Power Grid Corporation of India Ltd (POWERGRID) Q1 FY23 Earnings Concall Transcript

Power Grid Corporation of India Ltd (NSE:POWERGRID) Q1 FY23 Earnings Concall dated Aug. 11, 2022

Corporate Participants:

K Sreekant — Chairman & Managing Director

Abhay Choudhary — Director (Projects)

Analysts:

Harshal Dhole — IIFL — Analyst

Mohit — — Analyst

Aniket Mittal — SBI Mutual Fund — Analyst

Rahul Modi — — Analyst

Apoorva — — Analyst

Anuj Upadhyay — HDFC Securities — Analyst

Dhruv Mittal — HDFC Mutual Fund — Analyst

Vishal Shah — — Analyst

Sumith Kishore — — Analyst

Presentation:

Harshal Dhole — IIFL — Analyst

Greetings everyone, I am Harsh Dhole, Energy Analyst at IIFL On behalf of IIFL securities I welcome you all to the First Quarter FY 23 Earnings Call of Powergrid. To discuss the [Technical Issues] outlook for the company today we have the entire senior management team of Powergrid. It’s my privilege to introduce them, first, Mr K. Sreekant, Chairman and Managing Director, followed by Dr V.K. Singh, Director Personnel and Mr. Abhay Chowdhury, Director Projects. I would request the management to take us through the key details subsequent to which the floor will be open for Q&A. Over to you, sir. Thank you.

K Sreekant — Chairman & Managing Director

Thank you Harsh. And very good morning to everyone. I’ll start with a brief presentation on the Q1 performance of Powergrid. I hope it is visible.

Harshal Dhole — IIFL — Analyst

Yes, it’s fairly visible. Thank you.

K Sreekant — Chairman & Managing Director

Thank you. Yeah. So a very brief overview of PowerGrid. We are Maharatna CPSE third largest in terms of Gross Block. Our aggregates assets are 172, 662 circuit kilometers and 267 substations. About 85% of the intra-regional transfer capacity is owned by Powergrid, that’s about 97,090 megawatts.

Next please. This quarter we have done capex of 1482 crores on a consolidated basis and capitalized assets of 1345 crores. Our annual target this year is 8000 crores. We are pleased to inform that [Technical Issues] two substation and lines [Technical Issues] have been completed. We also added transformation capacity at Bhadla and Fatehgarh to facilitate the evacuation of [Technical Issues] energy. Coming to operational performance, the availability of have been at 99.5% of quarter one. Marginally above 99.77% achieved last year. As you are aware, we have incentive capped at 99.75%. So we are above that threshold. The dripping per line have also slightly better at 0.12 per line. Financial performance, the disclosed numbers or declared numbers show a reduction in the pad from 6,085 crores to 3,766 crores this year stand-alone or on a consolidated from from 599 to 801. I would like to bring to your notice you would have already seen that last year first quarter, we had profit on account of monetization [Technical Issues] of BASF. And that is, and if we adjust for that, we see the profit growth from 3,341 crores to 3,801 crores on a consolidated basis. The revenue growth has been about 11% from [Technical Issues] on a consolidated basis. Some of the numbers on a Q4 to Q1, again, there has been a monetization of couple of cash flows in the last quarter, which has given about 600 crores of exceptional item the profits on account of such monetization. If we adjust for these kind of one-off items, we see a marginal growth between Q4 last year and Q1 of current year. These are numbers on a consolidated basis. I won’t [Technical Issues] these details. Yeah. So the gross fixed assets on a consolidated basis are about 200,064. Net worth is about 80,000 crores. We have, debt equity is at 62,238 on account of paring down of the debt due to repayments as per schedule. Some of the numbers you are normally interested in, we have put them in customary into this. I think if we can’t, I just want to bring to your attention at this year, the first quarter CSR has been significant. We made a contribution of, I think, 75 crores to PM CARES Fund, so that is the reason this has gone up in this quarter, but average asking rates CSR would be about 75 to 80 crores per quarter.

