Torrent Power Ltd
NSE:TORNTPOWER
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Torrent Power Ltd
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Ladies and gentlemen, good day, and welcome to Torrent Power Limited 2Q FY '22 Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Harshavardhan Dole from IIFL Securities. Thank you, and over to you.
Thank you, Zed. Greetings, everyone. On behalf of IIFL Securities, I welcome you all for the second quarter earnings call of Torrent Power. To discuss the Q2 numbers in detail and share the performance outlook, we have the entire management team of Torrent Power. It's my privilege to introduce you to Saurabh Mashruwala, VP, Finance; Rishi Shah, GM, Finance; and Jayprakash Khanwani, AGM, Finance. I would first request the management to make opening remarks, subsequent to which we can open the floor for Q&A. Over to you, Saurabh-bhai.
Thank you, Harsh. Good morning to all of you. Thank you for joining the earnings call for Torrent Power for Q2 FY '22. First, I will take you through the performance of the quarter, after which phone lines will be open for a Q&A session. Let's go through the company at PBT level first. Reported PBT for the quarter stood at INR 485 crores as compared to INR 230 crores in corresponding quarter last year. It has increased by about INR 255 crores, 111% on reported basis. There are no one-off items during the course of the current quarter. But as you would recollect that reported PBT of corresponding quarter of Q2 FY '21 was carrying 3 one-off items. The fourth one is there was a provision of about INR 100 crores towards doubtful debt, mainly from subscription business due to lower collection efficacy due to COVID. Second, there was an under recovery of fuel cost of INR 42 crores in certain projects, which got reversed in Q2 of FY '21. Then lastly, there was an increase of INR 21 crores arising from CERC tariff for the control period of 2019 to '24 for our SUGEN power project. All put together, there was net nonrecurring charges of INR 121 crores in Q2 of FY '21, which is last year. Adjusted for this one-off, PBT for the quarter stood at INR 485 crores compared to INR 351 crores in the comparable quarter last year, which is higher by INR 134 crores, that is 38%. Now I will take you through the key highlights on improvement in the PBT for the current quarter. Of course I will update you about the 3 positives, which has contributed with this increase in the profit. Then I will update about the 2 negatives also, which has reduced the profit. For this, there is a substantial reduction in T&D losses mainly in the distribution franchise business due to restoration of industrial demand, which was significantly impacted last year due to COVID-19 pandemic. The positive impact of this development is INR 70 crores. Second is higher PLF from renewable projects, mainly due to abnormally low wind speed witnessed during the last year. This has also contributed INR 46 crores positively to the profit. The third is gross reduction in finance cost for the quarter by INR 54 crores. This is mainly because of a lower rate of interest and average level -- lower level of debt. Interest rate for the quarter was lower by 90 basis points compared to corresponding quarter of last year. The average debt level also as of 30 September 2021 was lower at INR 7,469 crores compared to INR 8,734 crores, which is lower by INR 1,265 crores. So our debt level has gone done by INR 1,265 crores. The fourth reason is increase in contribution for franchised distribution, mainly due to higher demand. This has contributed about INR 13 crores in the profitability. Then I would talk about there are 3 reasons, which has reduced the profit for the company. First is the annual recovery -- recovery of fixed costs of SUGEN plant due to reduction in long-term PPA with PTC from 75 megawatts to 50 megawatts, which have impacted the profitability by INR 5 crores. The second is that increased acquisition due to increased incremental CapEx with the previous quarter, which has impacted the profitability by INR 15 crores. And there is an increase in salary and O&M costs by INR 10 crores. So these are the reasons which has contributed -- which have impacted the profitability of the company. And the demand is both licensed as well as franchised distribution area have improved by 19%. And we almost reached the pre-COVID level, mainly due to the relaxation given by the government from COVID and previous lockdown and reopening of economic activity in the quarter in the country. We expect we are likely to be under the demand, which is at the pre-COVID level of FY '20. Moving over to the payout number. Consolidated payout reported for the quarter was INR 367 crores as compared to INR 204 crores reported in the corresponding quarter last year, which is higher by INR 163 crores or about 80%. So this completes the overview of the quarterly operating performance of the company. Now I will move to the update. I will move and give you an update about the current projects, which are in pipeline. During the quarter, the company has entered a share purchase agreement with CESC and their associate company to acquire 156-megawatt wind power projects located in State of Gujarat, Rajasthan and Madhya Pradesh. The key details of the project have already been shared by stock exchange submission. Moving on to the other projects. For 650-megawatt SECI V project, which we have received extension of COD from February '22 to September '22. So we got some additional time to commission the project up to February '22. EPC contract has already been awarded for this project, and project is likely to commission during FY '23. The second is the SCOD of 100-megawatt GUVNL project is also extended to October '22 from July '22. The Torrent 300-megawatt of TPLD project, SCOD, this also is extended to December '22 from November '22. As you know, the AP project is still subsidized. There is no progress in the AP project. With respect to 3 core licensed distribution in union territory of Dadra and Nagar Haveli, Daman and Diu has informed during the last call, the Supreme Court has [ seconded ] the stay imposed by the Bombay High Court on the tender process and we are awaiting the -- hearing from the Supreme court. Now I would request the coordinator to open the line for Q&A session. We wish everybody to stay safe and healthy. Handing over to operator. Thank you.
