Tata Power Company Limited (TATAPOWER) Q1 FY23 Earnings Concall Transcript

Tata Power Company Limited (NSE:TATAPOWER)Q1 FY23 Earnings Concall dated Jul. 26, 2022

Corporate Participants:

Praveer Sinha — Chief Executive Officer & Managing Director

Sanjeev Churiwala — Chief Finance Officer

Analysts:

Rahul Modi — ICICI Securities — Analyst

Swarnim Maheshwari — Edelweiss Securities — Analyst

Sumit Kishore — Axis Capital Limited — Analyst

Mohit Kumar — DAM Capital — Analyst

Puneet Gulati — HSBC — Analyst

Atul Tiwari — Citi — Analyst

Deepika Mundra — J.P. Morgan — Analyst

Rajesh Majumdar — B&K Securities — Analyst

Girish Achhipalia — Morgan Stanley — Analyst

Anuj Upadhyay — HDFC Securities — Analyst

Murtuza Arsiwalla — Kotak Securities — Analyst

Ankit Patel — L&T Mutual Funds — Analyst

Gopal Nawandhar — SBI Life Insurance Company Limited — Analyst

Apoorva Bahadur — Investec — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Tata Power Q1 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Dr. Praveer Sinha, CEO and MD from Tata Power. Thank you. And over to you, sir.

Praveer Sinha — Chief Executive Officer & Managing Director

Thanks, Ryan. Good evening to everyone, and thanks for joining the call, and I hope all of you are doing fine and taking care of yourself. I am joined today in the call by my colleagues, Sanjeev Churiwala, CFO; Mr. Jinendra Patil, Financial Controller; Soundararajan Kasturi from the Investor Relations; and few other members from our finance team.

We are meeting you after a quarter that has seen significant development in many ways for the energy industry and as also for Tata Power. We have seen in last few months unprecedented rise in coal prices, accompanied with demand, which has led to short-term power prices going up. At the same time, initiatives like Green open access and increased trajectory of RPO by 2030 to 47% will further help in the implementation of renewable projects in the country.

Tata Power has also completed another remarkable quarter with significant progress on various OPEC’s strategic initiatives. Besides a very strong operational performance in all these businesses, we have progressed significantly on the renewable transaction in last two months. The CCI approval for this transaction has been received just today evening and we expect to receive the first tranche of INR2,000 crores in next few weeks.

On the Mundra front, we have been operating the assets under Section 11 which was passed by Ministry of Power, under which a pass-through mechanism has been provided. At the same time, we have been working with the procurer, especially the Gujarat procurer, to finalize the long-term arrangement with them. The merger of CGPL with Tata Power has been completed last quarter with effect from first 1 April, 2020, which provides a significant operational synergies to our Group.

This quarter, we saw a steady operational performance from all our assets, generation, transmission as well as renewables business and very high profit from our coal mines due to higher coal prices. We achieved nearly 90% growth in reported PAT, which stands at INR884 crores as compared to INR466 crores in the previous year quarter. This is now the 11th consecutive quarter of delivery year-on-year profit growth and is expected to continue in the future.

We saw a robust year-on-year growth of 48% in revenue, which stood at INR14,776 crores this quarter. Similarly, we saw a reported EBITDA for this quarter at a steady INR2,107 crores compared to INR2,365 crores in the previous year, which had a one-off impact of INR302 crores due to the tariff order that we have received in Mundra. Our renewable business delivered strong execution in the last quarter as Tata Power Solar commissioned 600 megawatt AC solar capacity, including India’s largest floating solar power project in Kerala Backwaters.

With the wins of 1.6 — 1.7 gigawatt in this quarter, TPSSL has now 1.3 gigawatt of owned projects and 2.3 gigawatt of external orders, aggregating 3.6 gigawatts of total large scale EPC contracts worth nearly INR15,000 crores, which has to be completed in next 12 to 18 months. Due to higher commodity prices, including solar cells and modules, and foreign exchange movements, we saw a dip in profitability of the EPC business, but expect that the margins will improve in coming quarters with newer orders and also with some contract manufacturing which has been tied up to be done in India.

We have also signed an MoU with Tamil Nadu Government to invest approximately INR3,000 crores for setting up a greenfield 4 gigawatt solar cell and 4 gigawatt solar module manufacturing plants. And this is coming up in Tirunelveli District of Tamil Nadu and the work is expected to start in next one month’s time. The manufacturing plant will help us in supporting the nation’s aspiration to create a comprehensive ecosystem for solar manufacturing and fulfilling the needs of the solar projects as also helping us to improve our margins and having a better control on the cost of solar cells and modules. The plant is expected — the first phase of the plant of solar modules is expected to be commissioned by June next year and the second phase of cells will get commissioned by November next year.

Tata Power’s new age business has also delivered promising results in this quarter as we achieved 4 times and 2 times growth respectively in rooftop solar and solar pumps business in terms of revenue over Q1 of last year. Margins in rooftop solar has tightened because of the commodity prices and the currency fluctuation, but with the new strategic initiatives, we foresee improvements in the coming quarters.

Similarly, Tata Power EZ Charge is also getting lot of traction in the market space where we continue to enter new partnerships to create Green Mobility infrastructure in India. We now have more than 240 ebus charging points and around 2,400 public EV charging points across 437 cities, which is the largest EV network in the country. We have also signed MoUs with OEMs to enter into strategic partnerships to facilitate a robust EV charging network and accelerate the adoption of EVs across the country. We have also entered in MoU with Naredco to setup around 5,000 charging stations across new construction project sites in Maharashtra.

This quarter, we operated three units of Mundra under Section 11 dispensation since 6th May, which allows us a full pass-through of the coal cost. This notification is valid till October ’22 with an opportunity for extension and with no under-recovery in Mundra. In parallel, our discussions with Gujarat on the supplementary PPA to implement the compensatory tariff is also underway and that will pave the way for a permanent resolution of the Mundra issue.

