IEXNSEAugust 03, 2023

Indian Energy Exchange Limited

6,775words
67turns
10analyst exchanges
6executives
Management on call
S.N. Goel
CHAIRMAN AND MANAGING
Rohit Bajaj
EXECUTIVE DIRECTOR (NON-
Vineet Harlalka
CHIEF FINANCIAL OFFICER
Amit Kumar
HEAD OF MARKET OPERATIONS
Aparna Garg
HEAD OF INVESTOR RELATIONS
Sumit Kishore
AXIS CAPITAL
Key numbers — 40 extracted
6.5%
2 years. According to the Economic Survey '22-'23, India's baseline GDP growth is projected to be 6.5% in real terms for the fiscal year '24, strengthening its position as the fastest-growing major
57.9%
eased manufacturing as input cost price has eased. India's average manufacturing purchase PMI was 57.9% in Q1 '24, higher by 6.8% compared with the same quarter last fiscal. The RBI expects investment
6.8%
t cost price has eased. India's average manufacturing purchase PMI was 57.9% in Q1 '24, higher by 6.8% compared with the same quarter last fiscal. The RBI expects investment activity to further improv
60.6%
deration in commodity prices. Backed by strong demand, India's average services PMI was at robust 60.6% during the quarter compared with 56.9 in Q1 of '22. The Index has remained above 50%, for nearly
50%
at robust 60.6% during the quarter compared with 56.9 in Q1 of '22. The Index has remained above 50%, for nearly 2 years; the longest since August 20, 2011. India's G20 Presidency has highlighted th
120 gigawatt
in the world. Further, according to a recent statement released by the government, an additional 120 gigawatt of fresh renewable energy capacity is at the various stages of implementation. With its commitm
1.8%
date, electricity consumption in India for quarter 1 FY '24 stood at 408 BU, a marginal growth of 1.8% year-on-year basis. Ambient temperatures kept the demand for power lower than the anticipated hig
223 gigawatt
ures kept the demand for power lower than the anticipated highs. Peak demand nevertheless reached 223 gigawatts in June 2023, lower than projected value of 229 gigawatts for the summer months. But higher than
229 gigawatt
highs. Peak demand nevertheless reached 223 gigawatts in June 2023, lower than projected value of 229 gigawatts for the summer months. But higher than the maximum peak of 207 gigawatts which was recorded in A
207 gigawatt
than projected value of 229 gigawatts for the summer months. But higher than the maximum peak of 207 gigawatts which was recorded in April 2022. Installed capacity in India reached 422 gigawatts as on 30th J
422 gigawatt
ximum peak of 207 gigawatts which was recorded in April 2022. Installed capacity in India reached 422 gigawatts as on 30th June, 2023, while installed capacity for renewables grew to 177 gigawatts. India is o
177 gigawatt
ndia reached 422 gigawatts as on 30th June, 2023, while installed capacity for renewables grew to 177 gigawatts. India is on track to attain its target of achieving 50% of energy consumption from non-fossil f
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Guidance — 20 items
S.N. Goel
opening
“India is on track to attain its target of achieving 50% of energy consumption from non-fossil fuel sources by 2030.”
S.N. Goel
opening
“To increase RE participation in the market, a pilot mechanism has been proposed for implementation within a year and an initial capacity of 1,000 megawatt will be tendered by nodal agency under the CfD model with a 15 year PPA tenure.”
S.N. Goel
opening
“Through our wholly-owned subsidiary ICX, we will be able to leverage the opportunities in the voluntary carbon space.”
S.N. Goel
opening
“We are confident that all aspects such as objective of coupling needs in the current market framework, will be examined by the honorable regulator before undertaking the next step.”
S.N. Goel
opening
“IEX was incepted with an aim to provide a platform to access electricity in India in the most competitive, transparent, flexible and reliable manner.”
S.N. Goel
opening
“We have cumulatively traded about 700 billion units across all market segments with a 30% CAGR since inception.”
S.N. Goel
opening
“Customized certifications courses will be offered to develop skills and expertise in electricity markets across aspects of power sector policies, regulatory framework and power exchange operations.”
S.N. Goel
opening
“In line with our aim to provide seamless experience to our customers, we launched the web- based platform EnergX.”
S.N. Goel
opening
“This was largely due to higher gas availability under the long- term contracts and increased domestic gas supply sold on medium-term basis.”
S.N. Goel
opening
“With gradual improvement in domestic production of coal and improvement in coal inventory, we expect rationalization of power prices on the Exchange and volumes to improve from there.”
Risks & concerns — 5 flagged
The average market clearing price in the DAM market during quarter 1 was INR5.17 per unit, a decline of nearly 34% on year-on-year basis.
