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Torrent Power Ltd
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Ladies and gentlemen, good day, and welcome to Torrent Power Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Saurabh Mashruwala, Chief Financial Officer, Torrent Power Limited. Thank you, and over to you.
Thank you so much. Good morning to all of you. Thank you for joining the earning call of Torrent Power Limited for Q4 FY '23. First, I will take you through the performance of the quarter, after which all lines will be open for a Q&A session.
We extend the performance of the company at PBT [indiscernible] and we take the tax expense separately thereafter. Reported PBT for the quarter before exceptional items stood at INR 668 crores as compared to INR 597 crores in the corresponding quarter last year, an increase by INR 71 crores, about 12% on a reported basis.
To understand the underlying performance of the company, we'll take you through the nonrecurring items first, in the quarter. So while there are no nonrecurring items for the current quarter, there were some nonrecurring items in the last quarter compared to the quarter last year.
There are 5 nonrecurring items of -- in Q4 of FY '22. First, we were sort of provision for doubtful date at franchise and distribution business of INR 16 crores due to better collection efficiency and increased vigilance activity within this quarter. Second, we were at partial provision of INR 28 crores out of total provision of INR 161 crores made for [indiscernible] projects -- wind projects during FY '20 as a performance [indiscernible] issued the key -- issue as a security for the development of transmission lines has been released by the PGCIL.
Third, reverse of a partial provision of INR 29 crores out of total provision of INR 51 crores made for 115-megawatt [ 65] projects in FY '20 as a project development work has initiated. Fourth, a credit of INR 34 crores recognized as a liquidity damage for 126 megawatt [ MSEDCL ] wind power project on account of settlement with the EPC contractor in the last INR 11 crores, which is due to renewal projects acquired during Q4 of FY '22 and contributed partially during the quarter. All put together, net nonrecurring credit fall above INR 118 crores in Q4 of FY '22.
As just for about one-off, PBT for the quarter stood at INR 668 crores compared to INR 479 crores in the comparable quarter of last year, which is higher by about INR 189 crores, about 39%.
I will now take you through the key highlights on the improvement in PBT of INR 189 crores for the current quarter. The improvement is the operating properties on account of 3 factors -- mainly 3 factors. First, improvement in overall contribution of distribution business, which improved by INR 190 crores, both licensed distribution business and franchised distribution business reported improvement in 2 following reasons. There are 4 reasons for the improvement both the licensed as well as the franchised distribution business.
First, improvement in T&D losses in licenses over franchise business by [indiscernible] as contribute an additional INR 48 crores. Improvement in the volume as well as tariff in the distribution franchise area contributed about INR 19 crores. Higher return on equity lowered [indiscernible] license business has also contributed INR 33 crores. The last contribution for the new acquisitions, which is Daman and Diu has contributed additional INR 100 crores in the correspond -- current quarter.
The second reason is the improvement in distribution business was partially offset by lower contribution of INR 19 crores from gas based power project. There are 3 reasons for the lower contribution in the gas based power project. First, get prices which were elevated during the first 9 months of the year has gone down to $10, resulting in -- $10 per MMBtu resulting in the lower profitability from trading of LNG within the quarter by INR 30 crores compared to the corresponding quarter of last year.
Second, additionally, the contribution from long-term PPAs were lower by INR 23 crores in the quarter resulting into the lower fuel savings, partially offset by lower O&M cost. Third, the [indiscernible] charge was lower by INR 37 crores for the gas based power plant on account of onetime impairment charges incurred in Q4 of last year, in the [indiscernible] as well as [indiscernible] date in SUGEN. The third reason is [indiscernible] business of the company witnessed an increased contribution of INR 25 crores.
So moving on to the after-tax numbers. Conservative profit after tax reported for the quarter is INR 488 crores as compared to loss of INR 484 crores in corresponding quarter last year, which is higher by INR 972 crores. Last year loss numbers increased [ debit ] on account of incremental charges in the quarter of INR 1,300 crores and later, we were all in deferred tax liability of INR 372 crores. So net charge to the P&L was INR 928 crores. Just of all this impairment provision [indiscernible] for the quarter stand at INR 488 crores versus INR 444 crores for corresponding quarter last year, is higher by INR 44 crores, about 10%.
Now moving into the operational performance of the company. Distribution business weakness and year-on-year improvement in the demand of [indiscernible] 6%. [indiscernible] Losses have also witnessed a marked improvement for FY '23 across all locations, mainly due to continued focus on the [ low ] reduction as well as recovery activities.