With the recent phenomena of power strategies and restart of thermal capacity, we are confident that this arrangement will be converted into a long-term arrangement which will provide the stable power to the five beneficiary states. The continuous effort to bring focused operations leveraging on our experiences from Mumbai and Delhi and investment across the four Odisha Discoms is leading to continuous improvement in their operational and financial performance. The technical losses have reduced by nearly 1% to 3% across these Discoms, while AT&C losses have reduced by 4% to 9% compared to Q1 of last year, which is a significant achievement in just last one year.

Moving to the balance sheet. The net debt level inched up a little bit in line with our earlier guidance on growth capex. Net debt at the end of Q1 is around INR42,000 crores with capex of more than INR2,000 crores inched up during the quarter, mainly in our renewable business and Odisha Discoms. However, the healthy growth in the operational profit from the businesses have helped us to improve our debt to underlying EBITDA further from 3.9 in the last quarter Q4 of FY ’22 to 3.6 in this quarter. Due to increase in debt, our net debt to equity stands little higher at 1.55 times compared to 1.53 times in the previous quarters. We believe with the sight of aspiration that we have to grow businesses, we will be able to maintain a very healthy debt to equity ratio.

The beginning of FY ’23 has also been very promising for our transmission business with our Resurgent platform securing the NCLT approval for takeover of South East U.P. Power Transmission Company Limited, which is developing an intra-state transmission line in U.P. of approximately 15 have kilometers along with five numbers of 400 KV substation. This is after we recently took over another transmission assets which is the NRSS XXXVI Transmission, again through the Resurgent platform. These two asset acquisitions together has a combined EV of around INR6,500 crores and annual revenue of around INR900 crores once they are fully implemented. We are actively participating in competitive bidding for transmission project, which is an important part of our growth in the future.

Lastly, we thank all our analysts and investors for their support and the institutional investors in All-Asia, excluding Japan, Executive Team 2022 Poll. With your support, we have been able to once again secure top rankings in several categories, including the Best IR program and ESG disclosures outside Mainland China. Tata Power continues to steadily move towards its long-term aspiration built on businesses of the future, while maintaining a healthy balance sheet. Quarter-on-quarter improvements can be seen in all our operational and financial metrics, and the trend will be visible in the future too. We look forward to your continued support in this journey.

With this, I hand over the call back to Ryan for the question and answer session. Thank you.

Questions and Answers:

Operator

Thank you, sir. [Operator Instructions] Our first question is from the line of Rahul Modi with ICICI Securities. Please go ahead.

Rahul Modi — ICICI Securities — Analyst

Good evening, sir, and congratulations. Good set of numbers. Sir, just a couple of questions that I had. On the two EPC segments that we are seeing actually, so we’ve seen a big loss being booked in Tata Projects. Last year we did a full year loss of around INR200-plus crores and this time we’ve actually reported on a quarterly basis. So how much do you see the pain coming in or most is done on the Projects part?

And secondly, a similar question on the solar EPC. So do you see in your order books any provisions that need to be taken further which can impact margins, though you mentioned that it should improve going forward? So any thoughts on that, please? Thank you.

Praveer Sinha — Chief Executive Officer & Managing Director

So Rahul, thanks for the question. As far as Tata Projects is concerned, last quarter we had booked a certain amount of cost. And the whole process was that we were identifying projects as to what is the cost to completion and if there is anymore provisioning that has to be done. We did in last quarter and we have done in this quarter so that going forward we do not have to carry any burden future write-offs that we need to do. So we expect that this is the end of the write-offs that we need to do and provisioning that we need to do and going forward they will be making all profits.

Similarly, in the — in our renewables EPC projects, we had — we have not a very large loss. Some of these projects which were in the last stages of implementation, we had procured these in last year and prices were on the higher side. We were expecting that way we will have a small hit. The only uncertain thing that happened to us, we also had a forex hit in the quarter because of the fluctuation in the dollar rate. We expect that now that we are fully hedged and we will not have an open position, we will be in a much better position to take care of it in the future.

Rahul Modi — ICICI Securities — Analyst

So sir, now we are hedging all our exposures back to back, is it, 100%?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah, we are not doing that. We had earlier left some open space because fluctuation was not so much. But now we are 100% hedging.

Rahul Modi — ICICI Securities — Analyst

Sir, in terms of the contract manufacturing, which you mentioned that we are doing domestically for the modules, sir how much capacity have we tied up? And sir, in terms of the price variations in that, sir, how are we better placed versus the imports that we do for the pricing that we are getting?

Praveer Sinha — Chief Executive Officer & Managing Director

So what happens is we have tied up with couple of manufacturers over here. And as you know that the customs duty for cell is 25% while for module is 40%. So we have 15% arbitrage as far as if we get it manufactured in India in terms of the customs duty. So we have a very competitive terms under which we have tied. And we do feel that we will be able to take care of our future requirements, especially where we have domestic component in terms of manufacturing to meet our future supplies.

Rahul Modi — ICICI Securities — Analyst

So sir, this contracting would be only for the next probably 12 to 15 months till your own capacity comes up?

Praveer Sinha — Chief Executive Officer & Managing Director

No it will be little longer than that because the capacity that we will have will take some time to stabilize. And secondly, it’s not that all the capacity that we have, 4 gigawatt, we will use 100%. So there would still be some spillover which we will take from the contract manufacturers.

Rahul Modi — ICICI Securities — Analyst

Right. So sir, you expect as a full year basis in the year to come, our Solar EPC margins will actually make a come back and will be a little more steady versus what we’ve seen in the last 12 to 18 months?

Praveer Sinha — Chief Executive Officer & Managing Director

No, it will definitely be much better. And once we have our own manufacturing over here, we will definitely be even improve drastically. Also, lot of these changes have happened very quickly in last one year. This notification for change of customs duty came on 3rd March, 2021. And there were certain projects which were in the pipeline which we have already bid for. So going forward, we have now with all projects where we have considered the impact of customs duty and hopefully in the better margins as we move forward.