[Operator Instructions] The first question is from the line of Aniket Mittal from SBI Mutual Fund.
I actually had a question on the fuel tie-up for our gas-based plants and the recent rise that we've seen in energy prices. So if you could highlight, one, what is the current extent now for tie-ups for these gas-based plants? And secondly, maybe from a near-term perspective, what are the measures that you have been taking or you can take to cushion yourselves if the current environment sustains [indiscernible]
Yes. Yes, Aniket. First, I will talk about this power purchase. If you look at the current scenario in country about the action prices, which we have witnessed about very high price in mid-October about these kind of things, then because of the coal shortage and demand has picked up also. But if you look at last 1 week time, we have seen some normalcy in the power purchase price -- power price in correction. In last 2, 3 days, it has also eased to about 3.5% of this kind of thing. So we expect that things are going to be normalized in terms of -- as far as the power purchase price in the country is concerned and [ what are expectations here ] and we are also entering the winter also. So the festival season is there, the winter is also there. Demand will be lower as compared with the September, October kind of thing. So power purchase price is back to normal. That is what we can say right now. In terms of gas, particularly in terms of price, if you look at, the current situation is unprecedented. Firstly, there are some certain development in terms of supply side then a supply side disruption and demand also has increased significant way, which has impacted -- which has reshifted the demand-supply position of LNG in terms of the market. So we -- and we hope that this situation will continue [ over ] the winter to be -- likely to be over by March '22, but by which time things should become normal. That is what our expectation is because this kind of a price is not sustainable, about $30-plus kind of price is not sustainable. And it has reached the parity with the brand also. Like, for example, if you look at -- considered $11 low and $80 crude price, about $8.8 kind of price should be there for the LNG, which is not at current level. So we expect the parity will come down, will come post winter. So expected post winter things should improve and we can see some normal level of LNG prices. That is what our expectation is. In terms of our tie-up, we have -- as you know, we have a contract up to calendar year December '22. So for beyond December '21, I would say, beyond December '21, we have recently in the month of August floated tenders for the LNG procurement for the next 5 years. We have sought the port for 34 cargoes. On the 34 cargoes, we got some offers from previous vendors. And since price was higher, the offer was not -- offer was on the higher side. So we were contracted about 3 cargoes for next 4 years, I would say, from '20 to '26. And '22, we still will be able to contract the cargo. But in terms of our tie-up, we have tie-ups with IOCL as well as Reliance and keeps about 25% of our requirement for our long-term PPA requirement. So with this tie-up of 2 cargoes, again, we have contracted 25% of our medium-term requirement for PPA. So balance requirement, we will wait till April things become normalized and then we will tie up for the balance of the year. So this is what the situation about the gas. So current situation of gas is unprecedented, not sustainable and it is likely to come down post winter. That is what our expectation is.
And Just 1 follow-up on that, if I may. So like you said, there is some tie-ups that we have on the domestic front as well. But how much of that is getting supplied? So maybe on a T&D basis, what is the quantum of T&D basis that we receive on a domestic basis, which I think would be [ APM ] level?
It is about 25% of our requirement for long-term PPA, like for our TPLD and PTC requirements.
So we're getting that supply.
Yes, yes. We are getting that supply. So it is covering about 25% of our required long-term PPA requirements. Few cargoes we have tied up very recently. It also add up to the another 25%.
So the 3 cargoes that you're talking about.
Yes. We've got about 4 for each year, I would say. Starting from calendar '23.
