SJVN Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Hydro shortfall drives profit down: PAT fell ₹155.64 crores YoY as generation from the two main Sutlej projects dropped ~13%, a risk management frames as normal hydro variability.
• Renewables are the growth engine: Renewable generation rose 13.5% YoY, and the company is racing to commission 240 MW of solar in Q4 alone, with a further 1,000 MW Bikaner project now targeting a September 2024 start.
• A 12 GW target is now a firm commitment: Management states it will "surely achieve" 12 GW by FY26, backed by 11 projects slated for addition in FY25 and 4,500 MW of tenders under finalization this quarter.
• The Nepal PPA is the nearest catalyst: A PPA for 50% of Arun-3's power is expected "within a month," with the balance to be tendered shortly after, unlocking value for the February 2025 commissioning timeline.
• What to watch next quarter: The signing of the Arun-3 PPA, the award of 4,500 MW in tenders, and any judgment on the HP water cess case, which could impose a new cost.

Hydro Performance & the Shortfall

• Core asset underperformance: Generation from the flagship Nathpa Jhakri (NJHPS) and Rampur (RHP) hydro projects declined 13.36% and 12.79% YoY respectively, driven by low precipitation in catchment areas and low discharge in the Sutlej river.
• The temperature, not snow, was the culprit: Management clarified the shortfall was not due to less snow but to a lower temperature rise during the May-June summer, which reduced snowmelt and peak-season generation. Peak generation is concentrated in June-September, making a Q4 recovery impossible.
• Design energy is a benchmark, not a promise: Against a design energy of 896.45 crore units, the 45.26 crore unit shortfall is described as "part and parcel of hydro projects," with a similar miss occurring in 2018-19. Management deflected a question on whether design energy should be revised downward.
• Compensation claim in progress: SJVN will claim compensation for the reduced generation through the CRC (Compensation for Reduced Generation) mechanism and is "hopeful to get some of it."
• Reasonable snowfall offers next-year hope: Management noted "reasonable snowfall" this year and expressed hope of making up the shortfall in the next fiscal year.

Geeta Kapur: "You are right there is overall shortfall off 45.26 crore units as against our design energy of 896.45 crore units but I would like to inform you that this is a part and parcel of hydro projects. Even in the year 2018 and 19 we were not able to meet our design energy but this year again we have had reasonable snowfall and so we are hopeful of making it up in next year."

Renewable Energy: Commissioning Pipeline & Delays

• Q4 commissioning sprint: SJVN plans to add 240 MW of renewable capacity by March 2024, comprising 50 MW solar in UP, 100 MW Raghanesda solar in Gujarat, and 90 MW Omkareshwar floating solar in Madhya Pradesh.
• Bikaner 1,000 MW delayed on domestic content rules: The project, earlier slated for April, is now set for partial commissioning by September 2024 and full completion by December 2024. The delay stems from a lack of operational domestic solar cell manufacturing capacity, with a key plant in Tuticorin running behind schedule.
• FY25 pipeline is deep: Beyond Bikaner, management listed 11 projects for addition in FY25, including Mothara solar (70 MW), Ujjain solar (50 MW), Punjab solar (100 MW), and Nangal floating solar (15 MW), among others.
• Tender awards imminent: Tenders for 4,500 MW of capacity are under finalization and likely to be awarded within the current quarter, providing visibility on the next wave of project additions.

AK Singh: "It was there but it is not possible because there is DCR sales in this model to be manufactured from the domestic sale and the domestic sale capacity has not come up, constructing a plant in Tuticorin but this plant is delayed."

Arun-3 & Nepal: The Nearest Value Unlock

• PPA within a month: Management is "very hopeful" of signing a PPA for 50% of Arun-3's power within a month, with rates already finalized and legal approvals underway. The remaining 50% will be sold via a tender, expected to close within one to two months.
• Commissioning on track for February 2025: The Project Development Agreement (PDA) with the Nepal government is signed, and the project is targeting a February 2025 commissioning date.
• Naitwar Mori PPA still pending: The newly commissioned 60 MW Naitwar Mori hydro project is currently selling power through the exchange at good rates while management tries to tie up a long-term PPA.

Thermal & Other Updates

• Buxar thermal nearing completion: The first unit of the Buxar thermal project is set for commissioning in June 2024, with the second unit following in September 2024.
• Dibang Valley allotment: SJVN has been allotted 5,097 MW across five projects in the Dibang Valley of Arunachal Pradesh, a significant addition to its long-term hydro pipeline.
• Pump hydro in pre-stage only: All pump hydro projects are still in the pre-development stage, requiring DPR preparation and viability assessment before any construction commitment.
• Joint ventures expand reach: The government approved JVs with Assam Power Distribution Company (1,000 MW renewables) and MAHAGENCO (5,000 MW renewables), broadening SJVN's state-level partnerships.

Regulatory & Financial Risks

• HP water cess case awaits judgment: The Himachal Pradesh water cess issue is sub judice in the HP High Court, with arguments completed and a judgment expected soon. Management is "very hopeful" the tax will not be levied, calling it not as per statute, but did not address a question on whether projects could be taken back or spending increased if the ruling is adverse.
• Incentive income dropped sharply: Incentive income declined ~10% YoY, driven by a collapse in UI charges from ₹85.42 to ₹7.54, partially offset by a rise in RAC from ₹0.04 to ₹1.4. Capacity charges also fell from ₹63.47 to ₹42.24.
• Revenue under recovery cannot be recouped in Q4: Management confirmed that generation in Q4 will follow the same slightly lower pattern, and because peak generation months are June-September, it is not possible to make up the shortfall in the current quarter.

Geeta Kapur: "As far as HP water cess issue is concerned the matter is subjudice in the honorable high court of HP and even arguments have been completed and we are expecting the judgment very soon. I would say that we are very hopeful that this will not be leveled as this tax is not as per the stature as on date."

Rooftop Solar & New Opportunities

• Three-state allocation under PM Suryoday Yojana: SJVN has been allotted Himachal Pradesh, Punjab, and Arunachal Pradesh for the government's 40 GW rooftop solar scheme, with management estimating "around four to five gigawatt will fall in our pocket."
• Revenue model still undefined: The modality for implementation is yet to be finalized, so revenue and profitability from the rooftop scheme cannot yet be estimated. Households have been identified and the list will be shared with SJVN soon.
• Construction finance facility secured: SJVN secured a ₹10,000 crores construction finance facility from leading domestic and international financial institutions, becoming the first PSU to enter such an arrangement.

Guidance & Commitments

Key Metrics