Torrent Power Limited (NSE: TORNTPOWER) Q2 2025 Earnings Call dated Nov. 13, 2024
Corporate Participants:
Saurabh Mashruwala — Chief Financial Officer
Rishi Shah — General Manager, Finance
Analysts:
Mahesh Patil — Analyst
Amit Bhinde — Analyst
Sumit Kishore — Analyst
Anuj Upadhyay — Analyst
Sagar Gandhi — Analyst
Mohit Kumar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the Torrent Power Limited Q2 FY ’25 Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Saurabh Mashruwala, CFO, from Torrent Power Limited. Thank you, and over to you, sir.
Saurabh Mashruwala — Chief Financial Officer
Thank you so much. Good evening to all of you and thank you for joining the conference call of Torrent Power for Q2 FY ’25. First, I will take you through the performance of the quarter, after which phone lines will be open for a Q&A session.
We explain the performance of the Company at PBT level first, then we will take you through the tax expenses separately. Reported PBT for the quarter stood at INR689 crores compared with INR741 crores in the corresponding quarter last year. Reduction of INR52 crores, which is about 7% on a reported basis. PBT for the current quarter includes non-recurring credit of INR67 crores on account of two factors. First, accounting of INR99 crores on receipts of favorable orders in the license distribution area, which mainly includes the carrying cost allowance, partially offset by lower generation from the wind power projects on account of force stoppage of wind turbines due to heavy rains and Asna Cyclone witnessed in Gujarat during the quarter, leading to a reduction of contribution of INR32 crores.
Adjusted for this one-off, PBT for the quarter stood at INR622 crores as compared to INR741 crores in the comparable quarter of last year, a reduction of INR119 crore, which is about 16%. Business-wise factors contributing this — to this performance are as follows. First, a contribution from thermal or generation business reduced by about INR80 crores mainly on account of two factors. First, lower contribution from sale of merchant power and LNG of INR35 crores. The country in general witnessed a lower electricity demand during the quarter mainly on account of extended and widespread monsoon in the current quarter against erratic monsoons during the comparable quarter of last year. So in anyway, in both the quarters are not easily comparable. Despite the lower overall demand, the Company was able to maintain almost same level of merchant volumes. However, margins were lower due to extended monsoon keeping merchant prices subdued.
Second, additional contribution for thermal generation was also impacted due to higher O&M expenses and lower incentives on account of scheduled maintenance in the quarter. Second, non-cash adjustment on account of foreign exchange variation of INR24 crores. The contribution from renewable generation adjusted for the one-off item reduced by INR29 crores on account of lower PLF from existing wind power, wind, and solar power plants due to lower wind speed resources and radiation respectively. Lower contributions on capacity of 274 megawatts commissioned during the quarter on — as the project is under stabilization phase. The operation license as well as franchise distribution business compensated each other and segment as a whole remained stable in terms of profitability. Demand growth was flat during the quarter at 1% across all our distribution areas. Balance deviation is on account of other income, finance costs, and depreciation. This completes the explanation of financial performance during the quarter.
Moving on to the project update. First update is renewable energy capacity of 274 megawatts was operationalized during the year, taking aggregate installed generation capacity for the Company at 4.5 gigawatt as of 30th September ’24. comprising of 2.7 gigawatt of gas, 1.5 gigawatt of renewable, and 362 megawatt of coal-based capacity. The Company was awarded pump storage hydro projects of 2 gigawatt in an auction conducted by the MSEDCL during the quarter. Pipeline project as at the end of the quarter includes 3 gigawatt of renewable power project and 2 gigawatt of pump storage hydro project and two transmission projects at Khavda and Solapur. Further details of the pipeline projects have been summarized in our latest investor presentation available on the website.
Moving on to the new venture for Company’s hydro project in green hydrogen blending with a CNG in UP is expected to commission shortly. Further, the Company has got allocation of 18 KTPA green hydrogen production under SAT PLI’s tender at an average PLI of 28.89 kg. Technical feasibility has been done and detailed business plan is under preparation. With respect to pump storage hydro project, have identified a project site with a potential of 8.4 gigawatts for pump storage hydro in the state of Maharashtra and UP. Pre-feasibility study completed and MOU terms of reference has been granted for the entire capacity of 8.4 gigawatt. Agency also appointed for the EIS study. As info for the year, we have been receiving LOA for providing pump storage facilities to MSEDCL for an aggregate capacity of 2.2 gigawatts. That’s all for the quarter.