Just 1 more question on the collection efficiencies for your distribution franchise circle. If you could highlight how are the collections in Bhiwandi and Agra right now moving because in the past, I think we've done some excess provisioning of around INR 130 crores. And I think none of that has reversed in this quarter. So if you could throw some light over there and how we see things progressing?
Bhiwandi, there are small reversals, but not significant, I would say. But collection at Bhiwandi overall is more than 100% for the quarter. In terms of Bhiwandi and Agra -- Bhiwandi and SMK, I would say. Agra is some about 98% kind of efficiency we have achieved. But in terms of T&D, we made a significant progress in terms of T&D losses. For example, we have -- our T&D loss was about 14.4% for the quarter. It was about 22% comparable quarter of last year. In terms of Agra, we have achieved a T&D of 9.36%, which was about 10.83% comparable quarter last year. So in terms of T&D losses, we have achieved a significant progress and the major driver, I would say, for profitability for this quarter is [indiscernible] T&D losses in franchised as well as licensed distribution area.
Next question is from the line of Mohit Kumar from DAM Capital.
Congratulations on a good set of numbers. My first question was a bookkeeping question. So do we have -- can you give us a breakup of profit at EBITDA level business-wise, which you give every quarter?
Yes. I can give the EBITDA breakup of -- this Q2. For example, gas is INR 809 crores as compared to INR 821 crores last year. And renewable project has improved a lot -- just a second. Yes, the EBITDA number of Q2 gas project is INR 189 crores. I am repeating again, INR 189 crores versus INR 175 crores. Renewable project is INR 226 crores versus INR 180 crores. Licensed distribution is about INR 341 crores versus INR 352 crores. And franchised distribution about INR 220 crores versus INR 153 crores. And total EBITDA before one-off, I would say, it's INR 974 crores versus INR 870 crores. We had a one-off, basically. So there is a one-off, INR 121 crores last year, then reported EBITDA will be INR 974 crores for the quarter and INR 748 crores for the last year similar quarter.
Yes, sir. Secondly, sir, you've done a lot of acquisition, started a number of acquisitions for renewable power plants. So what are the kind of equity returns possible after taking all the improvements you need to make it more efficient? And secondly and the third question is that what is the long-term plan for the renewable portfolio? Are you looking for some kind of listing or [ invite ] or something else? And the kind of target -- and the kind of -- any gigawatt number you are targeting, let's say, the next few years down the line?
Yes. We said in the previous quarter we have about 5,000 megawatt of plan, renewable plan for next 4, 5 years, I would say. That is what we generally -- our target is. And we are aiming for, what, 13% IRR -- equity IRR from the renewal projects. And we are, yes...
On the acquisition, too, we see the number, correct?
Sorry?
On the acquisition pipeline, we can expect a similar number?
So Mohit, what we are trying to say is that as a target right now, if you look at our existing capacity, including the projects which we have on the pipeline, that is around 2 gigawatts, which we expect to announce it to 5 gigawatts over a period of time, let's say, next 3 to 4 years. That's what the expectations are. Now that could be in the form of a greenfield or that could be in the form of acquisitions. We have not closed our options. We are looking at both the options. But the target is to expand our portfolio to 5 gigawatts over a period of next 3 to 4 years.
Sir, lastly, what is the status of Daman and Diu bid? Is there any update that you can share with us?
Yes. Daman and Diu, we explained that it is matter of Supreme Court. We expect hearing to happen in Supreme Court post which government will expect it to issue the LOA for the Daman and Diu. And then we can -- post receipt of the LOA, we can take over Daman and Diu. So we are awaiting the hearing from Supreme Court.
Next question is from the line of Rahul Modi from ICICI Securities.
Sir, a quick couple of questions. Sir, is there any update on the SECI III 500 megawatts or there's no chance of that coming back? And secondly, sir, a little bit more in the gas sourcing. So you mentioned that we booked 3 cargoes. So just to understand, so what are the rates that we are getting currently under the medium term that you had gone for? And secondly, sir, what happens to your plant availability for SUGEN and UNOSUGEN in a situation where the gas price is, beyond December, remain at more than $10 to $12. If you can just highlight?
As far as SECI III project is concerned, there is no further update. It is -- as of now, we are not going ahead with the project. So that is what the current update is. And as far as -- yes, that is concerned, yes, we have a contracted 3 cargoes for the next 4 years, '22 to '26 at a very reasonable, I think, good scope, I would say. So we are not able to exactly update you with what scope we have contracted. It is a very good scope we have contracted 3 cargoes each year. That is what the current update is and -- what was the last question?
