Adani Green Energy Limited (ADANIGREEN) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Adani Green Energy Limited Q2 FY '27 Earnings Conference Call hosted by Emkay Global Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference call over to Mr. Sabri Hazarika, from Emkay Global Financial Services Limited. Thank you, and over to you, sir.

Good morning, everyone. And on behalf of Emkay Global, I welcome you all to the Q2 FY '27 Post Earnings Conference Call of Adani Green Energy Limited. We have with us the top management from the company led by Mr. Ashish Khanna, CEO, Adani Green; Mr. Rajat Seksaria, CEO, BESS; Saurabh Shah, CFO; and Vijil Jain, Head, Investor Relations. So today's session would be opening remarks and update on the performance by the management, followed by the question-and-answer round. Now without any further delay, I would request Mr. Khanna for the opening remarks. Over to you, sir.

Thank you, Sabri. Good morning, everyone, and thanks for joining this call on our Q2 FY '27 results. As we know, India's energy transition is gaining unprecedented momentum as the country rapidly scales renewable energy and electrification to strengthen energy security and advance its decarbonization and sustainability goals. With about 308 gigawatts of installed non-fossil fuel capacity, representing more than 54% of total installed power capacity, the country is progressing rapidly towards the 500 gigawatt target by 2030. India's peak electricity demand continues to reach new highs, reflecting rising consumption driven by industrial growth, electric mobility, data centers and the broader electrification of the economy. Against this backdrop, Adani Green Energy delivered another strong performance in H1 FY '27, crossing the significant milestone of 20 gigawatts of operational capacity. Our 20.8 gigawatt portfolio supplies clean power equivalent to the needs of more than 4.4 million homes, while helping avoid 17.5 million tonnes of CO2 emissions during the period. Our operating and financial performance remained robust. Energy sales increased 32% year-on-year to 25.7 billion units in H1, supported by a 24% increase in greenfield capacity additions on Y-o-Y basis. Revenue from power supply in H1 FY '27 increased 36% year-on-year to INR 8,299 crores, while EBITDA grew 41% Y-o-Y to INR 7,957 crores, enabling us to deliver industry-leading EBITDA margin of 93%. The total EBITDA during H1 FY '27 was INR 8,276 crores. If curtailment would not have been there, this EBITDA would have been close to INR 9,000 crores. The performance during quarter 2 was equally strong, with revenue from power supply increasing 45% year-on-year to INR 4,019 crores while EBITDA from power supply ending 51% higher Y-o-Y to INR 3,835 crores, resulting in a strong EBITDA margin of 92% during the quarter. Energy storage is becoming the next major pillar of our growth. During the quarter, we commissioned 3 gigawatt hour of battery energy storage at, taking our total installed storage capacity to 6.6 gigawatt hour. This capacity accounts for more than 50% of India's operational. We remain firmly on track to exceed 10 gigawatt hour during the year. While our maiden 500-megawatt pump storage project at, is also progressing towards completion by year-end. At Khavda, the world's largest renewable energy plant, we have commissioned 10.8 kilowatt hour of solar wind and hybrid capacity. Our focus on technology, digitization and advanced analytics continues to support high asset availability and strong operating performance across the portfolio. Looking ahead, we see significant opportunities emerging from growing needs for firm and dispatchable renewable energy, rising power demand from AI, data centers and hyperscalers alongside growing demand for integrated renewables plus storage solutions from commercial as well as industrial customers. Our investment in BESS is also helping mitigate curtailment challenges at Khavda by providing greater flexibility in managing renewable energy generation and enabling the utilization of power that would have been otherwise wasted. We will continue to closely monitor the developments on transmission infrastructure availability at Khavda. And at the same time, we have significantly accelerated the development of BESS to insulate ourselves from delays, if any, on transmission network. We remain focused on disciplined execution of our 2.4 lakh growth CapEx program through FY '30, backed by securing new capacities under long-term contracts and prudent capital allocation. We remain committed to maintaining 13% to 14% ROE threshold by tying up capacities with AA+ counterparties. At AGEL, it remains neutral from a counterparty standpoint and will pursue opportunities that deliver high returns while offering long-term contractual visibility and desired credit quality. On sustainability, AGEL retained its #1 global ranking in alternative electricity subsector by FDIC Russels for the second consecutive year. Our Khavda BESS project was also recognized as the largest project of the year at India Energy Storage 2026. Additionally, our Chitravathi, and pump storage projects received the best Construction Safety Excellence Award at the IBC Safe India awards. As India's power requirements grow, our strategy is clear: combine renewable energy at scale with storage, technology and disciplined execution to deliver most reliable clean power. Thank you.