This completes the overview of the quarter what we finance as well as operating performance of the company. Now moving on to the -- we'll give you a brief update on the current projects, which are under pipeline. First, commission of 115 megahertz SECI-V [indiscernible] delay in construction of EHV line, due to sectors were under control of the company. And same is expected to look at commission by end of June '23. Necessary application for extension of [indiscernible] has also made to the SECI.
[indiscernible] make solar projects. As informed in the last call, we said to commission by end of this fiscal '24. [indiscernible] wind project was executed in March '23. The contract for the development of the project has been awarded to Suzlon. SPOD date of the project is expected in March '25.
Moving to our Distribution segment. The company has made application for grant of parallel distribution license [indiscernible] Maharashtra, including Thane and Palghar, Pune and Nagpur. [indiscernible] MSEDCL is encumbered licensee and will continue to remain as a licensee. Once the license is granted, which is expected to take 3 to 6 months' time, consumer will have -- in this area, will have option to choose any 1 of the licensee for the power supplier.
That's all for this quarter. Now I will request the coordinator to open the line for Q&A session. We wish everybody to stay safe and healthy. Thank you. Handing over to operator. Thank you.
[Operator Instructions] The first question comes from the line of Mohit Kumar from ICICI Securities.
Congratulations on a very remarkable performance on distribution side of the business. First question is, sir, can you please give us the breakup of the revenues, especially for Tata and [indiscernible] -- sorry, the demand view revenues, EBITDA and profit for the fiscal 4Q?
For the full year, the revenue is about close INR 6,000 crores and end user of close to 10,000 annuals.
Sir, on the EBITDA PAT, sir?
Profit as we see here is about INR 100 crores for the quarter. That is what we see in the content...
For the year, sir? For the year, for the fiscal year?
[ INR 114 crores ] PBT.
Understood, sir. My second question is on this -- on the breakup, which you usually give for the EBITDA into the 4 segments. For fiscal year, if you can give us, sir?
For fiscal year, you can notch it down to [indiscernible] EBITDA of INR 1,500 crores, INR 900 crores last year. [indiscernible] about INR 850 crores against last set of about INR 650 crores. Tax distribution is close to about INR 1,800 crores, against INR 1,238 crores last year. [indiscernible] I see about INR 1,030 crores against last year of 760 and overall EBITDA is INR 5,140 crores as against INR 33,826 crores.
And my third question is on the -- given that the gas prices have declined materially, how do they think about tying over the gas now for FY '24?
The gas price has declined substantially as compared with what we have witnessed in the -- maybe the Q1 -- Q1 and Q2 quarters is now sub $10 available per MMBtu. So -- and we expect -- if you look at the storage capacity in Europe also, it has also started going up. We expect this for gas price will further come down somewhere around in the month of June, July kind of thing. So it will be the right time at that point of time to tie the further cargoes. So we are waiting still -- to yet by -- to further fall, decline. And I think in a couple of months' time, we will start tying up the cargoes, that is what our expectation is.
And how much is long-term tie as of now sir for FY '24?
We have available from IOCL and RIL reliance [indiscernible]. So we can amount about 25% the requirement. And we have -- every next 3 years, we have 3 cargoes tied up for each of the years, which amount to about 20%. About 45% to 50% that is already there.
Next question comes from the line of Rahul Modi from Nippon Asset Management.
Congratulations for a good set of numbers. Sir, just wanted your medium-term view on how we are progressing in the various projects, which are there under construction in renewables. And in terms of strategy going forward, over the next probably 3 to 4 years, in terms of renewables, whether we are looking at inorganic expansion or participating in base, C&I -- all of that.
Yes. See, our strategy is very clear. We will -- we want to focus more on the distribution as a renewable segment and as a transition also. So focusing on -- we are a willing team. In the renewables side, yes, we have some 100-megawatt of projects in the pipeline. We are also actively looking at the inorganic acquisition as well as greenfield projects also. The plan is to, as we explained earlier also, the plan is to reach to about 5 gigahertz of capacity the next 3 to 5 years' time. So we'll continue to focus on the renewable segment.
At the same time, we also will focus on the distribution also because they are a core of our business, important business for us. And as we explained earlier also in the last call, we have participated in Maharashtra for a couple of locations, which will take some time because we have to wait about -- there is some process involved with the regulator. So that will require about 3% to 6%. So we will focus more on distribution as well as renewable assets also.
