Torrent Power Limited (TORNTPOWER) Q3 FY23 Earnings Concall Transcript

Torrent Power Limited (NSE:TORNTPOWER) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Lalit Malik — Chief Financial Officer

Saurabh Mashruwala — Vice President, Finance

Unidentified Speaker —

Rishi Shah — Assistant General Manager – Finance

Analysts:

Mohit Kumar — DAM Capital — Analyst

Girish Achhipalia — Morgan Stanley — Analyst

Anshuman Ashit — ICICI Securities — Analyst

Nikhil Abhyankar — DAM Capital — Analyst

Rahul Modi — Nippon India Asset Management — Analyst

Akhilesh Bhandari — ICICI Prudential AMC — Analyst

Bhavin Vithlani — SBI Mutual Fund — Analyst

Harsh Dole — IIFL — Analyst

Bharani Vijaykumar — Spark Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Torrent Power Limited Q3 FY ’23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Lalit Malik, CFO, Torrent Power Limited. Thank you, and over to you, sir.

Lalit Malik — Chief Financial Officer

Thank you. Good evening to all of you and thank you for joining earnings call of Torrent Power for Q3 FY ’23. First, I’ll take you through the performance of the quarter after which phone lines will be open for question-and-answer session. I’ll explain the performance of the company at PBT level first and we’ll take tax expense separately thereafter.

Reported PBT for the quarter stood at INR977 crores as compared to INR509 crores in the corresponding quarter of last year, increase of INR468 crores that is 92% on reported basis. There are no non-recurring items in both the current quarter and corresponding quarter of last year.

I’ll now take you through key highlights on improvement in the PBT by INR468 crores for the current quarter. The improvement in the operating profit is mainly coming from, one, improvement in profitability of gas-based power plant on account of two factors. First, is the net gain of INR397 crores coming from sale of LNG, which as discussed in earlier calls with elevated LNG prices, it makes commercial sense to sell LNG instead of converting it into electricity; and second, is the gain of INR35 crores on account of lower depreciation charge in DGEN on account of one-time impairment charge taken in Q4 of FY’22 and reduction in depreciation rate in SUGEN. Therefore, in total, including above major factors profitability of the gas-based power plants improved by INR435 crores.

Second, moving on to performance of distribution business pursuant to restoration of industrial demand, which was impacted last year due to COVID-19 pandemic, there was marked improvement in overall contribution from the distribution business by INR122 crores. Major factors of which are given below. A, gain on account of reduction in T&D losses of INR45 crores; B, volume and rate gains from franchisee business of INR19 crores; C, higher ROE and incentive in license distribution of INR26 crores; and D, higher contribution from new acquisition of DNH and DD of INR32 crores.

Next, renewable business of the company witnessed an increase in contribution mainly on account of three factors. One, profit booked on account of acquisition consummated during last three quarters amounting to INR21 crores; B, partially offset by lower contribution of approximately INR3 crores from existing plants, mainly on account of lower PLF and non-availability of 50 megawatt of SECI-1 wind power project for part of the month owing to EHS tower failure. Therefore, in total, profitability of renewable power plants has increased by INR22 crores.

Next, increase in finance cost of INR71 crores, which is mainly due to increase in average borrowing by approximately INR2,700 crores, increase in depreciation and amortization expense by INR18 crores and increase in other miscellaneous expense INR15 crores.

Moving on to after-tax numbers. Consolidated profit after tax reported for the quarter is INR695 crores as compared to PAT of INR369 crores reported in the corresponding quarter last year, which is higher by INR326 crores that is 88%.

This was all about the financial performance of the company during the quarter. Now, moving on to the operational performance of the company. Distribution business witnessed an year-over-year improvement of approximately 3% in overall demand.

While the T&D losses for nine months ended December ’22 at Ahmedabad, Surat, Dahej and Bhiwandi have remained stable, losses at Agra and SMK have remarkably reduced mainly due to continued focus on loss reduction and recovery activities.

This completes the overview of the quarterly financial and operating performance of the company. Now moving on, will give a brief update on current projects which are under pipeline. One, commissioning of 150 megawatt of SECI-V has been slightly delayed owing to delay in construction of EHV line due to factors beyond control and same is expected to get commissioned by April 2023. Necessary application for extension of SCOD has already been made to SECI.

