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NTPC Ltd
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Ladies and gentlemen, good day and welcome to the NTPC Limited Q3 FY '18 Earnings Conference Call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen-only mode. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Rahul Modi from ICICI Securities. Thank you, and over to you, Mr. Modi.
Thank you. Hello, everyone. On behalf of ICICI Securities, I welcome you all to the third quarter earnings call of NTPC. To discuss the results and share the performance outlook, today, we have the management of NTPC, which will be represented by Mr. S. Roy, Director, Human Resources and Finance; Mr. A.K. Gupta, Director, Commercial and Operations; Mr. S.K. Roy, Director, Projects; and Mr. Sudhir Arya, CFO and ED; and also the entire finance team.I would like to hand over to the management for the opening remarks, post which we could have the Q&A session. Over to you, sir.
Thank you, and a very good afternoon, everybody. Let me take this opportunity to introduce myself, I'm Saptarshi Roy, Director, HR and holding charge of Director Finance. I'm also supported here with -- on this conference call with my fellow colleague directors, Mr. A.K. Gupta, Director, Commercial; Sri. S.K. Roy, Director, Projects; Mr. P.K. Mohapatra, Director, Technical; Mr. Prakash Tiwari, Director, Operations. I also have with me Mr. Sudhir Arya, the Chief Financial Officer and Executive Director, Finance; and other key members of the NTPC team.Before I take you through the major developments, let me wish you all a very happy and prosperous New Year on behalf of team NTPC. Today, the company has announced the unaudited financial results for the third quarter of financial year '17-'18, as well as for the 9 months period ended December 31, 2017. The key performance highlights for the quarter and the 9 months have already been disclosed on both the stock exchanges.To begin with, I will briefly touch upon some of the highlights and developments since our last interaction held on November 13 last year. The major highlights for the third quarter and 9 months period in the financial year '17-'18 are as under: NTPC standalone gross generations increased by 10.695 billion units to 197.239 billion units, registering an increase of 5.73% in the 9-month financial year 2018 over the corresponding period of the previous year -- Q3 financial year '18, recorded double-digit generation growth of 10.4% over the Q3 financial year '17, represented by 6.386 billion units. NTPC has posted highest quarterly generation of 67.782 billion units during third quarter financial year '18, surpassing previous highest quarterly generation of 65.047 billion units during Q2 of financial year '18. Gross generation of NTPC group increased by 10.2% in the third quarter this financial year as against the corresponding quarter of Q3 of the previous year. Increase in the commercial capacity during the Q3 of the current financial year was 1,100 megawatts, comprising of commercial operation of 1 unit of 800 megawatts at Kudgi, 1 unit of 250 megawatts of Bongaigaon and 50 megawatts of wind capacity at Rojmal. However, 325 megawatts was decommissioned of -- at Patratu Vidyut Utpadan Nigam Limited, a subsidiary of NTPC Limited. With this, the commercial capacity of NTPC on standalone basis and the group as a whole has become 44,492 megawatts and 51,383 megawatts, respectively. With commissioning of 1,210 megawatts during the 9 months period in this current financial year, the installed capacity of NTPC Group is revised to 51,383 megawatts as on 31st December 2017. For 9 months period in current financial year, 5 coal stations of NTPC clocked PLF of more than 55% -- 85% and also were amongst the top 10 performing stations in the country in terms of PLF. Talcher Thermal, Sipat, Vindhyachal, Korba and Rihand with PLF of 92.15%, 88.84%, 88.75%, 88.61% and 88.34% were ranked third, sixth, seventh, eighth and ninth in order of the total overall ranking in the top 10. During 9 months period in current financial year, PLF of coal station was 77.5% as against the national average of 59.68%. NTPC has been consistently maintaining a spread of 16% to 18% over national PLF over last 2 decades. We have still suffered loss of generation due to grid restrictions, though it had been declined in the comparisons to the previous year. We have still -- for the coal-based generation, the loss was 6.671 billion unit in the third quarter of current financial year as against 11.014 billion units in third quarter of the financial year -- the previous financial year. And for 9 months period in the current financial year, the loss was 22.206 billion units as against 30.876 billion units in the corresponding period in the previous year.Similarly, for the gas-based distribution, the loss was 5.882 billion in third quarter in the current financial year as compared to 6.358 billion units in the third quarter of the previous year. And for 9 months period in the current financial year, the loss was 17.865 billion units as against 19 billion units in the corresponding period previous year. The generation loss on account of fuel supply constraints in the coal-based stations was 5.179 -- 5.169 billion units in third quarter of the current