Sir, one question I had on apparently, we've been allotted some line for green hydrogen in Gujarat. Some thoughts on that, please.
Yes. It's a land we have allocated. Large land is allocated. So we plan to set up renewable projects there also. So it will -- and we beat the various picky projects and state discount project for the renewable segment.
So this is not because green hydrogen per se, but for RE projects itself.
Yes. RE and green hydrogen, both.
Okay, so okay. But how will set up -- will it be in tandem or you are first going for -- so this is just land, you will only start putting up capacity once you get PPAs or you win bids up like and so forth.
Absolutely, absolutely.
And how much land have we got in terms of megawattage, what can be put up there?
About 600 -- 6,000 hectares we got in Gujarat. So it's a very large piece of land we got. So we'll develop the projects as and when we tie up the PPAs.
So is it fair to assume that is primarily for solar and that will be what, 2,000 megawatts -- 3,000 megawatts?
Yes, about 3,000 megawatts.
Okay, and that will be in solar.
It's solar and wind, both hybrid kind of [indiscernible].
Next question comes from the line of Mohit Kumar from ICICI Securities.
My question was how much of -- what is the consideration for the land which you've got from Gujarat?
6,000 hectares.
No, sir. Consideration for the land, how much do you need to pay per annum basis or it was an upfront number?
I don't have the numbers right now. We can do it offline.
[Operator Instructions] Next question comes from the line of Amit Bhinde from Morgan Stanley.
I just wanted to understand what's happening on the gas EBITDA. Last year, the gas EBITDA was around INR 462 crore for the quarter. Right now, as you said, it's 15,000 for the year. Then moving to the RLNG gains, it hardly comes out to be INR 213 crores for the quarter. So what exactly is the difference between last year INR 462 crore and INR 213 crore this year on the gas base plants -- thermal plants, totally [indiscernible]? So have you earned lower incentives? What has got -- what has changed Y-o-Y?
So we give the last year full year gas EBITDA was of INR 1,500 crores compared to INR 900 crores this year. In the Q4, if you look at the numbers, we made EBIT about INR 200 crores in gas base power project compared to INR 282 crores last year. Yes, gas EBITDA is lower for the current quarter -- in the current quarter.
So what are the reasons for this change? Can you just highlight it?
PLF is low -- PLF is low and profits in the gas are also less compared with the comparable quarter of last year.
Then, I guess, you mentioned that there's a minimal gain on RLNG this time, I guess, because that's -- last time it was INR 50 crores. And this time, as you mentioned that there's a deference of INR 30 crores.
This quarter we were lower by INR 30 crores. This quarter, it's lower by INR 30 crores.
Last year, Q4, I think it was INR 50 crores, INR 30 crores lower. So it is only INR 20 crores this time. So I don't -- so that explains...
Last quarter, it was INR 120 crores, this quarter it's about INR 90 crores.
Okay. Still INR 282 crores on INR 200 crore difference, INR 82 crores of that INR 30 crores is explained, remaining INR 52 crores?
Remaining INR 52 crores EBITDA lower fuel gain about INR 25 crores because of lower generation.
Next question comes from the line of Bharani Vijaykumar from Spark Capital.
Am I audible?
Yes, you can speak little louder?
So I just want to know the EBITDA contribution from the RLNG sale for the full year FY '23.
It was about close to [ INR 200 crores ] for the full year.
Okay. And just to reconfirm the yearly EBITDA number. Renewables, you said INR 850 crores this year was INR 650 crores last year, right? EBITDA from renewables, INR 850 crores this year versus INR 650 crores last year, correct?
INR 850 crores versus INR 650 crores last year, yes.
And the license distribution INR 1,800 crores versus INR 1,238 crore last year. Is that right?
INR 1,800 crores or INR 1,400 crores, INR 1,438 crores last year.
And coming to this gas that we are -- sorry, gas power where we are supplying during this summer peak, from, say -- so which are the plants from which we are supplying. And of course, the tariff is in the public domain, but how much would be the contribution on a per unit basis?
We are supplying to our [indiscernible]. We'll come back on the contribution thing then later on off-line. We don't have numbers right now.
No problem. But this will be happening only for the 3-month period, right?
Up to June 15, I would say.
Okay. Any likelihood that it will be extended?
It all depends on the summer. How the summer is going on. So how is the demand working out going forward, it all depends on the demand as well as the demand and supply situations.
Next question comes from the line of Nikhil from Alliance [indiscernible].
