Adani Power Limited (ADANIPOWER) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Adani Power Q2 and FY '27 Earnings Conference Call hosted by Antique Stockbroking Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinion and expectation of the company as on date of this call. These statements are not the guarantee of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ishan Verma from Antique Stockbroking Limited. Thank you, and over to you, Ishan.

Thank you, Danesh. Good morning, everyone. On behalf of Antique Stockbroking, I welcome you all to the Q2 FY '27 Earnings Conference Call of Adani Power Limited. We have with us today from the management, Mr. S.B. Khyalia, CEO; Mr. Dilip Jha, CFO; and Mr. Nishit Dave, Head of Investor Relations. We will begin with the brief opening remarks, followed by a Q&A session. Thank you, and over to you, sir.

Good morning, friends. Welcome to our quarter 2 earnings call. Thank you for joining us today. Our quarterly results and analyst presentation are available on the stock exchanges and our website. I hope you have gone through them already. Joining me today on this call are our CFO, Mr. Dilip Jha; and our Investor Relations Head, Mr. Nishit Dave. Recently concluded quarter has been another blockbuster quarter for us. Power demand has been strong and power selling rates are high. We have seen healthy volume growth on the same operating capacity year-on-year. As a result, we have seen strong growth in revenues and EBITDA and ended the quarter with a solid profit after tax of INR 7,000 crores. We have also moved closer to commissioning the first unit of our ongoing capacity expansion projects. Now coming to the power market first. India needs abundant and reliable baseload power supply using domestic coal. This is especially important in times of geopolitical uncertainty, changing weather patterns and rapid industrialization. Domestic coal-based power remains vital to India's energy security and economic growth. India's power demand rose 11.5% year-on-year to 502 billion units in quarter 2 with lower hydropower output because of weak monsoon, coal and lignite stepped up supply 73% of incremental generation needed to meet the demand. The average summer PLF increased to 68% from 62% a year earlier. Now coming to Adani Power's performance in this backdrop. We achieved power sales growth of 11.5% and supplied 26.4 billion units in this quarter, and our PLF improved to 70%. This was supported by a high level of plant availability across our portfolio. This strong operating performance delivered record quarterly results. Total continuing revenue rose almost 30% to more than INR 17,000 crores. Continuing EBITDA rose by more than 18% to INR 6,300 crores. This reflects the strength of our core portfolio despite higher fuel prices. Reported EBITDA rose by 46% to more than INR 8,700 crores. Consolidated profit after tax rose 142% to more than INR 7,000 crores. This was supported by strong operating profit and onetime prior period revenue. For H1, total continuing revenue was nearly INR 35,500 crores, continuing EBITDA was INR 13,300 crores and profit after tax was nearly INR 12,000 crores. Quarter 2 was also an important quarter for our corporate structure, financial profile and capacity expansion. Adani Power's credit rating was upgraded from AA to AA+. The upgrade reflects our operating track record, strong cash flows, market leadership, revenue visibility and balance sheet flexibility. We received a letter of award for a 25-year PPA of 1,320 megawatts from Uttarakhand Power Corporation Limited during this quarter. It will be supplied from the upcoming Korba 2 power project. We have now secured long-term PPAs for 62% of our upcoming 24 gigawatt thermal pipeline. We were declared a successful resolution applicant for GVK Energy Limited under the CIRP process. This marks our entry into hydro generation through the operational 330-megawatt Alaknanda plant in Uttarakhand. We are expanding into dispatchable green energy by expanding our project portfolio in Bhutan. We signed a shareholders' agreement with Druk Green Power, our project partner for 770-megawatt hydropower project. The project will be developed through a 49:51 joint venture. It is our second joint development in Bhutan after the 570-megawatt hydro project. We are progressing quickly and steadily on our 24 gigawatt thermal capacity pipeline. At Korba Phase 2, the first 660 unit has been achieved grid synchronization. Commercial commissioning is expected shortly. The second unit is planned for quarter 4 of '27. The 1,600-megawatt Mahan Phase 2 project is also at an advanced stage. Commercial operations are targeted for early financial year '28. Similarly, Raipur Phase 2, Raigarh Phase 2, Mirzapur and Anuppur projects are also under execution. We are also adding the third phase of expansion with a 1,600-megawatt ultra-supercritical power plant at Raipur. This will expand the site to 4,570 megawatts and supply the second long-term PPA to Maharashtra DISCOM. In conclusion, India needs more than 100 gigawatts of new thermal capacity by 2032. Adani Power has the execution capability, fuel logistics and balance sheet to support this growth. We remain committed to reliable, cost competitive round-the-clock power and sustainable stakeholder value. Thank you. I will now hand over to our CFO, Mr. Dilip, for the financial and operational details. Over to you, Dilip.