Rahul Modi — ICICI Securities — Analyst

Right, perfect. That’s very helpful. Just last question, I’ll just slip in. Our receivables have gone up almost by 40% to 50%, sir, any cause of worry what’s led to this if you can just elaborate? Thank you very much.

Praveer Sinha — Chief Executive Officer & Managing Director

So our receivables have gone up because of three reasons. First is that we have been over a period of time not received some old payments, which we are supposed to get from Andhra and Tamil Nadu and all that. Now that the court order has come and they have been asked to make that payment, we should be able to get that. Secondly, during the month of March we had imported large quantum of solar modules to avoid buying it from April when the BCG had come in. That is getting liquidated and that benefit will come in this quarter. Lastly, we have also been buying that quantity of coal for Mundra. And because of the higher prices of coal, there has been little stress on the — on our cash flow. Again,we will get aggressive this quarter.

Rahul Modi — ICICI Securities — Analyst

Thank you, sir. I’ll come back in the queue. Thank you very much.

Operator

Thank you. Our next question comes from the line of Swarnim M. with Edelweiss. Please go ahead.

Swarnim Maheshwari — Edelweiss Securities — Analyst

Yeah. Hi, sir. Good evening, and thanks for the opportunity. Sir, my first question is again on Tata Projects, and you did touch base that there were losses. But just wanted to better understand that commodity inflation of course has a possible reason, but we have not really seen any other large EPC companies reporting losses at least. So what’s happening? Is it — is there some sort of kitchen sink before the possible IPO?

Praveer Sinha — Chief Executive Officer & Managing Director

No, this is a routine business and in that the board and the audit committee always examines that was sort of provisioning we need to do, especially when we know that the cost to completion will be on higher side. So that’s a standard way of the accounting and that has been done in this quarter.

Secondly, the increase in commodity prices have been there from all companies. All of the companies which have been in construction business, infrastructure companies have seen this sort of trend in last one year. Fortunately, now the commodity prices are coming down and we will take the benefit of this going forward. So our ability to now forecast, adjust this is much better, and hopefully, we will not have any impact in the future quarters.

Swarnim Maheshwari — Edelweiss Securities — Analyst

Okay, got it. Secondly, on this Mundra, if you can just elaborate what exactly is the arrangement that we are continuing with the Section 11? And you mentioned that the extension is labeled up to October ’22, is that right?

Praveer Sinha — Chief Executive Officer & Managing Director

Under Section 11, the requirement is that the generator will generate an offer powers to the procurers and they will be fully compensated for the cost of generation. So we expect that whatever is the actual costs that we will incur in producing power will be a pass-through. And this arrangement uphold is up to 31st October, but it may get extended. We have been told to be ready in case it gets extended to supply power because there has been lot of huge increase in demand in last few months. And if the same trend continues, then we might have to continue operations under Section 11.

Swarnim Maheshwari — Edelweiss Securities — Analyst

So that would imply no operating losses per se for whatever you are operating?

Praveer Sinha — Chief Executive Officer & Managing Director

Yes. And going forward if it continues under Section 11, there will not be any operating loss.

Swarnim Maheshwari — Edelweiss Securities — Analyst

Okay. But sir, at the moment, we’re operating about three units, whereas the other two units are still not getting operated. So would there be P&L consequences over there or a lower PAT?

Praveer Sinha — Chief Executive Officer & Managing Director

So we are offering on a daily basis full declared capacity. That means all the five units, 3,800 megawatt is being offered. And then the scheduling is being done by the Discoms. So we are ready to operate all five and we will get paid the fixed cost for operating all five.

Swarnim Maheshwari — Edelweiss Securities — Analyst

Okay. Got it. Thank you so much, sir. I’ll get back in queue for more questions.

Praveer Sinha — Chief Executive Officer & Managing Director

Thanks, Swarnim.

Operator

Thank you. Our next question comes from the line of Sumit Kishore with Axis Capital. Please go ahead.

Sumit Kishore — Axis Capital Limited — Analyst

Good evening, and thanks for taking my questions. The first one on CGPL. Could you — because there is no slide this time given it has been amalgamated in the standalone entity, but would like to understand here what was the under recovery for CGPL in the June quarter? And given Section 11 was implemented early May, since then what has been the under recovery? And has there been even capacity chart under because a couple of units were not available?

Praveer Sinha — Chief Executive Officer & Managing Director

So Sumit, the Section 11 came from 5th of May. So before that, there has been an under recovery and the details I think we’ll share with you. So the under recovery has been from 1st April to 5th May. And thereafter, there should not be any under recovery. We are of course before the CERC and the order is expected in next few weeks. So the details can be shared with you by Rahul and team.

Sumit Kishore — Axis Capital Limited — Analyst

Understand. But for the same quarter, you have been sharing the figure on fuel cost under recovery. What has it been for the full quarter? And what has been the — and after Section 11 implementation, has the negotiated tariffs being cost reflective? So can you confirm that there has been zero under recovery post 5th of May?

Praveer Sinha — Chief Executive Officer & Managing Director

So May onwards, the tariff has to be determined by the regulator. Interim tariff was given by Ministry of Power, based on which we have done the billing for last two months. However, the petition is now before CERC and we still have to hear from them as to what will be the final tariff that they will approve. So once the details, the order comes in next few weeks, we’ll be able to share that. But our understanding is that these are costs reflective tariffs that they will fix because under Section 11 it’s a compulsory generation that has been done, and hopefully, there should not be under recovery from fixed.

Sumit Kishore — Axis Capital Limited — Analyst

Understood. So was the interim tariff cost reflective? And if not, have you accounted for the difference as a receivable in this quarter post 5th of May?

Praveer Sinha — Chief Executive Officer & Managing Director

So the interim tariff that has been given for — it has been given only for four weeks. So for the first two weeks it was cost reflective, for the next two it was not cost reflective. The full details have been furnished to CERC and they are examining same. So concept wise, it has to be cost reflective, that’s what is important.

Sumit Kishore — Axis Capital Limited — Analyst

Okay. And often early the supplementary PPA arrangement gets implemented hopefully some time in future, would that — what would it entail?