Now I would request coordinator to open the line for a Q&A session. We wish everybody to stay safe and healthy. Thank you so much. I’m handing over line to operator.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. [Operator Instructions] Our first question comes from Mahesh Patil from ICICI Securities. Please go ahead.
Mahesh Patil
Yeah. Hello, sir. Thanks for the opportunity. Sir, my first question is with respect to the employee cost and other expenses in Q2. There seems to be some significant increase compared to Q2 last year. Employee costs are up by 18% and other expenses around 14%. So any specific reason? Any one of items in this?
Saurabh Mashruwala
There is no one item normal increases are there whereas the increase in O&M expense for the higher merchant sale is accounted for, normal staff cost increase is there and the ForEx loss which is a non-cash item, we also booked as an other expense.
Mahesh Patil
So foreign exchange item is around INR24 crore you mentioned, correct?
Saurabh Mashruwala
Sorry?
Mahesh Patil
Foreign exchange loss that you mentioned is INR24 crores, correct?
Saurabh Mashruwala
INR24 crores. In fact, if you look at the euro was about INR90 as on 30 June went up to INR94 as on 30 September. Again, it came down to INR91 as of today. So hopefully this will get reversed. It’s a non-cash item in the Q3.
Mahesh Patil
Okay. The second question is regarding this — our Bhiwandi franchise area wherein the agreement is expiring in January 27th and as we’re almost entering 2025 now, any plans and related provisions in the agreement for further extension?
Saurabh Mashruwala
So provision — the franchise agreement Bhiwandi when last got renewed in 2017, There is a provision that with mutual concern it can be extended for a further five years. So when time comes on the ’27, we’ll again discuss the MSEDCL for the extension, but the agreement provides the extension period of — a further period of five years with a mutual discussion.
Mahesh Patil
Okay, okay. So this will be taken up for discussion sometime in FY ’27?
Saurabh Mashruwala
Appropriate time we’ll take it up with MSEDCL.
Mahesh Patil
Okay, sir. Thank you so much. I’ll get back in the queue.
Saurabh Mashruwala
Okay, thank you.
Operator
Thank you. [Operator Instructions] Our next question comes from Amit Bhinde from Morgan Stanley. Please go ahead.
Amit Bhinde
Yeah, I just wanted to know the exact quantum of merchant EBITDA that was there in the base quarter, because to the extent that I remember in Q2 FY ’24 we just had around INR25 crores of merchant EBITDA, I think so. And notes to the accounts at around INR150 crores of revenue on that, which you used to disclose earlier. So now if I say INR35 crores of difference then we are indicating minus INR10 crores of merchant EBITDA. I don’t think that would be the case, right? We wouldn’t be selling anything on loss? So if you can help us with the exact numbers.
Saurabh Mashruwala
In last quarter merchant EBITDA was about — merchant profit, I would say, was about close to about INR40 crores, INR42 crores. And current — since there is an INR35 crores reduction, about INR7 crores for the current quarter.
Amit Bhinde
INR7 crores is the exact. So we had — if I talk in terms of units, we had DGEN generating around 180 units — million units and apart from that some small sales that you do from SUGEN, et cetera. So would the number of units be around 200?
Saurabh Mashruwala
300 MUs?
Amit Bhinde
So you sold 300 MUs and you made a INR7 crores of profit.
Saurabh Mashruwala
Yeah.
Amit Bhinde
Got it.
Saurabh Mashruwala
The market was subdued because of the monsoon season.Q2 generally always has an impact of monsoon. This quarter monsoon is very widespread and very heavy as compared with the last year it was a very erratic monsoon, not that widespread. So demand last quarter or similar quarter demand was very strong as compared with the current quarter. So which has impacted the merchant sales also as well as our wind and solar PLF also this quarter.
Amit Bhinde
If I look at 300 units approximately sold INR7 crores of merchant EBITDA. We’re just making a INR0.2 EBITDA per kilowatt. That’s like pretty low. I mean then —
Saurabh Mashruwala
If you look at the price also over the exchange also it was lower as compared to our price.
Amit Bhinde
Lower, yeah. Right.
Saurabh Mashruwala
So if you compare the comparable this year also it was bit higher as compared to last year. So monsoon has impacted the quarter in terms of merchant volumes as well as PLM wind and solar PLM also.
Rishi Shah
So if you look at Amit last year’s Q2, there were erratic monsoons and it was not widespread compared to current year. In this quarter it was a very widespread and very good monsoon because of which the demand had — has been impacted. So even after that sort of demand, we were able to demonstrate that we will be able to sell merchants of 300 MUs in this quarter with lower profitability.