Thank you, sir, and good morning, everyone. I will walk you through our financial and operating performance for quarter 2 FY '27. I will provide you an update on our balance sheet, debt metrics and liquidity position. As Khyalia Sahab highlighted, quarter 2 FY '27 was marked by intense demand growth, which was driven by economic momentum and a weak monsoon. Peak demand reached 270 gigawatts and power exchanges saw substantial tariff increase. Plant load factor increased to 70.1% in quarter 2 FY '27 from 62.8% in quarter 2 FY '26. For H1 FY '27, PLF reached 74.1% against 64.8% last year. Consolidated sales volume expanded by 11.5% to 26.4 billion units in quarter 2 FY '27, compared to 23.7 billion units in quarter 2 of last year. H1 '27 volume grew 14.3% to 55.1 billion units. Sales under long-term and medium-term PPA expanded by 29.7% to 23.4 billion units, reflecting increasing offtake by DISCOMs. We also have a larger capacity operating under PPAs now as compared to last year. PPA realization improved by 12.7% on a continuing basis, supported by the pass-through of import coal indices and the recent medium-term PPA. Merchant and short-term volume were 43% lower year-on-year as we strategically tied up previously opened capacities under medium-term contract. However, short-term merchant tariffs surged by 33% per unit, capturing strong demand momentum. Our total continuing revenue stood at INR 17,528 crores, which is 28.5% higher year-on-year basis. For H1 FY '27, total continuing revenue stood at INR 35,464 crores, which is 27.5% high. During the quarter, we recognized onetime prior period revenue of INR 2,422 crores. And in comparison to that quarter 2 last year, it was INR 669 crores, primarily arises from revision of the initial energy charges for the Gujarat PPAs for which indexation has been applied in subsequent years. Including these onetime items, total reported revenue for quarter 2 FY '27 reached INR 19,951 crores. H1 FY '27 total reported revenue stood at INR 39,273 crores. Now on operating performance. Total fuel cost for quarter 2 FY '27 increased by 40% to INR 10,229 crores, compared to INR 7,216 crores in quarter 2 of last year. This rise was driven by increased volume, coupled with an approximate 50% increase in the landed cost of imported coal. For H1 FY '27, fuel cost stood at INR 19,769 crores. Our continuing EBITDA for the quarter for FY '27 was INR 6,321 crores, compared to INR 5,333 crores in quarter 2 of last year. H1 FY '27 continuing EBITDA grew by 20.1% to INR 13,304 crores. Reflecting the recognition of prior paid items, reported EBITDA grew by 45% to INR 8,743 crores in quarter 2 FY '27. Finance costs for the quarter were INR 760 crores in compared to INR 842 crores in quarter 2 of last year, driven by disciplined debt and liquidity management. For H1 '27, finance costs were INR 1,662 crores. Continuing profit before tax rose by 32% to INR 4,370 crores in quarter 2 FY '27 from INR 3,298 crores in quarter 2 of last year. Reported profit before tax grew by 71% to INR 6,792 crores. The quarter included a net tax credit of INR 231 crores, which is due to the reversal of provisions made earlier following the amalgamation of subsidiaries with Adani Power. As a result, consolidated profit after tax for quarter 2 FY '27 rose sharply by 141% to INR 7,019 crores, compared to INR 2,906 crores in quarter 2 of last year. For the first half of FY '27, PAT stood at INR 11,886 crores, representing a 91% increase year-on-year basis. Moving to our balance sheet and capital position. We have kept a tight control on borrowings. We are funding our CapEx primarily through internal accruals. We rely on debt only to the extent of any gap between accruals and CapEx funding requirements. As of September 30, 2026, total debt stood at INR 61,860 crores, compared to INR 53,556 crores as of March '26. Net debt stood at INR 45,846 crores as of September 30, 2026, compared to INR 45,022 crores as of March 31, '26. Some of the funds drawn down by us near the end of the quarter are reflecting as cash balance. Our liquidity profile remains strong, enabling us to support our brownfield and greenfield CapEx program, predominantly through internal cash accruals while maintaining conservative leverage metrics. The recent credit rating upgrade to AA+ by CARE Ratings and India Ratings acknowledges this financial discipline, robust liquidity buffers and predictability of cash flow. In summary, quarter 2 FY '27 has been an excellent quarter for Adani Power. Sales volume increased by 11.5% to INR 26.4 billion unit (sic) [26.4 billion unit] with an operating PLF of 70.1%. Total continuing revenue grew by 28% to INR 17,528 crores, with continuing EBITDA expanding to INR 6,321 crores. Reported PAT grew by 141% to INR 7,019 crores. Our rating upgrade to AA+ and the operationalization of our subsidiary amalgamation significantly strengthened our capital profile and structural efficiency. Our organic expansion projects are progressing on schedule, backed by disciplined and self-funded capital allocation strategy. Thank you for your time and continued support. We are now ready to take your questions, if any. Thank you.