[Operator Instructions] The first question is from the line of Mohit Kumar from ICICI Securities.

Congratulations on a very good set of results. My first question is, can you just talk about the mission as commissioning, especially in Khavda region. Have you seen any acceleration from the Power Grid side or the other players to accrete this commissioning is so that they were less and lesser the curtailment as we go forward here?

I think -- so thanks, Mohit, for your question. I think we don't have any doubt about the credibilities and the capabilities of whether it is AESL or Power Grid on execution of these transmission lines. And we are monitoring it very closely too. I think there are certain things which are not helping them with respect to RoW issues on which they are working very closely at both the state and central government, has a lot of focus towards it. From our side, while it is out of our control, but we closely and very closely monitor it, and are aware of all the efforts which they are taking.

So understood. I'll take it offline, maybe. The second question is what your target for commissioning in this fiscal? And how much of this capacity will be -- is tied up under C&I?

See, we originally have at the end -- beginning of the year a target of 4.5 to 5 gigawatts, which we shared with you. And from our side, you first asked the question on the point of a transmission line. So let me say that we were earlier expecting this to come by at the end of this year. Now we are expecting this transmission line of Phase 3, the evacuations to come by the next quarter. That's where we currently look at it. Now we are fully capable of commissioning the projects as and when this transmission lines come. I'll share with you that in the learnings of the past, which we have is that we have invested fully and are now working on completing all the infrastructure and what we call the balance of system from our end so that whenever there is a certainty of this transmission corridors of being available, we would be able to very quickly deploy our modules and commission our project. So we still believe that if this corridor come by the end of this next quarter, I mean quarter 4, we will be in a position to commission 4.5 to 5 gigawatt.

Understood, sir. And sir, is it possible to share out of 4.5 gigawatts, which is commissioned, how much of this capacity will be tied up at C&I? And do we still maintain the target of installing 10 gigawatt or a battery, if I'm not battery by the end of this fiscal?

Look we are very committed to not only commission the 10 gigawatt by the end of the year, but would be definitely able to surpass it to. But yes, we are very confident of achieving it and also serving it. Regarding the C&I business, that's -- I think we, in the past, also in the last quarter have clearly said that the way we are working is and what is required for this company, for our capital expenditure and for our growth is to have a sustainable partner who are there with us for the next 25 years. Our return on our investment income on 13% to 14% of ROA, and that is where we stand. On this long term and this AA+ partners which we look at, AESL is definitely one of the company, which is there, and that's what our strategy is. But we keep on looking for organizations which give us a return. In the past, it has been AESL in the future, it could be them too on that matter. But we are very clear from our side, like I told you, we are firm on our return on our assets in 13% to 14% and looking for a long-term tie-ups of 25 years with all our efforts.

Just one last question, sir. What happens to the payment as in curtailment for your PP and the C&I?

See, when we -- all our PPAs are on a take-or-pay basis on the supply, which we give it to them.

Understand.

Curtailment, whenever there is a curtailment from the grid to us, specifically being asked, we are paid for it as the deal generate.

For all the PPAs, right?

For the PPA, which we have.

Next question is from the line of Nirav Shah from Geecee Holdings.