financial year as compared to 0.252 billion units in the third quarter of the previous year.NTPC Limited and Rajasthan Rajya Vidyut Utpadan Nigam Limited have submitted a joint application to the Ministry of Coal to allocate coal from RUVNL (sic) [ RVUNL ], that is Rajasthan Vidyut Utpadan Nigam Limited captive mine for Chhabra Thermal Power Plant. The consent is still awaited.RFP for possible acquisition of operation domestic coal-based power assets was floated on November 25, 2017, and the last date for receipt of the proposals have been extended up to February 2, 2018. NTPC has commissioned cumulative capacity of 920 megawatts of renewable capacity in its energy basket.During 9 months period in the current financial year, generation from renewables was 914 million units as compared to 341 million units generated in the corresponding period previous year. From Pakri Barwadih coal mine, approximately 15 lakh metric tonne of coal has been activated and 365 bricks of coal have been dispatched till December 31, 2017. As a basket mine, coal will be supplied to different power stations of NTPC from this mine. Environmental management initiatives for preserving environment have been -- steps have been taken for compliance of the new norms and control of SOx, first FGD has been commissioned at Vindhyachal. Erection of FGD at Bongaigaon is in advanced stages. Procurement of FGD system package for other stations are under process, which includes capacity under implementation of 13.85 gigawatts and NIT for 24.65 gigawatts.NOx control in coal-fired power plants is presently achieved by controlling its production through adopting best combustion practices. Over and above this, since tall stacks are provided in coal stations, gases emitted through stacks is widely dispersed and diluted. In gas basedstations, NOx control systems, that is hybrid burner or wet DeNOx, have been provided for good combustion practices. For compliance of new norms, pilot studies based on SCR and SCNR (sic) [ SNCR ] technology are being undertaken at 9 locations.Some of the major financial highlights are that the gross sales for third quarter of the current financial year is INR 20,698.09 crores as against the corresponding quarter gross sales of INR 19,287.47 crores, thereby an increase of 7.31%. For the 9 months period in the current financial year, the gross sales for 9 months period in the current financial year are INR 59,930.07 crores as against the corresponding 9 months period of gross sales of INR 57,468.75 crores, thereby registering an increase of 4.28%.The total income for the third quarter in the current financial year is INR 21,087.84 crores as against the corresponding quarter total income of rupees INR 19,646.09 crores, thereby registering an increase of 7.34%. There is an increase of 5.36% in the total income, that is from INR 58,455.45 crores to INR 61,590.12 crores in the 9 months period in the current financial year. The total profit after tax for 9 months period in the current financial year is INR 7,417.58 crores as against the corresponding period of PAT of INR 7,305.86 crores, thereby registering an increase of 1.53%.For third quarter of the current financial year, the profit after tax is INR 2,360.81 crores as against INR 2,469.26 crores during the corresponding period of the previous year. The profit before tax for third quarter in the current financial year and 9 months period in the current financial year is INR 2,584.78 crores and INR 9,272.93 crores, respectively, as compared to INR 3,082.54 crores and INR 9,379.95 crores, respectively, for the corresponding period in the previous year.An update on the various other financial activities are as under: The regulated equity as on December 31, 2017, was INR 50,562.54 crores. As far as fund mobilization is concerned, average cost of borrowing on 9 months in the current financial year was 7.063% as compared to 7.461% during this 9 months period in the previous year, mainly due to reduction in the interest rates.As far as CapEx is concerned, this 9 months in this current year, we have incurred a CapEx of INR 14,537.18 crores against INR 17,520.68 crores in the 9 months period in the previous year. The CapEx by the other group companies have been INR 2,838.68 crores. Thus, the total group CapEx for 9 months period in the current financial year was INR 17,375.86 crores. The capital outlay for current financial year for the total group has been estimated at INR 28,000 crores.Now let me discuss the operational performance for the period in this third quarter and the 9 months period in the current financial year. In terms of the fuel, as far as coal is concerned, during the 9 months period in the current financial year, materialization of the coal against the ACQ was 97.96% as against 93.2% in the 9 months period in the previous year. The coal consumption during 9 months period in the current year was 126.09 million metric tonne. This comprises 125.82 million metric tonne of the domestic coal and 0.27 million metric tonne of the imported coal. The coal consumption of corresponding period of the previous year was 121.7 million metric tonne with 120.25 million metric tonne of domestic coal and 1.45 million metric tonne of the imported coal.As far as gas is concerned, the gas consumption during 9 months