Suzlon Energy Ltd
NSE:SUZLON
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Suzlon Energy Ltd
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Ladies and gentlemen, good day, and welcome to the Suzlon Energy Limited Q1 FY '19 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on date of this call. These statements are not guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded.I would now like to hand the conference over to Mr. Tulsi Tanti. Thank you. And over to you, sir.
So very good morning to all, and thank you for joining us on our quarter 1 FY '19 earnings announcement. Present with me during this call are J.P. Chalasani, our Group CEO; Kriti Vagadia, our Group CFO; and our Investor Relation team. I hope you had an opportunity to review our result and investor presentations. I will share with you our overview of the industries, and my team will walk through our quarter 1 FY '19 performance. We will then take your questions.The bidding regulations continue to evolve, addressing all initial [ bidding ] issue it faced. This will enable to streamline the future auctions and -- as well as its executions. As you know, India has -- and central government has already completed the successful building of 7,500-megawatt. However, this is also resulting into elongation of the transitions period impacting FY '19 volume, which might shift to FY '20. I wish to [ repeat ] that the government cost on our renewable energy and wind specifically remain intact. The government has very ambitious plan. And currently, our whole energy, future energy portfolio is dependent on the renewables only. And this is also reflected in the revised renewable energy target, 227-gigawatt by 2022 from the earlier 175-gigawatt. It shows very clearly the government is more interested to continue more and more renewable because this gestation period is very low and extremely cost competitive energy, bringing energy securities and mitigating the climate risks. So all aspect is the government is really seriously looking for that. But unfortunately on our execution side and the new systems, which is established by the central government, it's taking some more time to stabilize and synchronize with all the stakeholders. But the good news is that by last month, most of the connectivity issues and every things, I think it's -- the government has resolved and now the streamlining is happening, but still it is on the ground some challenges, it still remains between state and central. So going forward, it will be also stabilized. Further government has also announced the target of 30-gigawatt on offshore. Good interest and traction has started based on first 1-gigawatt announcement almost 30, the investor has participants to -- in that investment opportunity. And the long-term plan for the offshore is 30-gigawatt will build a good visibility to establish some of the infrastructure and manufacturing capacity in the country.We are also seeing a positive policy action in other emerging area, like wind, the solar hybrid and the repowering. And wind solar hybrid almost more than 4,500 bids are in the pipeline, so there is a -- clear action has started. And that is the more future for the country to stabilize the grid systems, wind and solar will come more and more projects.Wind-solar hybrid is gaining traction. Here, with around the 5-gigawatt of bids are already in the pipeline. Until now the 7,500-megawatt bids are already included. And additionally, almost, by current financial year is 14,000 megawatts are -- bids are in the pipeline only for the wind, and some of the bids are wind, solar, the hybrid. So by this financial year, the total backlog of the order pipeline of the country will be not less than 20-gigawatt. And so we strongly believe, because of that, next 24 years after FY '19, the 22-gigawatt will be the clear execution pipeline. Top of that, there is other market is there, but this central building systems will bring the 20-gigawatt business for the next 2 years.Suzlon is one of the few players having demonstrated turnkey capabilities of the both, wind and solar, giving us the competitive edge. And as you know, we are end-to-end solution provider last 22 years. So we have a very good competitive edge to capture this growth and opportunity on execution side.Under the new bidding regime, the long-term output for India, wind sector is extremely positive with exceptional volume growth expected in the next 2 to 3 years.Apart from the auctions, the country has a very active market for the captive and PSU segment that continue to grow every year. Top of that repowering market for the next 2 to 3 years is not less than 5,000-megawatt. Suzlon has a very strong presence in this segment and are the best positioned to capitalize on this opportunity as well. Thus, there are a lot of growth opportunity available in Indian market and, Suzlon being the market leader, will be obviously beneficiary.On the technology side, we will continue our R&D effort to focus on developing product with higher energy yield. As you know, we have already achieved the 40%-plus PLF product -- performance on the ground and are continuously reducing levelized cost of energy and to maintaining our cost competitiveness, so that we remain competitive in the bidding process and to maintain our margin and our -- the profitability.So I now invite my team to take through our quarter 1 FY '19 performance. J.P.C.?