Second, TPLD 300megawatt solar project, on the other hand, has picked up some pace as due to recent reduction in module prices. LOA has been issued for procurement of modules. MNRE has also issued a notification to extend the SCOD up to March 2024 for all projects bid before March 2021. This will allow us sufficient time to execute the project.

Next, 300 megawatt of SECI-XII wind project maintain status quo. The project was won by the company in Q1 FY ’23 and LOA for the same has already been received. PPA is expected to be signed in due course.

Next, moving on to distribution segment. The company has made an application for grant of parallel distribution license in various areas of Maharashtra including Thane and Palghar, Pune and Nagpur. MSEDCL is the incumbent licensee and will continue to remain a licensee. Once the license is granted, the consumers will have an option to choose any one of the licensee for power supply.

That’s all for this quarter. Now I would request coordinator to open lines for Q&A session.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Mohit Kumar from DAM Capital. Please go ahead.

Mohit Kumar — DAM Capital — Analyst

Yes, good evening, sir, and congratulations on the good set of numbers. Sir, first question is on the — can you please share the duration of contracts for the LNG which we have right now and how much is there for this fiscal? And is there something which available for the next fiscal also?

Saurabh Mashruwala — Vice President, Finance

Mohit, I’m Saurabh. So as admitted during the last quarter these LNG prices are higher. There is no further contract we have executed in the last quarter, but on an overall basis about you know we have a contract, exist contract with IOC and Reliance Gas where about 25% of the capacity is contracted for our gases SUGEN and UNOSUGEN power, right. Another three cargoes we have booked every quarter for next four years, which will cover another 25%. So overall SUGEN and UNOSUGEN project 50% of that capacity for the calendar year, next four calendar years, we have contracted.

Mohit Kumar — DAM Capital — Analyst

Understood, understood. And secondly, can you please share the EBITDA contribution of the businesses during the quarter?

Saurabh Mashruwala — Vice President, Finance

You can note down the gas — EBITDA for the current quarter is about INR678 crores versus INR300 crores for the last year, the increase of INR378 crores. Out of which as we have explained about INR395 crores on account of the LNG, INR397 crores on account of the sale of gas and renewable is current year is INR161 crores versus last INR114 crores. So increase of INR47 crores.

License distribution business EBITDA is about INR427 crores versus INR352 crores. So increase of INR75 crores, which includes Daman and Diu also. New area, which was not the last quarter and the franchise distribution in Dahej, Agra, Bhiwandi and SMK has contributed INR255 crores in Q3 of current year as compared to INR206 crores of faster increase about INR49 crores. And overall reported PBT EBITDA I would say is INR1,528 crores versus INR1,000 crores last year. It has increased by INR528 crores about 53%.

Mohit Kumar — DAM Capital — Analyst

Understood, sir. Lastly, sir, what has changed in last couple of quarters that various private company like us, they are trying to apply for parallel distribution licensee. Is there something of understanding and change of the Electricity Act?

Saurabh Mashruwala — Vice President, Finance

No. We find the opportunity because Maharashtra is a fairly good area and that’s quite regulated area. I mean, the regulatory is quite good I would say same like Gujarat. And the demand, if you look at the third three areas, which we have applied for the second licensee like Palghar and Thane and Nagpur and Pune. So those are the area where we find industrial demand is almost 50%. So we find this area is attractive and the regulatory mechanism is well placed in Maharashtra I would say. So we find good opportunity there to expand our — to set up our network there and slowly, slowly we try to — we want to capture the market in these three areas also. This area — three area, if you look at the — almost some areas larger — larger than Ahmedabad. And so — and Pune for example Pune we have already City Gas Distribution — we have City Gas Distribution license in Pune. So we are — we have little presence in Pune also, as well as Palghar and Thane because of Bhiwandi and SMK area we are — it’s very near to our area. So where synergies — there is a synergy I would say in case of Palghar and Thane as well as Pune also.

Lalit Malik — Chief Financial Officer

And we can also add our efficiency through our past experience, which will be beneficial for the consumer.