period in the current financial year was 5.7 MMSCMD, that is million metric standard cubic meter per day, at -- as against 5.18 million metric standard cubic meter per day in the 9 months period in the previous financial year.The gas consumption of 9 months in the current financial year procured under APM plus PMT mechanism was 3.97 MMSCMD under non-APM gas 0.69 MMSCMD and under spot RLNG was 1.04 MMSCMD. In respect of the coal mining, the cumulative expenditure of INR 4,489.02 crores has been incurred on the development of the coal mine till 31st of December 2017 and expenditure made during the 9 months period in the current financial year is INR 619.58 crores. As far as our commercial position is concerned, the TPS have been signed with 27 states or Union Territories as on date and 100% utilization of the dues are ensured till 31st of December 2017.Now I will briefly touch upon some of the NTPC group's companies. NVVN, our trading subsidiary, transacted about 12.216 billion units during the 9 months period in the current financial year against 11.285 billion units during 9 months period in the previous financial year, thereby registering an increase of 8.25%. Units transacted during the 9 months period in the current financial year include 4.372 billion units of solar-bundled power, 2.636 billion units traded through bilateral events, 2.737 billion units under cross-border trading and 2.471 billion units traded through power exchanges, including RECs.NVVN has also -- has done first-time trading in energy saving certificates on IEX platform and traded 5,47,397 ESCerts till December 2017, which is the highest volume by any entity in the country and is 57% of the total ESCerts traded on IEX.During the 9 months period in the current financial year, we have received dividend of INR 45.12 crores as compared to the previous year, which was INR 39.49 crores from our subsidiaries and joint venture companies, thus comprising INR 30 crores received from NTPC Vidyut Vyapar Nigam Limited, INR 2.5 crores received from Utility Power Limited, INR 3.6 crores received from PTC India Limited, INR 8.8 crores received from Energy Efficiency Services Limited and INR 0.22 crores received from NTPC GE Power Services Limited.NTPC continues to win laurels and awards in various fields. Major award received in the third quarter of the current financial year are: NTPC has been presented with Dun & Bradstreet Infra Award in the power generation category, NTPC has been bagged -- has bagged 4 awards at the annual SCOPE Corporate Communication Excellence Award in the year 2017, NTPC Employees Provident Fund Trust has been ranked #1 by the Employees Provident Fund Organisation for the month of July 2017 out of total 1,552 exempted trust establishment, which is functioning under EPFO.These were some of the highlights which I wanted to share before the further question-and-answer session.Now with this, thank you very much, and I now leave this session open for question and answers.
[Operator Instructions] We have the first question from the line of Abhishek Puri from Deutsche Bank.
Two things. First, can you help us explain what will be the adjusted profit for the quarter because I see a lot of one-time expenses in this notes to account? So if you can tell us whether Barh sales provision that has been made, 416 quarter, that was made in last quarter as well. So that is one. Second, the previous year taxes of INR 563 crores and the tax recoverable of INR 106 crores, is there any related income to that as well?
Yes. For this quarter, our reported profit is INR 2,360.81 crores as against INR 2,469.26 crores during the previous corresponding quarter. So last year when we had adjusted, we had reported an adjusted profit of INR 2,067.48 crores. The adjustments which were carried out were previous year sales of minus INR 374.05 crores and then IT adjustment of minus INR 107.56 crores and tax impact on adjustments of INR 79.83 crores. So current quarter, the adjustments which we have carried out are one is the adjustment of sales due to IT, that is INR 105.61 crores. Then previous year sales is minus INR 11.83 crores. Then we have an abnormal item, this pay revision and leave encashment. You'll see that pay revision is due from 1st January 2017. So this year, employee wage bill is with the revised -- expected revised pay scale; whereas in the previous Q3, it was at the old pay scale. And then there is an abnormal surge in leave encashment by employees because of some clarification issued by DPE, which was later withdrawn by them, but during that one week or ten days period, there was sudden rush to encash leaves by employees, which resulted in leave encashment of roundabout more than INR 900 crores and our liabilities which were existing against that, those were not enough. So that has impacted both these things. The leave encashment as well as wage revision have impacted by INR 446.89 crores, if you do apple-to-apple comparison. And the next adjustment is IT adjustment of minus INR 563.03 crores in the -- that was carried out in the first quarter itself, but -- no, it was in the third quarter. And the tax impact of the -- on the above adjustment is minus INR 115.39 crores. So our adjusted PAT is INR 2,223.06 crores as against INR 2,067.48 crores, showing a growth of 8%.