Incentive as you’ll see on a consolidated consolidated basis, we received 149 crores reflects the full availability up to the ceiling we have received. Telecom, the income has been 166 crores, it is at par with what we used to get in the past. We are targeting to take this up to around 200 to 250 crores per quarter in 22-23. And we have increased the availability of our OPGW through agreements with MSPCL and DBC. And we are also partnering with domestic and international clients for telecom services. Consultancy income has improved significantly to 211 crores on the back of a couple of projects we are doing for the Government of India in the Northeast and also a few new assignments, which we have received from Nepal and in other areas.

Commercial performance has been good except for Jammu Kashmir, Tamil Nadu and couple of states. Then you are aware that the Government of India has debt payments such as rules which provided for kind of instalment payments. The dues outstanding as on June, if the customers provide the payment security mechanism and also pay their dues outstanding dues on time, so there is a mechanism following the withdrawal of the CERC regulations on regulation of power, the Government of India has notified these rules. These also provide for regulation of power if there is no payment, security mechanism or if there is a default in payment of outstanding dues. This has been accepted by six dispones Jammu Kashmir, Tamil Nadu, Uttar Pradesh, Jharkhand and Madhya Pradesh and one more. We have settled about 2000 crores [Technical Issues] under this scheme. Primarily from Jammu Kashmir, Tamil Nadu and Uttar Pradesh. Couple of transmission projects under TBCB have been acquired that transmission under clearance Alcon’s transmission under the intrastate. We have also signed a transmission agreement with Reliance industries, which is a bulk consumer. It will be a dedicated line build for the Reliance Jamnagar plant from ISTS Jam Khambhaliya pooling station to their Jamnagar facility. This line will be owned by the Powergrid Corporation and tariff will be recovered from the Reliance as per the CERC regulations. So this is the first such arrangement and we are looking at such opportunities with others as well.

Other related businesses, smart metering, there has been some element in this, we have signed a MOU [Technical Issues] for about 66 [Technical Issues] meters and scope for further addition. So we have already started the tendering process and hopefully by the end of the year we should see the first meters on. Solar generation is another area, couple of issues here. One we have to progressively go towards net zero and whatever auxiliary power consumption we do, we want to procure it from the renewable sources. And also we want to exploit whatever spare land we have at our substations and generate solar power. So in that direction, the first site we have is at Nagda which has been acquired long back and is now vacant. We are going to setup 85 megawatt solar power plant at Nagda. The feasible studies have been completed and we will be starting the tendering shortly. The total [Technical Issues] at about 52,000 [Technical Issues] 8200, TVCB 15,800. This year, as I mentioned, we have a target of 8,000 crores of capex.

Now briefly on ISTA’s expansion plan and all, I think a couple of trends, which we are seeing our one energy security and then the other is sustainability. These are the key trends we see particularly in our context following the commitments of India, the COP26. Now there is lot of activity towards achieving this target of 500GW of non-fossil capacity and lot of that will be from renewable sources. And significant is on account of solar parks and large-scale renewable capacities. So, which require transmission. In addition, there is also lot of investment proposed in the storage also. So the activities have started in this direction and we will see the, on the ground in very short period. Tenders and other things to take place. A lot of communication is going on between the center and the states towards achieving these targets and because there is also the acceptance that the journey towards renewable power is inevitable. It has to be embraced all the enabling policies and other whatever facilitation is required that the government is committed to do and therefore, there is a significant amount of movement in that direction.

Finally, a couple of awards and accolades which we have received this quarter. Powergrid is a great place to work, among the best companies and only PSU in this list. We have also received award for the CSR initiative for improving livelihoods and protecting environment through our integrated work sheet management program recognized among the Dun and Bradstreet top companies in the part [Technical Issues] distribution sector. So thank you very much, I will stop here and happy to take questions.

Harshal Dhole — IIFL — Analyst

Thank you, sir. Nikhil can we please [Technical Issues] Q&A.

Operator

You are the host now Sir, you can start the Q&A.

Questions and Answers:

Harshal Dhole — IIFL — Analyst

So, ladies and gentlemen, you can raise your hand and we’ll unmute your line, so that you can go ahead and ask the questions. So the first question is actually [Technical Issues] Omar. Mohit your line is unmuted.

