GREENPOWERNSEQ1 FY 2020August 06, 2019

Orient Green Power Company Limited

7,618words

89turns

6analyst exchanges

2executives

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Management on call

S. Venkatachalam

- CEO and Managing Director; and

K. V. Kasturi

- Chief Financial Officer.

Key numbers — 40 extracted

Rs. 468 lakh

ncy in the REC market and interest waiver on promoter loans. We have been able to achieve a PBT of Rs. 468 lakhs, as against a loss of Rs. 63 lakhs in the Q1 of last year. Now coming to the

Rs. 63 lakh

iver on promoter loans. We have been able to achieve a PBT of Rs. 468 lakhs, as against a loss of Rs. 63 lakhs in the Q1 of last year. Now coming to the overall scenario in the country, the

80.5 Gw

ming to the overall scenario in the country, the total RE installations as on June 30th was around 80.5 Gw with wind at 36.4Gw and solar was fast catching up at 29.4 Gw. However, the pace of our installa

36.4Gw

cenario in the country, the total RE installations as on June 30th was around 80.5 Gw with wind at 36.4Gw and solar was fast catching up at 29.4 Gw. However, the pace of our installations remained very

29.4 Gw

llations as on June 30th was around 80.5 Gw with wind at 36.4Gw and solar was fast catching up at 29.4 Gw. However, the pace of our installations remained very subdued, though marginally higher than las

2151 Mw

r, the pace of our installations remained very subdued, though marginally higher than last year at 2151 Mw, as against 1541 Mw of the previous year. Though it is better, it is still very much subdued. Wind

1541 Mw

nstallations remained very subdued, though marginally higher than last year at 2151 Mw, as against 1541 Mw of the previous year. Though it is better, it is still very much subdued. Wind was definitely bett

748 Mw

e previous year. Though it is better, it is still very much subdued. Wind was definitely better at 748 Mw, as against 148 Mw of the previous year. But still far, far below the rates required to achieve th

148 Mw

ough it is better, it is still very much subdued. Wind was definitely better at 748 Mw, as against 148 Mw of the previous year. But still far, far below the rates required to achieve the Government’s ambi

175 Gw

year. But still far, far below the rates required to achieve the Government’s ambitious targets of 175 Gw overall for renewables. Uncertainties in land allocation, grid connectivity and bank funding are

Rs. 3.42

e TN tender are still unable to achieve financial closure despite a relatively attractive price of Rs. 3.42, this is mainly because the TN utility now pays after about 23 months. Most of the bid tenders ar

50 Mw

ived. Further to this, you must have all read the developments in Andhra Pradesh wherein we have 50 Mw of installations under Beta Wind Farm. There have been attempts by the newly elected Government to

Guidance — 20 items

S. Venkatachalam

opening

“We were quite close to completion, but the payment delays and AP are delaying the process and once we come to a regular situation, the banks will be enthused to refinance our entire Rs.”

S. Venkatachalam

“We have been in discussion with them since a while now but we haven’t seen any material impact of that – so anytime line you can share with us as to when do you expect things to materialize?”

S. Venkatachalam

“So, we are at the SMA 1, SMA 2, kind of category will be Beta Banks and that is mainly because the Andhra receivables about Rs.”

Manoj Bagadia

“Second question is the advances that we have given for the balance expansion project in AP.”

K. V. Kasturi

“So, with regard to these receivables and the advances which we have paid for the project.”

K. V. Kasturi

“So, we will be taking decision between Q2 and Qq3.”

K. V. Kasturi

“So, we are working with the Group and definitely the solution will be determined during this period.”

K. V. Kasturi

“And we hope to conclude this at the earliest.”

S. Venkatachalam

“And a lot of people from outside or the outside money has come into the sector also and into the other infra project also.”

S. Venkatachalam

“And I am sure you will be at least in the next three months to six months, you should see some announcements in these regards.”

Risks & concerns — 6 flagged

Uncertainties in land allocation, grid connectivity and bank funding are really the challenge that bidder who have quoted in the last few tenders have faced.

— S. Venkatachalam

We have been in discussion with them since a while now but we haven’t seen any material impact of that – so anytime line you can share with us as to when do you expect things to materialize?

— S. Venkatachalam

But however this Andhra situation in the last couple of months has actually gone worse and we are trying with various other banks to give us a kind of a bridge loan, which also without a security is getting to be a little bit of a challenge.

— S. Venkatachalam

But if it goes into court of law and if it long time, then the sufferer will be the company and especially, the weak balance sheet, they will suffer more because courts take long time and I do not think….

— Manoj Bagadia

500 crore, we are paying very high interest cost actually in this environment when the 10 year T-Bill is 6.43 and add on that the risk premium and other things.

— Manoj Bagadia

But do you foresee any risk of other states also going through this path, if any?