[Operator Instructions] First question comes from the line of Mohit Kumar with ICICI Securities.

Congratulations on a very good set of numbers. My first question is on the fuel cost, sir. I think the fuel cost has increased materially Q-o-Q. If I do the numbers, it looks like the fuel cost has risen by 20%. Is there an element of tariff -- PPA tariff, which you expect to increase further in Q3 as the coal cost prices have risen very sharply in the quarter?

See, there are different type of PPAs, and it will all depend on the type of PPAs. So from the Adani Power perspective, if you are talking about from the market perspective, yes, tariffs has to go to some extent up, including the rates of merchant. As regards to Adani Power is concerned, the major increase in fuel cost is of the imported coal-based projects. And most of our capacity is passed through, except in case of Gujarat, it is linked to index, but in a way, that is also passed through. So obviously, it will have impact on the tariffs. As regards to the domestic coal is concerned, per se, the Coal India has not increased any rates, but prices has slightly gone up, because of the quality received in the second quarter because of rainy season, it was quite poor. And normally, when you receive poor quality of coal, the effective cost goes up. And that is the phenomenon which we have normally every year in quarter 2 because of the monsoon season where the quality of coal was down and therefore, the per unit, the coal consumption will go up, but that will not get reflected directly in the tariffs.

My question was, sir, was there an element of tariff -- was the lag in the tariff versus fuel cost for the imported coal-based PPA, which has impacted negatively in the quarter? That was the question, sir, primarily.

So it has not impacted negatively because where we have the tariffs which are linked to index, it is only in case of Gujarat. And in case of Gujarat also the per unit realization was not less than the actual cost of fuel. Yes, in a way, it has impacted slightly because otherwise, our margin would have been higher, it has gone down. And this increase of fuel cost of imported one will get reflected almost after more than 6 months. So it will not get reflected even in next quarter because the indexing mechanism is such that whatever fuel prices has remained in this quarter will not get reflected in next 2 quarters. Probably it will get reflected in the third quarter. So obviously, it will have impact.

And this is the impact of Bangladesh PPA, sir? Is it right to say?

In case of Bangladesh PPA, it has positive impact because the Bangladesh tariff is determined based on the international prices. So whenever international price goes up, it is immediately get reflected in their billing. So there is no question of time lag there.

Understood. Very helpful, sir. My second question, sir, when do you expect the Lanco Korba to initially get commissioned? And is there any site of PPA for Lanco Korba? Or are you looking to sell this in the merchant for time being, yes?

Yes, because our -- the PPA will start after 4 years. And therefore, for next 4 years, certainly, it will be either sold in the medium term or in the merchant. So if you will get any PPA for the medium term, we will get the coal linkage also. And if we will sell this in the merchant, then in that case, obviously, we have to take the coal from the auctions.

Our next question comes from the line of Abhinav with ICICI Securities.

Sir, my first question is on the -- there has been certain reports of the thermal capacity addition getting extended beyond the 97 gigawatt, that's the target for 2035. Just wanted some insights from your end on that particular topic.