Congratulations on our decent operating performance. So one broader-level question is on the interest rates. I mean we are seeing a surge in yields across India and globally. So on this related issue, I mean, how are we -- or what steps are we taking to minimize the overall impact of this certain lease as well as how do we see our interest rates moving from the current 8.9%, whenever the next reset happens? And also, I mean, on the rating portfolio, I mean, what efforts are we further taking to ensure this thing? I mean, the minimal impact.

Thanks, Nirav, for the question. See, from Adani Green perspective, 72% of our loans -- project loans that we take are all fixed rate for a medium term to long term. So like between 3 to 5 years, we are fully fixed. So the rate cycle effect does not happen for a very substantial portion of our loans. Also, other than that, what happens is that because we are into a 25-year fixed tariff PPA scenario, a small cycle change does not affect the overall returns on the projects. Thirdly, what happens is that from a credit perspective, our credit rating works in a way that during under construction, we are given a rating which is generally between BBB- 2 A category. When we are operationalized, as soon as we get operationalized, that rating generally moves to a AA category. And once that rating moves to a AA category, you easily get a 50 basis points deduction. So what happens is that every notch increase and see very recently, one of our SPVs, which does the news, I'm very happy to share that the news has come yesterday night. One of our SPVs AGE23L, which is nearly 15% of Adani Green's overall EBITDA has now become a triplet AAA asset. Now when that -- something like that happens, which is like 7 notches increased in the last 5 years in that entity. What happens is that the rate of interest, which was earlier at near to 10%, 11% has gone down to today at 8.4%. So similarly, every notch increase gives us a reduction or -- increase in the rating and reduction in our interest cost. At Adani Green level also in the past 7 years, if you will see, we have been at 11.1% in 2019. Today, we are at 8.9%. Now this reduction of nearly 200 basis points, which has happened -- more than 220 basis points which has happened with whatever rate cycle changes have happened in the last 7 years. In 7 years also, the rate cycle has gone up and down. So it has not changed for us. Our rating interest rates continuously goes down. See, when we are today at 20 gigawatt of operating capacity, doing 5, 7, 8 gigawatt of construction. And with battery also, we are doing more construction today. We -- our under construction portfolio still is about 30% of our overall portfolio. Now once we reach 30 gigawatts of operating capacity, our under construction portfolio will be 20% or 10% of our portfolio. So what happens is that under construction only the interest rate have a very larger impact. Otherwise, it starts to taper. So this, from our perspective, we see that the transition to more and more operating capacity with a 25-year PPA, there should not be any major impact on our interest rate cycle even with the interest rate cycle going up, our interest rate should not be affected much. And just to repeat, with a 72% to 73% of our portfolio being a fixed rate portfolio in a medium-term range of 5 years, it doesn't impact much. Yes?

No, absolutely, that's very heartening to your especially, it alleviates a lot of investor concerns regarding the interest rate impact on our operations. And sir, second question is on the evacuation. So you just mentioned in the earlier question that 70 gigawatt line is commissioning in the fourth quarter of financial year compared to third quarter. There was another 7 gigawatt time. So is that on track or it's pushed back by 1 quarter?

That is also, as we speak, has been further -- looks to be delayed on that particular part. Currently, we are more focused on this first one because most of our evacuation and our investments at Khavda is going through this particular corridor. So that is where we are now more focused on. See, there are 2 things which we have done, Nirav. One is that we are focused not only on the getting the lines to. This 7 gigawatt gives us the full G&A capacity. So this entire 7 gigawatt is coming to us in that sense. And out of that, the existing whatever the curtailments are will be removed and plus, we will be able to execute more on that capacity. Secondly, we have accelerated our batch development in a very big way to ensure that we don't fall -- the curtailment impact are lesser on the company. So we will see that in the second half of the year, the curtailment impact should not be as high as the earlier half because of the accelerated development on the batteries that we are doing. So if I can just add on this. if you look at it with respect to -- there has been, like we said, challenges on it. First is we are closely monitoring it. But yes, more importantly, our accelerated efforts on the battery storage is also helping us to mitigate to a large extent that curtailed power from Khavda in particular, and that's what we are doing.