Saurabh Mashruwala — Vice President, Finance

And basically two part tariff, there’s a cost plus tariff basically on top of it. So it’s not like a franchisee kind of a distribution area. So though the T&D losses in current distribution area is not like our franchise area, so it is lower. So two part tariff is available, cost plus tariff is available. That is one other advantage to us.

Mohit Kumar — DAM Capital — Analyst

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

Saurabh Mashruwala — Vice President, Finance

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Girish Achhipalia from Morgan Stanley. Please go ahead.

Girish Achhipalia — Morgan Stanley — Analyst

Thank you for the opportunity. Just one question on this acquisition news on renewables. So there was discussion about 350 solar and 750 wind, I guess. Where are we right now in terms of this development happening or not happening or have you called it off? Can you just provide some color around this?

Saurabh Mashruwala — Vice President, Finance

Which acquisition you are talking about?

Girish Achhipalia — Morgan Stanley — Analyst

The ReNew Power 1.1 gigawatt?

Saurabh Mashruwala — Vice President, Finance

So basically, yes, it’s a NBO stage. So further progress needs to be made, which are currently at the preliminary stage, NBO stage right now.

Girish Achhipalia — Morgan Stanley — Analyst

Okay. Fair enough. Thank you.

Operator

Thank you. The next question is from the line of Anshuman Ashit from ICICI Securities. Please go ahead.

Anshuman Ashit — ICICI Securities — Analyst

Thank you, sir, for the opportunity. Sir, a question on the LNG sale, LNG trading, which we have done. So, sir, the profits, which we are booking from the LNG sales, are we adjusting it into a regulated business because we are buying the power from the market? So how is this adjustment being made?

Saurabh Mashruwala — Vice President, Finance

It’s basically merchant LNG. So it’s basically independent of the regulated things basically.

Anshuman Ashit — ICICI Securities — Analyst

Okay. So it is not included in our regulated business. But the gas, which we were procuring for SUGEN and UNOSUGEN, so I’m just trying to understand, because the contracts that we have is for generating for that regulated business. But the sale, which we are making through the trading that we are not booking or adjusting in our regulated business?

Saurabh Mashruwala — Vice President, Finance

It’s the merchant LNG we are using basically.

Anshuman Ashit — ICICI Securities — Analyst

Okay, sir. Okay. We are not using the allocated sale, okay. And, sir, so going forward as well. So this run rate of around INR400 crores for the quarter, because we currently have around three cargoes booked for every quarter and the —

Saurabh Mashruwala — Vice President, Finance

Cargoes for the calendar year, not every quarter. Every calendar year, for calendar year ’23.

Anshuman Ashit — ICICI Securities — Analyst

Okay. So will this run rate continue to be on similar levels from LNG sales, LNG trading?

Saurabh Mashruwala — Vice President, Finance

Depend on the opportunity available. So we, as you know, we collect the spot price of LNG was pretty high in the last nine months. So we find it was good to sell LNG rather than generate the power. So — and as you notice these LNG prices are coming down. So it depends on the opportunity available.

Lalit Malik — Chief Financial Officer

It may not continue the same way. It all depends upon the pricing and the availability.

Anshuman Ashit — ICICI Securities — Analyst

Sir, what is the threshold price below which we’ll go for generation instead of trading?

Saurabh Mashruwala — Vice President, Finance

It’s a dynamic situation, so at what price we are getting LNG and what is the market price. We can’t put any threshold on LNG business. So basically it’s a dynamic situation. We have to see the opportunity coming in and then accordingly we have to work.

Anshuman Ashit — ICICI Securities — Analyst

Okay. Thank you, sir. And sir how has been the receivable situation. So could you give us the number at nine-months end?

Saurabh Mashruwala — Vice President, Finance

Which number?

Lalit Malik — Chief Financial Officer

Receivables.

Anshuman Ashit — ICICI Securities — Analyst

Receivables.

Saurabh Mashruwala — Vice President, Finance

Receivables numbers, we don’t have right now. So we can give offline if you want.

Anshuman Ashit — ICICI Securities — Analyst

Okay. And, sir, the capex number for nine months?

Saurabh Mashruwala — Vice President, Finance

That we can provide.