My first question is on the distribution opportunities being excluded in Maharashtra. Would it be possible for you to share some more color on that? Is the infra owned by the incumbent and the PPAs, are they transferred, are they not transferred? How does it work?
Maharashtra distributions are same.
The opportunity is Maharashtra distribution.
Yes, it's too early to talk about. We have applied for the couple of areas. So regulatory is evaluating our applications, require some process at the regulator end. So takes about 3 to 6 months' time. Once that we have some visibility on these applications, so we'll update once it process -- basically regulatory is undertaking a process. So it requires about 3 to 6 months' time.
So just to add what Saurabh has told, it will be a parallel license. So we will -- we are supposed to build up our own network and source our own power. So there will not be any sharing of PPA or usage of any network, even if we will have to use it will have to be as per the billing charges what we will have to pay. Effectively, it's a parallel license, a second license.
A related question on the same front on a competitive distribution model, government has been working for a long time. Any further progress you've seen from a government perspective on it? I mean they've been trying to update that, but any progress that you have heard on beyond?
I think government is -- it would be put up in the coming session of Parliament. Nothing more than that in terms of any color on that.
Understood. And 1 last question. On the renewable opportunities, there was this press news, I think earlier this year on Torrent exploring acquiring assets from renew power. Are those discussions still ongoing? Possible to share any views on those?
These are under evaluation, there is no -- there is no firm answer on this, but its still under evaluation right now.
Next question comes from the line of Harsh Dole from IIFL.
I got quite a few questions. First is with regards to our Ahmedabad and Surat circle. I believe there has not been any tariff increase. In that case, how do we intend to earn the incremental ROE towards the CapEx that we have done or planning to do? That's point number one.
Point number two was I heard that we have made almost INR 140 crores of PBT in the DNH circle. That's almost 14% ROE on a full year basis. Any one-offs in that particular circle. Third was we heard in news that you're likely to bid for the coal-based plant of SKS in terms of acquiring it at [indiscernible] in terms of our strategy of not putting up additional capital for generation?
In the first question about the distribution Ahmedabad and Surat distribution, so yes, tariff, if not given but always a regulator pass on the tariff between power purchase cost in the fuel costs and power [indiscernible] increased by our [indiscernible]. On a regular basis, we are getting the increase in the -- in terms of our [indiscernible] PPAs. So that is available to us on a regular basis, on a quarterly basis, I would say.
Second question is on Daman and Diu, we said INR 140 crores PBT. There are no one-off, fully from the distribution activities only. And mainly it's coming from -- coming out of the savings in O&M as well as the T&D losses and as well as the return on equity also.
So and the third question is SKS. Yes, we are [indiscernible] for the SKS. We have participated in the bidding. So there are 4 payers currently in the race: one, our Torrent Power, [ Jindal Power ], Vantage Point and the [indiscernible], 4 pillars are there. We are -- as per our understanding, our [indiscernible] are very close right now. So -- and as per our information, the lenders are -- there are 2 lenders. Yes, [indiscernible] is the lead lender and FCI is the second lender. And currently the reservation [indiscernible] plan, everybody -- all bidders are provided a time resolution plant. And currently, the [indiscernible] by the lenders. That is the [indiscernible].
So just to add what Saurabh has said on the first question, I think your question was more on the capital cost. So effectively, what happens is though tariff has not been increased. Regulator has allowed a certain capitalization of expenses or the capital which we have put in. In fact, it happens that your volume also increases on a year-on-year basis. So as for what the CapEx which you have done and what they have allowed, there is no requirement of increasing the fixed charge. Because of capitalization because the units are also increasing. So effectively, we are getting the pass-through of the fixed cost on the CapEx which we have done. So there is no reason for the regulator to increase the tariff because of that.
Yes, very clear. I'm quite pleased to see in the very first year of taking over DNH, we have managed to swing it around and get almost 14% ROE. Now how sustainable is this? And what kind of growth in this number should we model going forward? Because when we started off, it was perceived that the base is significantly low, and therefore, the concerns emerge that we have overpaid for the asset. So how have you been able to turn this around and swing this kind of a profitability?
So we have worked around under a distribution network. Distribution loss in the fourth rates up to 1.59%, which is significantly lower than the normal one. And we -- our view is said that a sustainable this number -- this kind of a number is sustainable going forward also because of the distribution, our management -- our work on the distribution reduction in this restriction losses. And O&M expense is also well under control.