Sir, it was more on the plant availability for both SUGEN and UNOSUGEN post December, how we are planning to do?
Plant availability is concerned, we generally have 1000% plant availability in terms of readiness for generation for both SUGEN as well as UNOSUGEN project. So in terms of availability, we don't see any issue. Fuel, yes, we are -- we have some 25% fuels available. So balance, we will tie up as per the requirement. So availability is ensured in terms of plant availability.
No. I'm saying the availability is more to do with including fuel. So beyond December, sir, the 25% that you mentioned domestic, you will split it between UNOSUGEN and SUGEN? Or how will you be going about it?
So Rahul, the issue is, obviously availability. So gas is plenty available in the market. So the availability should not be an issue. The issue here is of pricing. So as far as availability is concerned, there should not be any issue of declaring the availability of both the plants.
Okay. Because UNOSUGEN had some conditions, that's what the understanding was.
Yes. UNOSUGEN condition was the price -- total price variable as well as fixed price cost should not achieve the midterm price. That's what -- medium-term price, I would say. That is what the condition was. But if you look at -- since the -- if we are ensuring lability and we are ensuring that the fuel is available, plant is available, then the PPA is up under Section 62, these are cost per tariff, 2-part tariff. And all PPAs being approved across the country under Section 62, where once we establish availability of the plant in terms of the fuel availability, in terms of plant viability, the fixed cost is being passed through. So we don't expect that any issue will be there in terms of pass-through of the fixed cost in terms of -- for SUGEN as well as UNOSUGEN projects.
Next question is from the line of Apoorva Bahadur from Investec.
Congratulations on a strong set of numbers. Sir, just I mean harping on the gas tie-up again. Just wanted to understand for this FY '23 by when latest do we need to have this gas tie-up so that the plants operate. Is there a lag physically between the tie-up and gas being becoming available at plant?
Gas, it's a continuous process. In fact, we are in the market to support the sourcing of the gas. So -- and for the FY -- current calendar year '22, we have 25% gas available. So we expect that the price will stabilize post winter. And by that time, we will able to shift more -- we will get the market and get more gas.
And sir, can UNOSUGEN also used in the domestic gas or that is exclusively for the PPA of SUGEN?
No. We can use the domestic gas also. In fact, we are getting domestic gas in UNOSUGEN project from Reliance. So we are getting the gas from Reliance from UNOSUGEN project.
Okay. Fair enough. Sir, second question is on this AMGEN retirement. So with the recent spike in prices, which is on the extend and then gas being so costly, are there any expectations of an extension over there?
As of now, there are no such news. But yes, if there is a shortage of the power in the country, the government may consider. But we -- as of now, there is no such clarity.
Okay. Fair enough. Sir, lastly, if I may ask in on this, on the loss reduction in SMK, that has not been as sharp as some of our other distribution franchisees despite the losses have been quite high. So what sort of a trajectory should we look at over there from a loss reduction point of view?
If you look at the loss as compared with the last Q2, we have reduced about 2% loss in the last 1 year, I would say. So -- and we are there in the SMK since last 1 year and that also -- during the COVID, we couldn't have been able to invest significantly in SMK as per our plan. So now we have started investing, we are putting this network -- we're underground-ing a network. We are ramping up the -- our efforts in terms of [ centering ] the network. So we expect good reduction in SMK T&D losses going forward.
Okay. Sir, just lastly, on this smart building scheme of the government. Do we see any CapEx opportunity in our distribution license business from this?
Which scheme?
The smart building scheme?
I don't think so. I don't think so.
Next question is from the line of Devam Modi from ARDEKO Capital.
I just wanted to understand with regards to the current environment, obviously, we also discussed on the call regarding the power shortages. We would expect that whenever there are such abrupt power shortages, typically as gas-based power remains area wherein people rely to for sourcing their short-term requirements. While on a year-on-year basis, if you see actually the utilization of gas-based power has actually dipped. So if you can just highlight the various nitty-grittys involved in this, and what will it take in terms of -- for us to get a higher, let's say, merchant volume -- a shorter-term volume on the gas-based front in terms of an overall environment.
