SJVN Ltd Q1 FY2023 Concall Summary

Key Takeaways

• Strong quarter, one-time boost: Revenue rose 52% YoY to ₹1,006 crore and PAT jumped 79% YoY to ₹607 crore, aided by a one-time ₹288 crore tariff gain from Rampur and higher generation across all stations.
• Arun-3 delay confirmed: Commissioning has slipped from June ’23 to December ’23 due to early heavy rains, flash floods, and geological issues in the head race tunnel, pushing back a major near-term growth driver.
• Solar pipeline scaling rapidly: A 1,000 MW Bikaner EPC award (₹5,491 crore) and multiple new PPAs signal a decisive pivot toward solar, with FY24 solar CapEx expected at ₹4,000–5,000 crore.
• FX exposure is unhedged and structural: A ~₹30 crore forex loss on ECB borrowings hit the quarter, and management confirmed this cost cannot be passed to consumers and is currently unhedged due to high hedging costs.
• What to watch next quarter: Whether the Arun-3 HRT achieves the targeted 250 meters/month run rate, progress on transmission line realignment, and any movement on the four pumped storage sites under exploration.

Arun-3: Delay, Progress & Tariff

• Delay driver: Commissioning moved from June ’23 to December ’23 because early heavy rains and flash floods from mid-February/early March impacted dam concreting, powerhouse work, and HRT progress, compounded by geological issues encountered in the tunnel.
• HRT status: Approximately 3 km of excavation remains; management is targeting an average run rate of 250 meters per month but acknowledges "many obstacles" and declined to provide the recent actual monthly run rate on the call.
• Transmission line: Progress has been made but realignment is required due to local objections; Chief District Officers have been directed to expedite land compensation, and management is hopeful of early possession, though the percentage of handing-over completed was not disclosed on the call.
• Tariff visibility: An MoU has been signed with PTC and Renew for power sale; the expected tariff is around ₹4.55–4.60 per unit, described as the maximum tariff, and management states it is comfortable at this level across various project cost scenarios.

N. L. Sharma: "This is the maximum tariff and we are hopeful, we have worked out the different permutations and combinations of the project costs and expected increase in the project cost also because of various reasons. So, we will be comfortable in the rate in terms of the project costs, we are comfortable at this level of tariff."

Solar & Renewable Pipeline

• Bikaner mega award: A 1,000 MW solar project EPC contract was awarded at ₹5,491 crore, described by management as the largest solar project signed by any company in the sector.
• PPA momentum: New 25-year PPAs signed include 400 MW with Punjab at ₹2.65/unit and 200 MW with Bihar at ₹3.11/unit; additional project awards include 75 MW and 50 MW solar projects in Uttar Pradesh.
• Floating solar entry: A 90 MW floating solar project was bagged in the Omkareshwar Reservoir, Madhya Pradesh, with the PPA already signed.
• CapEx scale-up: Next year, solar CapEx is expected at ₹4,000–5,000 crore, mainly ₹5,000 crore.

N. L. Sharma: "This is a major RE project which SJVN and I think this is the largest project so far signed by any company in the solar sector."

Thermal & Pumped Storage

• Buxar thermal on track: First unit commissioning is scheduled for June 2023 and the second unit for January 2024; land for the water corridor has been handed over, and a major portion of railway siding land is in hand with the rest expected soon.
• Hydro test timeline clarified: Management pushed back on the assumption of a one-to-two-year gap between hydro testing and commissioning, stating that if all components are ready, a unit can be commissioned within six months after the hydro test.
• Pumped storage exploration: A committee of experts visited approximately 10 sites; four locations are now under further exploration for viability, with a consultant engaged for due diligence. The majority of sites are in Maharashtra, with some in Andhra Pradesh, Karnataka, Arunachal, and Mizoram.

N. L. Sharma: "So, this is not the actual position. One year or two years of hydro test. So, even within six months also the project can be commissioned. Unit can be commissioned after the hydro test. All the components, if they are ready, then there is no such time requirement that only after one year prior to testing to that will be commissioned."

Financials: One-Time Gains & Structural Costs

• Rampur tariff review: CERC accepted previously excluded costs (guarantee fees, other costs) in a review petition, yielding a one-time amount of ₹288 crore that boosted the quarter.
• Incentive mix shift: Total incentives rose to ₹87.59 crore from ₹71.55 crore YoY, driven by a sharp increase in UI/deviation settlement mechanism incentives (₹24.25 crore vs ₹9.7 crore), while capacity incentives were nearly flat.
• Forex loss is structural: Interest on ECB borrowings resulted in a forex loss of around ₹30 crore in Q1; this is not a pass-through item for renewable energy projects and will remain unhedged because management considers hedging costs too high relative to the risk. The loss will be capitalized when the project amount is capitalized.
• Interest rate sensitivity contained: Management stated that rising interest rates are not materially impacting IRR because interest is capitalized only during the construction period and for a short duration.

N. L. Sharma: "Yes. They interest on the HRB the ECB, some portion was over INR30 crore but INR30 crore HRB on ECB, that will not be passed to the consumer."

Funding & Balance Sheet

• CapEx delivery: FY23 CapEx target of ₹8,000 crore is expected to be achieved; Q1 stood at ₹1,990 crore against a ₹1,800 crore target. The FY24 CapEx target is set at ₹10,000 crore.
• Asset monetization: A ₹2,000 crore monetization target for FY23 has been set, with proceeds earmarked primarily for equity investment in the large pipeline of projects entering construction, including the Sunni dam hydro project requiring ~₹750–800 crore in equity.
• Funding diversification: Future funding sources under consideration include green bonds, bonds, Yen and Pound borrowings, and securitization of debt-free assets.

Guidance & Commitments

Key Metrics