Lalit Malik — Chief Financial Officer

Yes, I think, the capex number for YTD nine months is around INR2,298 crores. Total capex, yes.

Anshuman Ashit — ICICI Securities — Analyst

Okay. And, sir, so the run rate, so the number which you told for next year. So for distribution, the license distribution business around INR1,200 crores and INR300 crores for the distribution franchise business?

Saurabh Mashruwala — Vice President, Finance

Yes, that’s a valid number.

Anshuman Ashit — ICICI Securities — Analyst

Thank you so much, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.

Nikhil Abhyankar — DAM Capital — Analyst

Thanks for the opportunity, sir, and congrats on good set of numbers. So sir, can you just first tell me what is the current capacity renewable capacity that we have and what is the under construction capacity?

Saurabh Mashruwala — Vice President, Finance

See, renewable capacity, commission capacity, I would say is 1,068megawatt. And as you — as we updated in the call, we have about 715 megawatt capacity under construction.

Nikhil Abhyankar — DAM Capital — Analyst

Okay. And, sir, is there any conscious effort on our part to acquire assets rather than developing new assets?

Saurabh Mashruwala — Vice President, Finance

Yes, we are working on the opportunity as you recollect, we have last year — last year we did some acquisition of about 235 megawatt kind of things 281 megawatts. So it’s basically we are continuously evaluating the opportunity as far as acquisitions are concerned, as far as new projects are concerned.

Nikhil Abhyankar — DAM Capital — Analyst

So we won’t be developing any projects on our own?

Saurabh Mashruwala — Vice President, Finance

No, we are. I mean, we are developing. There’s 715 megawatt of capacity in the construction.

Nikhil Abhyankar — DAM Capital — Analyst

Okay. And sir, can you just give us the RPO obligation for all the license distribution, license areas that we have?

Saurabh Mashruwala — Vice President, Finance

RPO obligations, once sec. We can come back to you on the RPO obligations.

Nikhil Abhyankar — DAM Capital — Analyst

I’m sorry. I didn’t get the last thing.

Saurabh Mashruwala — Vice President, Finance

We will come back to you to give offline. We said we’ll take it offline.

Nikhil Abhyankar — DAM Capital — Analyst

Sure, sir. And then just regarding the parallel licensing. So, sir, now that you have applied for the license at three, four places. So what our plans? Will we be setting up a new infrastructure or will we be using it with the current distributor?

Saurabh Mashruwala — Vice President, Finance

No. See, second licensee concept is means you have to setup a new infrastructure like Dahej. And Dahej is a example where original license was state DISCOM and it was Dahej SEZ I would say. So we have put a new network there in Dahej SEZ. We capture means all the customers at Dahej SEZ is with us rather than with the state DISCOM. So similar thing means we have to set up the new network basically.

Nikhil Abhyankar — DAM Capital — Analyst

Understood, sir. And just a final question. Suppose if we are given a — the second parallel license, so what time line will it be required to cover the entire city area to develop our own infrastructure?

Saurabh Mashruwala — Vice President, Finance

It is a long-term thing I would say it’s not happening. It cannot happen in a I mean very short period of time. Maybe five years plus is required to set up the network.

Nikhil Abhyankar — DAM Capital — Analyst

Okay. Okay, understood, sir. That’s it from me.

Operator

Thank you. The next question is from the line of Rahul Modi from Nippon India Asset Management. Please go ahead.

Rahul Modi — Nippon India Asset Management — Analyst

Good evening, sir. Thank you for the opportunity. Sir, just to understand the previous person’s point of discussion. So when you’re setting up a new license, when you’re setting up a new network. So does it fall under the regulatory regime or this will be our capex and how will be the risk mitigation in terms of, obviously, the target will be to be more efficient and you know have a much better power supply mechanism. So how does the capex be means it will be — how will it function under the regulatory regime if you can explain?

Saurabh Mashruwala — Vice President, Finance

It’s a regulatory regime only like what we have in Ahmedabad kind of a thing, Ahmedabad, Surat kind of areas.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. So it means — so for example, if there’s someone who’s invested INR1,000 crores already, they’ve got a asset base and you set up another INR300 crores. So the customers get charged on this INR1,300 crores?

