Key highlights from Tata Power Company Limited (TATAPOWER) Q4 FY24 Earnings Concall
- Power Demand
- Electricity demand in India grew by 8% in the previous year.
- In March-April 2024, demand increased by 10.5% before summer started.
- Peak demand reached 224 GW on April 29, 2024, compared to 208 GW last year.
- Expected peak demand is 260 GW, requiring efforts to meet energy requirements.
- Quarterly Performance
- Coal, hydro, transmission, and distribution businesses performed well.
- Odisha discoms showed substantial improvement after resolving billing and debt issues.
- All four Odisha discoms started making profits within three years.
- Renewable Energy
- Significant renewable project implementation in FY24 after delays in previous years.
- 4 GW projects expected in FY25, including 2.5 GW utility-scale and 1.5 GW third-party.
- 4 GW module plant commissioned, 4 GW cell plant to be commissioned soon.
- Won around 2 GW of bids from 40 GW ordered last year.
- Focusing on complex/hybrid bids over pure-play solar/wind.
- Leadership in rooftop solar, expecting active role in PM Surya Ghar Yojana.
- EV Business
- 86,000 home chargers, 5,500 public chargers, 900 bus chargers installed.
- Focus on supporting e-mobility initiatives with charging infrastructure.
- Rooftop Solar
- Government scheme targets 25-30 GW rooftop solar installation in 3-4 years.
- Tata Power expects 20% market share, leveraging current 2 GW installed capacity.
- Will utilize own manufacturing capacity to meet Domestic Content Requirement.
- Targets 4-5% PAT margin in rooftop solar EPC business.
- Tata Projects
- Turned profitable in Q4 (INR 32 crore) after losses previously.
- Full year profit with solid order book position.
- Expected to deliver better results going forward.
- Dividends and Divestments
- Received $90 million dividend from ITPC after settlement agreement.
- Expecting $40-60 million dividend from ITPC next year.
- Ongoing $10-15 million annual dividend expected from ITPC.
- Arutmin divestment proceeds already received, no further amount remaining.
- Utility Scale Renewables
- Government plans for 50 GW utility scale renewable bids this year.
- Tata Power selective in bidding, focusing on hybrid and Fixed Duration Renewable Energy (FDRE) bids.
- Expects better margins due to complexity, limiting competition.
- Already has 5 GW+ project execution pipeline, including 1.8 GW won last year.
- Manufacturing Capacity Utilization
- 4 GW cell and module capacity being commissioned.
- Initially utilizing for captive requirements to meet contracts.
- Potential to sell outside after ramping up capacity utilization.
- Mundra Plant and Coal Mining
- Mundra plant operating under Section 11 cost-plus model throughout the year.
- Aiming for cash breakeven at Mundra.
- Coal mining realizations stabilizing after high prices in FY23.
- One-off high dividend from coal mining not expected in near future.
- Renewable Energy Asset Impairment
- Impairment of around INR 100-150 crore per year expected.
- Non-cash charge for unwinding goodwill from Welspun asset acquisition.
- Overall surplus available after impairment test.
- Merchant Power and Regulations
- Around 300 MW merchant capacity from Haldia and other plants.
- Positive outlook based on demand-supply situation.
- No plan to cap merchant power prices as of now.
- Growth Targets
- Company on track to double revenue, EBITDA and profit over FY23-FY27 as planned.
- Capacity additions in renewables, manufacturing, transmission projects to drive growth.
- FY24 saw 10% revenue growth, 12% profit growth, reaffirming roadmap.
- Fixed Duration Renewable Energy
- FDRE with renewable plus storage seen as future, replacing greenfield thermal.
- Customer preference for green energy driving demand for such solutions.
- Viable alternative to thermal capacity addition in next 2-3 years.
- Working Capital Management
- Significant reduction in average working capital to around INR 3,500 crore.
- Improved financial discipline, collection from retail customers, and timely payments contributing.
- Supply chain management efforts also aiding working capital optimization.
- Allowed high capex of INR 12,000 crore with stable debt levels.
- Debt and Capex Plans
- Targeting debt-equity ratio of around 1.5 as comfortable level.
- Focus on improving cash flows to self-fund larger part of capex.
- Renewable pipeline of 5.4 GW over 2-3 years requiring INR 15,000-20,000 crore capex annually.
- Wind Energy Program
- Approach involves combination of solar, wind and battery storage projects.
- Will build wind capabilities as per requirements of hybrid/RTC projects.
- Targeting returns better than mid-teens for such projects.
- Transmission Business Plans
- Selective in bidding for transmission projects based on timelines and ROW issues.
- Won 2 projects last year, INR 2,300 crore out of INR 40,000 crore ordered.
- Aggressive plans for some states, creating a quality transmission portfolio.