— S.N. Goel
IGX generated total volume of 42.6 lakhs MMBtu during quarter 1 of FY '24, a decline of 9% over the same quarter last fiscal.
— S.N. Goel
World over, with the way gas supply positions and the prices are, there is a lot of volatility and because of that, we are also seeing on the Exchange platform, it is very difficult to make any assessment for the next 4, 5 years.
— S.N. Goel
So I'm expecting that by the end of the year we should have a volume growth of at least about 15%, but then in exchange market, it is very difficult to estimate these things.
— S.N. Goel
And again, product wise, giving breakup is going to be difficult, because it depends on the market conditions.
— S.N. Goel
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Q&A — 10 exchanges
Q
Thanks for the opportunity. My first question is, sir, how does the Grid Code help us in increasing our volumes? And secondly, you said that the arbitrage between DAC and DAM will go away. Is that regulation finalized or when do we expect this to go away?
S.N. Goel
So, Grid Code is expected to be implemented from 1st of October. That is what we hear, but the date is yet to be notified. See, as per the new Grid Code, there are certain changes in the scheduling mechanism. Now, generator will have to give the schedule on day ahead basis and based on that, all beneficiaries will have to give the schedule on a day ahead basis. And whatever URS power is left, that power now can be sold by generator in the Day Ahead Market without taking consent of the beneficiary. This is a very, very important new change which has been introduced. Earlier, the consent of the
Q
Hi! Good evening Mr. Goel. Thank you for letting me ask this question. The recent development that happened about the market coupling and I got an update from IEX Management that in the current scenario the market coupling may not be something which government should be considering due to the market dynamics which operate in 1 given country, it is something which should be considered between 2 countries or between multiple countries. So I just wanted to hear your insights furthermore that how IEX's future looks like if the market coupling and all is implemented and what are the chances that th
S.N. Goel
As I told earlier also, market design is something which the regulator has to decide about. Government via their 2nd June letter has requested CERC to consider market coupling and initiate the process of discussions with the stakeholders. Now, I'm sure CERC will do detailed analysis about the market coupling, whether market coupling in the present market framework is relevant, is it required, what kind of benefits it will bring to the market, to the consumers, and based on that they will initiate the process, if it all it is required. So, it is too early to say for me whether market coupling w
Q
Just two questions. First, you did mention multiple drivers which could improve the overall volume growth on the power side. Any target that you have in terms of what could be the full- year volume growth in FY '24 for us? That is one. And secondly, you talked about Ancillary Services starting from June both DAM and RTM. Some more information about them and the likely revenue potential from those new products?
S.N. Goel
Yes. See, our first quarter volume growth has been almost about 8%. Month of July so far has been very good. I think it's almost about 20% volume growth so far. So I'm expecting that by the end of the year we should have a volume growth of at least about 15%, but then in exchange market, it is very difficult to estimate these things. It all depends on the demand and supply and availability of the coal. So if everything goes well, because you know first quarter you have seen the demand increase only by 1.8% whereas we were expecting demand increase of almost about 8%, 9%. So, it all depends on
Q
Thank you for the opportunity. The first question I had, Mr. Goel, was on the Grid Code. I think the URS power sale, if allowed, will be a good move for the market. Just wanted to understand; A, timelines of this. I think I've missed it, if it was discussed on the call earlier; and B, whether it'll require any changes to existing PPAs or even without that it can be done?
S.N. Goel
Timeline for implementation of Grid Code as I've told you, we are hearing that it may get implemented from 1st of October, but no timeline has been notified so far because NLDC has to finalize some procedures and they have to do some software tweaking. They are working on that. So based on that, our expectation is 1st of October. And for selling URS power through the Exchange, no change in the PPA is require. Grid Code supersedes all PPAs. The scheduling mechanism indicated in the Grid Code supersedes the PPA. And as per that, the generators will be now free to sell URS power on the Exchange p
Q
The first one is assuming that market coupling happens and the exchanges don't discover prices directly, what will the exchanges do? So, what is the incentive for individual exchanges to invest in coming out with new products if everyone is discovering the same price for a given time slot?
S.N. Goel
You asked a very relevant question, but I have no answer to that. The point is, the role of the Exchange has been defined in the PMR. And as per the PMR, Exchanges are associated with a price discovery. And if they're not doing price discovery, will they be called as Exchange or something else? I don't know that. So I'm sure all these aspects will be examined by the regulators before taking the next step. The Contract for Difference are a very promising step forward for deepening the exchange markets, what is the expectation, how many gigawatts can happen over the next 1 year and next 2 years?
Q
Hi Sir! Thank you for the opportunity. Wanted to understand what's our right to win in the carbon credit exchange. I believe NSE is also looking to enter this?