Thank you, Tulsi Bhai. Yes. Thank you, Tulsi Bhai. Good morning to each one of you. In quarter 1 of this fiscal year, which typically is a low-volume quarter, we delivered 155-megawatt in volumes and commissioned 99 megawatts. Last year, bulk of the auctions and order book buildup happened in the second half. The first half of this year was anyway expected to be subdued.Our FY '19 revenue guidance comprised of auction-based -- predominantly auction-based orders, 2 states, PPA-based orders and captive and PSU segment orders. A delay in connectivity approvals for the auction projects, mainly the central auction projects, have elongated the execution schedule. Thus, some other volumes that were budgeted to be delivered in this financial year will get delivered in the next fiscal year. Volumes from state PPA-based orders -- PPA-based orders will depend upon timely regulatory approval. If the approvals are received on time, large part of these orders will be executed in the current year itself and we will still be able to achieve our guidance. Else, out of this, volumes will also be shifted to next year. Volumes on captive and PSU segment, which is our -- one of our key areas continues to remain on track. In light of above uncertainties, we have decided to withdraw our operational guidance, while we maintained our -- the guidance with regard to the debt reduction.On the bright side, the connectivity issues relating to the auction project is now resolved, which was one of the major bottlenecks delaying the project. CERC has released a detailed process for granting connectivity and streamlining the process. We're happy to announce that all the 4 auctions are now being cleared for connectivity. This will pave the way for a smooth execution for our auctions ahead. Very clear visibility in the bidding volumes, as mentioned by Tulsi Bhai, in the industry and the industry is poised for a strong growth position.Around 21 gigawatts of auctions are expected to be completed by FY '19 and as announced by the government from time to time. Of this, 7.5-gigawatt is already concluded in the last year, while more than 10-gigawatt is announced with deadline. Assuming full 18 months for execution, these capacities have to be commissioned before FY '21. Apart from this, there will be state bids, captive and PSU segment. While due to longer execution schedules, FY '19 will see lower volume, but we expect there will be a clear ramp-up in FY '20 and FY '21. We're happy to note that we continue to maintain our leadership in auction regime in rendering maximum orders win share. Of the 7.5-gigawatt auction until date, we bagged orders of 1.4-gigawatt. However, still around 20% of the 7.5-megawatt -- 7.5-gigawatt capacity is open in the market, for which we are also under discussions with the clients.While we are having -- the largest volumes are in the bidding, our focus is more on the quality of the order book rather than market share numbers, as we mentioned earlier as well. Our 1.4-gigawatt order won by us, all of them top quality customers, including large domestic and international utilities.Substantially, all of the orders are a result of strong PB tie-ups and on a full turnkey basis, which is our key strength. We are not only ahead in taking orders but also ahead in execution. We are happy to note that we have made significant progress under SECI 1 and have started executing SECI 2 projects.Our operation and maintenance business continues to grow in the size with around 15-gigawatt of renewable capacity under maintenance, including 12-gigawatt from India alone. We are now -- not we are now, we have been the second largest O&M company and continue to be so in the Indian power sector next only to NTPC. We have a strong order backlog of 1,135-megawatt plus a framework order of 700-megawatt plus.Debt reduction, cost optimization and working capital optimization will remain our top priority like in FY '18, FY '19 as well. I would now like to invite Kriti to take you through the detailed aspects of our financial performance before we get on to the Q&A. Kriti?
Yes. Thank you, J. P. C., and good morning to all of you. During quarter 1 of FY '19, we delivered about 155-megawatt of wind capacity, contributing to overall revenue of INR 1,272 crores. Q1 FY '19 is neither comparable with Q1 FY '18, which was an exceptional due to execution of last leg of FIT orders, so it was a high-volume quarter, nor with Q4 of FY '18, which is generally high-volume quarter. So once you compare Q-on-Q or Y-o-Y, both way, Q1 FY '19 might not be equally comparable because in both the places, there are different things.Our EBITDA margin pre-ForEx is at 6.1% was impacted primarily due to low operating leverage. You may notice that we continue to keep tighter control over our fixed cost.Operation and maintenance revenues continue to remain stable at INR 457 crores in this quarter. Our financial performance was impacted by INR 254 crores ForEx loss, which is purely translational in nature and noncash. This is primarily due to impact of steep depreciation of Indian rupee against the dollar. As you know that our FCCB and the SBLC-backed loan, both are denominated in dollar. While our net working capital is further reduced by -- further reduced to INR 2,401 crores, it continued to remain high due to ongoing transition period. We firmly believe that the working capital in the auction design will be significantly optimized, likewise for our working capital debt also.Our term loan -- term debt, including FCCB stand -- excluding FCCB stand at INR 7,136 crores, higher by INR 169 crores vis-à-vis last quarter, despite the fact that we have actually repaid debt worth INR 150 crores. The increase is purely due to currency impact.Our repayment schedule is back-ended, with only 35% of gross term debt payable over the next 4 years, while 65% is payable in FY '23 and beyond, allowing the required headroom for the operations to grow. In FY '19, we continue to remain committed to our target of reducing debt by 30% to 40% through a combination of asset monetization and operational cash flow. Thank you all.
We open the floor for...
We open floor for questions, please.
[Operator Instructions] We take the first question from the line of Puneet Gulati from HSBC.
First of all, if you can help me understand what's the progress on the O&M business? Their revenue hasn't grown as much as you would have thought. Some insight on this would be helpful.
Yes. Our O&M business is completely about the turbines and what we have commissioned. So whatever the turbines we commissioned last year, to that extent, it keeps growing the business. As we said that we are at around 12 gigawatts in India and 15 gigawatts in the overall India-wide transaction. Our margins in the O&M business, it's like it's an annuity business and would remain at the same level or slightly increase, based on the efficiencies what we're bringing in on in terms of percentages. Having with -- agreeing to do that, and in fact, the first quarter, the performance has been significantly good.
Sorry, I thought the revenue is flat Y-on-Y, isn't it?
Yes, I'll explain that. In quarter 1 last year, one international subsidiary revenue was added and you are aware that we discontinued operation in one of our subsidiary and that it is why those revenue is not getting reflected in quarter 1 FY '19. So that is the primary difference. And that is why it's not comparable.
