Torrent Power Ltd

NSE:TORNTPOWER

Earnings Call Analysis

Torrent Power Reports Reduced Revenue Amid Monsoon Disruptions

Torrent Power's Q2 FY '25 financial performance showcased a PBT of INR 689 crores, down 7% from INR 741 crores a year earlier. Adjusted for nonrecurring factors, PBT fell 16% to INR 622 crores. The decline stemmed from decreased thermal generation profits, attributed to lower demand during a prolonged monsoon and increased operational costs. The company’s total installed capacity reached 4.5 GW, with a pipeline of 5 GW in the works. Looking ahead, Torrent forecasts continued flat demand growth of around 1% and plans to enhance its green hydrogen projects, with 18 Ktpa allocated under the PLI scheme.

Overview of Q2 FY '25 Performance

Torrent Power Limited reported a decrease in profit before tax (PBT) to INR 689 crore for Q2 FY '25, down from INR 741 crore in the same quarter last year—a reduction of approximately 7%. When adjusted for a one-off credit of INR 67 crore this quarter, the adjusted PBT stands at INR 622 crore, reflecting a more substantial decline of 16%. This performance is attributed mainly to lower contributions from thermal generation and renewable energy sources due to unfavorable weather conditions impacting power generation.

Key Factors Affecting Profitability

The thermal generation business reported a decline of about INR 80 crore, primarily driven by lower merchant power sales, which dropped by INR 35 crore due to decreased nationwide electricity demand amid a prolonged monsoon. Increased operating and maintenance (O&M) expenses, along with scheduled maintenance, further impacted profitability. From the renewable segment, contributions dipped roughly INR 29 crore due to reduced Plant Load Factor (PLF) from both wind and solar sources caused by lower wind speeds and solar radiation.

Insights on Demand and Market Conditions

Demand growth remained flat at just 1% across distribution areas. This stagnation can be linked to the extended monsoon that hindered electricity consumption, contrasting sharply with the erratic monsoon patterns from the previous year, which had resulted in higher demand. Future performance may differ as seasonal patterns evolve.

CapEx and Investment Update

In the first half of FY ‘25, Torrent Power spent around INR 1,400 crore on capital expenditures, with INR 650 crore allocated to renewable projects. They have laid out plans to expand their renewable energy capacity to 4.3 gigawatts over the next three to four years, while a significant portion of their current 3-gigawatt pipeline remains in development.

New Ventures and Strategic Developments

The company recently marked its footprint in green hydrogen by being allocated 18 KTPA of production capacity under the SECI PLIs tender. A pilot project blending green hydrogen with CNG in Uttar Pradesh is expected to be commissioned shortly, signaling Torrent's commitment to diversifying its energy portfolio. Furthermore, they were awarded a 2-gigawatt pumped storage hydro project by MSEDCL, strengthening their renewable infrastructure basket.

Guidance on Future Performance

Looking ahead, while the company anticipates operational challenges due to the monsoon's impact on demand, management remains positive about future earnings potential. They expect gradual improvements in their merchant volumes, especially with ongoing projects, and believe their ability to maintain prices amidst fluctuating demand can support profitability moving forward.

Conclusion and Investor Considerations

Despite a challenging operational environment impacted by adverse weather conditions, Torrent Power's strategic investments in renewable energy and hydrogen positions the company for future growth. Investors should note the company's capacity development plans, ongoing projects, and the efforts to mitigate risks associated with fluctuating energy demands. As they plan to enhance their renewable and green energy initiatives, there’s potential for long-term value appreciation.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Torrent Power Limited Q2 FY '25 Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Saurabh Mashruwala, CFO from Torrent Power Limited. Thank you, and over to you, sir.

[Saurabh Mashruwala, executive]

Thank you so much. Good evening to all of you and thank you for joining earnings call of Torrent Power for Q2 FY '25. First, I will take you to the performance of third quarter, after which phone lines will be opened for a Q&A session. We'll explain the performance of the company at PBT level first and then we'll take you through the tax expenses separately.

