Adani Power Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Strong quarter, clean earnings: Continuing EBITDA rose 53% YoY to ₹6,290 crores, driven by higher PLF and lower fuel costs, while one-time regulatory income nearly vanished as past petitions are resolved.
• Merchant power is the margin engine: Contribution per unit jumped to ₹4.56 from ₹3.71 YoY as coal costs fell sharply; management caps merchant exposure at 20% to balance upside and risk.
• Doubling down on thermal: A 30.67 GW target by FY29-30 is backed by a 1,600 MW brownfield start, three more 1,600 MW projects in prep, and two NCLT resolutions pending.
• Balance sheet strength is funding growth: Finance costs fell on debt prepayment and improved credit ratings, while banks are now open to funding merchant capacity on standalone viability.
• What to watch next quarter: The KSK Mahanadi bid outcome, NCLT orders on Lanco Amarkantak and Coastal Energen, and any PPA tie-up progress for the new 4,800 MW brownfield pipeline.

Operating Performance

• PLF surge: Plant load factor rose to 78% from 60% YoY as all plants contributed higher volumes, supported by competitive merit order position and lower imported coal prices.
• Volume-led revenue: Continuing operating revenue grew 29% YoY; lower import coal prices reduced tariff realization in some pass-through PPAs, but strong merchant tariffs more than compensated.
• Fuel cost advantage: Coal cost fell to ₹2.89 per unit from ₹3.86 YoY because Coal India auction supply is comfortable and premiums have dropped, versus last year's high imported coal cost and auction premiums from scarcity.
• Godda fully online: The second 800 MW unit commissioned end of June last year, so full generating capacity was available this quarter, contributing to the volume increase.
• Regulatory overhang cleared: One-time prior period revenue fell sharply to ₹422 crores from ₹6,497 crores YoY as regulatory petitions related to domestic coal shortfall claims and past dues from DISCOMs are nearly fully resolved. Reported PBT was ₹4,906 crores versus ₹8,800 crores last year solely because of that large one-time item.
• Finance cost tailwind: Finance cost fell to ₹811 crores from ₹883 crores YoY due to debt prepayment from regulatory cash flows, a healthier balance sheet, improved credit ratings to the AA family, and lower interest rates.
• Depreciation step-up: Depreciation rose to ₹996 crores from ₹935 crores YoY on commissioning of the Godda plant.

Khyalia: "if we take full load for 16 hours and let us say 55% for 8 hours, still the PLF would be above 70% which is very good PLF for a thermal power"

Merchant Power Strategy

• Contribution economics: Merchant contribution per unit rose to ₹4.56 from ₹3.71 YoY, driven entirely by the coal cost drop; tariff was nearly flat at ₹7.45 versus ₹7.57.
• Sales mix: Most merchant sales are under bilateral contracts of less than one year; 20%-30% of merchant capacity is kept for exchange sales because full short-term PPA tie-up is not possible given take-or-pay obligations.
• Risk cap: Management wants to keep around 20% of capacity under merchant as a balancing act, capturing higher market rates without exposing the portfolio to market risk beyond that threshold. For expansion, 15%-20% of new capacity will be kept for merchant.
• NCLT assets fit the strategy: Capacities acquired under the NCLT route, located close to coal-bearing areas, are well-suited for merchant market; newer brownfield and greenfield expansions will look at full tie-ups under PPA.
• Funding availability: Financial institutions and banks are open to funding merchant capacity; the Government of India has indicated banks should look at standalone viability of merchant capacity rather than requiring full PPA cover.

Khyalia: "we don't want to expose ourselves to market risk for more than the 20%, which is sufficient to take the advantage of higher rates from the market."

Capacity Expansion Pipeline

• Mahan Energen Phase II: A 1,600 MW ultra-supercritical expansion is underway with targeted completion by June 2027.
• Three new projects in prep: Advanced preparation has started for three more projects of 1,600 MW each at Raipur, Raigarh (expansions in Chhattisgarh), and Mirzapur (UP, in a recently acquired subsidiary).
• Brownfield evaluation: Management is evaluating further brownfield expansion of 4,800 MW alongside inorganic opportunities of more than 1,000 MW.
• NCLT resolutions pending: Awaiting NCLT approval for Lanco Amarkantak (600 MW operating, 1,320 MW under construction at ~70% completion) and Coastal Energen (600 MW operating with a Tamil Nadu PPA, 600 MW available for merchant). The NCLT has reserved its order for both.
• KSK Mahanadi bid: KSK Mahanadi is under bidding with submission due by end of business hours on July 31, 2024.
• Inorganic criteria: Management evaluates targets on quality of equipment, plant maintenance, water availability, transmission availability, proximity to coal-bearing sites, and room for expansion. Inorganic expansion is framed as a way to access good sites and capacities that can be turned around quickly, not the key strategy.
• PPA confidence: Management expects to be able to tie up long-term PPAs for all planned organic and inorganic expansion, citing state bids from Maharashtra, UP, and Rajasthan for 6,400 MW with 25-year durations, and more bids expected from other states soon.

Khyalia: "we have never given in terms of capacity numbers more than this. This is our announced and notified capacity to exchange also and to everybody."

Demand & Regulatory Backdrop

• Government demand driver: Peak demand is projected to grow from 250 GW to 400 GW by 2031-32, requiring 80-90 GW of additional thermal capacity.
• State procurement active: Three states have already invited bids for 6,400 MW of thermal power with 25-year PPAs; more bids are expected from other states soon.
• Thermal PLF resilience: Management believes solar and battery storage will not threaten thermal PLF because batteries are not yet competitive with thermal; thermal can run at full load for 16 hours and 55% for 8 hours, yielding PLF above 70%.
• Carbon tax pass-through: Any carbon tax would be a change in law and would be passed through under the PPA, similar to the Green Cess/GST Compensation Cess which was allowed as pass-through.

Khyalia: "any carbon tax would be a change in law and therefore it would be passed through under the PPA."

Fuel Security & New Initiatives

• Commercial mining: Management is focusing on enhancing fuel security through commercial mining licenses under an asset-light model.
• Green ammonia pilot: Adani Power is carrying out a pilot study at Mundra to establish whether green ammonia can be co-fired with coal; currently in technical feasibility stage. If technical feasibility is established, market rates of ammonia are viable, and pass-through under PPA is allowed, management will go ahead.
• Bangladesh supply stable: The entire power from the dedicated Godda station is going to Bangladesh; it is not connected to the Indian grid, Bangladesh is taking full power, and no increase in supplies is expected as the station is fully tied up.

Guidance & Commitments

Key Metrics