Just to add, Harsh, is that basically, it's an industrial area. So effectively, if I benchmark it with our industrial area, which is the hedge, as you said, we are working at 0.5% T&D losses. So effectively, there is still headroom available for us to reduce the T&D losses. But on the other side, regulatory may also keep on changing the normative norm. So both put together, we feel that these are sustainable numbers. And going forward, there will also be some element of CapEx which we'll be putting in, which will give us incremental ROE on that CapEx. So as far as the current numbers are concerned, we feel that they are sustainable over a period of time.
Next question comes from the line of Nikhil Abhyankar from ICICI Securities.
I have got 2 questions. You just talked about the SKS facility that you are trying to acquire. So does this facility have any power types? And if not, how do you intend to use this power plant?
So it has a PPA about 200 megawatts. So balance our [indiscernible] market is very good, where we can use our own distribution, and we can sell in the merchant market also.
Okay. So we don't intend to tie it up with PPAs?
No, we are going to do it. Once we [indiscernible] long-term basis.
Okay. Sir, can you give us the breakup of capital expense for FY '24? And also a guidance for FY '24?
Full year distraction CapEx was about close to INR 1,800 crores and franchise estimation is about INR 250 crores. So distribution put together is about all CapEx, there's about close to INR 2,000 crores. Same guidance we maintained for the next years also, INR 2,000 crores CapEx we are maintaining. Out of INR 1,700 crores is license distribution and about INR 250 crores to INR 300 crores is franchise distribution area.
Okay, and sir, for Daman and Diu license area, -- do we have any long-term tax for any power plant? And would we procure any short-term plant as well?
Daman and Diu area?
Yes.
Yes, we have some tire with our NTPC, so long-term time, and balance power. They are securing from the open -- on a bilateral basis [indiscernible].
Bilateral as well as [indiscernible] exchange also.
So it also quantify the long-term tie-ups?
So it also has some short-term tie-ups, which effectively comes from central utilities. Let's say, a nuclear power corporation and those other central utilities, wherein they sell on a short-term basis to DD, DNH. So this would be the whole mix of power purchase arrangement in DD, DNH.
Sir, can you just give us the breakup of long-term and short-term? How much we procure?
We don't have numbers as of now. We'll give it a...
A percentage ballpark figure, no problem.
We'll give it you offline.
Next question comes from the line of Jiten Rushi from Axis Capital.
My first question will be on the EBITDA. Can you please give us the breakup of EBITDA for the fourth quarter?
So fourth quarter EBITDA [indiscernible] current quarter is INR 207 crores versus INR 282 crores. Renewable is about INR 200 crores of this, INR 150 crores last year. License distribution is about INR 535 crores versus INR 421 crores last year. [indiscernible] about INR 230 crores -- INR 235 crores versus INR 167 crores last year. And overall EBITDA is about INR 1,200 crores versus INR 1,088 crores last year.
Sir, what would be from the new distribution center [indiscernible] EBITDA for Q4?
So you said PBT is INR 144 for the full year, right?
Yes. we have a combined number. So I'm just looking at the breakup.
We'll give it to you offline. We don't have a currently takeup of the EBITDA, and we have a considered number of license in the business.
So basically, sir, in the gas business, you said, INR 90 crore is from the trading gains this quarter?
Trading is about by INR 30 crores.
So how much is the actual trading in Q4?
INR 90 crores.
INR 90 crores, that is. And last year, it was INR 120 crores. Last year same one. I'm sorry, in Q3, it was like almost INR 397 crores, right, sir? Last quarter, Q3, it was INR 397 crores, and this quarter it is INR 90 crores. And 2 year, you said INR 780 crores, INR 700 crores, INR 700 crores.
So coming to the EBITDA number of Q4 of Daman and Diu, it is about INR 107 crores for Daman and Diu Q4 numbers and full year is about INR 173 crores.
Sir, the interest cost has also gone down this quarter. Any reason because the debt holders are changed...
It has gone up, it has gone up.
[indiscernible] INR 189 crores, while in Q3, it was INR 220 crores. I'm asking about sequential decrease in interest cost.
Daman and Diu has gone up by almost INR 1,700 crores. A sequential number, not the early -- it's amount.
Next question comes from the line of Aniket Mittal from SBI Mutual Funds.
Few questions, sir. So firstly, on the distribution franchise, I think for Bhiwandi and Agra, we've seen very sharp reductions with your T&D losses over there are sub-10% levels. So going forward, how do you look at these numbers in terms of the loss reduction from year on? And where do you think this can settle down?