Reported PBT for the quarter stood at INR 689 crores compared to INR 741 crores in the corresponding quarter last year, a reduction of INR 52 crores is about 7% reported business. PBT for the current quarter includes nonrecurring credit of INR 67 crores on account of 2 factors: first, accounting of INR 99 crores on receipt of favorable order in the license distribution area, which mainly includes the carrying costs allowed -- carrying cost allowance, partially offset by lower generation from the wind power projects on account of forced stoppage of wind turbines due to heavy rains and Asna cyclone witnessed in Gujarat during the quarter, leading to a reduction of contribution of INR 32 crores.

Adjusted for this one-off, PBT for the quarter stood at INR 622 crores as compared to INR 741 crores in the comparable quarter of last year, reduction of INR 119 crores is about 16%. Business-wise factors contributed to this performance are as follows: first, contribution from thermal generation business reduced by about INR 80 crores, mainly on account of 2 factors. First, lower contribution from sale of merchant power and LNG of INR 35 crores.

The country, in general witnessed a lower electricity demand during the quarter, mainly on account of extended and widespread monsoon in the current quarter against erratic monsoons during the comparable quarter of last year. So in any ways, in both the quarters are not pretty comparable. Despite a lower overall demand, the company was able to maintain almost same level of merchant volumes. However, margins were lower due to extended monsoon keeping merchant price subdued. Second, additional contribution for thermal generation was also impacted due to higher O&M expenses and lower incentive on account of scheduled maintenance during the quarter.

Second, noncash adjustment on account of foreign exchange variation of INR 24 crores. The contribution from renewable generation adjusted for the one-off reduced by INR 29 crores on account of lower PLF existing wind power -- wind and solar power plant due to lower wind speed resources and radiation, respectively.

Lower contribution from capacity of 274 megawatts commissioned during the quarter on as the project is under stabilization phase. The operation license as [indiscernible] business compensated to each other and the segment as a whole remained stable in terms of profitability.

Demand growth was flat during the quarter at 1% across all our distribution areas. Balance deviation is on account of other income, net finance costs and depreciation.

This completes the explanation of financial performance during the quarter. Moving on to the project update. For [indiscernible] renewables energy capacity of 274 megawatts [indiscernible] personalized during the year, taking an aggregate installed generation capacity of the company at 4.5 gigawatts as on 30th September '24, comprising of 2.7 gigawatts gas, 1.5 gigawatts of renewables and 362 megawatts of coal based capacity.

The company was awarded pumped storage hydro projects of 2 gigawatt in an auction conducted by the MSEDCL during the quarter. Pipeline project as of the end of the quarter includes 3 gigawatt of renewable power project and 2 gigawatt of pumped storage hydro project and 2 transmission projects at Khavda and Solapur. Further details on the pipeline for this have been summarized in our latest investor presentation available on the website.

Moving on to the new ventures. First, company's pilot project in green hydrogen blending with the CNG in UP is expected to be commissioned shortly. Further, the company has got allocation of 18 Ktpa of green hydrogen production under SECI PLIs tender at an average PLI of 28.89 kg. Technical feasibility has been done and detailed business plan is under preparation.

With respect to pumped storage hydro project, we have identified project site with potential of 8.4 gigawatts of pumped storage hydro in the state of Maharashtra and UP. Pre-feasibility study completed and MOU terms of reference has been granted for the entire capacity of 8.4 gigawatts. Agency also appointed for the EIS study, as in [indiscernible] years. We have been received LOA for providing pumped storage facilities to MSEDCL for aggregate capacity of 2.2 gigawatts.

That's all for the quarter. Now I would request coordinator to open the line for Q&A session. We wish everybody to stay safe and healthy. Thank you so much. Handing our line to operator.

[Operator]

[Operator Instructions] Our first question comes from Mahesh Patil from ICICI Securities.

[Mahesh Patil, analyst]

So my first question is with respect to the employee cost and other expenses in Q2. There seems to be some significant increase compared to Q2 last year. Employee costs are up by 18% and other expenses around 14%. Any specific reason, any one-off items in this?

[Saurabh Mashruwala, executive]

At first, there is no one item, normal increases are there whereas increase in O&M expenses for the higher merchant sales is accounted for. Normal staff cost increase is there. And the ForEx loss, which is a noncash item, we also booked as other expenses.

[Mahesh Patil, analyst]

Foreign exchange item is around INR 24 crores you mentioned, correct?

[Saurabh Mashruwala, executive]

Sorry?