— Saikiran Pulavarthi

Q&A — 6 exchanges

Thank you, I have few questions sir. Firstly, what is the current stage of our discussion with the Bankers? We have been in discussion with them since a while now but we haven’t seen any material impact of that – so anytime line you can share with us as to when do you expect things to materialize? Secondly, we continue to show loss from discontinuing operations in our P&L – till when would be keep accounting for that? How much more do we have to write off? And lastly, a word on REC’s – what’s the current trend in terms of pricing? As far as the banks are concerned the renegotiation, we were ac

Management

There are few questions actually. One is the receivables for biomass, you said, it will take us six months to complete. So, basically, it is taking a long time to complete the sale process, even to the Group company. And this is not a big amount actually can’t they settle the amount and everything much earlier than because I mean, it will help us a lot in terms of making our accounts regular with the bank and then refinancing. So, actually, we are suffering because of that. That is question number one. Second question is the advances that we have given for the balance expansion project in AP.

K. V. Kasturi

So, with regard to these receivables and the advances which we have paid for the project. So, we will be taking decision between Q2 and Qq3. And definitely, we will work out, which will not impact the company significantly. So, we are working with the Group and definitely the solution will be determined during this period. As far as strategic things are concerned, Mr. Venkatachalam will brief you on this. S. Venkatachalam: We are waiting for the situation in AP to ease out. And then we will definitely take a call because we have got a number of things ready for that. So, we are waiting for tha

I think, there is some discussion which happened and Andhra Government's decision and all that stuff. But sir, broadly if we take a step back and I do understand that you mentioned that there will be no legal sanctity for whatever the move which the Government had taken. But do you foresee any risk of other states also going through this path, if any? What could the central Government do to prevent such kind of….

S. Venkatachalam

See, basically few things. Se, couple of years back when the tariffs started falling and the tariff went as low as Rs. 2.44 and Rs. 2.43 for wind and solar, there was a temptation of various Government’s especially Karnataka and Andhra itself, Telangana others they started the ball rolling in terms of renegotiation of tariffs. So, they tried that for a couple of months and then they realized that this is not the right thing to do because it sets back investments in their own state and also it is wrong precedents as such. So, the other states, they have already been through this process and the

When can we see improvement in the earnings sir?

S. Venkatachalam

Sir, we are putting all the efforts to ensure that we give the best return to the shareholders. However, you have seen that in the past, there have been certain setbacks and now we are in a much better situation as far as we are a wind only company and we are hopeful that we will in the next couple of years let us things improve to give best returns to the shareholders. Can we expect improvement in the next two years? Let us hope so, sir. In fact, one cannot give any speculative answers on this. But definitely we are hopeful that we will give you the earlier than that, we also are hopeful that

I have a few questions. So, right now, you mentioned that the Andhra Government has backed down a little but they are taking the supplies from you. So, but right now, are you are getting paid for whatever you are supplying to them or is it kind of getting delay in the payments?

S. Venkatachalam

Yes, payments are still delayed. In fact, it started about two years back from 30 days 45 days, it is it was at eight months and then these two months, it has gone up to 10 months, there is no payments coming out from Andhra. I understand, there are no funds, but they were raising some money about Rs. 2,000 crore was supposed to be raised and once that comes they should definitely pay at least the pass. Okay. And from the agreement that you had initially you cannot supply to anybody else, right? You can supply the entire… All state PPAs do not have an open access, unless you specifically apply

Thank you very much to all the participants. And as we said, we have definitely been through various phases, as we went through the development over the last 8 years - 10 years and following which, in fact at that point in time the wind and the biomass were the best-looking industries with good returns. But then things various turns in terms of grid back down and various other things which happened, the biomass tariffs. Definitely, there were set backs as far as the industry’s were concerned. Things then did start improving and we actually did high hive-off the biomarkers and even the Andhra p

K. V. Kasturi

Thank you.

Speaking time

S. Venkatachalam

Manoj Bagadia

K. V. Kasturi

Moderator

Ashwin Reddy

Prithviraj Mehta

Suraj Digawalekar

Saikiran Pulavarthi

K. P. Singh

Opening remarks

Suraj Digawalekar

Thank you. Good afternoon, everyone. I welcome all of you to Orient Green Power Company Limited’s Earnings Call to discuss the performance for the quarter ended June 30th, 2019. We have with us today Mr. S. Venkatachalam -- CEO and Managing Director; and Mr. K. V. Kasturi -- Chief Financial Officer. Before we begin, I would like to mention that some of the statements made in today’s discussion may be forward-looking in nature and may involve risks and uncertainties. Documents relating to our financial performance were e-mailed to all of you earlier and have been also posted on our corporate website. I would now like to hand over the floor to Mr. Venkatachalam. Thank you and over to you, sir.

S. Venkatachalam

Thank you, Suraj and a very good afternoon all of you, and thanks for joining the investor call. I trust that all of you, would had look at the results and gone through the Investor Presentation that was circulated earlier. the key operational Let me begin developments both from the industry and the company’s perspective, post which, our CFO – Kasturi will take you through the financial performance. the discussion by briefly highlighting Overall, I am glad to announce that we have had a profitable quarter, despite a late start to the wind season. The late start to the wind season set us back in the overall turnover terms. However due to buoyancy in the REC market and interest waiver on promoter loans. We have been able to achieve a PBT of Rs. 468 lakhs, as against a loss of Rs. 63 lakhs in the Q1 of last year. Now coming to the overall scenario in the country, the total RE installations as on June 30th was around 80.5 Gw with wind at 36.4Gw and solar was fast catching up at 29.4 Gw. Ho

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