Saurabh Mashruwala — Vice President, Finance

No, no. Based on our regulatory filings what we have incurred because like same procedure of what we undertake in the Ahmedabad and Surat area. So we have to submit the ARR and then the tariff will be determined by the regulators.

Lalit Malik — Chief Financial Officer

Same process.

Rahul Modi — Nippon India Asset Management — Analyst

Sir, is there any overlap in the network laying? How does it work? Because I’m just trying to understand a little better you know you are —

Saurabh Mashruwala — Vice President, Finance

There will be overlap because there will be parallel networking is like state DISCOM network will be there, our network will be there, similarly parallel network will be there.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. So sir, now this cost that gets loaded, for example, what is the incentive of the regulator to allow that. Is it city like Pune for example which may be not so inefficient. So to have a parallel licensee and loading up the cost because this is not only happening in Maharashtra, you going in Maharashtra, but it’s happening across India. So just to understand this concept a little better that will it lead to higher tariffs eventually and obviously better quality of service. Is that the right way to understand?

Saurabh Mashruwala — Vice President, Finance

Better quality of service, lower cost of power, those are the benefits consumer will have.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. And sir, as you mentioned that you got an IOCL tie-up for 25% and another 25% you’ve got with RIL. So what would be the approx. cost that we are getting at the current crude slope?

Saurabh Mashruwala — Vice President, Finance

It is linked with the brand IOCL and as well as with Reliance linked with the brand slope basically. So we will not actually update you about the slope, but basically linked with the brand.

Rahul Modi — Nippon India Asset Management — Analyst

Got it. So just to understand currently, today we are suppose to — we have to use this power, what would be the tariff?

Saurabh Mashruwala — Vice President, Finance

We’ll not comment on this right now.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. Sure. Just last question from my side. Sir, your 4,000 plus megawatt target of renewables remain. And if yes when are you planning to achieve this through organic and inorganic?

Saurabh Mashruwala — Vice President, Finance

So we set up about 2025, 2026 to achieve this kind of a capacity.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. That will be 4,500 — or 4,000 if I’m not wrong?

Saurabh Mashruwala — Vice President, Finance

Yes. Yes, you are right.

Rahul Modi — Nippon India Asset Management — Analyst

Okay, sir. Thank you.

Saurabh Mashruwala — Vice President, Finance

Around 5,000 is what we were looking at the next three to five years.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Akhilesh Bhandari from ICICI Prudential AMC. Please go ahead.

Akhilesh Bhandari — ICICI Prudential AMC — Analyst

Yes, sir, thank you for taking my question. My first question is on the parallel distribution network. So MSEDCL already will have some PPAs they’re using to supply power to the areas. So — how will the allocation of PPAs now work? You get to pick and choose some of the PPAs or do you go out and find best PPAs. How does that work? How do you plan also for the network?

Saurabh Mashruwala — Vice President, Finance

What you’re saying is a parallel licensing. So it’s our — we don’t have to use their PPA. We have to do our own arrangement for the distributions procurement of the power. This is not a kind of a sharing of network. We will have a separate network. There PPA will be independent of our power procurement arrangement.

Lalit Malik — Chief Financial Officer

Yes, it’s like, you have your telecom channels, you can have RIL, you can have Vodafone, you can have this. So you have a parallel infrastructure and —

Saurabh Mashruwala — Vice President, Finance

We are not sharing their networks. We are planning to set up an independent network.

Akhilesh Bhandari — ICICI Prudential AMC — Analyst

Just a question on the entire — general question on the entire thing because the duplication of network and duplication of PPAs for the same area has the potential to make the entire system more inefficient, adding more cost structure in a fixed cost environment. So to get the approval, do you have to show, let us say some benefit, some fixed benefit to the user in terms of a tariff reduction or to get the approval or I mean what are the merits based on which this is decided by the regulator. Just your thoughts on that?

Saurabh Mashruwala — Vice President, Finance

Yes, we have demonstrated lower tariff, lower T&D losses, better services was kind of a tangible thing we have to demonstrate.

Akhilesh Bhandari — ICICI Prudential AMC — Analyst

Understood. Got it. Thank you.