Praveer Sinha — Chief Executive Officer & Managing Director

That is still under discussion, so it’s little premature to say. So a lot of arrangements are being discussed under that. And let’s wait for some more time before we are able to at least spell out what will be the arrangement.

Sumit Kishore — Axis Capital Limited — Analyst

Sure. You also not published your slide — customary slide on Indonesian coal stand. So could you please speak about the average HBA coal sold, the net revenue after royalty and the net profit per ton which was a particularly sweet quarter for the state of Indonesian coal mines. So we’d like to understand the dynamics here?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah. I’m sure after the — Rahul will share the details with you. As you know that there has been changes in Indonesia also in terms of the royalty in the corporate tax and all. While the license was renewed from 1 January, many of these have been notified in later part of May and June. And hence, the details are still under calculation and the Indonesian Government is still working out the arrangement in terms of what sort of taxes, royalty and other shaving off profit has to be done in that. So whatever details we have, we will share with you. But it is still little interim and the finality has not today.

Sumit Kishore — Axis Capital Limited — Analyst

Yeah. Quick follow-up on Tata Projects. We were reading earlier that there was a rights issue that was planned by Tata Projects which are compulsorily all stakeholders, including Tata Power would have to subscribe to. What is the status of that rights issue?

Praveer Sinha — Chief Executive Officer & Managing Director

There is no plan immediately like that. So once we take a decision on that, we’ll share that information. At this stage, there is no decision about anything like that.

Sumit Kishore — Axis Capital Limited — Analyst

My final question on Tata Power Solar EPC business where you had mentioned in the last quarterly conference call that the Q4 margin factored in provisioning for elevated module and commodity prices for the existing order book. I understand that there has been FX impact as well, but could you speak about the margin profile of the order backlog now that all these things are behind us? And what does this business mean for you on ROE, ROCE perspective given your overall goals under Tata Power 2.0? Is this eventually going to be supportive of profitability or is it just going to be a drag? Thank you.

Praveer Sinha — Chief Executive Officer & Managing Director

See, we have to support and it has to become profitable. So all of these businesses that we are doing have to stand on its own and on the merit of being profitable. So the details can be shared again by Rahul. I think he has already shared some of the details. But he can provide you any specific information you require on Tata Power Solar. All these projects have an arrangement on a back-to-back basis in terms of procurement of the cells and modules. Similarly, we have now done 100% hedging of the currency. So going forward, we don’t expect too much of swing in terms of the profitability of the Tata Power Solar.

Sumit Kishore — Axis Capital Limited — Analyst

Thank you so much for answering my questions, and wish you all the best.

Praveer Sinha — Chief Executive Officer & Managing Director

Thank you.

Operator

Thank you. Our next question comes from the line of Mohit Kumar with DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Yeah. Good evening, sir, and congratulation on good set of numbers. So my first question is on the Mundra. As I understand, the government has — Government of Gujarat has passed a resolution on the cabinet which allows the complete pass-through and one of the competitors has got the PPA approval — PPA approved from CERC. Are we working on a similar kind of resolution? Is my understanding correct? And how long do you think the long-term resolution will take?

Praveer Sinha — Chief Executive Officer & Managing Director

So the arrangement with us is a little different than with the other suppliers of power in Gujarat. And so ours is being arranged on that basis. However, the fundamental thing that is being agreed, is that the coal cost has to be a pass-through because the way the coal cost has gone up in last one year. So the pass-through arrangement has to be agreed. Now there are certain other aspects, which are there, which is the — is to be negotiated and finalized between both the parties and we are still under discussion with them. So it’s little premature, but conceptually, the coal cost whatever is there, it will not get restricted to a certain HBA level, but it will be a full pass-through.

Mohit Kumar — DAM Capital — Analyst

Sir, as far as the interim tariff is concerned, are we to expect these fixed charges which you had bid to get recovered under Section 11?

Praveer Sinha — Chief Executive Officer & Managing Director

Beg your pardon?

Sanjeev Churiwala — Chief Finance Officer

Charges under Section 11.

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah. So the concept of Section 11 is that all costs have to be given. So whether it is fixed cost or variable cost, there cannot be any deductions. In fact, there has to be a certain profit margin also which has to be given. So that is agreed legal provision based on the earlier order. And we are expecting that when CERC decides on it, it will consider this aspect while determining the tariff.

Mohit Kumar — DAM Capital — Analyst

Lastly sir, has there been any write-off in the coal mine in this quarter for the Q4 FY ’22 given the changes in Indonesian regulation?

Sanjeev Churiwala — Chief Finance Officer

No, there is not no write-off in the coal mines.

Mohit Kumar — DAM Capital — Analyst

No, I’m talking has the last quarter profit for the coal mines is restated or something?

Sanjeev Churiwala — Chief Finance Officer

No, no.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Thanks, and all the best, sir. Thank you.

Operator

Thank you. Our next question is from the line of Puneet with HSBC. Please go ahead.

Puneet Gulati — HSBC — Analyst

Yeah. Thank you so much, and then congrats on the quarter. My first question is just again clarification on the Mundra side. So is the understanding correct that under the Section 11 you would also be making sort of profits out of Mundra and not just the EBITDA-neutral?

Praveer Sinha — Chief Executive Officer & Managing Director

Concept wise that is what is this principle on which the Section 11 tariff is journeying. Now the matter is before CERC, so let us wait to hear from them as to what they will apply under the present context.

Puneet Gulati — HSBC — Analyst

And is CERC also considering the profits from the — your Indonesian mine while calculating this or is that separate from the discussion?

Praveer Sinha — Chief Executive Officer & Managing Director

That is separate, that has nothing to do with the operations.

Puneet Gulati — HSBC — Analyst

Okay. Got it. My second question is on your Odisha Discoms, so while year-on-year we see AT&C losses go down, but on Q-on-Q they are up. Is there some seasonality that the [Indecipherable] read into this?