In terms of plant operation, I would say, the gas-based plant is very ideally placed for -- to start the operation as compared to coal-based part of this. So that is one advantage we have in terms of running the plant, yes, just to offer it. So in terms of -- but importantly the fuel availability and that at what price fuel is available because this is the current opportunity, a very appropriate opportunity for gas-based power project to run the power project. But at the same time, the gas price has gone up so much that it's not comparable, I would say, competitive in terms of current domestic power price. So yes, this is ideally placed to run the gas-based plant is in the current situation when there is a huge coal shortage and power price has gone up [ effectively ] to this kind of a thing.
And Devam, just to add to him, yes, you can start to get this power plant at a very short notice, but the issue is that the ecosystem has to be available to start the gas-based power plant. So a lot of power plants in the country are as of now stranded. So you can't start those plants with a short notice. If a power plant is running and you have ability of fuel, then only you can start the plant. So compared to all other power plants, our power plants are up and running and in a ready state. But because of the prices, which were very high, the use of power plants was not that high or the PLFs of the gas-based power plants was not that high. So if a plant is stranded, you need a couple of months of preparation to start the power plant. And the spike, which we saw in current merchant markets was very sporadic and very fast, which nobody had anticipated. And that's why you have seen that the gas-based power plants were not able to contribute to that.
Yes. So basically, the 1 clear indicator, which people saw the higher prices, which all of us would see what the prices which were there on the energy exchange. Now those prices indicated much higher levels. So would that be a broad proxy of the kind of pricing, which was prevailing? Or you would say that on bulk when the [ SEBs ] come to the sourcing or probably your plants would get -- would be selling the power, the actual power price will be much lower?
No, no, the prices which you saw on the exchanges, they are short-term kind of prices, which again have gone back to the original levels of INR 3 to INR 3.5. So such kind of short-term price hikes may not be addressed only by gas-based power plants if you don't have the fuel.
Okay. And a rough conversion, let's say -- if we say that fuel is available on a very rough, rule of thumb, that is fuel is available at $10, I mean your variable costs will come to roughly around $5 -- sorry, INR 5 per unit. Would that be a rough number to take at USD-INR 75?
INR, you can consider.
So 0.55% would be the ratio for converting from USD.
Yes.
Okay. And from what we recall earlier, this used to be like 0.45, which has only depreciated by like around 10% from those levels. So would there be a difference in the heat rates or what is it that has changed?
Heat rate won't make -- no, it was never 0.45 [indiscernible]. It was always between 0.5 to 0.6.
Okay, okay, okay. And also on the gas-based plants, what we also need to understand was that there would be ideal proxies for [ clubbing ] with renewable power because of the RTC issues that renewable power faces. So any thoughts or any progress on that front with regards to a government policy for the same for the renewable power or for [ teaching ] because we were hearing of that since a couple of years that something is in the works, but we are not seeing anything in terms of any draft paper or anything. So any thoughts on those fronts?
Government is working on it, but nothing is on the ground right at this moment.
Okay. And also...
Government talked about this concern, but nothing has come so far and nothing is on the ground for this particular concern.
Okay. Because we do see talks of these kind of things in several power manufacturers like ABB or Cummins or those kind where they're also talking about these kind of things. But still, it is not happening to government policy. So I mean you are saying -- what you are saying is that there is no such talking -- there is no such thing, which is coming out from the government as of now.
But the importance of fuel at reasonable price would be available for the gas-based plants. I think government is working towards that how can they can make the fuel available to the gas-based part of it at a reasonable cost.
Okay. And then finally, there is this separation of kerosene content, which is probably in advanced stages or at a certain level. So how does that affect us? And in our case, in particular, since there will be a lot of areas adjacent to our current license distribution area where we could tap into if we get a separation of kerosene content. Do you see it as an opportunity for Torrent or how would that work out?
Licensing, for example, licensing, will give a good opportunity for Torrent [indiscernible] where we have a very strong hold on the distribution. We can go and because nobody will come to Ahmedabad, for example, the [indiscernible] would be difficult for a new player. So -- but we can go and tie up some new areas, urban areas and new rural area kind of a thing near to our areas also. It will give a good opportunity for us to go and expand for our distribution area -- business.
Sure. And what are the time lines we see on this because a lot of talks have been happening on this front. What would be the time line for you?
As parliament as in government was supposed to bring the bill, but I don't think -- it hasn't happened. So we are awaiting on this particular front from the government.
[Operator Instructions] The next question is from the line of Subhadip Mitra from JM Financial.