Operator

Thank you. The next question is from the line of Bhavin Vithlani from SBI Mutual Fund. Please go ahead.

Bhavin Vithlani — SBI Mutual Fund — Analyst

Hi, sir, good evening. A few questions. The INR395 crores EBITDA from the LNG, what was this corresponding period last year? And if you could also help us with the data for nine months for this fiscal and the previous one please?

Saurabh Mashruwala — Vice President, Finance

Nine month number is about INR641 crores.

Bhavin Vithlani — SBI Mutual Fund — Analyst

Sure. Corresponding period previous year, please?

Saurabh Mashruwala — Vice President, Finance

It was about INR107 crores last year.

Bhavin Vithlani — SBI Mutual Fund — Analyst

Okay. Fair enough. The second question is we have seen a sharp reduction in the AT&C losses at our franchisee. You have earlier in the call communicated about a rule of thumb. Is there a change now I mean for every percentage reduction in the AT&C and the franchisees? What is the incremental profit that come flows through to the EBITDA or PBT?

Saurabh Mashruwala — Vice President, Finance

There’s no change in their assumptions right now. The same assumption can continue.

Bhavin Vithlani — SBI Mutual Fund — Analyst

Sure. The third question is the continuation of the previous participant. So in Ahmedabad, we have about 350 odd square kilometers of our license areas. And over time cities have expanded manifold. Are we also applying for the extended version of the city, which like in theory could be the easiest one to try because you are already present?

Saurabh Mashruwala — Vice President, Finance

So currently, it’s too premature to talk about this. But, yes, city is growing. We are expanding. Demand is increasing by 5%, 6% every year.

Bhavin Vithlani — SBI Mutual Fund — Analyst

Okay. No, the question was in terms of as the city expands beyond your license area and which may in turn fall in the state DISCOMS avenue. Is that also an opportunity that, in theory, we could assume that can come to us?

Saurabh Mashruwala — Vice President, Finance

It is an opportunity, but city — it is an opportunity yes for us.

Bhavin Vithlani — SBI Mutual Fund — Analyst

And last question from my side. There have been news reports on promoters bidding for the NCLT for with Reliance Capital. Now historically, our track record has been impeccable in terms of no related — transactions. Can we assume the same to continue?

Saurabh Mashruwala — Vice President, Finance

We’re not able to comment on the Reliance Capital at this moment.

Unidentified Speaker —

I think — Bhavin, it’s Rishi here, I think your question is more on the — any Torrent Power linkage with Reliance Capital?

Bhavin Vithlani — SBI Mutual Fund — Analyst

No. The question is the related party transactions till date has been pretty clear. There is no loans. Only related party receives dividends or the remuneration. Can we expect the same to continue or like can this entity be used too?

Saurabh Mashruwala — Vice President, Finance

Absolutely, absolutely.

Rishi Shah — Rishi Shah – Assistant General Manager – Finance

So this transaction is being envisaged at the parent level, not at any operating company level and that discipline would definitely be maintained going forward also, which we have seen for the last 20 years.

Saurabh Mashruwala — Vice President, Finance

Independent of Torrent Power. This transaction is independent of Torrent Power. It’s not — nowhere it is connected.

Bhavin Vithlani — SBI Mutual Fund — Analyst

Sure. So the question was only for Torrent Power and the related parties. That’s very reassuring. Thank you so much. These are my questions.

Saurabh Mashruwala — Vice President, Finance

Thank you.

Operator

Thank you. The next question is from the line of Harsh Dole from IIFL. Please go ahead.

Harsh Dole — IIFL — Analyst

Hi, thanks. My question is actually same on the parallel distribution licensing. While it’s good to know that we are going quite aggressive in terms of new areas. Have you heard anybody applying for license or parallel license in our bread and butter Ahmedabad and Surat business, A. And in case somebody applies what is going to be [Technical Issues] to ensure that the incremental growth is not lost. And second part is basically our time lines. Can we expect in terms rollout of the network and what regulatory approvals are necessary and at what stage are we. Thanks.