Okay. Which is why probably the EBITDA is higher, but revenues haven't grown?
Correct.
Yes, yes.
Secondly, just a bit on the gross margin side. While there is no solar revenue being recognized in this quarter yet, the gross margin is actually lower, both on -- lower on Y-on-Y basis. Any insights on that? ASP also, if I' just divide your wind turbine revenue by what is delivered, 155, I get a 5 crores per megawatt number, which is lower than the earlier quarter. So some insights on these will be helpful.
Kriti, would you like to answer that?
Yes. Let me take the second question first, that in 155-megawatt, whatever we have delivered, the revenue has 2 parts. One is turbine supply and another is BoP. So BoP has been lower. The execution part has been lower and that is why you see the difference. So the simple division of revenue by this megawatt may not clearly reflect the selling price. That is what I just wanted to highlight. And so far revenue margin is concerned, margin on WTG is intact as compared to what we have guided, so there is no change. Solar revenue is not there, and some margin is not there due to solar. But on an overall basis, we believe that margin on wind turbine business continued to be in line with what we have guided.
Okay. So while you've withdrawn operational guidance, in terms of gross margin perspective, that wouldn't have changed at all?
Yes, that's correct.
So and any thoughts on why not give a revised guidance, maybe lower in the light of industry transition. Why withdraw it altogether?
That is because the -- at the stage where we are in, again we're talking today on 6th of August. There are still certain issues, which are getting crystalized. As you know, that the -- in the July beginning, just after that SECI V bids so call it, in fact, the next 2 days where the connectivity for the entire 4 rounds of SECI have been granted. Everybody got it correctly beyond this. Now as you are aware that the -- whenever the connectivity is granted, our Power Grid also has to enhance the capacity in some of the places. Those schedules are being worked out. So therefore, the clients will try to match with their schedule with respect to the Power Grid connectivity. Because as an EPC contractor, we do not take any risk towards the delay in Power Grid substation readiness on this. They're ascertaining that. So therefore, once they complete their ascertain for SECI III and SECI IV, the -- while the connectivity is granted, when does the capacity would get ready, I mean Power Grid capacity will get ready, they will finalize the exact schedule for us. So that is when we would know. Part 2, which is also we mentioned, is that in case of Andhra Pradesh, here we have a significant capacity. There were some regulatory developments during this quarter from last time when we spoke to now. We submitted the -- we've been asked to submit application under Section 62 for tariffication, project-specific tariffication, which we are done now. The regulator has said that he will now hand -- he has given an order that he will end global the PIT regulation, which order has come to us just 2 weeks back. So therefore, now he will look at our applications and he has to give a approval under Section 62 for project-specific tariffs. Obviously, our assumption is that when we talk next time, we would have more clarity on exactly the time it has come or it's likely to come the regulatory approval would decide that how much capacity we will need. Because there are a couple of issues that are still under [ dictation ], under resolving. So therefore, we thought there is no point in giving a guidance again and keep revising it. That's the basic reason.
But I guess, all these issues were still there around May when you gave that guidance. So I'm wondering what has really changed in the 2, 3 months' time.
Two things, yes, yes. Two things happened. I don't think while -- when we were there in the last quarter, when we discussed, when we gave this guidance, it was expected that the Power Grid connectivity will come much faster than what it's been finally in the July first week, be around July 10 obviously, it was not what we expected. Secondly, that wherever they've given the connectivity, which they gave at 220 kV level, there is some capacity enhancement required. So obviously, that client, as I said that, as I said in my remarks, I repeat, we do not take the risk of in Power Grid supply. Clients would like [ that but then completely excited ] when it is coming, they will give it. That was not there last time. And AP regulatory commission orders, which I've mentioned to you, are the developments, post what we gave out guidance. These are based on the subsequent developments happened and which are there today.
Okay, okay. Lastly, in order...
Sorry, Mr. Gulati. I just wanted to add one thing that whatever we have estimated as revenue, nothing is getting lost. Due to execution delays, part of the revenue might shift from FY '19 to FY '20.
That a good point. That's right.
So basically, FY '19 could still be weak which essentially means your free cash flows would be lesser but you maintained your debt reduction target. So is there any progress on the asset monetization program there?
Kriti, would you like to answer?
Yes. Asset monetization program is on track, and we are committed to deliver that in this financial year. And we are making significant progress on whatever we have planned in each of the assets.
Okay. Can you just refresh the plan again?
I think we have not given the details of the plan due to commercial sensitivity and that is why I'm sorry, but I will not be able to elaborate the details of that.
We'll take the next question from the line of Mohit Kumar from IDFC Securities.
Sir, my question pertains to given the back-dated transmission evacuation constraints, which keeps coming up. Does it mean that SECI V, VI, VII and VIII will essentially be delayed? And also the various auction, which you're saying like solar, hybrid and all of those, if there's delayed, it means that FY '19 is 3-gigawatt as per your new projection, FY '20 could again be a -- the lower estimate. I understand that 7.5-gigawatt has been auctioned. But out of 7.5-gigawatt, another 500-megawatt I think of the Maharashtra has not been awarded, besides Gujarat, the new thing has been canceled. The SECI V has been canceled. So how do you see going forward the auction pipeline to materialize over the next 8 to 9 months?