[Mahesh Patil, analyst]

Foreign exchange loss that you mentioned is INR 24 crores, correct?

[Saurabh Mashruwala, executive]

INR 24 crores. In fact, if you look at the euro was about INR 90 on 30th June went up to INR 94 as on 30 September. It again came down to INR 91 as of today. So hopefully, this will get reversed. It's a noncash item in the Q3.

[Mahesh Patil, analyst]

Okay -- and sir, my second question is regarding our Bhiwandi franchise area, wherein the agreement is expiring in Jan '27. And as we're almost entering 2025 now, any plans and related provisions in the agreement for further extension?

[Saurabh Mashruwala, executive]

So provision, the franchisee agreement Bhiwandi -- when we last got renewed in 2017, there is a provision that there is mutual concern, it can be extended for further 5 years. So when the time comes in the '27, we'll again discuss the MSEDCL for the extension. But the agreement provides the extension period of -- further period of 5 years with the mutual discussions.

[Mahesh Patil, analyst]

So this will be taken up for discussion, something in FY...

[Saurabh Mashruwala, executive]

At appropriate time, we'll take it up with the MSEDCL.

[Operator]

[Operator Instructions] Our next question comes from Amit Bhinde from Morgan Stanley.

[Amit Bhinde, analyst]

I just wanted to know the exact quantum of merchant EBITDA that was there in the base quarter because to the extent that I remember in Q2 FY '24, we just had around INR 25 crores of merchant EBITDA I think so. And notes to the accounts had around INR 150 crores of revenue on that, which you used to disclose earlier.

So now if I say INR 35 crores of difference then we are indicating minus INR 10 crores of merchant EBITDA. I don't think that would be the case, right? We wouldn't be selling anything on loss. So if you can help us with the exact numbers.

[Saurabh Mashruwala, executive]

Last quarter, merchant EBITDA was about -- merchant profit, I would say. It was about -- close to about INR 40 crores, INR 42 crores. And current since there is INR 35 crores reduction, about INR 7 crores for the current quarter.

[Amit Bhinde, analyst]

INR 7 crores is like that. So we had -- if I talk in terms of units, we had DGEN generating around 180 units -- million units. And apart from that, some small sales that you would from SUGEN, et cetera. So would the number of units be around 200 MU?

[Saurabh Mashruwala, executive]

300 MUs.

[Amit Bhinde, analyst]

So you sold 300 MUs and you made a INR 7 crores of profits.

[Saurabh Mashruwala, executive]

The market was subdued because of the monsoon season. Q2 generally is always has an impact of monsoon. And this quarter monsoon is very widespread and very heavy as compared with the last year was a very erratic monsoon, not that's widespread. So demand last quarter or middle quarter demand was very strong as compared with the current quarter. So which has impacted the merchant sale also as well as our wind and solar PLF also this quarter.

[Amit Bhinde, analyst]

Then if I look at 300 million units approximately sold INR 7 crores of merchant EBITDA, we're just making a [ 0.2 ] EBITDA per kilowatt, that's pretty low, I mean...

[Saurabh Mashruwala, executive]

If you look at the price also over the exchange also, it was lower as compared to -- so if you compare the comparable period also it was a bit higher as compared to a last year. So monsoon has impacted the quarter in terms of merchant volumes as well as wind and solar PLF also.

[Unknown Executive]

So if you look at, Amit, last year, Q2, there were erratic monsoons and it was not widespread -- compared to current years in this quarter, it was a very widespread and very good monsoons because of which the demand has been impacted. So even after that sort of a demand, we were able to demonstrate that we will be able to sell merchant of 300 MUs in this quarter with a lower profitability.

[Amit Bhinde, analyst]

In anyways, I think -- now just 1 more number that I would like to understand. Earlier, when the Brent price was around $85, we used to say our effective cost would be around [ INR 6.5 ] or so gas cost. So now with this Brent price falling steeply, where does our gas cost stand per unit?

[Unknown Executive]

You get the $75 as a Brent. And roughly, it will be $75 and about INR 4.50 -- I think, Amit, so -- I think our long-term contracts are linked with Brent,so a 3-month dated Brent. But for spot cargoes, they are typically sort of fixed rate prices. So I'm not able to get a clear understanding on what is your question. You can't directly compared Brent with merchant cost of fuel. Long-term contracts are linked to Brent. But for merchants, we typically book spot cargoes. And then we tend to convert that into fixed rates also. So effectively, we'll have to look at it on an MMBtu basis.