Saurabh Mashruwala — Vice President, Finance

So, Harsh, see if you look at the scenario. So we in Ahmedabad and Surat kind of area we are efficient. Okay. Our services are better, tariff are competitive, T&D losses are lower. So this kind of a parallel licensing will be more attractive as the state DISCOMS are operating. Like for example, whatever area we have applied is MSEDCL, they are operating which are inefficient area. So there is no point up for any distributor who will come in an efficient area and compete with us because they will not be able to compete with us because of our sheer efficiency of the private sector players. So this kind of a model will work only where the state DISCOMS are operating and they are inefficient basically I would say. Their tariff is inefficient, their tariff is higher, the T&D losses will be higher. So those kind of area, these kind of a model will work, not in Ahmedabad kind of a model I would say.

Lalit Malik — Chief Financial Officer

I mean Ahmedabad and Surat, we are at the lowest in terms of the T&D losses also. So therefore, further efficiency on that will be limited for anybody to look at. On the other hand, with the government, there would be opportunity.

Saurabh Mashruwala — Vice President, Finance

So these will be a differentiating factor between current private sector players and the public sector player, state DISOM, I would say.

Harsh Dole — IIFL — Analyst

Understood. Very well appreciated. If you can comment on the time line and what regulatory approvals are necessary and at what phase are we?

Saurabh Mashruwala — Vice President, Finance

Time line, it’s difficult to say because we have applied for it. So normal process MERC will do. Like, for example, they invite public comments and they will — they will hear the objections. So all those public — those standard process, they will undertake. And accordingly they will do the public hearing kind of a thing. And they will consider all factors, technical capability of the new comers basically, financial capability of the new comers, all this factors, they will evaluate and then they will take the decision.

Harsh Dole — IIFL — Analyst

Appreciate it. And if I can squeeze in one more question.

Saurabh Mashruwala — Vice President, Finance

Yes, you can.

Harsh Dole — IIFL — Analyst

So in general, we have seen that the capital costs for the renewable projects have gone up and the interest rates are what they are. Now in your opinion, do your tariffs are in general new projects which have been bid out, those have adequate margin of safety to adhere to our capital allocation norm or there is some rethinking in that bidding strategy?

Saurabh Mashruwala — Vice President, Finance

No. As we told all the years, we are expecting load in IRR for these upcoming projects. So that assumption is continuing. Like, for example, 300megawatt TPLD project, model size went up to, say, 0.28 kind of a thing. Now this coming to 0.19 kind of a thing. So we have contracted it. We have committed — we have contracted because it is reaching our IRR range. So we have contracted with the model for the 300 megawatt, and we are going ahead with the implementations. So things are coming back to the normal level, I would say. So that is why we are exiting these projects.

Harsh Dole — IIFL — Analyst

Okay. Thank you very much. Thanks.

Saurabh Mashruwala — Vice President, Finance

Thank you.

Operator

Thank you. The next question is from the line of Bharani Vijaykumar from Spark Capital. Please go ahead.

Bharani Vijaykumar — Spark Capital — Analyst

Yes, good evening. Sir, how much of this LNG sale will happen in the upcoming quarters? Will we be able to sell this merchant LNG from the three cargoes we have won?

Saurabh Mashruwala — Vice President, Finance

We will not able to give any future guidance for it.

Bharani Vijaykumar — Spark Capital — Analyst

So what I’m asking is, in this particular quarter, are we continuing to do it?

Saurabh Mashruwala — Vice President, Finance

That is what I’m saying, we will not able to give future guidance. It depends all opportunities available to us at a given point of time.

Bharani Vijaykumar — Spark Capital — Analyst

So right now there is 50% gas available for generation, right, sir?

Saurabh Mashruwala — Vice President, Finance

For this calendar year, yes, 50% gas is available for SUGEN and UNOSUGEN project.

Bharani Vijaykumar — Spark Capital — Analyst

And the three cargoes imported that we have booked that’s available till December 2026, correct?

Saurabh Mashruwala — Vice President, Finance

The three cargoes which we booked is basically to target our summer requirements. So it is for the Q1 of the next year we are targeting.

Lalit Malik — Chief Financial Officer

Every year it will be.