Praveer Sinha — Chief Executive Officer & Managing Director

So the losses, if you compare it to last year Q1, has gone down and that is the trend that we have seen over there. And the price initiative that we have taken, we expect that this trend will continue in future.

Puneet Gulati — HSBC — Analyst

No, but 1Q over 4Q is up. For example, for CESU, it’s 35.7 versus 29 in the fourth quarter.

Sanjeev Churiwala — Chief Finance Officer

That is because of the seasonality. So what happens in the summer months because the supply is more, the demand is more so by the time you get the benefit of it. So that’s why in distribution business, they always do a 12 month cycle rather than doing a three months cycle.

Puneet Gulati — HSBC — Analyst

Understood. That’s helpful. And on your EPC contract, on the solar side, what are you now doing to protect your margins? Are nature of contract different from what they were before?

Praveer Sinha — Chief Executive Officer & Managing Director

So basically what you need to do is that we need to consider what is the forecasted prices of cell and modules and consider now that customs duty is there, you need to add that. In case you are getting it manufactured through the contract manufacturing, then you need to consider the customs duty for cell and not for the modules. So you need to do a much better projection based on whatever details of the level of the future cost of cells module and then big contracts on those lines. Also now that we have taken care of the currency fluctuations and the other balance of plant where again the commodity prices have come down, you need to protect yourself by tying up on the long-term basis.

Puneet Gulati — HSBC — Analyst

But wasn’t custom duty a part of the change in law? Should we expect some benefit coming later?

Praveer Sinha — Chief Executive Officer & Managing Director

In some cases it was there. So where projects were bid before the customs duty was announced, they were there. But in some cases where it was done subsequently because of the delay in supply from China and the transportation delays and all that, there we will not get the customs duty or customs duty pass-through. So it’s a basket of projects under which you need to operate.

Puneet Gulati — HSBC — Analyst

That’s helpful. That’s all from my side. Thank you so much, sir. All the best.

Operator

Thank you. Our next question is from the line of Atul Tiwari with Citi. Please go ahead.

Atul Tiwari — Citi — Analyst

Yeah. Thanks a lot. Again on this Mundra Section 11 arrangement, so who will be the — which Discoms are the customers for these three units under Section 11?

Praveer Sinha — Chief Executive Officer & Managing Director

So right now we have been supplying it to Gujarat and Maharashtra. But under Section 11, mandatorily you need to supply and it is mandatory responsibility of all the buyers to take that power or if they are not taking, they will still have to pay the fixed cost for that. So that’s the arrangement under Section 11.

Atul Tiwari — Citi — Analyst

Okay. And these two months’ bill that you have laid, I mean, have you received any payments from the Discoms or they all have been pending and leading to some receivables build-up?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah. So they have been paying, both Gujarat and Maharashtra have been paying. The other states have not paid, but they’re waiting for the order from CERC and thereafter they will take a call.

Atul Tiwari — Citi — Analyst

Okay. And sir, what will be the current fuel cost of the power that is being generated?

Praveer Sinha — Chief Executive Officer & Managing Director

I don’t have the numbers, but we can share that number. It depends on how the procurement of coal has been done. Not that everything comes on HBA tariff, some of them are the spot market or distressed sales. So there is a blend of coal that comes. And based on that, the tariff is determined.

Atul Tiwari — Citi — Analyst

About INR7, INR8 is that rough ballpark, right? I mean, fuel approval cost.

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah. It is in that range I would say. INR6.50 to INR7.

Atul Tiwari — Citi — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Deepika Mundra with J.P. Morgan. Please go ahead.

Deepika Mundra — J.P. Morgan — Analyst

Thanks for taking my questions. Sir, on the receivables part, could you quantify as to what is the additional receivables from Mundra? And similarly, we see that the regulatory assets across the Discoms, some of them have been going up. Can you talk a little bit about that what’s driving the increase over there?

Praveer Sinha — Chief Executive Officer & Managing Director

No, regulatory asset is basically in the Discoms, whereby there is an arrangement today, if the tariff goes up or the cost of generation goes up or because of power procurement goes up, then you are allowed to take it up with the regulator who subsequently gives it by additional tariff or additional surcharges that has to be charged. In some cases, it is the additional power purchase adjustment cost. So in case of Mumbai operations, it has gone up. The details of the regulatory assets have been also shared with you in Slide 31 and you can see over there what sort of cost increases have happened.

Deepika Mundra — J.P. Morgan — Analyst

So are you likely to receive a revised tariff orders soon or do you think that this continues to build-up through the year?

Praveer Sinha — Chief Executive Officer & Managing Director

So what happens is that the regulator allows certain amount to be adjusted as the part of power purchase adjustment. They’ve already allowed that think in Mumbai, certain quantum not the full quantum. Similarly, in Delhi also, there is a power purchase adjustment and special power purchase adjustment which is there and a surcharge. So the whole objective is that over a period of time it can be amortized. And if it gets delayed, then they continue to pay interest for the outstanding regulatory assets.

Deepika Mundra — J.P. Morgan — Analyst

Got it, sir. And on the transmission part, you mentioned once again about significant opportunities. Could you talk us through whether these are inter-state or intra-state projects? And what is the bid environment currently like for transmission?

Praveer Sinha — Chief Executive Officer & Managing Director

So these are mix. Some of them are inter-state, some of them are intra-state, some of them are green corridors. And there are large number of projects which are coming up in the next 10 years. The numbers were something like…

Sanjeev Churiwala — Chief Finance Officer

INR42,000 crores.

Praveer Sinha — Chief Executive Officer & Managing Director

INR42,000 crores of projects are coming up. And these are basically to meet the requirement of renewable power to be transmitted within the state as well as inter-state and we are participating. Of course, it’s a tough market in terms of large number of people who are there, large number of competitors. But with better technology and we use Tata Projects as the in-house partner for implementing, we feel we have much better chances of winning many of these projects.

Deepika Mundra — J.P. Morgan — Analyst

Got it. And sir, would it be possible to get the Mundra power plant profit/loss for the quarter? And similarly, you mentioned about the coal profit not being offset. Does that get offset once the supplementary PPA or the revised PPA with states gets effective?