Amit Bhinde
Right, right. Yeah for that. And any which ways I think now just one more number that I would like to understand. Earlier when the Brent price was around $85 our effective cost would be around INR6.5 or so gas cost. So now with this Brent price falling steeply, where does our gas cost stand per unit?
Saurabh Mashruwala
At the $75 Brent and roughly it will be $75 and about INR4.50.
Rishi Shah
I think Amit, so you — I think our long-term contracts are linked with Brent. So three months dated Brent, but for spot cargos, they are typically sort of fixed rate prices. So I am not able to get a clear understanding on what is your question. You can’t directly compare Brent with the merchant cost of fuel. Long-term contracts are linked to Brent, but for merchants, we typically book spot cargoes and then we tend to convert that into fixed rates also. So effectively we’ll have to look at it on a MMBTU basis.
Amit Bhinde
Right. Right. Okay. Got it. Because I was just trying to compare it with the slope because Brent was correcting. Then I thought probably we’ll have lower gas costs and lower pricing probably to —
Rishi Shah
That you are right. That is part of our long-term contract, which are typically for our PPA, which we have.
Amit Bhinde
Got it. Got it. Yeah. Thanks for clarifying. Thank you. Those were my questions.
Operator
Thank you. [Operator Instructions] The next question comes from Sumit Kishore from Axis Capital. Please go ahead.
Sumit Kishore
Good evening. Thanks for the opportunity. Just one question, of your total contracted capacity of 2,149 megawatt, is it correct that PPAs have been signed for the entire capacity except the REMCL 100 megawatt?
Saurabh Mashruwala
So renewable — you are talking about our renewable capacity?
Sumit Kishore
Yes, yes. The contracted 2,149 megawatt, excluding the I think REMCL. It seems that PPAs are signed across the board, right?
Saurabh Mashruwala
So renewable — as per renewable about 1.5 gigawatt operational capacity is completely tied up. About 3 gigawatt under construction. Out of 3 gigawatt about 200 megawatt is untied up, meant for the merchant, rest is at the tied up PPA is signed or the LOA is received.
Sumit Kishore
Okay. No, so I was referring to slide 15 where the contracted capacity is 2,149 megawatt. Out of that, only REMCL shows that the SCOD is ’24 months from PPA.
Rishi Shah
I think you’re right, Sumit. PPA is pending for REMCL and as Saurabh bhai explained for air power since it’s a merchant capacity, which we are putting up there is no PPA.
Sumit Kishore
There’s no PPA.
Rishi Shah
Every other contract, we have already entered into a PPA.
Sumit Kishore
Got it.
Rishi Shah
And REM sales would get — should be, let’s say, in a month or two months time.
Saurabh Mashruwala
Yeah, month or two months it will be signed.
Sumit Kishore
Okay, that was my only question. Thank you.
Saurabh Mashruwala
Thank you so much.
Operator
Thank you. [Operator Instructions] The next question comes from Anuj Upadhyay from Investec Capital. Please go ahead.
Anuj Upadhyay
Yeah. Hi, thanks for the opportunity, sir. Sir, just want to get your sense on the reimposition of Section 11. It has been extended for the thermal, but not for the gas-based session. So want to know your view on this? And if you can elaborate more on the recent PSP tie-up which we did with Maharashtra that would be helpful, sir.
Saurabh Mashruwala
In terms of Section 11 during the summertime it was enforced first time with our gas power, right? So thereafter it haven’t got renewed also. So we’ll have to see next summer, how the next summer will be. And as far as the PSP capacity of 2 gigawatt is concerned, it’s a 40-year contract we have, and about INR85 lakhs per megawatt per annum is the rate fixed cost, and powers will be provided by the MSEDCL. So we don’t have to worry about the power. And it’s a total five hours of continuous supply and three hours is optional. We will schedule it and it will be — cycle is about 25% cycle of these NFH is stipulated basically meaning maximum cycle out of 25%. That is what the contract is, and there will be 2 gigawatt of contracts we have signed for 40 years.
Rishi Shah
And Anuj, just to add to what Saurabh bhai said on the earlier question of yours, in terms of Section 11 not being extended to gas-based power plants, typically, if I look at gas-based power plants in the country apart from us, a lot of gases power plants are slightly costlier than coal-based power plants. So typically on a FIFO basis if you look at it, demand — if demand is higher then Section 11 typically would be available on gas-based power plants. But if demand is lower I think then first port of call would be for coal-based power plants to be operational under Section 11 and then if it surpasses a certain amount of demand then typically would be on the gas-based power plant because it will be looked upon from the entirety rather than on one particular plant. So all other gas-based power plants are slightly costlier compared to coal.