So just going back to the conversation around the fuel cost and the tariffs. So our sense is that for the UNOSUGEN PPA, there is a price cap of around INR 4.4, which implies a gas price of maybe closer to around $7-odd. So as per our math, what we are seeing is once you move closer to $9 kind of a number, you will probably start seeing variable cost, other recoveries also, not just fixed costs. So just wanted to get a sense from you that assuming that the gas prices has stabilized even around $9 or $10, what kind of impact would one be seeing on UNOSUGEN? Would we start seeing the fixed cost under recovery playing out over there?
If you look at the UNOSUGEN PPA was approved under Section 62, which is a cost plus tariff. So 2-part tariff, I would say. So if you look at the all PPAs, which approved in the country and of Section 62, fixed cost is part and we have to ensure that the plant is available, fuel is available. And we don't see any -- both are available in our case. Both should be available in our case. Fuel also, it should be available, though it is a bit expensive. But -- so we don't see any much issue on recovery of the fixed cost.
So the cap of that 4.4-odd, is that including the fixed cost because that was our understanding.
Yes. It is -- 4.4% is variable cost only. Fixed cost is INR 1.1 over and above that, which is around INR 228 crores kind of a thing.
Understood. So would I then be looking at potentially a INR 6.2 kind of a number as the cap, including the fixed cost?
No. About INR 4.28 plus INR 1.10 That is what the total cost.
Correct.
INR 5.5 is kind of a thing.
About INR 5.4, yes, INR 5.38 is the number. So INR 5.38 is the effective cap, right, both put together. So assuming your variable costs are higher, would you be looking at a scenario that you would voluntarily want to shut down the plant? Or are you saying that I will always see -- even if I'm buying gas at $15 and my plant is available to produce, you would still see fixed cost recovery because it's a bit of a quandary, right, because let's say you're showing gas availability at, let's say, what is it, $14 or $15 and you're running the plant and the price cap is, let's say, INR 5.4, you will actually start making under recovery. So which is why I'm asking the question.
So Subhadip, so what we are trying to say is that if, let's say, price of gas is uneconomical, which should not be passed on to the consumers, we'll still show the availability of the plant, which will allow us to pass on the fixed cost. As Saurabh explained that it is a Section 62 PPA, which means your fixed cost recovery is dependent upon the -- you declaring the plant availability. So if you are declaring our availability of plant, but it is not getting scheduled because your gas price is very high and because of which the variable price is very high, you'll still be getting the fixed cost. That is what our expectation is.
Okay. So you're not looking at a scenario that the DISCOM will ask you to produce since you're anyway showing availability, it's not a scenario where this DISCOM will ask you to produce the power and sell it to them at this life cap of INR 5.4 regardless of where gas is available. So that is not a contention?
No, no. That is not. That scenario is there for Section 63 PPA, not Section 62 PPA.
Okay. So good. This is a good clarity on this point. Secondly, on the same point, on SUGEN, would you be looking at a scenario where I understand that, that's an ROE-based PPA and you will show availability. But currently, you do earn a lot of these SHR and other efficiency-related benefits. So my understanding is that assuming that plant is not getting any withdrawal of ours because of higher gas prices, you might actually start seeing, let's say, the profit number there coming to closer to only about INR 100-odd crores, which is the normalized regulated ROE instead of a higher number that you own today? Are these numbers more or less correct?
If we are not generating, yes, there will be a reduction of this block in terms of fuel efficiency gain. So only impact would be the SHR saving, which you make if you're running the plant. If you're not running the plant, the savings from SHR savings would not accrue to us. That would be the impact on the profitability. There is no other impact in terms of SUGEN PPA.
Okay. So the base level ROE that SUGEN would earn would be, what, in the range of around INR 100 crores, INR 120-odd crores assuming only the ROE and without any efficiency?
We are not sharing those numbers on a plant-on-plant basis to everybody.
Next question is from the line of Noel from Ashika Group.
Actually I just had 1 question regarding, so CapEx for the current quarter and for the full year and forward -- for the next 2 years, has there been any changes?
The CapEx for the half year is in line, I would say, about -- we have incurred about INR 400 crores CapEx in licensed distribution area and franchising, which has about -- we stand about INR 113 of CapEx in franchised distribution area. As far as the guidance is concerned, our annual -- for next 3 years including current year, INR 1,200 crores for licensed distribution area and about INR 250 crores in for our franchised distribution area. The guidance is continuing.