Why has there been a decline from the last quarter because last quarter, if you adjust for the Barh INR 416 crores, your profit is much higher, INR 2,438 crores was reported and INR 416 crores was the Barh provision that you made. Is the Barh provision also made in the current quarter because as per notes to account, it seems you've made it in the current quarter as well?
No, it's just continuing.No, it is a continuing one.
Okay. It's a continuing one.
But the sale had been reduced in the current quarter, corresponding sale.The major impact is because of this leave encashment and wage revision and second is that our new units in Kudgi, Sholapur and Mouda. They have not been able to declare the DC of 85% because of certain problems and that is why a huge disincentive is there in these 3 units.
Right. So, second question is on the wage provisioning that you've mentioned, INR 446 crores. There is no regulated income related to that. So this is only related to the leave encashment, so there -- obviously, that cannot be recovered through the tariffs going forward, right?
That is is right.
And on the JCV norms case, where are we on that and the fixed price pulling proposal also, we had given that from 1st April 2018 that could start. So any update on that site?
I will request my Director, Commercial, to respond to this question.
As far as JCV case is concerned, I think I briefed you last time that there was a recommendation by Central Electricity Authority about giving some for pithead station around 85 kilocalories to 100 kilocalories and for non-pithead station, 105 kilocalorie to 120 kilocalorie gap between as received and as fired. Now the case has been then put into CRC and CRC had a hearing on 7th of December 2017, and now the next date for the hearing has yet to be fixed by CRC. I think now the new chairman of CRC has joined, so now it will be heard again.
And on the price pulling site?
On a price pulling site, whatever we had -- what scheme we had prepared, that has been discussed with all the states and all the states have generally concurred with it, with some kind of suggestions, which we have incorporated. And now we have given this scheme to Ministry of Power, who would -- with a request to refer it to CRC and give a suitable direction to CRC to really allow this successfully [ . So I think we are pursuing Ministry of Power, and I think appropriately, we will take it up with CRC after MoP forwards it.
We have the next question from the line of Venkatesh B. from Citi.
I was -- just wanted a little more clarification on what Abhishek asked you in the first question. See, last time in the second quarter result, your reported number was close to INR 2,400 crores and there was a Barh sales reversal of INR 416 crores. So if I add it back, your second quarter profit on a recurring basis was almost close to INR 2,800 crores. From INR 2,800 crores in the second quarter, the recurring profit now has gone close to INR 2,023 crores, which is like a decrease of almost INR 600 crores or INR 700 crores on a quarter-on-quarter basis. So --.
No, from where did you arise this INR 2,023 crores. We have told INR 2,223, that is the adjusted profit.
Sorry, sir. INR 2,223. So in that case, that's like a decrease of almost INR 600 crores. So I believe a portion of that has come because of the leave encashment effect.
Yes, leave encashment and wage revision.
Wage revision was there, provision was there in last quarter also, sir, second quarter.
Okay, okay. Right.
So I believe the leave encashment might have caused an additional net [ of INR 290 crores or INR 300 crores. Am I correct sir?
Yes, correct.
And another INR 300 crores would be the disincentives you add in those 3 power plants, which you said, where you couldn't show availability. Mouda -- what were the power plants you mentioned, sir? Can you repeat it, sir, please?
Mouda, Kudgi and Solapur.
Mouda, Kudgi. So could that have caused an effect of almost INR 300 crores on the numbers?
Much more than that.
Okay, much more than that. Okay. And can you explain why you couldn't show availability? What was the problem is showing availability?
In Mouda?
Mouda, Kudgi and in Solapur.
Yes, I will request our Director, Operations, to explain the reasons for not able to declare ourselves as per the --.
This -- that recovery on fixed cost charges was primarily because of less availability of coal. Though we have tried to mitigate it by swapping coal from our stations, which have enough coal stock with us, primarily because of a coal shortage.
I think I'll clarify it a little bit more. You see what happened in this third quarter, there was -- a lot of power demand has gone up. And if you see from the results, there was an increase in generation by 10% percent in this quarter, primarily because of this wind and -- wind generation has gone down, because there was a lot of pressure put on the coal -- coal-fired stations. So that has actually -- because of this higher generation, the matching coal could not be arranged because there was a little bit shortage of coal and also there were some issues related with some of the mines. So that is one of the reason when overall there was a shortage of coal, and this is felt not only by NTPC, but also all generating companies in the country.
