Adani Power Ltd Q3 FY2025 Concall Summary

Key Takeaways

• Earnings power intact despite soft quarter: 9-month recurring EBITDA rose 22% YoY to INR 16,478 crores, driven by higher recurring revenue and lower fuel costs, even as Q3 PLF dipped to 63.9% on weather-driven demand variability.
• Merchant strategy is volume over price: Realizations fell from INR 6.86/unit to INR 4.54/unit, but the company pushed volumes up more than 50%, earning substantial contribution by operating at technical minimum during solar hours and ramping to full capacity at peak.
• One-time income recognition is tapering: Prior period revenue dropped sharply to INR 2,420 cr from INR 9,227 cr because the bulk of regulatory claims were already received; INR 782 cr from Haryana coal compensation was newly recognized this quarter.
• The 30 GW bet is fully in motion: BTG orders placed for the entire 11.2 GW pipeline, BHEL selected as supplier, and management expects to tie up all new capacity under long-term PPAs without project-by-project financial closure.
• What to watch next quarter: Whether demand and merchant realizations sustain their January pickup through the high-demand summer months, and any progress on tying up PPAs for the untied pipeline capacity.

Quarterly Performance: The Demand Aberration

• PLF compressed by weather: Plant load factor fell to 63.9% from 68.6% YoY, driven by lower temperatures and reduced agricultural demand, an aberration management expects to reverse as demand picked up from January.
• Merchant realizations dropped sharply: Continuing EBITDA was ~INR 200 cr lower YoY mainly because merchant tariffs fell from INR 6.86/unit to INR 4.54/unit, a trend management attributes to solar-hour price compression that has persisted for 2-3 years.
• Volume offset the price decline: The company increased merchant volumes by more than 50% by operating plants at technical minimum during low-rate solar hours and ramping to full capacity during peak hours, tying up contracts across weekly, monthly, and medium-term durations.
• One-time income recognition narrowed: INR 782 cr recognized from Haryana DISCOMs for coal shortfall compensation, INR 411 cr from coal shortfall Haryana, and INR 422 cr from Tiroda DSM and LPS for other DISCOMs, recognized only after establishing a consistent payment pattern over Q1 and Q2.
• Bangladesh operations stable: The plant is running per its PPA with no communication of any issue; the company is receiving slightly more than the regular bill from the last 3-4 months, partly liquidating old outstanding dues. A USD 100 million reconciliation difference exists due to interpretation issues on the HBA formula, but management is confident of realization.

Khyalia: "During solar hours, obviously the tariff has to be lower and will go down lower, because the solar power is available, let us say, with reference to cost at INR 2.50 or so. So, obviously, tariff has to be lower, but this trend has been there for last 2 - 3 years and is going to be more or less same."

The 30 GW Build-Out: Orders, Funding, and Fuel

• BTG orders locked for the full pipeline: Main plant equipment orders have been placed for the entire 11.2 GW capacity, with balance of plant, civil work, erection, and commissioning orders being awarded in a phased manner.
• BHEL selected as sole supplier: BHEL was chosen as the most eligible supplier based on lowest cost and capability to deliver, not through a formal bidding process; management cited BHEL's reliability as a PSU with greater economic strength and surety of on-time delivery, and declined to name other competitors.
• No project-level financial closure needed: Most project funding will come through internal accruals given the current EBITDA and pre-tax profit run rates; interim funding may be needed only if there are cash flow mismatches during a few years.
• Fuel security via captive mines: The Dhirauli mine, adjacent to the Mahan power plant, will supply 0.5 crore tonnes of coal after two years for Mahan's untied capacity; the company is also focusing on acquiring commercial mines in coal blocks near its power plants.
• Mahan and Raipur expansions underway: The 1,600 MW Mahan project has crossed 40% physical progress and is on schedule; work has started at the Raipur site for another 1,600 MW, with a PPA already signed with Maharashtra DISCOM for a net 1,496 MW.
• Korba revival in discussion: The company is in discussions with OEMs and contractors to revive and complete the 1,320 MW Korba expansion, acquired via the Lanco Amarkantak transaction.

Khyalia: "We have already given out the main plant equipment orders for 11.2-gigawatt capacity and secured the most critical part of the project supply chain."

PPA Strategy: Tying Up the Pipeline

• Long-term PPA confidence: Management expects more states to come out with bids for long-term PPAs and is very confident it can tie up the entire 12.5 GW capacity under such arrangements; new capacities are not envisaged under the captive scheme.
• Target states identified: Uttar Pradesh, Madhya Pradesh, Assam, and Karnataka are target states where the company has coal allocations under SHAKTI B(iv); Andhra Pradesh is also in process.
• MSEDCL PPA on an accelerated timeline: The PPA with Maharashtra DISCOM allows five years for commissioning, but the company's internal plan targets commissioning within four years.
• Lanco balance work: Commissioning of the remaining Lanco capacity will take approximately 30 months from the date of the call to proceed.

The Baseload Conviction: Why Thermal Endures

• Solar-plus-battery is not a baseload substitute: Management argued that a seven-day completely cloudy environment would leave batteries uncharged and solar unavailable, making thermal power irreplaceable for baseload regardless of battery storage duration.
• Peak-hour shortages persist: Because enough thermal capacity has not been added, the country will continue to have shortages during non-solar peak hours, when power rates can reach almost INR 10 per unit.
• CEA's resource adequacy plan supports the build-out: Even the most conservative scenario in the Central Electricity Authority's plan, which already factors in aggressive pumped storage and battery storage targets, shows the capacity being planned is very much required.
• Technical minimum reduction underway: Two of Adani Power's units are targeted to achieve a 40% technical minimum next year per the government's trajectory; the company is working on this, and while revenue depends on availability, customers cannot ask the company to operate below 40%.

Khyalia: "Let us say, a situation where you will have 7 days of completely cloudy environment, then no solar power will be available for charging the battery. So thermal power will not have any substitute. Ultimately, you need thermal power irrespective of whatever hours of battery you establish."

Regulatory Income & One-Time Recognition

• Haryana coal shortfall compensation: INR 782 cr recognized this quarter, representing 50% of the claim accepted by Haryana DISCOMs; the amount has been fully received, and the company will continue to recognize this 50% payment consistently going forward.
• Balance Haryana claim uncertain: A bill of INR 1,908 cr has been raised, half received; management offered no timeline for the remainder, saying only "let's see about the balance."
• Prior period revenue tapering is structural: The sharp drop in prior period revenue from INR 9,227 cr to INR 2,420 cr reflects that the majority of regulatory claims were already received in the previous two fiscal years, not a change in the claims environment.
• Recognition approach is conservative: One-time income is recognized only after establishing a consistent payment pattern; the INR 916 cr component was not accounted as income earlier precisely because this pattern had not yet been demonstrated.

Capital Allocation & Surplus Cash

• Significant surplus cash flow expected: Given the current EBITDA and pre-tax profit run rates and the five-year capacity target, management expects a significant amount of surplus cash flow over time.
• Return-focused deployment promised: Management invoked the Adani group's DNA and assured that surplus cash flow will be utilized in a manner that delivers the best industry return in the future, without specifying a timeline or mechanism.
• Acquisitions consolidated: The Moxie Power, Korba Power, and Dahanu power plant acquisitions have been completed, increasing operating capacity; Lanco was acquired 100% on 6 September, contributing partially in Q2 and fully in Q3.

Jha: "You know the DNA of the Adani group, and I can assure you that this surplus cash flow will be utilized in a manner that it will give the best of the industry return in the future."

Guidance & Commitments

Key Metrics