Mohit — — Analyst

Hi good morning sir, am I audible.

K Sreekant — Chairman & Managing Director

Good morning. Yeah.

Mohit — — Analyst

Thanks for the opportunity. My first question is on the smart metering, is it based on totex or capex mode. And secondly, what is the pricing gets decided.

K Sreekant — Chairman & Managing Director

Yeah, thank you. The smart metering is on [Technical Issues] model, where we will be doing the investment. The implementation period is two and half years and after that seven and half years will be the operation and maintenance period. We will be receiving monthly rentals. The pricing will be decided after the our bids are invited from the meter manufacturers and the system providers. On that basis, kind of cost plus, it will be going, there are some guidelines of the government regarding the VAT to be considered and other broad principles. But once we get the bids from our vendors, we will be in a position to make our model and offer it to Gujarat or any other state.

Mohit — — Analyst

Secondly on this national [Technical Issues] pipeline do we maintain that that we can monetize at least 25 billion in the second half or is there any hurdle which is coming up in the monetization. So we haven’t heard anything significant in the last past four, five months.

K Sreekant — Chairman & Managing Director

Last year we had a target, which we have achieved above. We have under the NMP 7,500 crores in 21-22 and 22-23 each year. Last year we did nearly 8300 crores so this year we plan to do 6600 crores. There have been few clarifications, which were to seek, we saw it from the ministry. Those are all in place. So now we are going ahead with appointing the councils, the transaction advisor and so on. And you should see action in the third and fourth quarters of the current financial. We plan to raise about 6,600 crores under the NMP this year.

Mohit — — Analyst

Lastly a lot of HVAC is this timeline you are looking at.

K Sreekant — Chairman & Managing Director

Which one?

Mohit — — Analyst

HVDC order, HVDC order pipeline has the work has the work started? When do you expect?

K Sreekant — Chairman & Managing Director

No that is not yet started, we are doing the studies as of now.

Mohit — — Analyst

Okay, understood. Sir, Thank you, sir and all the best.

K Sreekant — Chairman & Managing Director

Thank you.

Abhay Choudhary — Director (Projects)

The next question is from Aniket. Aniket please go ahead.

K Sreekant — Chairman & Managing Director

Perhaps you can also mention the institution, yeah, thanks.

Harshal Dhole — IIFL — Analyst

Aniket Mittal, I think he is from SBI Mutual Fund, Aniket.

Aniket Mittal — SBI Mutual Fund — Analyst

Yes, am I audible.

K Sreekant — Chairman & Managing Director

Yeah, yeah.

Aniket Mittal — SBI Mutual Fund — Analyst

Few questions. So firstly, if you could provide some insight on what is the current awarding pipeline for TBCB projects in the country and how do you see that panning out over the next 12 to 18 months?

K Sreekant — Chairman & Managing Director

Okay. See, there is a strong pipeline, that has been significant change in the transmission planning [Technical Issues] Transmission planning is captive to the team approved by the RPCs. So it has to go ahead of generation and it is based on now [Technical Issues] system where the e drawing entities have the right to draw from any part of any generator located any part of the country. So it is, it is expected to increase the ease of implementation of ISG ahead of the generation. And the current pipeline we are seeing many of teams in Rajasthan are expected. We are also having about 130,000 crores, which is the target for the interstate transmission up to 27. And schemes of about 25,000 crores are expected to be ongoing or in the next three, four months, they are expected to be put out to bid.

Aniket Mittal — SBI Mutual Fund — Analyst

The next question that I had was actually on the issue of the Great Indian Bustard and this is more to understand from your role as a CTO as well, if you could give some context both let’s say at a system level as well as the Powergrid level, what are the quantum of projects that have been impacted because of this. And secondly, has there been any resolution now towards this issue?