Okay. Sir, I understood that. Now, sir, the next question is again related to this question only which you said. First of all, if you could explain what exactly has happened in India over second quarter and third quarter that suddenly there is this pickup in demand, because you've had -- you've spent 2 years to 3 years where there was hardly any power demand, now suddenly your generation growth is growing at 7% last quarter; this quarter, it's grown 10%. What has happened exactly in the last 6 months which has caused this demand to come through, and is this demand sustainable? And on a related note, at the end of third quarter, is your coal availability problem being solved or it is going to persist in the fourth quarter of this year also, where you might have shortage of coal to show full availability in all your power plants?
Actually, you are right. It's a positive sign for the power sector, that the demand is growing. In fact, if you look at -- if you have been monitoring the demand scenario for the last 3 months or 6 months, there -- if you see the -- compare with the last year corresponding period, there is an increase in demand to the level of 6,000 megawatts to 9,000 megawatts, and that's what is actually reflecting back to this coal generation. So there is a -- it is -- and we firmly believe that this is going to be a trend.
Sir, can you explain why this is happening? Why, what has happened in the last 2 quarters? Why this demand has gone up?
I will not be able to answer that because we need to really get into more detail, but this is something which I'm sharing with the factual numbers.
Okay. And last bit of question is, over the last one year or so, there has been a gap which had developed between your commissioned capacity and your commercialize capacity. Now, we have closed that gap. At the end of the third quarter, your commissioned capacity is equal to your commercialized capacity. Now, are you still confident that going ahead also, next year also, you can commission 4 gigawatts or 5 gigawatts or there could potentially be issues because there is no longer that buffer available which was available over the last one year.
We're fairly confident that whatever that we have been talking about, we'll be able to add that amount of capacity. We are clearly confident of that.
Okay. And, sir, you didn't answer that part of -- at the end of the quarter, have you had this problem of availability of coal in these 3 power plants. Has that problem being solved or that is still a recurring problem to -- at the beginning of January?
I think -- you know there is a group created -- a study group created between the Ministry of Railways, Ministry of Coal and Ministry of Power. This group sits -- we call it a sub-group. This group meets every week, and every week, they are trying to see how to really increase the placement of rigs by railways because it's not only the coal availability issue, it is also the issue of the transporting coal to the stations. So this group is actually working very hard, and we are trying to really see that how best we can push coal to Mouda and Solapur. But let me tell you that we are -- all of us are working on it, but it is not that we are going to see in very, very close future the problem is fully solved.
Okay. Sir -- and is it possible to quantify the number? You said it is more -- much more than INR 300 crores. How much is the impact of disincentives in this quarter?
INR 546 crores in this quarter.
[Operator Instrcutions] We have the next question from the line of Subhadip Mitra from JM Financial.
Thank you, my questions have been answered.
We have the next question from the line of Mohit Kumar from IDFC Securities.
Sir, couple of questions. First, has the -- the Unchahar power plant is shut down. Is it also impacting the profit for the third quarter?
Yes, it is impacting because it is no longer generating, so we are not able to recover the fixed charges for that.
But you are charging interest and depreciation for the power plant?
Yes. It has to be charged.
And so second question pertaining to status on buyout of power plant [indiscernible] UI. So is there any update which you can share with us?
Yes. Actually, we are planning to open the BITS on 2nd of February. And I think we would be able to give you details only after that.
Okay. And so my last question, sir. This -- what is the impact of net leave encashment in this particular quarter? Can you just quantify that amount, is it INR 300 crore or more than that?
Wait a minute.This leave encashment impact for the quarter is INR 242 crores and for the 9-month period, it is INR 232 crores.
We have the next question from the line of Bhavin Vithlani from Axis Capital.
Two questions. One, if you can help us what is the regulated equity as at end December and which are the plants that we should be expecting commercial for the coming quarter, fourth quarter fiscal '18 and the target for fiscal '18-'19?
Regulated equity as on 31st of December 2017 was INR 50,562.54 crores.In the last quarter, we are going to commission the couple of units at Kudgi Unit 3, Lara Unit 1and Meja -- that's a commission, that is a capacity addition.[multiple speakers]Megawatt is at --.
Unit-wise detail would be more appreciated, sir.
Kudgi Unit 3, 800 megawatts; Lara Unit 1, 800 megawatts; and Meja Unit 1, 650 megawatts. So these 3 units will commission, that means capacity addition.