Praveer Sinha — Chief Executive Officer & Managing Director

It depends what sort of an arrangement we come up with. So at this stage there is nothing like that and it’s a little premature to say anything about this. But as and when it gets decided, we’ll share with you. The other details, Rahul will share with you on Mundra. Now that Mundra is part of Tata Power, they will have to cut that out and share the details.

Deepika Mundra — J.P. Morgan — Analyst

Sure, sure. Thank you so much.

Operator

Thank you. Our next question is from the line of Rajesh Majumdar with B&K Securities. Please go ahead.

Rajesh Majumdar — B&K Securities — Analyst

Yeah. Thank you for taking my questions, sir. So I had a question on the Discom model because we had been at this Discom business for some time now. And at some — at one stage, we were talking about meaningful profits from the Discom business say in four to five years. Now if we look at CESU, it’s been around for some time and still it’s not generating any kind of meaningful profits and the profit stream is also very erratic, as someone pointed out. So when is it that this Discom model is going to be generating or throwing up a reasonable number of profitability that we can see in our business? That was the first question.

Praveer Sinha — Chief Executive Officer & Managing Director

So Rajesh, the Odisha Discom was the first one, the Central Discom was taken on 1 June, 2020 and this was the COVID period. In last two years, it has made profit. Last year was the first full year of operation and it has made profit. I don’t have the numbers, but I can tell you that it has made substantial profit last financial year. In this quarter also, it has made profit. And the type of changes that it has in the Central Odisha, the same type of changes are happening in the other three Discoms also, and all the Discoms last year made profit. So I think earlier when we had bid, our projection was that first three years we’ll not make profit and the fourth year onwards we will make profits. So we’ve actually done very well in the distribution in Odisha.

Secondly, many of the — there are basically three profit drivers in distribution business. First is on the capex that you incur, you get a return. Second is on the reduction or the introduction of AT&C loss and the billing efficiency, you get a incentive if it is better than whatever is the benchmark that has been set by the regulator or the trajectory that has been set. And the third is, if you do any old collections before takeover, you get a certain incentive on the asset. In all the three, we have been getting on the old payments and on AT&C. The capex has been incurred in the last few months. The benefit of that will start coming in the subsequent months — in the subsequent quarters because the capitalization has not happened as yet. Now once that also happens then the profit will become much more robust. And I’m sure in next one year, you will see a huge amount of bump up in the profit in all these Discoms.

Rajesh Majumdar — B&K Securities — Analyst

So sir, FY ’24, ’25 will be a reasonable year to assume some kind of meaningful profits from these?

Praveer Sinha — Chief Executive Officer & Managing Director

More than meaningful.

Rajesh Majumdar — B&K Securities — Analyst

Okay. And sir, my second question is, probably I missed the first part of conversation. On the Tata Projects, is this a one-off kind of loss because the revenues are not down, revenue is also up? It’s not that the revenues are down, but still the loss is quite substantially. So is it like to be taken as a one-off?

Praveer Sinha — Chief Executive Officer & Managing Director

That’s what Tata Projects. We have suggested what will be the cost to completion and we are booking losses based on that. So it’s not that they have incurred loss already, but on cost to completion basis, we are taking the loss and that is being considered. So you need to consider it from that aspect. It’s not that the revenue has come down, but we expect that when it gets completed, it will feature a loss and we are considering that well.

Rajesh Majumdar — B&K Securities — Analyst

So it is not a percentage of completion accounting method, is it?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah. Hello, Rajesh?

Operator

Our next question is from the line of Girish Achhipalia with Morgan Stanley. Please go ahead.

Girish Achhipalia — Morgan Stanley — Analyst

Sir, thanks for the opportunity. I just wanted to understand what is being discussed with the regulator or under the supplementary more importantly. Is this about the profit sharing under Indonesia which is being ironed out because HBA spoke about a certain formula or is there something else? I mean — and under Section 11, has a regulator completely allowed all profit that you had in Indonesia? Sir, one clarification on Mundra. And the second thing was on bill discounting. So as of 31st of March, I think you had 11.5 billion of bill discounting done. And over and above that the receivables have now gone up. So has the bill discounting come down or what’s the level of bill discounting now at the quarter end? And the third one was on capex. We’re spending about INR10,000 crores on renewable, if you could just break it out for us. Does his include the INR3,000 crores of module manufacturing? And how much commissioning are we expecting out of that balance if INR3,000 crores is against the INR10,000 crores? Thanks.

Praveer Sinha — Chief Executive Officer & Managing Director

So Girish, on your first question, I have already replied it four, five times that under Section 11 it’s a full pass through, there is no adjustment and the regulator order is expected. So we have to wait for the regulator order to really know what exactly. But the concept is that and the noise that is under Section 11 if you incur any cost, it has to be fully paid for, both the fixed and the variable cost. Secondly, on the bill discounting, the details we will furnish you what has been done in terms of bill discounting. We’ll give you the ranges. And what’s the third question?

Girish Achhipalia — Morgan Stanley — Analyst

[Speech Overlap]

Praveer Sinha — Chief Executive Officer & Managing Director

Okay. So that also we’ll share with you. You are 100% right that the INR3,000 crores that we will incur in the manufacturing is part of the INR10,000 crores and overall INR14,000 crores that we will spend in this financial year. And the projects which are ongoing projects, utility-scale projects that we are doing, those will be the balance. We have already implemented I think 275 megawatt in the first quarter. There is another 225 which we have commissioned in this month. So all that will be part of the capex that we incur in this financial year.

Girish Achhipalia — Morgan Stanley — Analyst

So supplementary PPA, is there a discussion around Indonesian coal profit or there is no discussion and they will also treat it similar to the regulator? I mean, how it was…

Praveer Sinha — Chief Executive Officer & Managing Director

We are waiting for final decision from the CERC on the Section 11 and then we will be discussing the supplementary PPA and what sort of arrangement it should have.