On the transmission, which you said, I'll slightly modify your statement while agree transmission is the one which has delayed initial thing. It is not the lack of evacuation facility, I feel it is a lack of coordination between the bidding and the making the transmission capacity available on it. Initial few biddings when it happened, the -- you've seen that the SECI was going ahead of the bidding, and there was not much of a coordination between SECI and the Power Grid also because there were no clear guidelines with respect to the connectivity in that sector. If you have seen it now from the SECI V onwards, the SECI started giving the guidance with respect to the capacity available at various substations. Though that's a guidance, there could be more substations coming on this, but there is a guidance. Now the coordination between the SECI and the Power Grid has started. At least in my clear decisions with the Power Grid and the Ministry of Power, the presentation is very clear that Power Grid can -- there is a spare capacity. There are substations, but you need an augmentation of substation capacity. They're very clear with the current schedule of 18 to 21 months, in fact, 21 months from the LoA. Here, it can easily set up this capacity provided they're told upfront. And earlier, that was not happening because that connectivity process was not there. Now we know that. So therefore, I think it's more of a lack of coordination than the lack of a transmission capacity which has actually caused this probably. As Tulsi Bhai mentioned in his opening comments, those things are now have been behind us. There is better coordination between SECI and Power Grids. These things -- I expect that these things would happen now between the 2 of those. And the SECI V -- see, for the SECI V's calculation and to my knowledge, if you see that SECI V bids -- bidding happened to be just a day before the connectivities were granted. I think if the SECI V had happened post those 2 days of connectivity where all the 4 rounds of SECIs have been granted connectivity, I think the results would have been different. Now SECI V is, from that angle, it's canceled, but if you say that SECI VI was that they renamed a SECI V and then put it as 1,200 megawatts and the bid is due on 24th of August. These are the teething troubles what they're going through and it's good that we're facing these issues upfront and getting resolved. So therefore, the -- we think that as -- in the Indian power sector issues keep cropping up. It has been for the last 10 or 15 years. But I think we also resolve that. So therefore, from that angle, with the current situation, we reasonably believe there could be some delays, but not the capacity going way anywhere of they are talking about.
You have not guided for FY '19 volume numbers. But given the fact that only 1.1-gigawatt of the order as it stands today. And if -- and out of 1.1-gigawatt, I think you can only secure maximum 500, 600-megawatt in this financial year and you will need another 400 to 500-megawatt to breakeven. So the issue of debt repayment which may come up in FY '19, can you please elaborate on that?
Yes. As we said the 1,135-megawatt is an unexecuted order, after what we have executed in the quarter 1. So therefore that 155-megawatt is not included in the 1,135-megawatt. Second, this doesn't include the 1,016 megawatts where the PPA has been approved. It's waiting for the Section 62 the tariffication of the regulatory commission. So effectively, if you add these 2, there's 1,900-megawatt, which is available in hand, which is what we also thought of the commission this year and next year, which is definitely there. On top of it, as I mentioned in my comments, in the 7.5-gigawatt what is already awarded, 20% of that capacity, the clients are still to decide who is the EPC service provider, which is roughly about 1,400, 1,500 megawatts. We are in advance discussions in -- with some of the clients and we do expect some success to happen there. So therefore, we're expected to increase our volumes in the already awarded projects that will get added to this 1,900, 2,000 megawatts what we have in hand. Part 2, captive, which normally happens gradually over the year. It doesn't happen right in the beginning. In fact, last year, we booked 250-megawatt of captive, but that captive orders didn't happen until December but executioned in March. So while we keep moving, the -- that captive orders will be coming significantly. Third, if you look at whatever the orders -- the bidding unknown as on date of the clear timeline, even if some of them moved a few week here and there and once those orders get finalized, till now our track record has been, as we said that we're the leader in backing the EPC from the auction bid. So therefore, we have reasonably confident based on the track record that whatever capacity gets awarded, while we're expecting that the bidding is substantial this year. So I think we will close with the good order backlog this year and the current year is what we already guided you.
Plus we can add Gujarat bid will come in this month.
Yes. In the state, the Gujarat is likely to happen as per our information. They're already with the regulatory commission for revised bidding guidelines approval.
Sir, is there any guideline looking for the asset demonetization, maybe can we expect in the next quarter or is this likely to be happened by end of FY '19?
Kriti, do you want to explain for that?
Yes. I think that would happen in quarter 3.
We take the next question from the line of Dhavan Shah from K.R. Choksey.
I have 2 questions. Firstly about the guidance. What you highlighted around 3,000-megawatt commissioning for the entire industry. So assuming that the market share will remain at the same level, so is it fair to assume that we'll execute on our main commission around 800 to 1,000-megawatt this fiscal because I think the order backlog is the main concern and you also discussed in last quarter about AP tariffication [ and it ] is still pending. So what is the status over there? And how can we improve the order backlog?
On the commissioning side, on the -- sorry, please go ahead, if you have not completed the question. Sorry.
