IEXNSEOctober 31, 2022

Indian Energy Exchange Limited

7,333words
33turns
6analyst exchanges
5executives
Management on call
Satyanarayan Goel
CHAIRMAN AND
Vineet Harlalka
CHIEF FINANCIAL
Rohit Bajaj
HEAD BUSINESS
Aparna Garg
HEAD INVESTOR RELATIONS,
Sumit Kishore
AXIS CAPITAL LIMITED
Key numbers — 40 extracted
6.8%
new orders and an increase in input costs. For FY’23, the Indian economy is expected to grow by 6.8% as per IMF. During the quarter, the electricity consumption at 385BU registered a growth of 6%
6%
.8% as per IMF. During the quarter, the electricity consumption at 385BU registered a growth of 6% YoY. The peak demand at 200GW declined marginally by 1% YoY. The surge in overall consumption was
200GW
e quarter, the electricity consumption at 385BU registered a growth of 6% YoY. The peak demand at 200GW declined marginally by 1% YoY. The surge in overall consumption was driven by the increase in e
1%
umption at 385BU registered a growth of 6% YoY. The peak demand at 200GW declined marginally by 1% YoY. The surge in overall consumption was driven by the increase in economic activities. The to
408GW
the increase in economic activities. The total installed capacity as on September 30th stood at 408GW registering a growth of 5% YoY. The renewable energy capacity is steadily growing, and its cont
5%
ities. The total installed capacity as on September 30th stood at 408GW registering a growth of 5% YoY. The renewable energy capacity is steadily growing, and its contribution today stands at 165G
165GW
f 5% YoY. The renewable energy capacity is steadily growing, and its contribution today stands at 165GW, which is 40% of the total capacity. It is evident that the nation is advancing towards a carbo
40%
wable energy capacity is steadily growing, and its contribution today stands at 165GW, which is 40% of the total capacity. It is evident that the nation is advancing towards a carbon neutral econom
50%
. It is evident that the nation is advancing towards a carbon neutral economy by 2070 and achieve 50% clean energy share by 2030. Unfortunately, led by geo-political disruptions, the global energy
293%
oal and gas. During the quarter, while the prices of e-auction coal witnessed a lower increase of 293% on YoY basis as compared to an increase of 376% YoY in Q1FY23, it was still a significant rise. T
376%
of e-auction coal witnessed a lower increase of 293% on YoY basis as compared to an increase of 376% YoY in Q1FY23, it was still a significant rise. This led to high cost of power generation for IPP
145%
quarter, the imported coal prices (HBA Index) and the gas prices also continued to increase by 145% YoY and 168% YoY respectively, a lower increase as compared to Q1FY’23, but a significant increas
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Guidance — 20 items
Sumit Kishore
opening
“Going forward, we expect further correction in prices on the Exchange which will result in an increase in volumes on the Exchanges.”
Sumit Kishore
opening
“Implementation of GNA will be more conducive towards market development within the country.”
Sumit Kishore
opening
“With a rationalization of power prices on the Exchange, the volumes are expected to improve, and we expect to end the fiscal year on a stronger note.”
Sumit Kishore
opening
“Our members have shown significant interest in this segment, and once prices normalize, we expect to witness similar growth in LDC as we have seen in case of RTM and Green markets.”
Mohit Kumar
qa
“In the second half this position will improve and there will be more e-auction coal in the market.”
Mohit Kumar
qa
“It will be difficult to say anything about the numbers because numbers are dependent on the demand growth and participation of distribution companies, but looking at our first half year performance, I'm sure we should be able to at least achieve the numbers which we achieved in the second half of the last year or better than that even.”
Mohit Kumar
qa
“So, we expect a much better participation in the REC market.”
Mohit Kumar
qa
“Maybe by December, we will launch that market, and ancillary market, regulator has issued the regulations, but that market will be functional only after GNA and Grid codes are notified and implemented.”
Mohit Kumar
qa
“Derivatives will be regulated by SEBI and will be launched only on the SEBI regulated exchanges, such as MCX or NSE or BSE.”
Aniket Mittal
qa
“And under the GNA, all these anomalies will be corrected and there will be a single charge where only buyers will have to pay the transmission charges.”
Risks & concerns — 6 flagged
As a result, there was increase in the e-auction prices, and decline in the availability of e-auction coal.
— Sumit Kishore
On a standalone basis, due to a decline in traded volumes, revenue for Q2FY23 declined to Rs.
— Sumit Kishore
It will be difficult to say anything about the numbers because numbers are dependent on the demand growth and participation of distribution companies, but looking at our first half year performance, I'm sure we should be able to at least achieve the numbers which we achieved in the second half of the last year or better than that even.
— Mohit Kumar
I'm sure when the prices soften in the market, the reverse auction transactions for delivery up to three months also will improve.
— Mohit Kumar
If you look at the volume decline on a year-on-year basis in Q2 was about 11%, but revenue declined slightly higher, closer to 13%.
— Sumit Kishore
They want to analyze from all angles, that there is no adverse impact of this on the spot market.