Anuj Upadhyay
No. Agreed. Agreed Rishi bhai. So would it be fair to assume that considering that the Section 11 can be imposed only mainly during the peak time period, say four months of the summer, and then probably it may get extended for say September, October probably I’m saying subsequent year as well. So DGEN at most can operate at around 35% to 45% kind of a PLF in a best-case scenario, I’m saying, or even that is on a slightly higher side?
Rishi Shah
Anuj, I think giving you specific numbers is very difficult because we also — it will be just putting an estimate. But what I can tell you is that if you look at our Q2 numbers, DGEN has shown a higher PLF compared to Q2 of last year. Our merchant volumes are also higher compared to last year even though the prices were lower. So whether Section 11 is imposed or not, I think we are in a position to run our plants without Section 11.
In terms of profitability is concerned, I think it’s a factor of what are the prices available in the market, and even at such subdued prices which we have seen in Q2, we have been able to make profits. Now those profits may not be significant compared to what we have seen in Q1. But typically running plants in Q2 where there is a demand is pretty low that also is — I think is a positive sign. I think that’s what I can tell you. In terms of percentage PLF very difficult to give you any guidance on that.
Anuj Upadhyay
No, fine. It’s helpful. Thank you.
Saurabh Mashruwala
Thank you, Anuj.
Operator
Thank you. [Operator Instructions] The next question comes from Sumit Kishore from Axis Capital. Please go ahead.
Sumit Kishore
I just had a follow-up question. What has been the total capex that you have incurred so far against the renewable portfolio expected project cost of INR19,316 crore so far? And, yeah, that’s the first question.
Rishi Shah
So, Sumit, we don’t have those numbers against INR19,000 crores, what we have spent. On a broad ballpark number, I think we would have spent around INR1,500 crores, but exact numbers I can give it to you offline. As of now, we don’t have that on hand.
Saurabh Mashruwala
Cumulative number, we don’t have right now.
Sumit Kishore
Okay. So total capex that you have incurred in first half of the year at a consolidated level would be how much? This is INR15 billion is only for RE.
Rishi Shah
So, sorry, you’re talking about the consolidated H1 capex which we have spent?
Sumit Kishore
Yeah, so INR15 billion is the RE capex that you have incurred so far for under construction project. What is the total H1 consolidated capex also if you have?
Rishi Shah
Yeah, I’ll tell you. So for renewables for the H1 we have spent around INR650 crores in the renewables part of it.
Sumit Kishore
Okay.
Rishi Shah
For license and franchise put together, we have spent around INR700 crores and some INR30 crores, INR40 crores balance on other ballpark capex side. So if I look at the overall capex number around INR1400 crores of capex which we have spent in H1.
Sumit Kishore
Okay. So just one observation that I wanted to clarify. If I look at capital work in progress in the BSE filing as of 30th September 2024, it is INR2,143 crores. And as of March 2024, it was INR2,472 crore. So CWIT seems to have come off in the first six months. So I would have thought that they should have gone up.
Rishi Shah
No, I think Sumit so that’s because we have also commissioned around 247 megawatts of capacity for our TPLD 300 megawatt project. Partly it is because of that and partly because our license distribution also would keep on capitalizing or commissioning certain projects.
Sumit Kishore
Yeah, very clear.
Saurabh Mashruwala
It is because of the capitalization only.
Sumit Kishore
Capitalization. Okay, thank you.
Saurabh Mashruwala
Thank you.
Operator
Thank you. [Operator Instructions] The next question comes from Mahesh Patil from ICICI Securities. Please go ahead.
Mahesh Patil
Yeah. So my question is on the other income for the quarter, which seems to have gone up to around INR125 crore on — so any color on this? What has contributed to the increase in other income?
Saurabh Mashruwala
Normal increase. Not — I would say INR108 crores to INR125 crores normal increase. I think, yes, I would say.
Mahesh Patil
Okay.
Operator
Mr. Patil, do you have any further questions?
Mahesh Patil
No, thank you.
Operator
Thank you. [Operator Instructions] The next question comes from Sagar Gandhi from Invesco Mutual Fund. Please go ahead.
Sagar Gandhi
Yeah. Good day, sir. My question is on the renewable portfolio. So while we are planning to expand it to 4.3 gigawatts over the next three to four years, can you highlight or give a broad perspective on any challenges that you face for evacuation of this upcoming capacity?
Saurabh Mashruwala
If you look at the renewable portfolio, challenges will be the land acquisition, evacuations, these are the main challenges. As far as our portfolios are concerned about 80% land is in possession and all four connectivity approvals are in place for — because those are the things — firstly we work on those things and then we participate bidding the project. So these are the things as far as we are concerned.