Yes. So because the -- there is a concern in terms of the order backlog, so even though I think if in fact, we can commission around 800 to 1,000-megawatt based on the market share what we are having, but it's difficult based on the current order backlog. Maybe we can end up the execution or commissioning number as we did in FY '18, that's -- it's implied. So can you please elaborate more on this?
Yes. On the commissioning side if you take it, our commission capacity would have been substantially higher than the 19-megawatt what we gave you because 250 megawatts of the SECI I order which we're executing in Tamil Nadu is ready for commissioning. Only thing which is pending there is the Power Grid substation connectivity. Because the approval for that came only in July, and thereafter, the process starts for filing your pay agreement and connectivity agreement, rental agreement, then you get the inter-connectivity equipment drawing approvals. Then we place order, get that equipment and build the connectivity. In fact, here we took an advance action of talking to Power Grid, pending the connectivity, took that risk and went ahead and placed the order for inter-connective equipment, which is our responsibility. But now the drawing approval is happening, thereafter the Power Grid inspection immediately. So therefore that capacity would definitely get commissioned in September and October 250-megawatt, which is not part of this 1,135, which is a pending delivery order on this. Plus there are some FIT orders, which we've supplied already. We're there at site. We are waiting for the lag in the foundations to be done by the clients, so that capacity will also get added. Plus this 155-megawatt what we supplied in the quarter 1 would also get commissioned. So therefore commissioning whilst you cannot look at what is the balance order book because there is substantial amount of work happened at site and ready for commissioning on this. So the commissioning one would be higher. And as far the AP is concerned, as Kriti has clearly mentioned, what we are talking about and whatever we said will happen in this financial year. We heard based on our clear order, it's not that our guidance is getting changed because we couldn't get the orders. These are all firm orders. including the AP. But because of some of these riddles of connecting the all the regulatory approvals, currently, we are not able to envisage what is the timeline. So therefore, they are moving from FY '19 to FY '20. But there is no reduction in the guidance whatever we gave you on this, maybe whatever is supposed to be in Q4 is actually moving to Q1 of the next year.
Okay. So is it fair to assume that would may be FY '20 we can execute a commission between 2,500 to 2,800-megawatt worth of contracts?
I would like to comment but I would only like to comment that we are maintaining our market leadership in terms of the commission capacity. And like whole of last year we did 75%, even in the quarter 1, we maintained our leadership and we'll continue to maintain the leadership on this. As we talked, we talked about what the country is likely to do. So therefore, if the market is going to be so much then being the market leader, it's obviously, we can easily assume that what numbers Suzlon, we will be doing.
Okay. One more question is about the WTG EBITDA performance. So based on the commentary, it is because of the poor execution, the EBITDA was in loss. So if I look at the EBITDA loss even excluding the ForEx impact, so it is around INR 75 crores for Q1 FY '19, vis-à-vis if I look at your Q2 FY '18 numbers, the execution was around 100-megawatt. But still EBITDA loss, excluding ForEx, it was around INR 12 crores. So why the EBITDA loss has been increased for WTG segment?
Kriti, do you want to explain?
Yes. Q2 last year was definitely -- some of the PPA-based order we have executed and that is why that was exceptionally high number. But basically, this business is something where if you try to compare on a quarter-to-quarter basis, there will be always some exception on a quarterly basis. This quarter, I would simply explain that, if you take the fixed cost and compare with volume of even quarter 1 of last year, the delta due to negative operating leverage you are getting is 11%. Had my volume been higher and comparable to quarter 1 of last year, probably you might be seeing EBITDA of 17%, 18% -- odd.
I think it's completely out of the fixed cost -- the operating expenses in Q1 what is coming. If you just nominate for that, the EBITDA levels are -- whether you compare on year-on-year basis or quarter-to-quarter basis were at the same level.
And one more question...
The second quarter would have been slightly better. Yes, please go ahead.
So one more question is about the debt repayment. So the FCCB is negative because of poor operating leverage. And we are on the track in terms of the asset monetization. So and FCCB is going to mature also in the next year. So what's our plan? I mean, are we going to repay our borrowing in terms of the ForEx debt? Or how are we going to repay the overall leverage in the coming year?
Kriti?
Yes, FCCB is part of our plan for debt repayment, that is number one. And number two, so far as overall debt reduction is concerned, the sharing pattern is always decided by the lender that in the ratio of their exposure. So there will be some part payment of rupee debt and some part payment of ForEx debt.
Because I think, the FCCB are unsecured loans, so is there any possibility that the secured creditors will demand to repay their money first and then...
We are confident that in the overall interest of all the stakeholders, bankers will take a practical view.
We take the next question from the line of Harshit Kapadia from Elara Capital.
Just to dwell more on this EBITDA number, would you be able to say that you will still be able to make double-digit margin for the full year despite you may be executing lower than what you had estimated because of the connectivity issues and the state regulatory approval delay has happened?
Kriti, you want to answer? Anyway, I think fundamentally, we didn't revise our guidance at this stage. So you are asking the same question. Kriti, still go ahead.
Yes, basically, it is our intent to maintain double digit. But as J.P.C. said that we don't want to give any revised guidance at this stage, basically, let us wait and watch. But we are confident that we'll be able to cross double digit.