Girish Achhipalia — Morgan Stanley — Analyst

Sure. Thank you.

Operator

Thank you. Our next question comes from the line of Anuj Upadhyay with HDFC Securities. Please go ahead.

Anuj Upadhyay — HDFC Securities — Analyst

Yeah, hi. Thanks for the opportunity. Just a follow-up, sir, on the supplementary PPA arrangement you mentioned. So this is only with Gujarat which we will be discussing or we have other states as well onboard?

Praveer Sinha — Chief Executive Officer & Managing Director

So at this stage we are discussing with Gujarat. So once we agree with them, the understanding is that the similar arrangement can be agreed with the others.

Anuj Upadhyay — HDFC Securities — Analyst

Okay. So the one which we are having with Gujarat is for the same quantum we had with them earlier? So close to around…

Praveer Sinha — Chief Executive Officer & Managing Director

Yes. The quantum remains the same with all the five procurers.

Anuj Upadhyay — HDFC Securities — Analyst

Okay. Fair thing, sir. Sir, coming to the EPC side, on the last call sir you had mentioned that the new orders which we have booked in the division are now benchmarked with the new module prices and hence the margins should improve from the Q1 onwards, but it couldn’t happen as on date. Could you just quantify that on the current order book of around roughly INR14,000-odd crores in the EPC, what quantum is now benchmark would be the new module prices so that at least you have some kind of clarity on the margin per se?

Praveer Sinha — Chief Executive Officer & Managing Director

So what happens is that the projects which have got implemented in Q1, these projects which was taking more than a year [Technical Issue] So those are on a much higher margin. Year one we had projected that these prices would come down a bit [Technical Issue] that did not happen in the [Technical Issue] So those are the ones which got impacted.

Anuj Upadhyay — HDFC Securities — Analyst

Okay. And lastly sir, if you could just — as you had mentioned earlier, if you can share the details of Mundra and Indonesian coal with us that would be helpful?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah, sure.

Anuj Upadhyay — HDFC Securities — Analyst

That’s it, sir. Thanks for that.

Operator

Thank you. Our next question is from the line of Murtuza Arsiwalla with Kotak Securities. Please go ahead.

Murtuza Arsiwalla — Kotak Securities — Analyst

Yeah. Hi, sir. A couple of questions again revolving around coal and CGPL. One, there is this INR2,000 crores working capital increase that we see at a consolidated level, could you highlight if any part of it is to do with CGPL because you may be recording the revenues, but not received any of the cash? That’s the first one.

Second is, when looking at some of the numbers that are there in the presentation, you’re talking about coal cluster profits of about INR968 crores and combined profits of INR500 crores. So is the math around INR460 crores of losses are on Mundra, right, the implicit maths? And again, the request to please provide all of the details on CGPL and coal so that we are better able to appreciate the financials.

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah, we’ll share the details with you.

Murtuza Arsiwalla — Kotak Securities — Analyst

Sure. And on the working capital and the competition of loss?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah, that also we’ll share with you.

Operator

Thank you. Our next question comes from the line of Ankit Patel with L&T Mutual Funds. Please go ahead.

Ankit Patel — L&T Mutual Funds — Analyst

Yeah. Good evening, sir. I had a question around again on the Mundra side. So if I see the PLF levels that you have reported at Tata Power level, they remained similar to the Q4 and the revenues have gone up at the Tata Power standalone level, yet the profitability is down at EBITDA level. So would it — wanted to understand whether this current Section 11 the plant is running, is it even profitable?

Sanjeev Churiwala — Chief Finance Officer

I think when we look at the standalone of Tata Power, it’s a combination of various things, including the CGPL, the Mundra plant. So I think it will be difficult to strip down separately on what the impact on the channel on the standalone on the Mundra plant. But as we have discussed, we will separately time work it out and share. Of course, as Dr. Sinha has said, that at the moment, we are looking at the CERC rate and that is supposed to be in principle, supposed to be a pass-through and we have taken up the matter further with CERC to kind of get a revised tariff. Till such time that is implemented, this is very difficult to decode as to what is the exact impact of that. So I think I think you’ll have to just wait for some more time and maybe in the next quarter we’ll have a better clarity.

Ankit Patel — L&T Mutual Funds — Analyst

Okay. Thank you. Now the second question was around Tata Projects again. So in the Q4, also there was a significant amount of negative bookings from Tata Projects. And our understanding and I think the discussion at the time was that probably this is some kind of clean-up as well as the amount of commodity price impact. Now again in this Q1, there is a booking and you are mentioning that it is on account of some cost accounting. Want to understand if this is a trend that would continue throughout this system or this is something that would stop at some point in time?

Sanjeev Churiwala — Chief Finance Officer

I think again Dr. Sinha, in reply to the previous question had mentioned that. There are certain projects we have taken up earlier. And there is a true-up on the cost to completion of that. And to that extent, we have — the Tata Projects have put those losses. We don’t expect further big losses to come in the subsequent quarters. And I guess, what you see right now is basically the cost to completion, of course some of the projects that was taken up earlier which had of course had impacted the previous quarter [Indecipherable] and now. But I think they’re almost close to now getting back to normal there.

Ankit Patel — L&T Mutual Funds — Analyst

Okay. Thank you.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Gopal Nawandhar with SBI Life. Please go ahead.

Gopal Nawandhar — SBI Life Insurance Company Limited — Analyst

Hello, sir. Thank you for the opportunity. I think my question was also on this — the write-off of — or the provisioning for the EPC businesses, both for Tata Projects and Solar. You have been like in the four quarters have been in this comfort in terms like the existing order book you’ve already taken some bit of provisioning, but still it is continuing for some more quarters. So just wanted to get some comfort on that? And the second question was on this INR3,000 crores increase in receivables. If you can just highlight from which areas it is coming? How much is from Mundra, how much is on renewables and solar EPC?