Saurabh Mashruwala — Vice President, Finance

So every year, three cargoes available next four years, three multiple by 12, 12 cargoes, I would say. But the current year, three cargoes is for meeting the summer requirement.

Bharani Vijaykumar — Spark Capital — Analyst

I’m not able to understand. So can you clearly tell for how much capacity of gas do we have gas for FY ’24, FY ’25?

Saurabh Mashruwala — Vice President, Finance

So 50% gas is available for our SUGEN and UNOSUGEN requirement for the license distribution area.

Bharani Vijaykumar — Spark Capital — Analyst

Okay. And this is the IOC Reliance Gas plus the imported gas?

Saurabh Mashruwala — Vice President, Finance

Yes, exactly.

Bharani Vijaykumar — Spark Capital — Analyst

Yes. Okay. And you are free to sell the imported gas if we don’t convert it to electricity?

Saurabh Mashruwala — Vice President, Finance

Yes. That opportunity is available. It depends on the — what is the cost of the gas versus what kind of tariff we are getting. So it basically depends on the opportunities available.

Bharani Vijaykumar — Spark Capital — Analyst

Okay. Next question is on the parallel distribution licensee. How much of capex will be required to create this parallel infrastructure, for example, say, in the city of Pune over the next five years?

Saurabh Mashruwala — Vice President, Finance

Five years, I would say, one can put the numbers about INR4,000 crores, INR5,000 crores capex would be there for Pune kind of a city, I would say, for next five years.

Bharani Vijaykumar — Spark Capital — Analyst

Okay. So regulated equity would be, say, about 30% of it.

Saurabh Mashruwala — Vice President, Finance

Yes.

Bharani Vijaykumar — Spark Capital — Analyst

Okay. Final question is on the EBITDA. So can you give the EBITDA from the new distribution franchisee areas like Dadra and Nagar Haveli separately?

Saurabh Mashruwala — Vice President, Finance

See, we’ll not able to give. We have given the combined numbers, so combined license, this is the number of EBITDA we have given, which we say that it will be at INR75 crores, current quarter, and you see substitute of last month — compared to quarter of last year.

Bharani Vijaykumar — Spark Capital — Analyst

Okay. Thank you, sir.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rahul Modi from Nippon India Asset Management. Please go ahead.

Rahul Modi — Nippon India Asset Management — Analyst

Sir, can you help me with the amount of regulatory assets that have been approved and pending approval? And now how are you getting comfort with the regulator in terms of liquidation, I would say?

Lalit Malik — Chief Financial Officer

INR1,500.

Saurabh Mashruwala — Vice President, Finance

Yes, about INR1,500 crores is approved upon.

Rahul Modi — Nippon India Asset Management — Analyst

And, sir, any liquidation targets of this and the unapproved part?

Saurabh Mashruwala — Vice President, Finance

Unapproved is a disputed one. It is under dispute one I would say.

Rahul Modi — Nippon India Asset Management — Analyst

What would be the amount?

Saurabh Mashruwala — Vice President, Finance

INR600 crores.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. And sir, any regulators indicated? Any liquidation plans for this?

Saurabh Mashruwala — Vice President, Finance

We are working with the regulator. So we are hoping that it should be recovered in next two, three years’ time.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. So, sir, how has the trend been? Is it been flat? Has there been increasing or it has been slightly declined?

Saurabh Mashruwala — Vice President, Finance

It is increasing. It is a bit increasing.

Unidentified Speaker —

I think, Rahul, just to add on to that, if you look at — if you remove last year or this year, I mean, there has been a decreasing trend in the regulatory assets. So basically regulatory assets were going down. But this year, because of higher gas prices and higher all over electricity prices, the regulatory assets have gone up. So it’s difficult to tell you up to what time we’ll be able to liquidate these regulatory assets. But if you look at — to remove this year, then it was a decreasing trend.

Rahul Modi — Nippon India Asset Management — Analyst

Okay. Perfect. That’s all from my side. Thank you.

Operator

Thank you. [Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Lalit Malik — Chief Financial Officer

Thanks. We wish everybody to stay safe and healthy. We thank you and hand over the call to the operator.

Saurabh Mashruwala — Vice President, Finance

Thank you.

Operator

[Operator Closing Remarks]