Okay. Yes, that is one thing. So just one more thing. I just wanted to know so regarding the plan for RE, I just wanted to just confirm. So you said that the plan we have to add around 5 gigawatts of RE. So that is including both organic and inorganic, right?
Yes, sir. Both organic and as well as inorganic.
Next question is from the line of Aman Madrecha from Augmenta Research Pvt. Ltd.
Yes, sir. Sir, just I wanted to ask like out of the total distribution generation, what proportion is the regulated equity and what is the merchant power plant? And the second one is can you just give an outlook on the region power plant. Do we expect the demand to come back from the region power plant or the scenario is going to remain the same over the next 3 years?
In terms of region power plant, we expect the demand in the country will be -- it will remain strong because of the pure GDP growth as well as [ lesser ] demand. But the currently, the fuel is a bit challenging because of the -- we believe that the [ 1st ] April '22, fuel price will cool down and will go to the sustainable level. So it all depends on the -- what kind of fuel -- what fuel is available for the region plant.
And also, sir, on the -- like my first question, like what is the proportion of regulated equity? And what is the proportion of merchant power plant in our thermal land distribution?
For example, in terms of gas-based [indiscernible], for example, we have 114 megawatt of capacity out of which 835 megawatts is for our TPLD distribution and 150 megawatts for PTC. The balance is not much in capacity. In terms of UNOSUGEN, out of 382 megawatt, 278 megawatts is for our TPLD and balance is the merchant capacity.
Okay. And on the regulatory-based side, there is no regulated equity right?
It's all fully retired. All PPAs are there. So it's -- there's no merchant kind of a thing as far as renewable is concerned.
Okay. And sir, going forward, like are we expecting the renewable capacity we're expanding, that would be under again the merchant or the regulatory equity, whichever capacities are coming going forward?
It will be against a PPA with maybe the city or the state DISCOM. So it will be fully tied up, I would say. So that is -- we don't do anything for the merchant. So it will be the state DISCOM or the city kind of a organization.
Next question is from the line of Sumit Kishore from Axis Capital.
My first question is that are prevailing similar kind in prices, the 2 PPAs that you've signed with GUVNL and TPLD for 1.99 and 2.22, when are you going to award the contracts? And do you see the company meeting the 2022 time line October and December for these 2 projects?
So at prevailing module prices, we will go ahead with these projects.
So we are awaiting the things to be normalized. So we know that the prices have gone up as compared to what we have budgeted. This is -- we have time. So we have not yet decided to place the order for the module. So we are awaiting the price to stabilize and then we'll take that -- this thing forward.
Completion in October, you have to place your contract over what time frame the delivery of the projects.
So it will -- so we can award modules or we can procure modules 3 months before that also, if you have all other things in place. So we are working on it how to make this project or construct this project. As of now, the clarity is still not available when module prices will come down. But as far as your question is concerned, we can get it done in 3 months' time also if you have other things in place in terms of land or evacuation and transmission. So we are working on those aspects to keep us in ready-state condition. So that if module price is correct, we may be able to order those modules. But as of now, clarity is not available when the module prices are going to correct.
My second question is on the Bhiwandi loss trajectory. It seems to be a quarter-on-quarter increase from 11.6% to 15.1%. So the -- because COVID disruption has petered out, this should have reduced.
Bhiwandi in terms of...
From June quarter to September quarter, I'm looking at the T&D loss figure that you gave in your presentations, it's 13.1% as of September and it was 11.6% in Q2.
No. So I think quarter-on-quarter, looking at the T&D losses may not be so relevant. You'll have to see on a YTD basis because there are certain changes or certain estimates, which we make in terms of T&D losses are concerned. So ideal way to look at it is on a YTD basis rather than on a quarter-on-quarter basis. The expectation is that for my franchised distribution business, we would be more or less in line with what we have seen T&D losses pre-COVID levels or below that. So we are in that line. So if you look at from H1-to-H1 perspective, H1 of FY '22, Bhiwandi is at 13.07% of T&D losses, whereas H1 FY '21 was 23%. So we have made up quite a progress in terms of T&D losses are concerned. Quarter-on-quarter, there could be some aberrations, which we would like to avoid. So I think ideal way to look at it is on a YTD basis.
Got it. And just to understand your 5-gigawatt renewable portfolio target over a 3- to 4-year perspective and is this like -- has this been laid out by the senior leadership? And have you thought out -- about how the mix of solar is going in the overall company? Or this is more like an aspiration that you are heading towards?