K Sreekant — Chairman & Managing Director

First of all [Indecipherable] is not the CTO, CTO is our subsidiary. As now, I mean that’s just been assigned, but as far as this GIB issue is concerned, there is a committee constituted by the Supreme Court, which he has been mandated to look into individual projects for laying overhead lines in the priority as well as the potential areas and give clearance. We had three projects, which were having lines in the potential area, we got the clearance for two projects as it is. In the case of one project, we were asked to make some diversion in the line and subject to that we got the clearance. So all our projects, which were pending before this committee for clearance have since been cleared. It has taken some time for them to formulate to understand the issue and then kind of appreciate our viewpoint and give the clearance. But we have nonetheless got the clearances. Looking forward, whatever new schemes, which are likely to come in the Fatehgarh and Bhadla area are likely to be impacted by this. But I think when we do the bidding, we have to factor in for some time for this also, to take approval of this committee.

The other question you had, was about I think future, what is the impact. None of our current projects are in that area. So we had three projects, all of them we got the clearances. Going forward, as I mentioned, if somebody is looking for capacity or transmission in area, potential area, then there can be an issue particularly in a certain strip of potential area, which has been considered as of higher importance by this committee. So they want to avoid that route though it is not a part of the priority area nor is it part of any notified area as such, but they have identified that strip as something which is there, which is of importance to the JIB. So they said that you avoid that and take that alignment. Have I answered your question.

Aniket Mittal — SBI Mutual Fund — Analyst

Yes. So I’m just, so just to, just to follow up on this, just to understand is that issue now settled by the committee, I mean as the committee came out and laid out clear words as to how someone can go and do this. And is there any re-work in the existing transmission scheme that needs to be done for it.

K Sreekant — Chairman & Managing Director

I’m not sure that they have set out any such framework in the public domain. As far as existing lines are concerned everyone is supposed to put the bird diverters. That is one aspect, now how many bird diverters and at what distance, around what conductors that is still under debate with the CA. As far as we understand from our experience of three cases they are, they have given us clearance for our 765 kV line as well as 4000 kV lines because there is no alternative in terms of undergrounding these lines. Only thing we observed, was that in one case they wanted a certain diversion in the route little away from the priority area.

Aniket Mittal — SBI Mutual Fund — Analyst

Just one last question. So this is pertaining to actually a media article that had come out and highlighted the fact that the Ministry of Power is considering the Powergrid may acquire a stake in PFC. So just wanted your thoughts on that and has there been any discussion with the Ministry on the same.

K Sreekant — Chairman & Managing Director

No, this is not PFC, I think the news article perhaps.

Aniket Mittal — SBI Mutual Fund — Analyst

Sorry in REC.

K Sreekant — Chairman & Managing Director

There is no such formal communication or discussion on this.

Aniket Mittal — SBI Mutual Fund — Analyst

Those are my questions. Thank you.

Harshal Dhole — IIFL — Analyst

So there is a question in chatbox that come from Deepika Kura, I will just read it for you. On the ISTS line, one, does it include green energy corridor? Second, in terms of interstate capacity, it implies just 2% CAGR is more investment required for renewable Genco at the interstate level rather intrastate level?

K Sreekant — Chairman & Managing Director

Say there is, I mean this green energy corridor is only a name for a particular scheme of the government and that was like initially it had two components and intrastate component and and interstate component. The interstate component was from Bhuj, [Indecipherable] Ajmer, Bikaner, Moga. That one was given to Powergrid for implementation. We have done and completed it somewhere around 2018 or so. As far as the intrastate component is concerned in the Green Energy Corridor Phase I, some of the states are still implementing it. And I think that is an ongoing program and second another Green Energy Corridor Phase 2 has been sanctioned, that is primarily in the intrastate segment again. That is being implemented by the state utilities. So whatever we are doing for example in Badhla, Rajasthan or Gujarat or Tamil Nadu lot of the transmission, which is being developed in the interstate segment is for the green energy on the renewables. We are hardly building any lines for new coal capacity or new gas capacity. Almost all the interstate, which will be built in the times to come will be predominantly for Green Energy, though they are not called Green Energy Corridors under any particulars. As far as investment by the GENCOs are concerned, now I think under the GNU regime, the requirement for the Genco’s to invest in transmission will be much lesser, only from their point to the pooling station, that is the investment which will be required. There will be a significant augmentation of the network as system strengthening all for the purpose of network expansion, which will be under the ISDS. Intra-regional connections also will be part of the ISDS. As far as intrastate is concerned, that is again a matter to be bid out and decided by the SKUs and the state utilities like UP is doing, MP is doing so others are building on their own. Some of the utilities feel they have enough capacity in the next. So they are not leaving it to the generators to do such augmentation that is my understanding.

