Indian Energy Exchange Ltd Q3 FY22 Earnings Conference Call Insights

Key highlights from Indian Energy Exchange Ltd (IEX) Q3 FY22 Earnings Concall

Management Update:

• IEX stated that CY22 started on a positive note for the company and on the first day cross-border trade commenced in the day-ahead market. The company’s cross-border electricity trade initiatives began with Nepal in April 21 and now Bhutan is also with IEX and is closely working with stakeholders in Bangladesh to garner their participation.

• In the quarter, IGX recorded traded volume of 3.6 million MMBTU, cumulatively trading 5 million MMBTU in the current financial year. IGX achieved breakeven in 3QFY22, within one year of authorization. Additionally, IOCL has joined IGX as a new strategic partner.

 Q&A Highlights:

• Devansh from SIMPL asked that in the IGX, after the recent stake sale, has the company complied with the ownership norm and if there will be any further stake sale. Satyanarayan Goel, MD answered that after sale of 4.93% stake to IOCL, IEX shareholding in IGX is reduced to 47%. And now IGX is an associate company of IEX. On further stake sales, there won’t be any as of now.

• Ankush Agrawal of Surge Capital asked about stake sale in IGX, and the selling of huge stake of 26% to NSE, what’s the rationale. Satyanarayan Goel, MD answered that NSE is the largest exchange in the country, not in the spot market. They have large reach in the market and the company is getting lot of value in the process. And it’s more to do with the competition dilution.

• Swarnim Maheshwari with Edelweiss  enquired how does the General Network Access (GNA) work, and once implemented will it mean the company will get rid of the open access charges levied by the state. Satyanarayan Goel, MD said that GNA is a very market friendly regulation. And under this regulation, distribution companies will have to take GNA on long term basis. And as long as transactions are happening, within the access taken, no other charges are to be paid.

• Swarnim Maheshwari with Edelweiss also asked that on the gross billing, will there be any kind of regulation that is likely to come.  Satyanarayan Goel, MD replied that for gross bidding the company has applied to CRC for approval. CRC has heard the petition and has asked the company to do the stakeholder consultation, which IEX is working on.

• Sumit Kishore from Axis Capital Limited enquired about the yet to be redeemed total backlog of REC of about INR65 million and if IEX is seeing a potential for pickup in the pace of quarterly run rate of REC trading.  Satyanarayan Goel MD answered that demand for REC is much higher because there is a backlog of two years. Looking at RPO compliance, there is a shortfall.

• Suraj Nawandhar from Sampada Investments asked about customer and supplier concentration. Satyanarayan Goel MD said that there is some concentration. If one adds the power consumption of the states of Gujarat, Maharashtra, Tamil Nadu etc., it will contribute to 50% of the consumption of whole country. Top 10 sellers are about 56% of the total sell. On the buy side, top 10 buyers constitute about 58% of total buy.

• Suraj Nawandhar from Sampada Investments also asked about the company’s charges for the renewable energy certificate from buyer and seller and the green TAM and DAM. Satyanarayan Goel MD replied that on the certificate the company charges INR20 on either side. On the green, it’s 3 paisa on either side.

• Suraj Nawandhar from Sampada Investments queried about the volume growth ex of new products. Satyanarayan Goel MD answered that 3Q electricity volume growth is 17%. And out of this 17% growth, the growth was mainly due to the RTM and DAM market, where the increase was 4%. Therefore, one can say new products have given significant volume.

• Apoorva Bahadur from Investec asked that on gross bidding, what will be the incentive for states with low variable cost power to place their power on the exchange.  Satyanarayan Goel MD said that the states who have allocation from the low-cost power plants and does not have demand to utilize the full allocation, they can sell that power on the exchange platform at the exchange clearing price and take advantage of the low variable costs.