See, every year, you can see the numbers are coming down. So [indiscernible] not seen in the same direction, the same proportion, I would say, we will continue. So it is coming to the sub-10% numbers. And if you look at the Bhiwandi, Ahmedabad and Surat kind of area it's sub-5%. So we expect that the loss reduction will further -- will be there going forward also, maybe not in the same proportion what we have achieved so far. But 1.5 of a point, 75% reduction we can assume going forward a couple of years.
Similarly, for SMK because over the past 2 years, we've seen a very sharp reduction from 45 now coming to 33. How would that trajectory look like?
What is going to happen every year, we expect a 4% to 5% reduction in SMK T&D losses also. It will continue for going forward also for SMK.
Just 1 last question. For the 715 megawatts of renewables that we have under construction, what is the total CapEx for that? And how much of that have you already incurred?
So I think the total CapEx would be around INR 5,000 crores for 715 megawatts. Out of it, 115 megawatts, we are expected to commission by June end of this year, for which major kind of CapEx has already been spent. As far as another 600 megawatts is concerned, the SCODs are 2024 and 2025. So significant work is yet to be done. So I'll say, out of INR 5,000 crores, around INR 800 crores to INR 1,000 crores would have been spent as of now, and majority spend will happen in the next 2 years.
Next question comes from the line of Subhadip Mitra from Nuvama.
My questions are more on focusing on how do you see the future growth panning out in terms of new areas. And I apologize if you've already answered these questions. I joined a little bit late. So firstly, in terms of the renewable side, I mean, with more bidding expected to happen over the current year and beyond, is there a revised target in terms of how much you plan to win, or are there any targets in terms of new acquisitions, et cetera?
I say there is no revised target to win, but our goal is to reach about 5 gigawatts in next 3 to 5 years' time. We explore various opportunity in [indiscernible] areas as well as inorganically also. So we don't have a target for the year. But yes, the medium-term target is about to reach 5 gigawatts in next 3 to 5 years' time.
Subhadip, it also has to be taken into consideration that the target -- they have a wish list. It will depend on whether we are able to get decent returns from the projects.
Understood. Secondly, in terms of the C&I or the corporate PPA market which has been opening up over the last 12 to 18 months. Any plans on that side?
So we are working on it. So we are actively in fact, working on it. So currently, we have some -- we exited about 20-megawatt PPAs also. Going forward, there is [indiscernible] area where we will actively work on it.
Okay. With regard to the [ region ] plant and the open capacity over there, -- are there any thoughts on at what gas prices do you actually see the possibility of having longer-term PPA side?
Longer-term [ PPAs ] looks difficult because generally the current trend is to have a short-term PPAs. So we about $6, $7 kind of gas available, I think it's probably more affordable to sell in the short-term market. And Subhadip, again, if you want to have a long-term PPA, it would be a fixed cost or a fixed tariff PPA, which would be difficult for us to enter into because I will not be able to hedge my gas prices in terms of price. So doing a long-term PPA would be slightly riskier for us if it is a fixed tariff PPA for a gas-based power plant.
Lastly, in terms of the distribution business, do you see any near-term opportunities there? Or is it that we need electricity at amendments to first come in before this area opens up?
As you know, we have applied for the parallel license in Maharashtra. So that opportunity is always available. So we don't have to wait for the ministers there to be amended. So opportunity is always available for a SECI licensing. We are excluding those opportunities in Maharashtra as well as in Gujarat also.
So for the Maharashtra parallel license, is there any movement on that front or an expectation that this can get awarded anytime soon?
It's the regulatory process requires some time for the regulator also to consider our application. So next 3 to 6 months, we have some visibility on this front.
Next question comes from the line of Sumit Kishore from Axis Capital.
Yes. My first question is, what is the total regulatory asset at the end of FY '23, your distribution license business? And how has the figure moved from FY '22?
Regulatory asset, as of March '23 will be about close to about INR 1,900 crores, which is accounted for, I would say. And there are some discussions going on with the regulators on a particular on the carrying cost which is about close to about INR 650 crores.
The INR 650 crores is not part of INR 1,900 crores.
No, that's not part of INR 1,900 crores.
The INR 1,900 crores is part of your balance sheet. What was this number last year?
Number was about INR 1,300 crores.
Okay. The increase has been driven mainly by Ahmedabad?
Ahmedabad as well as Surat.
Okay. Based on your assessment of how regulatory orders may pan out, do you see this figure further increasing in FY '23?