Harshal Dhole — IIFL — Analyst

Thank you. We take the next question from Rahul Modi. Rahul please go ahead.

Rahul Modi — — Analyst

Thank you for the opportunity. Hello.

K Sreekant — Chairman & Managing Director

Yeah, yeah. Please go ahead Rahul.

Rahul Modi — — Analyst

Yeah, sir. Sir, just a couple of questions. Sir, one. this slide, one of the slides mentioned the capex of around 1.25 lakh crores over the next five years up to FY 27, so just wanted to put this in context, for example, whether, you know, the Ley-Ladakh line is a part of this capex. And secondly, sir, because that states 27000 – 28000 crores for this year, for example, versus our target, is there a mismatch only in terms of timelines of what we are expecting in terms of progress, how do we read the two numbers?

K Sreekant — Chairman & Managing Director

This 1.25 is the entire system as planned by the CT, so this is a kind of potential for the entire sector. Out of that, a part will be bid out and run by Powergrid. The Ley-Ladakh system, you are mentioning is also included in this. The immediate number which we see on the ground for the current year is 8,000 crores, that is what, though we will try to better that, but that is the immediate. So, maybe going forward next year when this build out projects are there we will have more visibility of capex.

Rahul Modi — — Analyst

Sure. So, sir, is my interpretation correct that if we remove the Ley-Ladakh and the Gujarat line from here. So another 90,000 plus crores kind of an opportunity still is there as per this plan in terms of bidding coming up over the next five years?

K Sreekant — Chairman & Managing Director

Yeah.

Rahul Modi — — Analyst

Okay, that’s very helpful. Sir any opportunities in the intrastate that you’ve seen because we’ve seen the RDS scheme and other announcements recently made in the sector. So do you see any opportunities or an increase in the capex by these steps on this and which is the and an opportunity for us. Thank you.

K Sreekant — Chairman & Managing Director

The RDS is predominantly being funded by the grant and Central Government systems from the central sector financial power finance institutions. So, investment opportunities are not going to be there. What we see is opportunity for consultancy work like we have recently been in talks with one of the states, they want to give us project implementations for about 1,000 crores plus kind of works. So those will be more project management and consultancy works.

Rahul Modi — — Analyst

Sure. And sir, any intrastate opportunity over the next three years.

K Sreekant — Chairman & Managing Director

Intrastate, there is again, we are seeing opportunities in UP, in Madhya Pradesh. These are the two states which have seen this and we are also in discussions one of the states a joint venture, for a joint venture we had previously discussed somewhere it got into sideline, but again we are hopeful that it will get revived and we get that joint venture up and running to strengthen the intrastate network and also get invested into the 66 Kv infrastructure. So, it’s very again, very preliminary stage, it is. So I think the one that we make little bit more progress, I’ll be happy to share that details.

Rahul Modi — — Analyst

Sure sir. And just last question from my side is on the smart metering that you mentioned that 60 lakh, 66 lakh meters have been signed for Gujarat, any any timelines, because obviously the overall execution on this front has been delayed. Not from our but from a system point of view. So do you see now things moving ahead faster?

K Sreekant — Chairman & Managing Director

Yeah. So we have signed an MoU with Gujarat, so the commercials of course are yet to be frozen once we get our bids. Then we have to come to an understanding about the rate and all. The timelines are December 23, I think 10 crore meters is the targets of the government, but I think we will have, once we sign a formal agreement, 13 months to implement this. So, we are targeting this in the next two and half years.

Rahul Modi — — Analyst

Sure sir, thank you and all the best.

Harshal Dhole — IIFL — Analyst

The next question is from [Indecipherable] please go ahead. I think some issue with the platform. The next question is from Apoorva Bado. Please go ahead.