[Amit Bhinde, analyst]

Right Okay. Got it. Because I was just trying to compare it with the slope because the Brent was correcting, then I thought probably we'll have lower gas costs and lower pricing probably to...

[Saurabh Mashruwala, executive]

That you are right. That is part of our long-term contracts, which are typically for our PPA, which we have.

[Operator]

[Operator Instructions] The next question comes from Sumit Kishore from Axis Capital.

[Sumit Kishore, analyst]

Just 1 question. Of your total contracted capacity of 2,149 megawatts -- is it correct that PPAs have been signed for the entire capacity, except the REMCL 100 megawatts?

[Saurabh Mashruwala, executive]

So renewables, you are talking about renewable capacity?

[Sumit Kishore, analyst]

Yes, yes. The contracted 2,149 megawatt excluding the -- I think REMCL it seems that PPAs are signed across the board, right?

[Saurabh Mashruwala, executive]

Renewable -- as far as renewable, about 1.5 gigawatt operational capability is completely tied up. About 3 gigawatt under construction. Out of the 3 gigawatt, about 200 megawatts is untied up mainly becasue of the merchant. Rest is tied up, PPA signed or the LOI is received.

[Sumit Kishore, analyst]

Okay. So I was referring to Slide 15, where the contracted capacity is 2,149 megawatts. Out of that, only REMCL shows that the SCOD is 24 months from PPA.

[Rishi Shah, executive]

I think you're right, Sumit. PPA is pending for REMCL. And as Saurabh explained for airpower since it's a merchant capacity which we are putting up, there is no PPA. Apart from that, every other contract, we have already entered into PPA. And REMCL should get -- should be, let's say, in 2 months or 2 months time.

[Saurabh Mashruwala, executive]

In a month or 2 months, it will be signed.

[Operator]

[Operator Instructions] The next question comes from Anuj Upadhyay from Investec Capital.

[Anuj Upadhyay, analyst]

Just wanted to get your sense on the reimposition of Section 11. It has been extended for the thermal, but not for the gas base station. So I want to know your view on this. And if you can elaborate more on the recent PSP tie-up which you did with Maharashtra, that would be helpful, sir.

[Saurabh Mashruwala, executive]

So in terms of Section 11, it is up -- during the summer time, it was imposed first time because of [indiscernible], right? So there are prices we haven't got renewed also. So we'll have to see next summer -- how the next summer will be. But -- and as far as the ESP capacity of 2 gigawatt is concerned, it's a 40 years contract we have and about INR 8,500,000 per megawatt -- INR 8,500,000 per megawatt per annum is the rate fixed cost.

And the power will be provided by the MSEDCL, so we don't have to worry about the power. And it's a 5-year -- total 5 years of continuous supply and [ 3 gigawatt ] is optional. We will schedule it. And it will be a cycle of about 25% in the cycle of the envisage is stipulated basically, meaning maximum cycle of 25%. That is what the contract is and there will be 2 gigawatt of contracts. We have signed for 40 years.

[Rishi Shah, executive]

And Anuj, just to add to what Saurabh said on the earlier question of yours in terms of Section 11 not been extended to gas-based power plants. Typically, if I look at gas-based power plants in the country, apart from us, a lot of gas-based power plants are slightly costlier than coal-based power plants. So typically, on a FIFO basis, if you look at it, demand -- if demand is higher, then Section 11 typically would be available on gas-based power plant. But if demand is lower, I think then first port of call would be for coal-based power plant to be operational under Section 11. And then if it surpasses certain amount of demand, then typically would be on the gas-based power plant because it will be looked upon from the entirety rather than on 1 particular plant. So all other gas-based power plants are slightly costlier compared to coal.

[Anuj Upadhyay, analyst]

I get it, I get it Rishi. So would it be fair to assume that considering that the Section 11 can be imposed only mainly during the peak time period, say, 4 months of the summer and then probably it may get extended, for say, September, October, probably, I'm saying subsequent year as well. So DGEN utmost can operate at around 35% to 45% kind of a PLF in the best case scenario, I'm saying or even that is on a slightly higher side?