Yes, it is a welcome news, obviously, and the Government of India has recognized this. You may be referring the statement of CEA Chairman. And we were also of the similar view earlier also, and that is the reason we have planned very aggressive capacity addition. And this statement gives us more comfort. And let us say, we may have to again think about our strategy of capacity addition. And obviously, this statement is with reference to the -- this time's quarter 2 shortages. But we are of the view that probably it will further go up because we have not started getting the load of the data centers. And data centers are going to be power guzzlers and data center will certainly require the baseload thermal power because when you -- when the data center says that I want to consume the green power, they are only taking the green certificates. Ultimately, reliable 24/7 is not missing a second power can be supplied only by the thermal power projects. So the future of the thermal sector is quite bright and which is obviously reflected in the statement of the government. Thank you.

Understood. My second question is on the other expense side. Other expenses have seen a decline Q-o-Q and also on the other income, which has seen an increase Q-o-Q. What is the reason behind it?

So, other expenses reduction is due to reversal of the quarter-on-quarter basis, the provision of expenses. And other income is due to the mutual fund, interest income, then my -- the FD interest income. So on quarter-to-quarter basis, this time, the interest income from our fixed deposits, those are comparatively lower than the quarter 2 of last year. So this is primarily -- this is the reason in reduction of other income, and expenses due to reversal of provision, which we had made in the quarter 2 of the last financial year.

Understood. So my final question is on the Uttarakhand PPA. What is the fixed charge over there that was signed during the quarter?

[indiscernible].

Our next question comes from the line of Nikhil Nigania with Bernstein.

My first question is on the Jaiprakash Power assets, where we hold minority...

Sorry to interrupt you, sir, but your voice is breaking.

My first question was on the Jaiprakash assets, where we hold a minority stake. Just wanted to know if there's any update on that or any plans to take our stake even higher?

At this moment, there is no change. So as and when we will, let us say, evaluate, we'll inform the market. No change in status as of now.

Got it. Got it. The second question is on future tie-ups. We can see a list of states which have ongoing tenders, UP, Gujarat, Bengal, Rajasthan. A, I wanted to check if there is any -- any of these are in advanced stage where we have submitted the bids as well, commercial bids? And b, any plans to tie up in discussion for data centers or C&I customers that we are in?

So your first part is that early dates, in case of UP, the bids are already submitted and likely to be opened, let's say, in this month or early next month. As regards to West Bengal is concerned, the West Bengal one bid of 1,600 megawatt is to be submitted in the first week of next month so far, unless it is extended because of upcoming Diwali holidays. So in any case, but it will happen in the next month. Rajasthan is also, submission is in first week of next month. So again, it is at advanced stage. As regards to Gujarat is concerned, Gujarat is, let us say, preparation is that they have done the bidder consultation, but they have yet to approach the regulatory commission. So they are slightly behind as regards to their level of progress is concerned.

Got it. And my last question was on the nuclear side. We have long plans until 2035. And given most of these assets take 10 years plus to come, is there any update on our nuclear aspirations in terms of land or even indicative tariffs that we are looking at?

I think I forget your second question of the first part. So can you -- can I take that first?

Absolutely.

What was that?

You had asked 2 questions, right? There were 2 parts.

Yes, on nuclear. Yes, yes, just since nuclear plants take 10 years to make.

Nuclear is the second question. In the first question, there were 2 parts. What was the second part?

Yes, yes. Correct, correct, correct. That one was on business development opportunities related to data centers or C&I customers. Any discussions on those lines?

So in case of data centers, we are not signing the PPAs directly. With reference to data center, I said only with reference to demand overall at country level, which will obviously will be met through the thermal projects. The tie-up will be either done with our AESL, the trading platform or probably they may be tying up through the DISCOM. And therefore, we are not dealing with the data center supplies directly. So it is dealt by our trading platform under the AESL. So that's about the data center. As regards to your question related to nuclear power is concerned, the rules and regulation has been -- draft rules and regulation has been circulated for the comments and the process of taking comments from the stakeholders has been over, and we expect that the rules and regulation will be notified soon. So as soon as the rules and regulations will be notified, we will certainly take the capacity expansion forward. At this stage, other than we are waiting for the rules and regulation, there is no other update.

Next question comes from the line of Swetha Rakhecha with Cantor Fitzgerald.

Swetha here on the line for Manish. Congrats on a great quarter once again. I have a question for Khyalia, sir. With lower hydro availability supporting thermal dispatch in the second quarter as we saw, how should we think about coal-based generation, particularly Adani Power's PLFs if hydro generation returns to normal levels going forward?