Apoorva — — Analyst

Yeah, hi, sir. Thank you for the opportunity. On the CTU plan which you had shared just wanted to know that does it include the entire transmission required for 500 gigawatts of non-fossil fuel capacity target or beyond this as well.

K Sreekant — Chairman & Managing Director

No this does not take us to 500 GWh because 500 GWh is 2030 target. So this is up to 2027, so I think there will be another, the next version will have more clarity on the schemes, which will be required for their 500 GWh. One committee has been found by the ministry to look at the transmission requirements. So the plan has been drawn and it is still under work in progress. Based on the potential identified, the different transmission schemes are being planned to facilitate evacuation of this 500 GWh non-fossil. So as I mentioned, significant activities are going on towards this target of 500 GWh.

Apoorva — — Analyst

Okay. Sir, can you share how much does this factor, this plant.

K Sreekant — Chairman & Managing Director

I think it is about half of the, I think it will take us around 400 GWh or 350 GWh. 350Ghws.

Apoorva — — Analyst

Okay, excellent. Sir. Also, secondly on the smart metering front, [Technical Issues] suggests that the [Technical Issues] are taking a lot of that starting to implement this. So are you also facing this because I believe that the tender sometime in March and have not been closed yet.

K Sreekant — Chairman & Managing Director

There are few reasons why it was not closed. One, I think some changes to the [Technical Issues] that is one. Second, it is a large tender, so there have been many suggestions from the industry. So that is another reason. But we are now going to close it by the month end, August 22 or so. This month we will definitely close and open the bids. We are able to come to an understanding with one of the best discoms in the country in Gujarat. So we expect to implement this scheme, you know with greater pace in Gujarat. Where we are seeing resistance, for example in UP or Bihar, there is certain amount of resistance to installation of these meters. That is the reason there is a delay in implementation, there is lot of teething issues in terms onboarding meters or in terms of communication systems. So, with that experience, which we have seen through joint venture ESL, we are planning to improve the systems implementation in Gujarat.

Apoorva — — Analyst

Okay, sir. So on business model over here if I believe initially we had to install so CPS was the government central government locations within the state. So are we going ahead with that or is it for the entire distribution area where we’ll be installing.

K Sreekant — Chairman & Managing Director

This is for the entire distribution area [Technical Issues], Gujarat the discoms have given us this mandates out stay, so we will be implementing in the command area.

Apoorva — — Analyst

Sir, last question from my side and this is on the transmission capacity requirement for new thermal capacities. So, we are beginning to see, sir, couple of companies, large companies announcing planned capacity additions or brownfield expansions, do you see any chatter from them on the transmission letting side or new lines required for those.

K Sreekant — Chairman & Managing Director

I think this will go more towards the city but not yet.

Apoorva — — Analyst

Okay. Thank you sir, thanks a lot.

Harshal Dhole — IIFL — Analyst

So next is [Indecipherable] please go ahead. We’ll take the next one from Anuj Upadhyay. Anuj go ahead.

Anuj Upadhyay — HDFC Securities — Analyst

Hi, morning, sir. I’m audible.

K Sreekant — Chairman & Managing Director

Yeah, yeah.

Anuj Upadhyay — HDFC Securities — Analyst

This is Anuj Upadhyay from HDFC Securities, sir. This is regarding the project we are constructing for Reliance Industries, could you mention about the size of the project. I mean, quantify what’s the size of this project and also you mentioned in your initial remarks that we are exploring similar opportunities with other players as well. So could you quantify how big the overall opportunity could be?

K Sreekant — Chairman & Managing Director

I’ll just let you know, see this is I think part of their endeavor to [Technical Issues] Green Power. So this is a transmission line between Jam Khambhaliya and their facility. They want, it is about 250 to 260 crores if they go up slightly, there is a conductor bidding change. So it may go up slightly.

Anuj Upadhyay — HDFC Securities — Analyst

Okay and on the size sir. We are in discussion or we are looking out for similar kind of arrangement with other private players as well, how big it is going to be?