Yes. So these will be commercially added, right?
No, no, no. We are going for capacity addition. So last quarter, we'll not do any commercial operation of those units [ .They will be synchronized.They will be [indiscernible].
okay, sir. And so far -- similarly for fiscal year '18-'19, if you can help us which will be -- which units will be added and also, which will be commercially added next year?
In '18-'19, we will add -- first of all, I will talk about commercial -- capacity addition. Capacity addition will be there in Bongaigaon Unit 3, that is at 250 megawatt. In Nabinagar joint venture, Unit 3, that is at 250 megawatt. Then capacity addition will be Lara Unit 2, that is an 800 megawatt. Then Solapur Unit 2, that is a 660 megawatt. Then Meja Unit 2, 660 megawatt. Then Gadarwara Unit 1, that is a 800 megawatt. So these are the units -- Talaipalli also Unit 1, 800 megawatts. So total 4,740 capacity addition we are targeting in the next financial year.
Sure, sir. Out of these, how much would be commercially added next year, sir?
That -- around 4,000, we'll do commercial operation in the next fiscal year.
Okay, sir. Is it possible to share unit-wise details? So which units we should be expecting commercial operation next year?
At unit wise --.
Sir, I assume the fourth quarter ones, Kudgi 3, Lara 1 and Meja would be commercially added next year.
Yes. Kudgi Unit 3 then, Lara Unit 1, 800, 800, 1,600; Meja Unit 1, 660, that is a 2,260. Then Kudgi -- not Kudgi was over -- 2,260; then Bongaigaon Unit 3, that is 250, that gives 2,510; and Nabinagar Unit 3, 250, that means 2,760; at Gadarwara Unit 1, that means 3,560; and another is at 660, that is in Solapur also, Solapur Unit 2, that is around 4,000. We are targeting for commission -- COD.
We have the next question from the line of Deepak Agarwala from Elara Capital.
Sir, I just wanted one clarification. You mentioned the impact of these 3 plants not achieving the DC. Was it about INR 300 crores or INR 546 crores? What was it --?
INR 846 crores roots.In this quarter.For the quarter, INR 546 crores. And for 9 months, the figure is different.[Multiple Speakers] Only for these 3 plants. We will give you these figures in a moment.
Okay. And what is the incentive that is earned from the plants who have been operating at so high level of PLF during the quarter?
Incentive for 9 months is INR 246 crores.
And for the quarter?
For the quarter, around INR 45 crores.
Okay. Second question is, how do you see this in terms of capacity additions now? What are we planning for in terms of renewables because there is a fair bit of tenders which are already there in the market invited by you. So in this 4,000 megawatt, are we planning to add another 1,000-odd megawatt in solar-wind in next year? Should we assume any such thing now?
Already for wind, 250 megawatt, that is in the tendering process. The solar thing is held up because of this PPA problem. So we are waiting for some good thing in this regard. And already from Karnataka and other states, we are trying to get a PPA first, then we will go for the solar.
Okay. So as of now, we shouldn't assume anything for FY '19. Is that the case?
I think FY '19 is a bit far now. You see, as explained by Director, Technical, actually, the issues is that everybody is watching in terms of falling tariff of solar, number one. Number two, there is also proposals to put some duties onto the solar imports -- solar equipment imports, and that has also been -- actually, there is a lot of confusion in the market on that sense. So the people are not able to really today able to take a call on PPS. I think this will -- I think tomorrow, once the budget is issued, there will be lot of clarity comes in. And after that, I think we'll be in a better position to tell you that what will be the capacity addition in terms of solar, because it all depends on the wires being ready to take this power and sign PPS.
And just last question, if I can squeeze in, what is the CapEx? Like the first half, we have done almost only 50% of the CapEx of the target of INR 28,000 crores at the parent level. So are we confident of achieving the entire INR 14 crores in the 4Q?
As per the 40% happens, that's a usual thing.No, but it is not 50%. We have already achieved INR 17,000 crores.Out of INR 28,000 crores, we have already achieved INR 17,000 crores. [Multiple Speakers]
INR 28,000 is the group target or the parent company target?
it's a group target.
Group target, okay. Then I stand corrected. And what is the target for FY '19?
INR 22,000 crores per entity.
Sorry, how much?
INR 22,00 crores.
For FY '19.
Yes.
