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Tata Power Company Limited Q4 FY24 Earnings Conference Call Insights

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.
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