K Sreekant — Chairman & Managing Director

Similar opportunities, I mean, of course, it will again be a function of the individual industry and the nearest pooling station. We are in talks but size or the kind of subdues required, those are not yet frozen.

Anuj Upadhyay — HDFC Securities — Analyst

Okay. And the tariff would be based on a cost plus basis by CFC.

K Sreekant — Chairman & Managing Director

Yeah, it will be based on the CERC system.

Anuj Upadhyay — HDFC Securities — Analyst

Fair point sir, Sir. Secondly on the Kavada project. So we have already seen that the first phase has been tendered out and one buy a private player any timeline? When can we expect the second phase to be tendered out?

K Sreekant — Chairman & Managing Director

I think the second phase will come is that part of our next one year scheme, Kavada.

Abhay Choudhary — Director (Projects)

I think by the end of this year, we should see this.

K Sreekant — Chairman & Managing Director

Mostly now the next in the Rajasthan area but also there maybe by September, we should be okay. Let’s just said.

Anuj Upadhyay — HDFC Securities — Analyst

Thanks. thanks for the opportunity.

K Sreekant — Chairman & Managing Director

All right, thank you.

Harshal Dhole — IIFL — Analyst

Next we have Dhruv Mittal from HDFC Mutual Fund, Dhruv, your line is unmuted.

Dhruv Mittal — HDFC Mutual Fund — Analyst

Yeah, thank you so much, sir. Sir, you mentioned that this 1.25 lakh [Indecipherable] plan till FY 27 will take us to 350 GWh of renewable, so we currently at about 100 odd. So that’s about 250 additional for 1.3 lakh crore so that seems relatively small, because we are adding almost equivalent capacity of India in the next five years in terms of renewables. I mean, what this can cater to and transmission investment is only 1.2. 1.3.

K Sreekant — Chairman & Managing Director

I think today we are about 167 or so in renewables, right. Not when you counted, you count hydro also okay. In this, so we are at around 168 is under construction. So this will be safe about 100 GWh, 125 GWh of additional RE.

Dhruv Mittal — HDFC Mutual Fund — Analyst

Okay. So the correct way to understand this is for 100 GWh this is 1.3.

K Sreekant — Chairman & Managing Director

And roughly take one crore per megawatt kind of a number for transmission.

Dhruv Mittal — HDFC Mutual Fund — Analyst

Okay, got it. And that’s the second thing is, if you can help us with the prior period sales this quarter and the interest from beneficiaries this quarter.

K Sreekant — Chairman & Managing Director

They are already announced. Let me just tell you the number.

Dhruv Mittal — HDFC Mutual Fund — Analyst

So prior period I get from the amount is 350 crores.

K Sreekant — Chairman & Managing Director

Yeah, its there know.

Dhruv Mittal — HDFC Mutual Fund — Analyst

The interest from beneficiaries not from subsidiaries.

K Sreekant — Chairman & Managing Director

Interest income from beneficiary, that is part of the other operational income. Our surcharge income is 97 crores in the current, 140 crores.

Dhruv Mittal — HDFC Mutual Fund — Analyst

Interest from beneficiaries.

K Sreekant — Chairman & Managing Director

Yeah differential tariff.

Dhruv Mittal — HDFC Mutual Fund — Analyst

And the prior-year respectively.

K Sreekant — Chairman & Managing Director

The prior period sale consequent to the final or 351 crores.

Dhruv Mittal — HDFC Mutual Fund — Analyst

Sure sir, thank you so much. And all the best.

K Sreekant — Chairman & Managing Director

Thanks.

Harshal Dhole — IIFL — Analyst

Next question is from Vishal Shah. Vishal, your line is unmute.

Vishal Shah — — Analyst

Yeah, hi, thanks for the opportunity. My question was again on that REC stake, management did clarify that no formal communication has come till now, but if such an offer were to come will Powergrid considerate it or considering it maybe bit unrelated to the core business and at the time where core transmission capex pipeline itself is looking strong, you may pass it and reject the same. So what are your thoughts on the same?

K Sreekant — Chairman & Managing Director

I don’t know what you mean by consider it, we will evaluate it for sure, okay. And if the government were to make such an offer, we have to evaluate it and then we have to respond and when we do that we will see what is in the interest of all the stakeholders.