The normal expectation of our thermal projects to deliver the PLF is around 65%. So because of the lower hydro availability this quarter, our PLF is 68% or so, I think. So this quarter is 70%. The half yearly is, I think 68%. So going forward, our normal expectation is 65%.

I had one more follow-up on hydro electricity in general. Given that we have long-term operating capacity targets for both thermal and nuclear, do we have any such targets for hydro? You mentioned we have 2 new projects in Bhutan and with the new assets that you have in Uttarakhand, would love to know if you have any long-term operating capacity targets for hydro?

So for hydro, Adani Power is as per the strategy of group is supposed to take the hydro projects at international level only. Within the country, Adani Green is supposed to take the hydro projects. And from that perspective, we have already signed a memorandum of understanding with Bhutan for 5,000 megawatt of hydro projects. And out of that 5,000 megawatt, as I stated in my earlier speech, we have already signed the shareholders' agreement with the Bhutani partner for the 1,340 megawatts. So as of now, our target is to reach to this 5,000 megawatt.

Thank you for clarifying. I had one more question on the onetime impact. Just following up on Mohit's question as well. Can we clarify whether we're going to see these revisions in the second half of '27 as well?

Swetha, sorry, can you just repeat your question?

Yes, Nishit. This is in regards to the onetime impact that we have on the income of INR 2,422 crores. Just want to clarify if we're going to see this impact in the second half of '27. Similar, like, if there is any revisions to energy charges for the Gujarat PPAs?

Yes, sure. So actually, the income that we have received -- see, the nature of this income is actually there was a revision in the base rate, the fixation of the base rate to which indexation was to be applied under the revised terms with the Gujarat DISCOM. So this was done with a retrospective effect. And the calculation of the incremental income we were supposed to receive at that -- on the basis of that rate revision, that has now been given effect. And we have received the views from the DISCOM in 3 installments over the course of the last 2 quarters. So we have recognized all the revenue related to the past period on the basis of this rate revision. And all the past period recovery has been completed. On an ongoing basis, the impact of the rate revision is also there in the tariff that we charge for DISCOM. So that is recognized as part of the regular revenue. There is no past period recovery remaining in case of the Gujarat DISCOM as of now.

So Nishit, you [indiscernible] PLF also. It was her question.

Yes. And the PLF that you were actually asking was on the -- for the first quarter, we had 78% PLF. The second quarter PLF was 70%. So the average PLF we achieved is 74% for the first half.

Our next question comes from the line of Apoorva Bahadur with IIFL Capital.

Sir, in your notes to accounts, you have mentioned that there was a derecognition of revenue of about INR 19.7 billion, INR 20-odd billion for this alternate coal compensation claims with Haryana DISCOM. Can you throw some light on this as to why did we recognize this? And now what's our stance on this issue?

So this is relating to the claims which we have raised regarding the domestic coal shortfall. And there are certain issues starting from 2021 to '23 and onwards. And the discussions are ongoing. So at this stage to adopt the conservative accounting principle for the time being, we have reversed that. Though we have received the money, but we want to have a conservative approach unless it is completely settled and 2 parties are at same page, we thought that we should make -- we should reverse it, though we have received the money. So as soon as this issue is finalized and reached to a settlement, at that time, we will give the appropriate accounting treatment.

This was the 50% of total amount which we had received, right, not the 100%?

Correct. Correct. Correct.

50% of the claim.

50% of the claim, which we...

Right, right. So sir, now what has changed in your discussions, if you can just provide us some color that we have decided to provide for this despite receiving the amount? Because I recollect, I mean, our claim was quite strong.

See, there are a few discussions which has happened in recent past. And since the issue is not closed, so as per the advice of the auditors that when the issue is not completely settled, even accounting for 50% is also not comfortable to the auditors. So we accepted their advice. And based on that, we have reversed this. And as and when this is finally concluded, then -- when there is no dispute about that, because when the payment is made 50%, that obviously indicates that other party has not fully accepted it. So once they will fully accept it, we'll make the appropriate accounting treatment.

Understood, sir. And lastly, this is the entire amount, right? Or do we need to provide for anything else on this? Possibly, would we also be providing for interest cost, say, if we have to refund?