— Devansh Nigotia
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Q&A — 6 exchanges
Q
I wanted to understand, sir, our electricity volumes have fallen around 8 - 9% in the H1. Where do you see we might end up in FY '23? And also at the start of the year, you had guided for 8 - 9 billion units for REC. Do you think we can still achieve it? Satyanarayan Goel: See, as far as electricity is concerned, you are aware that in the first quarter, the situation was quite challenging and it was not only in India, but world over. In fact, in India, the government comparatively managed the disruptions in an efficient manner. There was shortage of coal, both imported coal prices and e-auctio
Mohit Kumar
Understood, sir. And also, can you give us a brief update on the timeline for new product launches and also the new business initiatives? Can you also share some details about the derivatives market as to when are we looking to launch it? And also, are we looking to launch it on our own or are we tying up with some other exchange for it? Satyanarayan Goel: See, we have already launched the long-duration contracts for delivery of power up to three months. In these contracts, we are seeing a lot of interest from the buy side. But since generating companies are still not very sure about availabil
Q
A few questions. Firstly, in your presentation, you have highlighted that there's been some shift in volume from the Day Ahead Market to Day Ahead Contingency Market. Just wanted to understand the reason for that? And what is the type of shift that has happened? And what would be our share in the Day Ahead Contingency Market right now? Satyanarayan Goel: See, the reason for some volume shifting from DAM market to the Day- Ahead Contingency market is that in the Day-Ahead Market, buyers, and sellers both have to pay their transmission charges. Whereas in the Day-Ahead Contingency market, it is
Aniket Mittal
Just a clarification, apart from the transaction charges, has something in the market also changed? Because this quarter our DAC volumes have also gone up very significantly. Is there some market condition that is also facilitating, let's say, to DAC from DAM? Satyanarayan Goel: No. Except for this arbitrage, I don't think that there is any other reason. The other question that I had was on the RTM market. And I'm fairly surprised by the growth that you're seeing in the RTM market despite the higher prices. I think we're now doing close to almost 70 million to 75 million units per day. Just wa
Q
My first question is that in the first 20-odd days of October, the liquidity situation seems to have improved because sell bids were almost we see close to 70% higher than the purchase bids. And the prices on DAM and RTM have also come up quite sharply even on a year-on-year basis, they're down almost by 60%. Still, we see the October volumes so far down close to 20%, so far on a year-on-year basis? So at what price level do we really see industrial demand on exchanges coming back or volumes coming back, because I thought prices have come off quite significantly even on a year-on-year basis? S
Sumit Kishore
Because coal inventory at power plants is actually better than what it was same time last year. It's almost nine days. But from IEX perspective, we should be tracking e-auction coal availability and e-auction premium to notified price? Satyanarayan Goel: Actually, this 9-day inventory is for the PPA based power plant. If you look at the inventory of the IPPs, which are merchant plants, that situation is still not comfortable. As Coal India has already started increasing the quantum in the e-auction, I'm sure in the next 15 - 20 days, that situation should also improve. Okay. Another question,
Q
Just a follow-up to the temporary shift in volume from DAM to DAC. I just want to understand the change in transmission charges and then the arbitrage of INR 0.3 to INR 0.4, we mentioned that it was from December 2020, but the shift we are largely seeing is in last three months to four months or probably six months. So, I'm not able to understand why this change happened in only the last six months? And secondly, also, the uncertainty of availability that I mentioned in peak hours, but both DAM and DAC, both the trades happen a day before. So the uncertainty should be there in both of them, th
Management
Q
I just had one question. Like we always talk about India's growth. We always talk about future is good. We are expanding in other countries and also a lot of other prospects. But I want to know if you can give us some guidelines and some detailed picture about what's going to happen and what's your plan and what is going right and what's not going right from your prospective? Satyanarayan Goel: What is not going right is, I told you already. Presently, the fuel availability is not right. Less coal available in the market under the e- auction route. E-auction rates are higher. Exchange clearing
Abhishek
Yes. I love the explanation. So one more question. Like there's a lot of negativities right now in terms of competition. I know you just explained that there's no competition in literal way, but a lot of negativity and especially FIIs, we see they're selling and share price also, we see a lot of negativity. Do you have any plan to account for that? Satyanarayan Goel: See, I can't say anything about what FIIs are doing and what is happening in the share market. I can only talk about my business and how we are doing and what we hope to do in future. Do you want to say anything about the competit
Q
Thanks a lot for giving us this opportunity to host the call. I wish team IEX and the audience on this call a very happy Diwali. So over to you for any closing comments. Satyanarayan Goel: I would like to thank all of you for being part of this call today. Q2 has been a challenging quarter for all of us. Going forward, we expect reduction in input prices, lower prices on IEX, and optimization by discoms and Open Access consumers, thereby better volumes on IEX. IEX, as always, remains committed to positively contributing towards the growth and sustainability of the Indian energy sector. Thank y
Management
Speaking time
Sumit Kishore
11
Moderator
9
Aniket Mittal
6
Mohit Kumar
3
Abhishek
3
Devansh Nigotia
1
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Opening remarks
Sumit Kishore
Thank you, Michelle. On behalf of Axis Capital, I'm pleased to welcome you all for the Indian Energy Exchange Q2 FY '23 Earnings Conference Call. We have with us the management team of IEX, which is represented by Mr. S.N. Goel, Chairman and Managing Director, Mr. Vineet Harlalka, CFO, Mr. Rohit Bajaj, Head Business Development, Ms. Aparna Garg, Head Investor Relations, and Corporate Communications We will begin with the opening remarks from Mr. Goel, followed by an interactive Q&A session. Over to you, sir. Satyanarayan Goel: Good afternoon, friends, and welcome to the Earnings Call for Quarter 2 of Financial Year 2023. Joining me today are Mr. Vineet Harlalka, our CFO and Company Secretary, Mr. Amit Kumar, Head of Market Operations and Product Development; Mr. Sangh Gautam, CTO; Mr. Samir Prakash, CHRO, Ms. Aparna Garg, Head of Investor Relations and Communications and Mr. Archit Gupta. India recently surpassed UK to become the world's fifth largest economy and is now steadily headin
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