Next question is from the line of Aniket Mittal from SBI Mutual Funds.

Just had a question on batteries. And given our strategy of derisking battery through long-term contracts, I wanted to understand what is the current tie-up that we have on the C&I front with respect to solar, wind and batteries. And just from a 3-year perspective, we look to install I think about 10 gigawatt every year. What's the amount of battery that you think will install and correspondingly, how much solar and wind will be needed for the overall C&I demand?

Please understand, Aniket, we don't differentiate between a C&I demand or any other demand. We are a developer who has a long-term tie-ups, whether it is B2B or B2G per say. There is as a developer, a business opportunity to have battery in place and then have a long-term tie-up from whether it is further used on a C&I basis or even with the -- like I said earlier, we are very clear in our -- why are we putting and what we are putting. We are installing batteries because, of course, there is a demand for a peak power as well as for RTC, but more importantly, we are looking at it as a long-term asset to us, which gives us 13% to 14% return on a long-term basis. I think this we have emphasized quite a lot, and with organization whether it is government organizations or it is a business housing, which can meet our requirements of being at least a AA+ and have a solid PPA on the terms of what is they're like SECI on those terms and conditions. These are the parameters on which we work. These are the benchmark which we use, like I said, AA+ organization, terms and conditions like SECI, PPAs and a 25-year agreement from that. Now with these parameters in place, whether it's government discom or it is organization like ESL, we go ahead on this basis. I hope I have been able to clarify to your question. And on capacity, we are definitely looking for this year, like we said, we already mentioned we have committed 10 gigawatt hour. We have already reiterated that because there could have been a transmission corridors, which are taking some time, our efforts towards battery and the CapEx has been now more infused out there too. With the result we are very confident of surpassing that particular target, which we have already shared with you.

Got it. So the clarification of the 10 gigawatt hour that is coming up, how much of that is tied up in long-term contracts?

Currently, we have 3.3 gigawatts.

3.5 gigawatt.

3.5 gigawatt which is already tied up. The rest, since it has just come at the end of this last quarter, we are in the process of doing it. I think I missed your earlier question, just been reminded of that how much solar or wind or other input power is required for it. It is already available with us. We have no challenge as well as the solar and if required wind for an input power for that battery stage.

Got it. The other question was, was on the solar CUFs that you've reported. So if you look at 1H to 1H, we've seen a dip to about 23% versus 24.8%. I'm assuming a decent part of that would be curtailment related. If you could just provide some color on that, what's the amount of curtailment on a like-to-like basis, what this number would have looked at that would be.

I think it is majority -- you have guessed it very right. It is primarily on account of a curtailment. Well, there are always a seasonal change for that matter, which is there. But when you look at a 6-month horizon, yes, it is predominantly on behalf of the curtailment. Otherwise, our plants are operating very well on that mine. There have been no challenge or, in fact, we have been working better if you look at it from the operational efficiency standpoint. So let me put it in a more elaborate manner. This year depends on my plant capacity utilization factor, which will depend on the resource on which it is coming, also how much I've been able to evacuate. The resource part of it is more or less same, if I say that. It has been slightly better this year, which is also reflected on our revenues as well as profits. And of course, we have grown from last year to this year, half yearly. But in the same manner, because we have growth and there has been a curtailment, which is more than the last 6 months, the CF has been dipped. Once this -- once this evacuation corridor is available to us, we would be having this CUF, which is worthy of what we should be whether is growth in place. See, Aniket, in our 25-year profit to business or a project business, 3 to 6 months here and there on curtailment will not have a very major impact on the return on asset on an asset. So from our perspective, yes, there has been, on a quarterly basis, a small blip again from the perspective. But what happens is that these blips, we were, in some extent, we were aware, there was certain amount of additional change which has happened in terms of when we are expected to get the curtailment another 3 months here and there. But it will not have a very larger impact on what we assume as our return on asset on the asset because what happens is that this is a 25-year period and a 3-month, 6-month change will not have that bigger impact on us.