I think it should not increase. If you look at the prices right now, be it of gas or for merchant markets, we feel that this figure should not increase because essentially, this increase is mainly because of last year, there was -- merchant prices were very high because of which the numbers have been elevated. Going forward, if prices remain at these levels, we expect that there should be some reduction in the regulatory asset. Just to remind you that this, again, will carry the carrying cost. So effectively, there is no impact on the P&L per se, just a cash flow mismatch, which happens here.
Okay. Just to understand this better, how much carrying costs are you recommending right now as a percentage of the regulatory asset?
So as per the launch, it is SBI 1 year MCLR.
SBI 1 year MCLR. And in the increase in regulatory assets, how much was driven because of carrying cost. So INR 1,300 crores going to INR 1,900, how much was because of carrying costs?
On a ballpark number, it will be around INR 100 crores to INR 150 crores while I'll get back to you with the exact numbers.
My second question is on the other end [indiscernible] distribution business there. The INR 140 crores PBT. How much of the PBT is coming from one on the cost savings and other incentives because of T&D loss reduction and how much is on account of ROE?
So I mean we will not be able to give you the exact numbers. I'll try to give you what ballpark is. Yes. So as far as regulatory equity is concerned, it is around INR 150 crores as of now on which 15% or 15.5% is available. As far as T&D is concerned, normative is around 4%, 4.5% against which we have recorded 1.6%. So that savings are available. And O&M, there will not be a major -- and we'll have to give it to you offline. We don't have that number as of now.
So this is -- we can make our assumptions.
Next question comes from the line of Anuj Upadhyay from Investec.
Just 2 questions, sir. One a confirmation on the consol CapEx for -- at Slide 24 you mentioned on a distribution front, it would be close to INR 3,000 crores plus we have another INR 4,000-odd crores to be spent on renewables. So would it be fair to assume on hereabout INR 4,000 crores of consol CapEx for FY '24 and FY '25?
If INR 4,000 crores is renewable, it will happen over a period of 2 years' time.
INR 2,000 crores on distribution and INR 2,000 crores on renewables. So would it be fair to assume?
So I say INR 2,000 crores of distribution CapEx, FY '24, it would be INR 2,000 crores. Going forward, then it will slightly taper off for FY '25 and going forward.
Okay. And secondly, any plan to venture into new business segments, say, like battery storage from Pumped Hydro. There was news hovering earlier that we are also trying to venture into the PSP segment. So any confirmation or anything which you want to elaborate on this?
We are working now, but very interest to talk about all these new areas.
So as far as Pumped Hydro and battery storage are concerned, we are working on that, but it would be too premature to comment anything on that. As far as new segments being adding up, I think we touched upon C&I as a new segment, which we have now started working on and wherein we have tied up 20 megawatts and will improve on it going forward.
Okay. Any internal target on what still you want to reach up to?
So certainly, we don't have targets or don't give targets, but we are concerned target about reaching to our 5 gigawatt in next 3 to 5 years' time.
For C&A, sir?
So no separate target for C&I.
Next question comes from the line of Devam Modi from ARDEKO.
Just wanted to check, are we exploring any opportunity to sell renewable power in the group captive arrangements? And there are several small companies we think have been set up. Subsidies have been set up under Torrent Power. So is there any angle of group captive set up over renewable power and what is the purpose for setting up those companies?
So as we discussed, C&I projects are basically for group captive projects. And the subsidiaries which have been set up are mainly for C&I projects or you can say, group captive projects.
So what is the kind of volume we are targeting over there?
As I said, we don't give any targets per se. We are -- currently, we have 20 megawatts, and we hope to have a larger pool of C&I projects. But we will not be able to give any targets per se.
Sure. And what is the -- I mean, generally, there has been a thought process, which has been running in the last few years that as renewable power increases, there will be a need to balance it with gas based power. But that's not happened so much till now, at least as per our [indiscernible]. So if you can just highlight that angle can come in at some point of time. And, what is the possibility of bundling gas based power with renewable and providing, let's say, more holistic quality power?
I mean that's a long-term question, which needs to be answered. I think there are 2 approaches here. One is bundling gas based power plant with renewable and providing an RTC power or having a battery storage and giving our RTC power. So it is too premature right now to say which technology or which approach would go going forward. But India has 24 gigawatts of gas based power plants, which can be effectively utilized for managing the intermittency of the grid. Now how it will be utilized, right now there is no clarity on that.