Okay. And sorry to drill you more on this execution part. So you mentioned that around 3-gigawatt of execution that you are looking for industry. If you can just break up from your side which -- in SECI I, II, and will it be SECI III also be part of this year's execution somewhere? And how much would you be to do from capital side?
No, no. See, the SECI III commissioning schedule as per the PCA itself is somewhere in November. I don't think -- but the commissioning right, so -- and we are not talking about few of the commission. We are not talking about supply. So therefore I believe that's probably the question because if you are talking about 3,000 megawatts. SECI III will not come in here. SECI I, the PCA date is May -- SECI II, sorry, date. SECI I would happen, I just go by third, based on some other third-parties, SECI I will definitely happen. Some part of SECI II should happen. On the state bidding, whatever is already happened concluded, some of those will happen and the captive. Captive segment is one which would happen. And also there are the carryforward things coming from the Q4 of the last year where suppliers made and directions have started. Those decommissioning also would happen now. So that is how we gave our guidance for 3,000 and we reduced from 4,500 to 3,000 because we -- because of some of these delays in the state bidding and the central bidding, especially there were connectivity delays.
Okay. So on the offshore, would you to be able to give kind of the cost per megawatt that you are looking at, what is right now coming for?
I think it's too early a stage to talk about that. Right now as you know that expression of interest has come in and we have participated in that. There are more details because these are all depends upon the -- these are offshore, so depends -- these are the project-specific costing would happen here. Unlike an onshore wind because the location-specific cost, marine costs are higher. Those details once the government provides and then we with our partners will look at the details and that's when actually we should be able to comment about what is the likely cost of offshore in India. It is a little premature at this stage.
We take the next question from the line of [ Nikhil Vaishnav ] from [ VD Investment ].
I would like to know what CapEx will be for FY '19.
Yes. Generally, we don't require any CapEx for capacity addition per se because we are having a required manufacturing capacity. The CapEx of the company is primarily on 2 factors. One is the maintenance CapEx in more than all those things, and the second is R&D CapEx, what we have. And we believe that annually, something around INR 300 crores should be a substitute.
Okay. And secondly, when will [ USF ] PTC commission taken place? And what will be the revenue [ you receive right, as it is, I think, and if you have any ] details?
Can you repeat your question, please?
Yes, yes. I can repeat. Yes. Sorry? I want to know when [ USF ] PTC commission taken place. So when it has taken place? And what revenue you will receive from this?
No, no. See, the [ USCF ], the PTC, what we have done is we have done the he safe harbor. It's like a warehousing of a small quantity of project capacity. If it [ go on ] FY '17, which would give us 100% PTP, but the project should be executed before 2020. So therefore, right now, we're in the stage of developing the projects, which will happen over the next couple of years. The revenues, we will start seeing revenues from maybe the FY '20 onwards.
FY '20 onwards, right?
FY '20 and FY '21 for the safe harbor 1. And we have also done the safe harbor for the year 2 with 70%, 80% PTC. It's under development work, which would have a year extra available for us to commission as well.
We take the next question from the line of [ Abit Puran ] from BOR Investments.
So if the industry volumes are 3 gigawatts and 8 gigawatts for '19 and '20, so that's a total of 11 gigawatts. How much will -- do you think your company will get as a share of that 11 gigawatts?
If you look at the last 2 years, we have been at 32% and 35% of the market share. So therefore, that's attractive to us. And therefore, right now, in building the orders, we'll maintain the leadership. So it's reasonable to assume that -- I don't -- we are not giving a guidance for the next 2 years, but it's reasonable to assume that -- we'd have that sort of a market share and this capacity is what we would be able to do it.
Okay. And in terms of the mix, a few -- I guess, a lot of moving parts on the order book, this Andhra Pradesh 1 and, I guess, the next few SECI V regulatory when it happens that option. When do you expect to kind of know either way on the Andhra Pradesh execution? Will we know that in the next month or so?
Yes. On the first one, on the 1135 megawatt work we have, 90% of that order book today is to the orders, so it's for confirmed orders. And also for each of these orders, our counterparties are very strong, as we mentioned. Like for like, they are in the international utility. So therefore, are we don't see any risk of them not executing the project. It's only a question of -- they're talking about the time length moving -- like what they get in there because of the connectivity. So therefore, there is no moving part with respect to the 1,100 megawatt that we have in hand, except for a bit of a time lag here and there. As far as the Andhra Pradesh is concerned, it was actually held up, because there was one order which we are supposed deliver the order. We'll just call it [ OP-5 ] which is with regard to the AP regulations whether it is restricting the regulations or those regulations will continue until August 2018 or whatever is [ the time was ] available. That order came just in a couple of weeks back when we said that these regulations don't exist but I will go ahead and still approve the projects on the cost-plus basis based on the CERC regulation. That has now come. Also, as we said that, they asked us to formally file an application under Section 62 because now we are filing Section 62 considering the CERC regulations, not the APERC regulations. So we revised the application and filed for the entire 760 megawatts, Section 62 petition and they will go through the normal process. But in the regulatory process as much as I am aware, you are aware, that you really cannot fix exact timeline, so but it is reasonable to expect that in the 60 to 90 days the order should come because we have already submitted the petition for clarification.