Plus many of our assets have also been before time. So our returns on that 25-year period remains with us. This is just the extra one which we were looking forward for bringing some assets before time.

Next question is from the line of Amit Bhinde from Axis Capital.

Creations on a great set of numbers. I just wanted to get a sense on the Phase 6 and Phase 7 ordering of the transmission connectivity for Khavda because -- and if there's an HVDC component on that because that would impact your FY '30 target, one? Second, if there's a delay on that side, do we have alternate resources in terms of land, new sites that you have identified to meet your FY '30 target in case the Khavda connectivity doesn't get resolved? So that's all the question that I have.

So Amit, a good question. Would have been better off with those PPCILs and CTILs, frankly, but let's give you -- because we closely monitor it, and we also put efforts on it. So yes, there are developments on the scheme level, which is happening on Phase 6 and Phase 7 as we are aware of it. Having said that, we are committed to our targets towards 2030. In that process, if you see the battery storage is going to play a very important role as a mitigation measure too. In case there is any changes or delays on Phase 6 primarily on Phase 6 plus, I think we are also looking at various other states to, including Rajasthan, where a decent amount of capacities can also come. So I think from our standpoint, we are committed to surpass what has been already stated as well as our targets for FY '30 is concerned.

I just -- Rajat Saxena here on the. I just want to give one piece of perspective, which gives a bit more confidence. So while the media releases have been about the capacity we have either put up or about to put, it is also worth noting the time in which we have put out. So it's a relatively short period of time. We're talking about a month, 8 to 10 months for the largest plants in the world. So that leaves us an adequate amount of flexibility. So the situation in demand. So we now have an added tool in or arsenal to respond to that, so that executing more solar and possibly win, it's kind of deconstrained by any delays that may happen on transmission. So versus last year, if you compare this year, we certainly have a very, very strong arsenal in our hand as a group, as Adani Green to take care of it. So that is why I think if anything, things have improved by having this virtual transmission effectively through a battery system that we have. And this can be deployed very fast, does not require too much of land, already substations are there. So that is why you see of all the deployments that has happened in the, roughly, we are striking 50% of that. So that, I think, is something we should be.

Right. On the -- sir, on the near term, let's assume that if Phase 3 gets delayed instead of Q4 to Q1, what would be your strategy? A, would you want to delay your capacity installation and miss the guidance? Or B, you would install more BESS to meet the guidance? What strategy would you apply, if the Phase 3 gets to Q1 next year.

A good question, right? We have lessons in the past, and our lessons in the past and being an organization, which is always improving. And even while we are the biggest, the largest and the best in the country as well as renewable is concerned, we keep on learning a lot in this process. Our lessons of the past is to commission projects when the corridors are there when the transition corridors are there. So accordingly, what we have done now is that all the balance of the system, which is required for our assets, which are to come on Phase 3, we are working on it. We are all working towards making sure that all the balance of the system and the infrastructure is ready. So that whenever we have a certainty of our evacuation in our system as well as solar is concerned, we will just put on the modules so that we are waiting for commissioning as and when the evacuation comes. And we will share the fact that in our business putting modules is possible a 2030 plus megawatt, we have done it on each day basis. So we have timed it up in a manner or we will time it up in a manner so that we can very quickly install the modules because all our balance of system and other infrastructure is the. So that's how we are working on it, and that would be our -- and that is our strategy, not a strategy but our way of working right now.

So from that perspective, that's what I'm trying to...