So I think we are agnostic to solar or wind. We would look at project on -- project to project on a very stand-alone basis if it is meeting our criteria of internal hurdle rates, then we definitely want to take up that project either be it wind or solar. But it will all depend on what kind of IRRs they are giving us.
So this would be on a project-to-project basis. There's no formal target as such.
No. So the aspirations are to grow -- to have 5,000 gigawatts -- I mean 5,000 megawatts or 5 gigawatts by 2, 3 or 4 years down the line. But then it all depends on whether that is giving us our hurdle rates.
Sure. And 156-megawatt acquisition from CESC meets the hurdle rate of mid to high teen IRR?
Yes. So as we explained on the CESC acquisition is that the PLF, which we are looking at it right now are subdued because of certain issues there. We expect that we will be able to improve the IRRs based on which, it should meet our low-teen to mid-teen IRR expectations.
The next question is from the line of Bharani Vijayakumar from Spark Capital.
So this CESC acquisition, when will it be consolidated?
We are hoping to conclude during the course of this quarter.
Right. So from the third quarter's results, it will be consolidated?
That is what we are hoping. There are some PPAs to be concluded before the closing of the acquisition. So we are in the process of doing it. So we are -- we hope to conclude -- CESC to control cities by before end of this quarter.
Okay, okay. And coming to the renewables addition. So 2 is what we have in operation and under consistent 2 gigawatts. So we are likely to add 3 more gigawatts over the next 3 to 4 years and then reach 5 gigawatts at the end of it. Am I right?
Yes. Yes.
Okay. Right. So regarding this renewables and since most of it is going to be on a PPA basis, just trying to understand from a generator like you the attractiveness of all these green products in the exchange markets that have been introduced. So would you be interested and use those products to sell your power? If not, why? Like your green term-ahead market, green dam products in exchanges?
It is too early to comment on this. It just started recently. So we have not looked at it very thoroughly as of now. It's too early to comment on that.
Sure. So as of now, we are not using even green term-ahead market? Okay.
No, no.
We don't have any untied capacity.
We don't have untied capacity. All capacities are tied up with a long-term PPA.
Got it. Still, there are generators who are still use it, so just trying to understand if you have any such plans. Okay. So final question is on the gas tie-up. So the requirement per year for SUGEN and UNOSUGEN together would be around 5 MMSCMD like 4 for SUGEN and about 1 for UNOSUGEN?
About 3.2, I would say. 3.2...
They are 5 to 6 MMSCMD, it depends on the PLF levels of both the plants.
Okay. Why I'm trying to ask Rishi is to find out what has been side of this, let's say, this is the outside number. So you're telling for UNOSUGEN, we have tied up from IOCL and Reliance. So that is fully taken care.
Bharani , just to correct you, I think what we have said is that we -- for our long-term PPA liabilities are concerned, we have tied up around 25% for both the plants, which is from IOCL and Reliance. On top of it, as Saurabh-bhai said earlier in the call that we have floated a long-term current tender to source international LNG from the market, wherein we have tied up 3 cargoes each year starting from calendar year '23, which is roughly around 25% of our additional requirement. So that takes us to 50% of our requirements for both these plants under the PPA liabilities are concerned. Balance 50% is open and calendar year '22 is also open apart from domestic. So domestic is available for '22 and going forward. International is from '23 calendar year and going forward.
Okay. So all this roughly 5 MMSCMD requirement, how much is coming from domestic for us right now?
25%.
So 25% plus 25% plus 25%, 75% is taken care?
I think 25% is available from domestic market.
Correct. So 25% tied up to IOCL and Reliance and another 25% from calendar '23 for -- I mean, from international? Only 25% -- or 50% open in calendar year '22 and 25% open in calendar year '23.
No, no, no. 75% open in calendar year '22 and 50% open for '23 onwards.
Ladies and gentlemen, that was the last question due to scarcity of time. I now hand over the conference to Mr. Harshavardhan Dole for closing comments. Over to you, sir.
Thank you. On behalf of IIFL Securities, I thank you everyone for logging on to this call. Also sincere thanks to the management for giving us an opportunity to host the call. Saurabh-bhai, Rishi-bhai, any last comments that you would like to make before we conclude this con call?
Thank you so much to everybody, and Happy Diwali to everybody. Thank you so much.
Thank you.
Thank you very much, members of management. Ladies and gentlemen, on behalf of IIFL Securities, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.