Okay. And you mentioned that these connectivity approvals came one day after that SECI V bid happened. So do you have a date on when the next round of auctions will happen?
The SECI-VI, which is now they are calling as SECI-V, which they have already announced that the 1,200-megawatt in fact before that 1,200-megawatt bid of NTPC is due today as we speak 6th of August and the next 1,200-megawatt which is SECI-5, they are calling it as SECI-6 to SECI-5, Whichever way you call it, it's next round of SECI bidding, let me take it that way [ without having to get into ] 5 or 6 and things like that, the date has come as 24th of August. So that is the idea. One of the requests which industry players have been telling SECI is to keep at least certain time gap between the 2 rounds of bidding, or at least until the reverse auction happens, because you bid based on a site specific thing, so those sites get locked up till the order is finalized so therefore you would not be able to offer that site in the next bidding. So that is the reason I think NTPC [ being ] 6th, they put this one on 24th. So before that, the NTPC reverse auction will happen. That is why you see the time gap between NTPC and the next SECI bidding.
Perfect. So for this NTPC auction, do you have pre-bid tie-ups in place?
I do not want to talk about NTPC per se because the bidding is happening today. All the orders of 1,400-megawatt was in the bidding, 97% to 98% of that came through pre-bid tie ups, we already had a bidding on this. Only thing now is as I mentioned some time back, the 7.5 gigawatts that is ordered, there are people who have bid without any tie-up of EPC or they had some lose tie-up and they still work out post bid, they are out in the market, which is about 20% of about 1400 to 1500 megawatts which is what we are trying to do. Otherwise, as far as we are concerned, predominantly it is a pre-bid tie-up is what we have. I see that same thing would happen moving ahead.
Okay. And just to clarify, the full NTPC total count order is up for auction. Your share will be kind of similar to what you've had historically?
It's difficult to say who -- it depends upon who is going to win. [ They'll come ] -- we all know that they do not do a pre-bid tie-up [ go and win and then post out there ] but yes, we are reasonably confident that even in this auction as well and also SECI-V auction, we would have the leadership in terms of getting EPC order. We will be the #1 in both in terms of the share.
One request from our investors’ point of view is that the order book is very useful to track your business and there are a lot of moving parts, obviously. So as and when you get new orders, can you just give a disclosure to the exchanges on what the order book looks like?
We do, we do that. We do that regularly. And our definition of order is that once we've signed the order and we get [indiscernible], we do it to some extremes. We make it public.
Great. Just for EBITDA margin, you said it's doing double digits for FY '19. What is the kind of minimum supply of WTGs that you have to do in order to get to double-digit EBITDA margin?
Kriti, you want to answer that, breakeven, double digit?
Yes. Basically, I would not prefer to go into a specific megawatt number at this stage since we have already withdrawn guidance. Otherwise, it would tantamount to giving you revised guidance.
We take the next question from the line of [ Abdul Shah ] from [indiscernible] [ Equity ].
I just wanted to know in the light of these revised -- in light of the AGM shooting down and specifically non-public institutional shareholders voting against the fund raise both equity and debt, what is the plan for the company if at all it wants to again pursue the fund raise?
Kriti?
Yes. Basically, first of all, I wanted to clarify that this were only enabling regulation, and there was no plan for -- a specific plan for any dilution, okay. So it is not impacting something what we have planned from a debt reduction point of view. That is number one. Number two, that in case there is a requirement for a fundraising at an appropriate price point, then we are sure that we would be able to get shareholders' support for a specific proposal.
We take the next question from the line of [ Renault Jendra ], individual investor.
My question is already covered, so I'm good.
We take the next question from the line of Puneet Gulati from HSBC.
Just if you can give some more color on why NTPC earlier auction was closed and Gujarat got axed -- got canceled? And if you see -- foresee this for any other auctions having the same fate?
NPTC got pushed back purely because of as you saw that what happened to SECI-5 and they knew that connectivity is an issue and that the connectivity issue should get resolved, so people will come in for bidding. That is the reason that NTPC got pushed out because now we said the connectivity issue is back. As far as Gujarat is concerned, our understanding is that there are some changes to the standard bidding guidelines. So whenever there is a deviation from the standard bidding guidelines, it should be to the Ministry of Power, they need to go and get a pre-approval from the state regulators, understand they are going through the process. So once they do that, they will announce the revised bid date.
Okay. And then apart from the SECI auction, do you see that the traditional states coming back in this regime? Or are they shying away at this point in time?
Okay. Right now, we are seeing any traction with their bidding other than Gujarat because the current -- the bid condition is that the -- in the SECI, the -- anybody can buy power, any state, including the [ Hindi ] states can buy power from the SECI bidding office. So right now, we are seeing here that some other states like Madhya Pradesh and Maharashtra and Maharashtra are even contemplating buying it from SECI. So I guess we are not seeing any traction in the state bidding at this stage obviously, other than Gujarat.
Okay. And just a couple of accounting-related issues. You adopted India's 115 and you stated that your profit would have been higher. Can you help us understand the impact there?
Kriti?