Plus if you also see that this whole enhancement and accelerated battery storage, which is coming up, is also going to help us to mitigate that issue. The existing assets which we have will be mitigated with this accelerated battery deployment and the future, as you said -- as we said is the way we are working. That's our strategy and that's our way of working.

Right. Got it. So one more question just I wanted to clarify on one of the answers that you gave to Mohit that in the C&I tie-up, the tie-up with AESL and as you call out the private layer, in that, if there's a curtailment and pace to the extent of the unit that you are supplying. But if there's a curtailment unlike a PPA, AESL would not pay you for that, right? The curtailment impact would come into your numbers, right?

No. I think let me clarify. It's a good thing you ask me because I was getting a sense that it might be misunderstood or misconstrued in a manner. What happened -- when I schedule a power and it is not taken, then I'm paid for it. This is the way the SECI pays me, the same terms and condition and paid for that generation. There is also an element when I have scheduled the power and the grid fails that you please back down. Then I also get that my electrons payment for that, what the grid has not taken because I have scheduled the power. However, if I have not scheduled the power, then I will not be paid. Let's make like very clear on this matter. Just I have been able to clarify to you as well as to Mohit in the past. But everything which I have scheduled, whether it is in AESL or with anyone else, and if they say that they are not ready to take, I will be paid for it. I'm again repeating. Anything I have scheduled and the grid because of their frequency changes. Ask me to curtail that also I'm paid for. But if I have not scheduled anything, of course, I will not be paid for it.

So grid-related issue led curtailment is also impact to AESL and not to you?

No, no. Whatever I am in a position to evacuate post whatever is given, see Khavda suppose has x capacity of evacuation in totality. That x capacity of evacuation, which is available right now, which I will schedule to AESL, it will -- AESL will pay to us if they are not for any reason whatsoever, AESL or any other party for that matter. I'm not differentiated between AESL or any other party. Any party I schedule for whatever I am allowed to evacuate from Khavda which are scheduled considering what is the generation possible on that 15-minute block. You see, we schedule power on a 15-minute block. To those 15 minutes block, whatever I have scheduled to if for any reason, one of the is not ready to take, I will be paid for. If for any reason, the grid asked me not to inject electrons in the grid, I will be paid for. But what I have not -- which is not possible to be scheduled, the procurer will not pay for it.

So that's what I mean to summarize, if the grid is not able to take the electrons that you are ready to supply, AESL takes back, but not you.

For power, we have scheduled for AESL.

Scheduled but grid is not able to take it. Still AESL takes the hit.

Yes, yes. That -- no, no, no. Please understand. I will give you an example here. Suppose I have 1 gigawatt of power, which is available with me. I may have 2 gigawatts with me. But I am -- it is only possible to evacuate 1 gigawatt of power. If I schedule that 1 gigawatt of power to any procurer it has been scheduled. Then if the procurer says no, I will be paid for it. If the procurer -- otherwise, if it is not possible to schedule. Now your question is within that 1 gigawatt, which I have scheduled, procurer will pay.

Got it.

It's a bit technical, but I hope I am able to clarify.

Yes. I'll just touch base with you later if required -- any other clarifications on that.

Next question is from the line of Dhruv Muchhal from HDFC AMC.

Sir, just to understand how much of this 10-gigawatt, assuming the 10-gigawatt is the closing capacity, 10 gigawatt hour is the closing capacity by the end of the year for batteries. How much of solar can it absorb? I'm just trying to understand this coming from that curtailment point, how much proportion of capacity that it can observe, because the curtailment, I believe you get impacted only during those few hours of the peak generation of solar. Say, for example, 10:00, 11:00, they will not be as much curtailment. Again 04:00, 05:00, not as much. So in the few hours. So I'm probably not able to get the numbers. So my math is 2 to 2.5 gigawatts of solar, but is that the right sense?

No, no, you're probably right. See, the simplistic answer is you generally try and divide it by around 4.5 to 5...

4.5, okay.