This is a very sharp reduction. Any specific reason, because I assume you don't include renewals in this CapEx and already, we are talking about 4,000 megawatts commissioning next year? Why there is a sharp fall in the CapEx next year?
See, that capacity addition -- any new units, we are not adding. What about the total CapEx? It's from the capacity addition and units are in pipeline and any new units if we add, then CapEx also will increase.
Okay. Because generally you assume -- you assume generally a run rate of -- that is equal to the depreciation in your CapEx in terms of the replacement of -- through new capacities. So that should reflect in year-to-year CapEx every year actually. So --.
No, there are not very many new independents which are coming in, no. All are under construction.All are under construction and almost nearing to the completion in the commissioning stage.See, some of the plants which we are putting for the next year, the one is the Patratu, there, it's a 4,000-megawatt plant. But as far as CapEx is concerned, that's -- only basically we consider the equity investment. So, I mean, because this plant is probably part of the JV project, so the same thing -- had it been NTPC project, that would have been added directly to the CapEx. But you see, we are as -- in fact, our Director, Finance, initially said in his remarks that we are looking for some of the acquisitions which we -- if that comes through, then maybe it would be -- it will add to our CapEx.
We have the next question from the line of Dhruv Muchhal from Motilal Oswal Securities.
So I just wanted to understand the accounting for the tax reversal which we had of INR 563 crores. So this reduces from tax -- the expense reduces from tax, there will also be reversal of revenue. So the point is on net PAT basis, there should be no impact. Is that understanding right?
There is a slight difference in understanding. See, this reduction in tax is primarily on account of some assessment orders we have received in the current year, okay? Liability earlier provided was higher, now this has been reduced. That is the reason this net [multiple speakers]
So this will go as a passthrough to the ND tariff or the bills you charge for the consumers, right or no?
No, it will not be. It will be retained by us only.
It will be retained by us. Okay. So this benefits us. So the point is if I -- there was a DC impact of about INR 563 crores, there was a leave encashment effect of about INR 200 crores. So if I add up everything, PAT growth will be significantly higher than probably 20% assuming a normalized run rate?
Adjusted PAT growth is 12%, what we have calculated.
Adjusting for the DC and the leave encashment impact?
No, we have not adjusted --. DC, we have note adjusted because that's a business as usual. [Multiple Speakers].
If you adjust for the DC, that itself will be around --?
That is maybe 20%, you may be right. We have not calculated that.
More than 20%. So what's driving this part? I mean what's driving this, there is something which is adding to because your regulated equity is 20%, of course, but the growth is higher than that. So what's driving our income there on a Y-o-Y basis? Are there some incentives which you are getting in terms of efficiency savings or the PLF -- besides the PLF incentives, are we getting something else? Sir, the point is, your regulated equity is growing by 20% Y-o-Y, but your earnings are significantly higher than that if you adjust for all the abnormal items?
Just come again, that's Murtuza, right?
Dhruv, madam.
So what are you saying that our income is --.
Income is growing is higher than our regulated equity. Of course, it will not align exactly, but still for the last 2 quarters, you are seeing this. So what's driving this?
No, but there has been some increase in the contribution.
So there is an increase in contribution, there is income from RRAs also, but that we don't consider as abnormal because we do consider that as adjusted profit because it will continue in future also.
So what's the income from RRA?
We normally don't disclose it.
Okay. And sir, second thing was this DC impact, will this continue in the fourth quarter, because you said there is still some coal supply issue which is continuing?
That we cannot predict as of now.I think we are expecting this to be -- this -- much, much lesser.
But there will still be some impact if I have to work with a number?
Also, but it will not be at the same level, it will be much reduced.
And sir, lastly, on the acquisition side, we have received a lot of tenders, so what's our strategy, I mean, in terms of -- are we looking okay with merchant power plants and if that is the case, how do we plan to -- do we want to sign? I mean, how do you work around with those kind of things? Are we okay with merchant plants or what is the strategy here?
No, actually, as of now, we are not talking in terms of merchant plants. First of all, if you see that -- if you look at our RFP, we are talking about where the cost ceilings or the tariff ceilings has been put INR 1.18 for fixed charge and INR 2 for variable charge. I mean, we are going to buy projects only below this. So we expect that at this rate, we would still be able to have states signing PPS with us. And we are going to take over only when we are able to get assurance on sale of power.
So effectively, you're saying you will not be buying any merchant power plant?