Vishal Shah — — Analyst

Understood, understood. Thanks. That was my question.

Harshal Dhole — IIFL — Analyst

Next question comes from Sumith Kishore. Sumith, go ahead.

Sumith Kishore — — Analyst

Thanks for the opportunity. Two questions from my side. First is that on the TBCB projects that you have one since January, February of last year, what would you say at a portfolio level is the equity IRR for those projects. My understanding is that with the proliferation of inmates integrate was already there you have launched one in and scarce amount of projects that are available, possibly the equity IRR for new projects is coming down your comments, please.

K Sreekant — Chairman & Managing Director

Well, it is a fact, it is coming down. I don’t see that the function of the inwards but it is because of the competition. The competition in the transmission business has intensified, many new players are coming. So I think the market is right now in a state of churn. So until the new business models are established, it is difficult to say, because it takes about two years to construct and then thereafter maintenance of this line for 35 years is critical. I think it is the advent of smaller players, smaller projects which are being offered, these are two reasons for this intensity in the competition and the returns have significantly come down.

Sumith Kishore — — Analyst

Did you say they have come down significantly. Yeah. Sorry I you assuming that it is 11%.

K Sreekant — Chairman & Managing Director

Sorry I’m not able to hear you, can you please repeat your question.

Sumith Kishore — — Analyst

So would it be appropriate to assume, am I audible now?

K Sreekant — Chairman & Managing Director

Its breaking.

Sumith Kishore — — Analyst

Am I audible.

K Sreekant — Chairman & Managing Director

Yeah, please speak. Yeah, so I was saying that is the equity [Technical Issues]. Sorry critical moment your voice is breaking, maybe you can put it in the chat box, Harsh can read it out.

Harshal Dhole — IIFL — Analyst

Meanwhile I can take a couple of questions from chat box which we missed out earlier. This question is from Deepika [Indecipherable] what is the risk on IRRs due to potential project cost increases on TBCB projects which are on the fixed price basis?

K Sreekant — Chairman & Managing Director

There are no recourse due to increase in project cost under the TBCB regime, unless it is that you had a change in law or some kind of — we used to have a back-to-back fixed price contracting with the EPC contractors. To protect ourselves from the price increases. But off-late due to the significant movement in the commodity prices the EPC contractors are also not willing to offer firm prices. So to some extent, we are required now to take the risk of project cost increases and there is no fall back on that to the customer because under the current regime, there is no variability in the tariffs due to any of these reasons.

Harshal Dhole — IIFL — Analyst

Sure, thank you. The next one is actually from Abhijit [Indecipherable] again from the chat box and his question is, are maintaining our asset capitalization guidance of 10,000 crores each FY 23 and 24 well.

K Sreekant — Chairman & Managing Director

This year, as I mentioned, we will be seeing capex of 8,000 crore plus and capitalization in the range of 11,000 crore plus. So capitalization means the assets, which we are expected to be commissioned in this year.

Harshal Dhole — IIFL — Analyst

Sure. The next question is from [Indecipherable] any plans on buyback as discussed earlier.

K Sreekant — Chairman & Managing Director

I don’t know if I can discuss it on this call, we will evaluate that as well.

Harshal Dhole — IIFL — Analyst

So I think, Sumeet is posted his question and his question is basically is the equity IRR in the region of 11% to 12%.

K Sreekant — Chairman & Managing Director

Yeah, that is the target.

Harshal Dhole — IIFL — Analyst

Sure. The sub-question is if we add the proposed capex of Powergrid plus Adani Transmission and Sterlite transmission in ISTS, it gets moved to 277 billion number so is the CTU [Technical Issues] overstated for the current fiscal.

K Sreekant — Chairman & Managing Director

Our CTU is kind of giving numbers, which I think these are estimates and estimates of what we are likely to achieve but then this will include some of the projects which are already in progress and which will be starting afresh, so I think, again, there is a function of how much has been announced to be bid out. Some of the projects got delayed on account of [Technical Issues]