[Rishi Shah, executive]

Anuj, I think giving you specific numbers is very difficult because we also would -- it will be just putting an estimate. But what I can tell you is that if you look at our Q2 numbers, DGEN has shown a higher PLF compared to Q2 of last year. Our merchant volumes are also higher compared to last year, even though the prices were lower.

So whether Section 11 is imposed or not, I think we are in a position to run our plants without Section 11. In terms of profitability is concerned, I think it's a factor of what are the prices available in the market. And even at such subdued prices, which we have seen in Q2, we have been able to make profits. Now those profits may not be significant compared to what we have seen in Q1. But typically, running plants in Q2 where there is demand is pretty low, that also is, I think, is a positive sign. I think that's what I can tell you. In terms of percentage CLF, very difficult to give you any guidance on that.

[Operator]

The next question comes from Sumit Kishore from Axis Capital.

[Sumit Kishore, analyst]

I just had a follow-up question. What has been the total CapEx that you have incurred so far against the renewable portfolio expected project cost of INR 19,316 crores so far. And yes, that's the first question.

[Rishi Shah, executive]

So Sumit, we don't have those numbers against INR 19,000 crores, what we have spent. On a broad ballpark number, I think we would have spent around INR 1,500 crores -- but exact numbers, I can give it to you off-line. As of now, we don't have that on hand.

[Saurabh Mashruwala, executive]

Cumulative number, we don't have right now.

[Sumit Kishore, analyst]

Okay. So total CapEx that you have incurred in first half of the year at a consolidated level would be how much -- this is 15 billion is only for RE.

[Rishi Shah, executive]

Sorry, you're talking about the consolidated H1 CapEx which we have spent?

[Sumit Kishore, analyst]

Yes. So INR 15 billion is the RE CapEx that you have incurred so far for under construction project. What is the total H1 consolidated CapEx also, if you have.

[Rishi Shah, executive]

Yes, I'll tell you. So for renewables for the H1, we have spent around INR 650 crores in the renewables part of it. For license and franchise put together, we have spent around INR 700 crores. And some INR 40 crores -- INR 30 crores, INR 40 crores balance on other CapEx side. So if I look at the overall CapEx number, around INR 1,400 crores of CapEx, which we have spent in H1.

[Sumit Kishore, analyst]

Okay. Okay. Just one observation that I wanted to clarify, if I look at capital working progress in the BSE filing, as of 30th September 2024, it is INR 2,143 crores. And as of March 2024, it was INR 2,472 crores. CWIP seems to have come off in the first 6 months. So I don't have thought that they should have gone up.

[Rishi Shah, executive]

No. I think, Sumit, so that's because we have also commissioned around 270 -- 247 megawatts of capacity for our TPL-D 300 megawatts project. Partly it is because of that and partly because our license distribution also would keep on capitalizing on commissioning certain projects.

[Sumit Kishore, analyst]

Yes, very clear.

[Saurabh Mashruwala, executive]

It is because of the capitalization only.

[Operator]

[Operator Instructions] The next question comes from Mahesh Patil from ICICI Securities.

[Mahesh Patil, analyst]

So my question is on the other income for the quarter, which seems to have gone up to around INR 125 crores on consol. So any color on this? What has contributed to the increase in other income?

[Saurabh Mashruwala, executive]

Normal increase. It's not -- I would say [ INR 125 crores ], it's a normal increase.

[Operator]

Mr. Patil, do you have any further questions?

[Mahesh Patil, analyst]

No, thank you.

[Operator]

[Operator Instructions] The next question comes from Sagar Gandhi from Invesco Mutual Fund.

[Sagar Gandhi, analyst]

My question is on the renewable portfolio. So while we are planning to expand it to 4.3 gigawatts over the next 3 to 4 years, can you highlight or give a broad perspective on any challenges that you faced for evacuation of this upcoming capacity?

[Saurabh Mashruwala, executive]

So if you look at the renewable portfolio, synergies will be the land acquisitions, evacuations. These are the main challenges. But as far as our portfolios are concerned, about 80% land is in possession and all core connectivity approvals are in place for -- because those are the things -- first thing we work on those things, and then we participate within the project. So these are the things -- as far as we are concerned.