No, no. The plants -- you see, the plants which -- see, when we are acquiring the plants, those plant might have been merchant, the plant might have been designed merchant, but once the -- you see, but we are going to take over the assets fundamentally. We are not taking over companies, we are taking over assets. And these assets have to offer to us, so as to really make the fixed charge lower than INR 1.18. And after that, once we have these projects with us and when we do the total due diligence of these projects, we would only take them over when we are able to find buyers for that.
We have the next question from the line of Anirudh Gangahar from Nomura.
Sir, there are a few questions. Firstly, if I look at your reported profit after tax, it's simply INR 603 crores. Simply adding back the prior period tax write back or what we've received, the INR 563 crores, our normalized profit for the quarter is just about INR 1,700 crores, given the hit on account of the under-recovery and the leave encashment. Is that calculation broadly correct, sir?
If you send that calculation over to us, they only we will be able to comment.
Okay, sir, I will do that. Secondly, sir, how many plants do we have -- are as of 9 months over there where RPF was below the 85% threshold?
We can give that --.Seven of them -- 7 or 8 of them, but 3 of them will make it, the rest may not, like BTPS, then there is Mouda, then Unchahar, then also Simhadri, but Simhadri will make it up, Bongaigaon, these are the main ones, Solapur.
So out of this, ma'am, the one -- the plants which are definitely not going to make it out are the 3 new plants plus Unchahar. And the next question is when is Unchahar Unit 5 -- is there any timeline for the restart of the unit, anything that we know in terms of the committee findings?
That revival is under process. And once final assessment will be done by BHEL and NTPC jointly, then only we'll be able to tell you the revival date.
Okay. Sir, the other clarification was that you mentioned that your CapEx target for next year is INR 22,000 crore. That is for standalone NTPC, not for the group ventures?
That is for group.
No, that's for standalone. [mulitple speakers]
So that is going down from INR 28,000 crores to INR 22,000 crores. How much, sir, is the CapEx target for NTPC standalone? I believe it was INR 23,000 crores for this year?
Yes, it was INR 23,000 crores standalone and INR 28,000 crores for the group.
So how much would be the standalone CapEx, sir, for the NTPC next year target?
That -- I don't have it readily with me now. We'll communicate to you.Approximately INR 18,000 crores.
We now have a question from the line of Rahul Modi from ICICI Securities.
Sir, there have been many numbers which are being discussed. Can you just give us again -- sorry to be repetitive. On the INR 22 crores, INR 23 crores, 2-2, 2-3, that you said adjusted PAT. Sir, what are the exact adjustments that we are taking and what are the hedges, please?
The reported profit for Q3 is INR 2,360.81 crores, and I'll read out the adjustments. One is adjustment of sales due to IT, first one, that is INR 105.61 crore and previous year sales minus INR 11.83 crores; pay revision and leave encashment INR 446.89 crores; and income tax provision, we have adjusted minus INR 563.03 crores. Then you total all these 3 -- all these things and then tax impact on these adjustments is minus INR 115.39 crores. So that will give you a figure of INR 2,223.06 crores.
And, sir, out of this INR 446 crores, is the INR 242 crores that you mentioned is pertaining to the leave encashment and balance is pay revision?
Balance is pay revision, yes.
Right, perfect. And, sir, just to follow-up on -- sir, which are the non-pithead plants do you think are facing coal issues and what's the situation like there?
We have already told about those 3.
The other barring these 3, are you seeing stress on the coal supplies possibly?
I think these are 3 projects where we are having problems in terms of Solapur, Mouda and Kudgi. Other projects, I think we are not going to have DC loss on account of -- non-pithead plants on account of coal.So that's about it. So one last question or we should call it or what?
Ma'am, it's up to you, we can take one more if you would like? We have -- the next question is from Rahul Murkya from Jefferies.
Just one question. This -- these 3 plants where we have DC impact is basically majorly is because of the rigs availability?
I think both, rate availability as well as coal availability.
Okay. And, sir, would this income would be recoverable or -- once the situation is rectified or it would not be recoverable going forward?
No. This PLF, the availability of 85% is basically seen on annual basis. So these numbers which we are sharing with you is for 9-month period. But ultimately, this total --normalization will be done for the full year, and we expect that some of the recoveries in the last quarter.
So there is a possibility that some amount could be recovered going forward?
Sure.So I think with this, we come to -- end to the --.
Yes. If you'd like to make any closing comments, please go ahead.
Yes. I would only say that thank you very much for -- to everyone for evincing and showing interest in the financial performance of NTPC, and we look forward to your continued support in the years to come. Thank you very much.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.