Yes. Basically, what happened that whatever is the liquidated damage or sales commission or those kinds of performance guarantee-related things, all those things are now getting deducted from revenue. So basically, your revenue line is getting impacted. Previously, it used to be part of your expenses.
Okay. So at EBITDA level, things wouldn't change?
Yes. In absolute number, EBITDA level, things wouldn't change. But your denominator, sales line, will get reduced.
Okay. And also can you help us understand...
Practically a regrouping, I will say.
Okay. That's helpful. And then on the exchange loss, apart from the debt, what else is leading to this foreign exchange loss?
I think primarily related debt because previously, you know that in previous accounting regime, what used to happen that even if there is a loss on a quarterly basis, that cost spread over maturity of the particular loan. But what happened that we refinanced our SBLC in March 2018. So it happened in the new accounting regime and hence, the full impact with the positive or negative comes in a quarter itself. So that is going to now impacting every quarter, unfortunately, positive or negative.
Sorry. So you have to adjust for -- you have to flow that debt change in every quarter?
Every quarter, yes.
And you can't capitalize it?
You can put it in, I would say, a spread over a maturity period, yes.
Okay. And -- but I thought there were 2 elements of the ForEx loss in the P&L statement. One was related to the interest cost and other was the others. So that is for the debt part? Is that understanding right? Or is that...
Yes. It is a combination of many things. But primarily, the major portion is on account of debt. Whatever is the interest liability increase due to FX movement, they're put into interest directly.
And the debt related part is the other ForEx?
That's correct.
Well, ladies and gentlemen, that seems to be the last question for today. I would now like to hand the conference over to Mr. Tulsi Tanti for closing comments.
Thank you. We appreciate all the investors' interest and participation and the concern of the -- some of the dynamic situation of the sector. Just to give more clarity on the sector point of view, there is a very clear visibility of the business. But on a preliminary, we see some of the fleeting problems between the stakeholders is happening. And because of this, his some of the delay, like SECI V was canceled. Because of 10th, it was -- the bid was there. And 11, 10, 12, they all bid the SECI I, II, III, IV. The PTC approval was clear. So because of that, on 10th, there was no visibility of connectivity for all earlier bids and there's a low participation, and that's why naturally it is a concern. Again, it will come in the August, and it will continue the bidding process. Secondly, the NTPC was also delayed because most of the sites are used for the -- each bidding. So it required some distance between 2 bids so that whatever the site has not qualified in the one earlier bid, that will be re-utilized for the second bid. And that's why NTPC was delayed. And third is, with regard with new bidding guidelines they hope to adopt in the bidding process, not only that they are moving from 500-megawatt to 1,000-megawatt planning. So because of that, there is -- a change is coming. And that bid will also come in the current month after the approval of Gujarat's GSE approval. So the momentum will be continued. So there is no big uncertainty. We have the volume, only the delay or deferment is happening. And that will affect the 1 quarter performance. It will move from current financial year to next financial year. By the way the same thing is bringing more stability of the systems which will give the good momentum to bring more and more bid faster and everything because all India base is quite good, demand is coming from the SECI because most of the states need more and more energy and the supply is not that much enough is there. So the demand side is good, investor participation is good and because of that once the system will stabilize, the volume will stabilize, not only that price will further improve and stabilize also. That will give the good visibility for the next 3 years. It is a temporary phenomenon. It is disturbing because we are moving from one established 20-year system of FIT to the new systems of the bidding regime and it took almost 15-months until now. So may be another 3 months it may take and after that it will be stabilized, which is good, giving a big volume opportunity for the sectors. With the newly discovered tariff wind energy is the most competitive, with respect of the all other source of energy and has emerged as a mainstream energy source. Going forward, we are well positioned to capitalize on the market opportunity with our competitive business model, the project execution experience spanning over the 2 decades across the India, the state-of-the-art technology and very competitive value chain and supply chain within the Indian market, new generation turbine offering the higher PLF and cost competitive and lower LCOE which is giving a competitive edge going forward, the presence across the entire value chain and more than 12,000-megawatt service asset portfolio and capability of the service and state-of-the art service. We are fully vertical integrated. The operations are giving us a very good competitive edge and faster execution capability because of that. The technology and innovation will remain to be the catalyst that will drive the growth in the renewable energy sector, and as you know, in the product and technology specific Indian market need of the technology, we are ahead on leadership on this, bringing the right product and technology for the Indian market because we understand the geography very well and we have more than 1,000 measuring met mast information and statistics and data based on that, and the ground profile information, what type of the right product and technology is required. So it is a quite huge difference is there. So any turbine is [ required to become a competitor has need ] for the Indian specifics. So [ because this ], we have a great experience in the last 20 years. With the government very high trust and focus and the country is experiencing the positive winds of the change in the energy sector and particularly in renewables. And it will continue for the next 5 to 10 years. With that being said, I thank you all of you joining us on the call. We hope all your queries are answered. In case of any further questions, kindly get in touch with our IR team. We will be very happy to answer any questions or any query. Thanks a lot and we appreciate your time and presence with us. All the best wishes.
Thank you very much. Ladies and gentlemen, on behalf of Suzlon Energy Limited, this concludes today's conference. Thank you all for joining us. You may disconnect your lines now.