Ladies and gentlemen, if there are no questions, there is one point I would like to highlight.
As there are no further questions, I would now like to hand the conference over to management for closing comments.
Yes. Thank you. Thank you for the question as an interest in the company. Before we close, I would like to highlight one point.
In the print media and a lot of -- on the net, one thing what has been reported is that our profit for the last quarter, Q4 this year as compared to the previous year, has come down to about [ 47% ], which is actually not -- which needs to be explained. Because if you look at the numbers, profit before tax for Q3, we had a profit of INR 898 crores as it is profit before tax for Q4 FY '24, which was 3,558, clocking a growth of 296%.
Now the profit for this year is on a steady state. But last year, in Q4, that is Q4 of FY '23. Because of the effect -- giving the effect of amalgamation of [ 6 ] of [indiscernible] Adani Power Limited, they are setting tracks that the certain provisions, which got reversed, and that was to the tune of INR 4,325 crores.
So in Q4 FY '23, the profit before tax of INR 898 crores went further up after reversal of certain provisions to [ INR 542 ] crores which is not a cash outflow. It was only a book adjustment book [indiscernible] which was required because of the effect of the merger.
So this point, I thought I must drive home, that number of -- the profit number of this year is very high. But because of one is a onetime adjusting the INR 4,345 crores because of the merger effect, the net profit of Q4 FY '23 looked higher.
So I thought I will take this opportunity to clarify this. And in case you have any further doubts about it, any clarification you want, we are happy to answer. Otherwise, thank you so much for your interest, and we look forward to speaking to you, interacting with you Q1 next year. Thank you so very much.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.