SJVN Ltd Q4 FY2022 Concall Summary

Key Takeaways

• A year of one-off headwinds: Revenue and profit fell sharply YoY because ~₹580 Cr in late payment surcharge from the prior year did not recur, and a ₹78 Cr adverse tariff order on Rampur Hydro hit the P&L.
• The project pipeline is now the story: Management laid out a path to add ~3,220 MW by March 2024, anchored by Buxar thermal, Arun-3 hydro in Nepal, and a 1,000 MW CPSU solar project, backed by ₹18,000 Cr in capex over two years.
• Nepal is a multi-project platform: With the 490 MW Arun-4 MoU signed, SJVN now holds three projects in the Arun River basin, and management secured majority control with full management rights in the new JV.
• Cash is high, but deployment is lagging: A large ECB draw at year-end inflated the cash balance because two projects, CPSU and Sunni Dam, faced delays, leaving capital waiting to be put to work.
• What to watch next quarter: Whether the Naitwar Mori project commissions on time in October-November 2022, any DPR approval for Arun-4 from the Government of Nepal, and the pace of equity deployment against the FY23 target of ₹1,000-1,500 Cr.

Financial Performance: The One-Off Reset

• Revenue drop: FY22 revenue from operations fell ~₹69 Cr YoY because the prior year included ~₹580 Cr in late payment surcharge from beneficiaries, a non-recurring item.
• Profit decline: PBT fell ₹496 Cr and PAT fell ~₹655 Cr YoY because of the missing LPS and a ₹78 Cr negative impact from the Rampur Hydro CRP tariff order, which comprised a ₹50 Cr cost disallowance and ₹20 Cr in interest.
• Q4 specifically: Revenue from operations fell ₹142 Cr YoY to ₹323 Cr because the Rampur CRP tariff order swung from a ₹104 Cr positive last year to a ₹58 Cr negative this year, despite an 11.5 Cr unit increase in generation.
• Finance cost jump: Finance cost rose to ~₹80 Cr from ~₹30 Cr YoY because of foreign exchange currency rate variations of ~₹25 Cr and utilization of ECB dollar loans for solar and upcoming projects.
• Exceptional item: A ₹23 Cr write-off was recorded because initial expenses on the Arun-3 transmission line were expensed after the decision that Power Grid would construct the Indian portion instead of SJVN.
• Cash build-up: Cash at end of FY22 was high because ECB was procured at very low rates for CPSU and Sunni Dam projects, but both faced delays; the last ECB instalment of ₹750 Cr was drawn at end of March, inflating the balance.

Sharma: "We are keeping our fingers crossed. We will see the opportunity. We require the funds and we are not able to mobilize funds from other sources. We can go for monetization of the assets and get funds for funding the new projects."

Project Pipeline: The 3,350 MW Build-Out

• Capacity addition target: Management expects to add ~3,350 MW before March 2024, comprising 1,320 MW from Buxar thermal, 900 MW from Arun-3 hydro in Nepal, and 1,000 MW from the CPSU solar project.
• Capex plan: FY23 capex is set at ₹8,000 Cr and FY24 at ~₹10,000 Cr, totalling ₹18,000 Cr over two years, with equity requirements of ₹1,000-1,500 Cr in FY23 and ₹2,000-2,500 Cr in FY24.
• Buxar thermal: The first 660 MW unit is expected in June 2023 and the second in January 2024, so both units will come into operation in the next financial year.
• Arun-3 acceleration: The project-government agreement timeline is February 2025, but management is trying to advance commissioning to December 2023 to gain additional running time within the 25-year concession period.
• CPSU 1,000 MW solar: Awarded to Tata Power Solar on an EPC mode for ₹5,500 Cr with a fixed-price contract, so no cost variation is expected despite rising component prices; commissioning is targeted by April-end or May 2024.
• Naitwar Mori: Commissioning is targeted for October-November 2022, with both generation and transmission components being executed by SJVN after the state agency and Power Grid expressed inability; the transmission line is expected to be ready in less than one year.
• 75 MW solar in UP: Commissioning is expected in this financial year, FY23.

Sharma: "If we advance the commissioning, we will get additional time for running the project, the time construction period for running the project is 25 years, if we commission it in advance. We will get additional advantage, so we are trying to commission it in the next year itself, 2023 itself."

Nepal Platform: Three Projects, Majority Control

• Arun-4 MoU: A 490 MW project in Nepal was allotted to SJVN on an MoU basis, not competitive bidding, making it the third SJVN project in the Arun River basin alongside the 900 MW Arun-3 and 669 MW Arun downstream; DPR approval from the Government of Nepal is expected within a month.
• JV terms secured: SJVN will be the majority shareholder with full management control, a condition management insisted on, arguing that only then could SJVN construct and commission the project on time; Nepal Electricity Authority is the JV partner and finally agreed to these terms.
• Arun-3 PPA strategy: Management is in discussions with multiple DISCOMs and bulk consumers, weighing options between a long-term PPA and supply to bulk consumers, and will choose whichever gives better rates.

Sharma: "We put our conditions that SJVN will be the major shareholder in it and the management in control will be totally with SJVN only and only then SJVN will be able to construct the project and commission the project on time and finally they agreed to it."

Operations: Generation Recovery Underway

• FY22 generation: Total generation was marginally down by 1.6 Cr units because a 34.8 Cr unit shortfall in Q1 from lower Sutlej River discharge was largely but not fully recovered by higher generation in Q2, Q3, and Q4.
• Plant availability records: Nathpa Jhakri achieved 106.6% and Rampur achieved 106.36%, both highest-ever plant availability factors.
• Wind and solar bright spots: The Sadla Wind Project generation increased by more than 2.5 Cr units to cross 10 Cr units, and the Charanka solar project achieved its highest-ever generation.
• Incentives up: Total incentives increased by ₹26 Cr YoY to ₹298.66 Cr.
• FY23 hydro outlook: Preliminary indicators show generation in the first ~2 months of FY23 is ~50% higher YoY; management expects to meet the benchmark in the monsoon season and is hopeful of crossing last year's 920 crore units from existing projects, though post-monsoon climatic behavior remains uncertain.

Renewables & New Initiatives: Early Stage, Long Gestation

• SJVN Green Energy subsidiary: A separate 100% subsidiary has been formed; new renewable projects, including the 1,000 MW CPSU solar project, will be routed through it, while the existing 103 MW of operational renewable assets remain with SJVN.
• Pumped hydro: The Government of India has identified ~10 potential sites for SJVN, mostly in Maharashtra with some in Arunachal Pradesh and Karnataka; a technical team has visited the sites, and discussions are ongoing with the Government of Maharashtra for other more viable projects, but the process is in the beginning stage and awaits state allotments and data.
• MoU with BHEL: Signed for collaboration on the renewable front, including BHEL's solar module manufacturing, with both power sector companies exploring possibilities for collaboration.
• MoU with Ministry of Railways: Signed for installing solar projects on land along both sides of railway tracks, with terms and conditions to be finalized if both parties agree.

Sharma: "No project will come to finishing in less than ten years; that too if the optimistic time taken less than ten years, so whatever the form of the pump hydro project, it will take time."

Guidance & Commitments

Key Metrics