Praveer Sinha — Chief Executive Officer & Managing Director

So as far as the receivables are concerned, Rahul will share the details with you. As far as the EPC for Solar is concerned, last quarter it played a very good profit. It’s only in this quarter they have been stressed. And as we mentioned that this is because of some of the older projects which were getting implemented and we had a huge hit also of the exchange rate. And now that we are fully hedged, it should not happen in future.

Secondly on the Tata Projects, we took this time last quarter and this quarter also that we teed up all the projects where we have a probability of having losses. And based on our assessment, we have taken a hit last quarter also and this quarter. And hopefully now that all those projects are being identified and provisions have been made, going forward, this will not have a impact in future.

Gopal Nawandhar — SBI Life Insurance Company Limited — Analyst

And sir, would you like to share what will be the — are we still running all three units in the Mundra?

Praveer Sinha — Chief Executive Officer & Managing Director

Yes, we are running all three units.

Gopal Nawandhar — SBI Life Insurance Company Limited — Analyst

Okay, sure. Thank you very much, sir.

Operator

Thank you. Our next question comes from the line of Apoorva Bahadur with Investec. Please go ahead.

Apoorva Bahadur — Investec — Analyst

Hi, sir. Thank you for the opportunity, and congratulation on strong results. Sir, wanted to understand one of the notes to accounts. You mentioned that an additional revenue of INR277 crores has been realized for Mundra. So sir, this was under the supplementary PPA, is this correct? And also is the INR277 crores only for the current period or does it pertain to the additional revenue which for power supply during the previous quarters and the supplementary PPA?

Sanjeev Churiwala — Chief Finance Officer

This is the revenue accounting because we are running three units. So to that extent, the revenue have been accounted for. So there is nothing exceptional about it. We can give you the break-up of that. That is not an issue.

Apoorva Bahadur — Investec — Analyst

This is only for the period between 1 April to 1 May?

Sanjeev Churiwala — Chief Finance Officer

Correct, correct.

Apoorva Bahadur — Investec — Analyst

Right. Fair enough. And sir, we are recording the full fixed charge for the plant and delivering to all these states as of now?

Sanjeev Churiwala — Chief Finance Officer

Yeah. So we kind of accounting as per the CERC orders.

Apoorva Bahadur — Investec — Analyst

Right. Fair enough. Sir also in the distribution business, we are seeing a lot of your private competitors are entering into the smart metering business. So any plans for us given that we have a fairly large franchise?

Praveer Sinha — Chief Executive Officer & Managing Director

See, in the distribution business, we are the largest in the country with 12 million customers, that’s the sum total of all the other private sector players in the country. And the type of understanding and the knowledge and experience that our team has, we are looking at taking it up in other states also once the private opportunities cum private sector opportunities or there are also the licensing when it happens. So we are definitely looking at being the biggest player in the distribution in the country.

Apoorva Bahadur — Investec — Analyst

Sir, and on smart metering?

Praveer Sinha — Chief Executive Officer & Managing Director

Smart metering also, we have done the maximum smart metering for our customers in Delhi, Mumbai as well as in Odisha. So we are now implementing in all the four Discoms. And we will become not only a big player of smart meters for ourselves, but we will also do it for various other state Discoms under the governance scheme of RGHS.

Apoorva Bahadur — Investec — Analyst

Okay. Sir, last question from my side and this is on the coal business. So are we meeting the DMO obligation in Indonesia? I mean, like — so basically wanting to understand, is this a case that this quarter we also had the mixed benefit as an higher share of export resulting in higher profits?

Praveer Sinha — Chief Executive Officer & Managing Director

That’s a given thing that you have to meet the DMO obligation. The DMO obligation is not right through the year, but in certain months, depending upon the quality of coal that you produce, the local power company PLN seeks that much quantity. So in the month of January, February, we had supplied a huge quantity of coal under our DMO obligation and that is 25% of the total capacity of the coal that is mined by us. So we will meet that requirement and it’s done through the year; not equally, but spread out in different months.

Apoorva Bahadur — Investec — Analyst

Okay, sir. Sir, so in this quarter, were we below 25% or above 25%?

Praveer Sinha — Chief Executive Officer & Managing Director

Since we did a lot of supply — Indonesia was from January to December calendar. So we’ve already done a large quantity in this year. And hopefully, whatever the rebalancing will be done in the few months.

Apoorva Bahadur — Investec — Analyst

Right, sir. Thanks a lot.

Operator

Thank you. Ladies and gentlemen, due to time constraint, we will take our last question for the day. It’s from the line of Rahul Modi with ICICI Securities. Please go ahead.

Rahul Modi — ICICI Securities — Analyst

Thank you. I’ll just slip in a quick last question. So may be repetitive, just to understand, as you mentioned that the interim tariff which was given that was I think the benchmark in there is different or it was behaving differently? In the two weeks that you said that obviously there was certain amount of difference. So are we billing as per the actual costs or are we billing as per the interim tariff which were given?

Praveer Sinha — Chief Executive Officer & Managing Director

It’s as per the interim targets. Once the actual cost details are given to CERC and they determine it and notify it, then whatever is the difference, we will do it.

Rahul Modi — ICICI Securities — Analyst

So whatever, if I’m not understanding it incorrectly, if this is coming in then we will have a prior period pull up on that front whatever for the couple of months where — for couple of weeks where we’ve not been able to charge the full amount?

Praveer Sinha — Chief Executive Officer & Managing Director

Yeah. Whatever is the actual amount, that will happen. Whether it is up or down, once let the tariff order come and then…

Rahul Modi — ICICI Securities — Analyst

Sure, sure. Right, sir. Thank you very much. All the best.

Operator

Thank you. I would now like to turn the conference over to Dr. Sinha for closing comments.

Praveer Sinha — Chief Executive Officer & Managing Director

Thank you to everyone for joining in the call. And whatever details we could not furnish today, my colleague, Rahul will share that with you. And in case you have any other queries, please connect with Rahul and our Investor Relations team, will be more than happy to furnish you the details. Once again, take care, and look forward to catching up again. Thank you. And thank you Ryan for conducting the call.

Operator

[Operator Closing Remarks]