S.N. Goel
See, IEX, we have the experience of running a spot exchange for last 15 years. We incorporated gas exchange that is also working satisfactorily efficiently from the last 3 years. So, we understand this market, we have good connect with the market participants. We have today more than 7,000 market participants who are registered with us in the power exchange, and large number in the gas exchange also. So, we have reach with this market participants and that is our strength. I'm sure with this and our expertise of the operating exchange, we should be able to get good market share in the carbon m
Q
I just want to know what would be the approximate number of participants on a daily basis transacting in the important Day Ahead and the Real Time market. Though we would have many registered participants, what is the, like the average number of participants transacting through Day Ahead and Real Time markets?
S.N. Goel
Earlier, number of participants used to be very high. As far as distribution companies and generators are concerned, their participation is limited. Distribution companies, we have almost about 50 distribution companies and generators maybe 400, 500. But earlier open access consumers, industrial consumers and commercial consumers, they were participating in a big way when the clearing price used to be low. But from the last 2 years, the clearing prices have increased and the viability for the open access has slightly reduced. That is why the participations have reduced now. And average number
Q
So, most of my questions have been answered, just one on account. There is a spike in the other expenses that we see this time around of around INR12.6 crores in total. Could you just explain like, is there any one-off that we are seeing here or this is a regular run rate? Vineet Harlalka: If you look at the quarter 1 numbers, normally what happens, we book the CSR expenses during the quarter 1, which is tune of around INR7 crores. So this is the one-time expenses of CSR mainly which impacted the number. Going forward, we look at in the range of INR5 crores, INR7.5 crores during the quarter. S
S.N. Goel
We did 15 years' celebration this year, as we completed 15 years on 28th of June, we had celebration for that. We had organized an event for the special participants. And then the CSR, entire obligation for the full year has been already booked in the first quarter itself. So the total amount is about INR7.5 crores. This amount will not appear in the subsequent quarters. Got it. Thank you so much. That’s all from my side.
Q
Just a follow-up on the earlier question, Sir. Should we expect similar levels of other income as well going forward. Quarter-on-quarter it is flat, but y-o-y, it is 40% jump?
Vineet Harlalka
Yes, it is in -- hopefully, it will remain same, but it's mainly dependent upon how the RBI look at it. If there is a significant cut from the interest rate by the RBI, it will definitely going to come down. But looking at the current scenario, we hope for this year that this will maintain the same. Sure. Sir, and earlier you mentioned about 1,000 megawatt of RE CfD contracts. So, what should be the expected timeline for it? I think there are activities happening on that. So, nodal agency will have to come out with the tender for purchase of the power. Maybe this year, at least all these activ
Q
Thank you, friends. I would like to thank each one of you for being part of today's call. During the quarter, we have witnessed a lot of initiatives announced by government and the regulators towards creating a favorable policy and regulatory environment to transform the energy sector. We remain committed in doing our bit towards building a sustainable and efficient energy future. Thank you all.
Management
Speaking time
S.N. Goel
23
Moderator
12
Sumit Kishore
5
Apoorva Bahadur
5
Nikhil Abhyankar
5
Vikash Jain
4
Mohit Kumar
3
Nikhil
3
Devesh Agarwal
2
Saaksha Mantoo
2
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Opening remarks
Sumit Kishore
Thank you, Yusuf. So good evening, ladies and gentlemen. On behalf of Axis Capital, I'm pleased to welcome you all to the IEX Q1 FY '24 Earnings Conference Call. We have with us the management team of IEX, which is represented by Mr. S.N. Goel, Chairman and Managing Director and the rest of his team members. We will begin with the opening remarks from Goel sir, followed by an interactive Q&A session. Over to you, sir.
S.N. Goel
Good evening, friends. I welcome you all to the IEX earning call for quarter 1 of FY '24. With me today on this call are Mr. Rohit Bajaj, our Executive Director (Non-Board), Business Development and Strategy; Mr. Vineet Harlalka, our CFO and Company Secretary; Mr. Amit Kumar, our Head of Market Operations and Product Development; Ms Aparna Garg, Head of Investor Relations and Communications and Mr. Aditya Wali. Friends, the Indian economy has sustained its growth momentum gathered over the past 2 years. According to the Economic Survey '22-'23, India's baseline GDP growth is projected to be 6.5% in real terms for the fiscal year '24, strengthening its position as the fastest-growing major economy in world. This sustained momentum can be attributed to improved private consumption, revival of rural demand and increased manufacturing as input cost price has eased. India's average manufacturing purchase PMI was 57.9% in Q1 '24, higher by 6.8% compared with the same quarter last fiscal. The
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