Mahesh Patil
So out of our under construction 3 gigawatt of renewable capacity that is — I mean in pipeline, are you trying to say that all of it is — I mean, has got transmission access or the transmission access will be there by the time this portfolio gets ready?
Rishi Shah
So, Sagar, what we do is we keep on acquiring land. So last two years if you look at it the 3 gigawatt which we are looking at was built effectively in last nine months. But before that also, even though we were not winning some bids, we kept on acquiring land, which provided good PLF in terms of solar or wind. Along with it, we also kept on applying for connectivity approvals. So effectively what has happened is for this 3 gigawatt which is under construction, we have around 80% land which is already available.
As far as evacuation is concerned, stage one connectivity approach are there for all the projects which we have. And we also keep on looking at additional land parcels and connectivity approvals to — as and when we keep on getting new projects, we’ll be able to utilize those connectivity and land parcels which are there or which we have acquired over a period of time. So, effectively, we have identified these two as a major — could be major roadblocks for renewable projects and we try to mitigate those risks by taking — without any projects in hand, we try to keep those land and evacuation ready. So as and when a new project comes in, we are ready with that.
Sagar Gandhi
Okay. And sir, my subsequent question is on the green hydrogen side. So while many players are figuring out on the manufacturing of the electrolyzer side, so what steps we have taken on that segment and what is our broad roadmap in that direction?
Rishi Shah
You’re talking about green hydrogen, right? So effectively we have won 18 KPK of green hydrogen under the PLI scheme. Right now we are trying to find out a commercial endpoint in terms of the price of — at which we can sell right now and what are the costs at which we can generate. So unless we are able to get a clear answer to that, we have not committed any capital under that. As and when — so we are working on that. As and when we get a clear answer on both these points, I think we’ll be committing the capital, but to give you any perspective on that right now is difficult.
Sagar Gandhi
Sir, any tie-ups that you may have done on the electrolyzer side that you may want to highlight?
Saurabh Mashruwala
Electrolyzers?
Sagar Gandhi
Yes, yes. Because that is a precursor to the manufacturing of green hydrogen.
Rishi Shah
That’s right. So Sagar what I —
Sagar Gandhi
What capability we have or are we tying up with some global players for building that capability? Yeah.
Saurabh Mashruwala
No, correct. So I think that would be a second stage. As and when we decide to commit on this capital for green hydrogen, then we’ll be looking at electrolyzers. Locking in electrolyzers and renewable capacity, but as I told you, we are still working on the end use in terms of economically viable end use and the selling price. So once we have a clear view on that, before that we will not be putting in any orders as of now.
Sagar Gandhi
Sure, sir. Thank you. Thank you. That is it for my side.
Operator
Thank you. [Operator Instructions] The next question comes from Mohit Kumar from ICICI Securities. Please go ahead.
Mohit Kumar
Hi, thanks for the opportunity. Pardon my — I joined late, so I may be repeating the question, but the question is on the pumped storage hydropower plant. So where are we in terms of giving the orders, what are the timelines you are looking at? What is the kind of capital cost you are expecting?
Saurabh Mashruwala
In terms of pump storage, the pre-feasibility study is completed. PUR has been received from the MOF and we have appointed the agency for the EIS study. And Letter of Award is also received. So from — 2 gigahertz capacity from the MSEDCL. The cost will be roughly about INR4.5 crore to INR5 crores per megawatt. That is what our current estimation is.
Mohit Kumar
You must have Identified the site, right? So what is the timeline you’re looking at? I think what is the — I think PPA allows you 48 months, am I right to commission?
Rishi Shah
Yes, 48 months for the commissioning period. The latest PPA.
Mohit Kumar
And have you signed a PPA as of now or is PPA is to be executed?
Rishi Shah
Sorry, we are not able to hear you properly.
Mohit Kumar
Have you signed a PPA or PPA is to be executed? PPA.
Rishi Shah
No, I think it should be done in sometime.
Mohit Kumar
Understood, understood. Okay, sir. Thank you.
Saurabh Mashruwala
Thank you.
Operator
Thank you. [Operator Instructions] As there are no further questions from the participants. I now hand the conference over to Mr. Saurabh Mashruwala for closing comments.
Saurabh Mashruwala
Thank you so much for joining Torrent Powers earnings call. Thank you very much. We wish everybody to stay safe and healthy. Thank you so much.
Operator
[Operator Closing Remarks]
Saurabh Mashruwala
Thank you.