And finally, just what is further -- I mean we have announced some acquisitions. These are on solar and wind. These are not part of the current capacities, which are being commissioned or which are already set up. So what is that quantum which is going to come in? And what is the payout that will happen towards [indiscernible].
New acquisition, whatever we announced was the last year. So any new...
There are no new acquisitions.
Not any of any new acquisition as far as renewables is concerned.
Those acquisitions which you have announced, they are already part of the current pay?
Yes. Absolutely, absolutely. It was [indiscernible] the last year, and 1 acquisition will be either in the Q1 of the current year. So our equity is factored in the current numbers.
Next question comes from the line of Bhavin Vithlani from SBI Mutual Funds.
Congratulations for good numbers. So a couple of questions, pardon me if this has been repeated. What is the CapEx that we are now expecting in the newly acquired distribution license in DNH?
So DNH, we plan to incur about at least INR 500 crores CapEx in the next couple of years, up 3 to 5 years, I would say. So that is for the planning.
INR 500 crores per annum or INR 500 crores cumulative?
No, no, cumulative CapEx.
It's not that large an area. So CapEx numbers would not be that large in this area. Also, starting there would be higher numbers of CapEx, then it will go down. As Saurabh has said, INR 500 crores would be spent over a period of 3 to 5 years on a cumulative basis. But for the near term, it will be higher, and it will gradually go down.
Okay. And what is the kind of CapEx that we should be expecting in Ahmedabad and Surat after '25 onwards?
'25 onwards, I think we should consider about INR 750 crores to INR 1,000 crores CapEx in Ahmedabad and Surat.
Just last question. When you look at the DNH of wind and especially, they have been trending down. So I'm referring to Slide 22, the bottom left chart, from 30% in '19, they have come down to 24%. If you could give some more color on this? And if I am correct, the underlying assumption is at 35% PLF for the newly constructed assets.
No, I think last couple of years, wind, wind has shown a reduction in the PLF because of the wind resource not being so robust. But I think we are now seeing it is improving, and we are hopeful that it should improve in the next couple of years.
So at what level you make a 12% IRR in the newly constructed assets? What is the assumption of PLF?
Okay. So I think it will depend on site to site. When you say newly constructed asset, we are working on 115 megawatts, which is expected to get commissioned in June of this year, so next month, basically. That is the PLF assumptions would be around 35% to 40%.
Next question comes from the line of [ Shreya Mehta ] from Equitas Investment.
My first question is in regards with the falling gas prices. How do we stand to benefit from this and from when?
Falling gas price will help us supply more gas for our power project -- gas based power project which is supplying gas to our own distribution area. So we don't have referred to the outside power for a power purchase and distribution will -- it still helps our distribution area to lower the overall power -- overall market of power purchase and which will have to recover even regulatory efforts also.
So we would see this impact coming from next quarter? And by how much quantum would this impact?
So yes, I think as far as profitability is concerned, the incremental profitability comes from merchant power from the gas based power plants. Now typically in India, H1 has the highest volumes or demand for the power is concerned. This year, we may not see a major improvement in the merchant selling because of high gas prices from our gas-based power plant.
Going forward, we expect the gas prices will soften further wherein we would want to tie up on a long-term basis or at least for a medium-term basis for our own distribution requirements, which will help us to reduce our overall cost of supplying power to Ahmedabad, Surat and our own license distribution areas. And that will help us to reduce our regulatory assets.
So as far as profitability is concerned, it does not impact our profitability because variable cost is a pass-through for us, but it will help us to lower the cost of power, which will, in turn, help us to recover regulatory assets, which have been built up last year.
All right. So as far as the merchant power is concerned, this year, we won't get the benefit in H1, but next year maybe because the flow of gas prices and the potential agreements, which we would get into, we would help it in FY '25 H1.
I think it is too early to cover because all these long-term prices are variable price contracts. They are not fixed-price contracts. So again, next year, we'll have to see what is the situation as far as price of gas is concerned, what is the merchant prices which are available. So it's a very opportunistic play, and you will not be able to give a guidance on it going forward.
Just why would we not be able to procure lower gas prices for the current H1?
Because prices were higher. So effectively, it takes 1 month for you to procure gas. Even if you order it now, it will take 15 days to 30 days depending on where the cargo is to get that LNG. And then you don't know what will be the merchant prices 1 month down the line.
Thank you. Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.
Thank you very much for joining Torrent Power call. So we wish everybody to stay safe and healthy. Thank you so much. We'll meet once again in the next quarter. Thank you so much.
Thank you. On behalf of Torrent Power Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.