[Sagar Gandhi, analyst]

So out of our under construction 3 gigawatt of renewable capacity that is, I mean, in pipeline, are you trying to say that all of it is -- I mean, has got transmission access or the transmission access will be there by the time this portfolio is ready?

[Rishi Shah, executive]

So Sagar, what we do is we keep on acquiring land. So last 2 years, if you look at it, then the 3 gigawatt which we are looking at, was built effectively in the last 9 months. But before that also -- even though we were not winning some bids, we kept on acquiring land, which provided good in PLF terms of solar or wind. Along with this, we also kept on applying for connectivity approvals.

So effectively, what has happened is for this 3 gigawatt, which is under construction, we have around 80% land, which is already available. As far as evacuation is concerned, Stage 1 connectivity approvals are there for all the projects which we have -- and we also keep on looking at additional land parcels and connectivity approvals to -- as and when we keep on getting new projects, we'll be able to utilize those connectivity and land parcels which are there or which we have acquired over a period of time.

So effectively, we have identified these 2 as a major -- could be major roadblocks for a renewable project, and we try to mitigate those risks by taking without any project in hand, we try to keep those land and evacuation ready. So as and when a new project comes in, we are ready with that.

[Sagar Gandhi, analyst]

And sir, my second question is on the green hydrogen side. So while many players are figuring out on the manufacturing of the electrolyzer side, so what steps we have taken on that segment? And what is our broad roadmap in that direction.

[Rishi Shah, executive]

No, you're talking about green hydrogen, right? So effectively, we have won 18 KTPA of green hydrogen under the PLI scheme. Right now, we are trying to find out a commercial end point in terms of the price of -- at which we can sell right now and what are the costs at which we can generate so unless we are able to get a clear answer to that, we have not committed any capital under that.

As and when -- so we are working on that as and when we get a clear answer on both these points, I think we'll be committing the capital. But to give you any perspective on that right now is difficult.

[Sagar Gandhi, analyst]

Sure. Sir, any tie-ups that you may have done on the electrolyzer side that you may want to highlight?

[Rishi Shah, executive]

Electrolyzers?

[Sagar Gandhi, analyst]

Yes, yes. Because that is a precursor to manufacturing of green hydrogen. What capability we have? Or are we tying up with some global players for building that capability?

[Rishi Shah, executive]

No, correct. So I think that would be a second stage. As and when we decide to commit on this capital for green hydrogen, then we'll be looking at electrolyzers, locking in electrolyzers and renewable capacity. But as I told you, we are still working on the end use and in terms of economically viable end use and the selling price. So once we have a clear view on that, before that, we'll not be putting in any orders as of now.

[Operator]

The next question comes from Mohit Kumar from ICICI Securities.

[Mohit Kumar, analyst]

I joined late, so I may be repeating the question. But my question is on the pumped storage hydropower plant. So where are we in terms of giving the orders, what are the time lines you're looking at? What is the kind of after cost you are expecting?

[Saurabh Mashruwala, executive]

In terms of pumped storage, [indiscernible] feasibility study is completed. TOR has been received from the MOEF and we have appointed agency for EIA study. And Letter of Award also received for 2 gigawatt capacity from MSEDCL -- the cost will be roughly about INR 4.5 crores to INR 5 crores per megawatt. That is what our current estimation is.

[Mohit Kumar, analyst]

We must have identified the site, right? So what is the time line you're looking at? I think what is the -- I think PPA allows you 48 months, am I right to commission?

[Saurabh Mashruwala, executive]

Yes, 48 months for the commissioning period [indiscernible] PPA.

[Mohit Kumar, analyst]

And have you signed the PPA as of now? Or is it still to be executed?

[Saurabh Mashruwala, executive]

Sorry. We are not able to hear you properly.

[Mohit Kumar, analyst]

Have you signed the PPA or PPA still to be executed.

[Saurabh Mashruwala, executive]

No, I think it should be signed in some time.

[Operator]

[Operator Instructions] As there are no further questions from the participants. I now hand the conference over to Mr. Saurabh Mashruwala for closing comments.

[Saurabh Mashruwala, executive]

Thank you so much for joining Torrent Power's earnings call. Thank you very much. I wish everybody to stay safe and healthy. Thank you so much.

[Operator]

Thank you. On behalf of Torrent Power Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.