Adani Energy Solutions Limited (ADANIENSOL) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Q2 and H1F527 Earnings Conference Call hosted by Adani Energy Solutions Limited. From AESL's side, we have the following on the call as main speakers. Mr. Kandar Patel, CEO, AESL. Mr. Ashok Jagatia, CFO, AESL. Mr. Rajkumar Jain, Business Head, Energy Solutions Platform. Mr. Prashant Soni, Head Finance, AESL. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Prashant Soni from AES Health. Thank you, and over to you, Mr. Soni.

Thank you. Thank you, and a very good day to everyone. I welcome you all to the Q2 and H1 FY27 Earnings Call of AESN. We hope you had an opportunity to review the earnings presentation and financial results that we shared on our website. To outline the flow of today's call, we will begin with the opening remarks from our CEO, Mr.Kandar Patel, following which we will open the flow for Q&A. The call will conclude with closing remarks from CFO, Mr. Ashok Jagetia. For those who wish to ask the questions, we request you to start joining the question to a little in advance to help us manage the Q&A efficiently. Thank you. And with that, I would like to hand over to Mr.Kandar Patel for his opening remarks.

Hello, good morning, everyone. Thank you for joining Q2's FY27 call today. This quarter marks another important milestone for AESL evolution. Our performance in this quarter demonstrates that AESL is now becoming mature, India's leading integrated infrastructure platform and utility, and it is supported by all our four business, which is in a growth mode, that's a transmission, distribution, smart metering, and energy solution. Our focus obviously remains on building long-duration utility assets. Currently, we have asset base of about 83,000 crores, and we have already locked in capex of more than 1 lakh crores, and that we will be delivering in another 4 to 5 years. So, as I said, will grow almost 1.3, 1.4 times from what we have today in next five years. In fact, since we have been focusing continuously on capex delivery on the ground, and we see now results coming up, the capex in this first half of the year is the all-time high. We have deployed about 7,850 crores of capex among all our businesses. As far as transmission is concerned, during this quarter, we added another two projects. One is at Vajek Panduti, and the second one is Satara. And with these two projects, our order book remains at about 87,000 crore. And as we said earlier, we have been focusing on those critical transmission assets, where large renewable and consumption that we are integrating. So, these two projects, obviously, is very, very important for development of Sathara, is important for development of PSP projects, and Pandurthi is for data centers that is coming up in Vizek region. And we will continue to focus on those large and critical projects like HVDC and this kind of a project where we are enabling renewable integration into the grid and also enabling rapid consumption in our economy. As far as distribution is concerned, both at AEML and MUL, we have been continuing to deliver exceptional operational performance. Our distribution losses in Mumbai has reduced further to 4.29% in the first half, and this, despite the fact that consumption has also increased by more than 10%. And we also continue to focus on reliability, customer service, and operational excellence as far as distribution is concerned. Smart metering, we have now delivered about 14.8 million meters so far. And around 60% of our order book that we have delivered, and balance portion we wish to complete in another 12 to 14-month time. As far as C&I and energy solution platform is concerned, we are steadily transitioning from incubation to scale now. During this quarter, the platform delivered revenue of over 2,000 crore and EBITDA of over 800 crore. And we already have a tie-up of 4 gigawatt of renewable and 3.5 gigawatt of base capacity. So while we are tying up on a supply side, we have also now started tying up on a consumer side. So we executed that 2,500 megawatt RERTC contract with MSC-DCL. And we also expect to further scale up on both sides, on our supply as well as consumer side, significantly in going forward. Financially, as well, we deliver another strong quarter with a total income growing over 50 percentage. EBITDA also increasing close to 67 percentage and PAT growing 145 percentage. As we made a commitment and we continue to focus on governance and ESG part, we are happy to say that now in SLP global electric utility category, we are number one globally getting 90 out of 100 rent. The industry average is about 40, and we will continue to focus on those aspects going forward as well. On our funding and balance sheet side, a significant portion of our data is also the fixed rate or health appropriately. So we don't expect much of the volatility due to foreign exchange or interest rate variation in our P&L or balance sheet. Overall, in all segments, be it a transmission, distribution, smart metering, or C&I, we see great opportunities going forward. Those opportunities, pipelines, remains robust, and we are well positioned to take advantage of the opportunity available to us in all the segments. And we will continue to focus on, besides CAG, as I said, on CapEx delivery. So, this is in a nutshell, and I hope you must have received all the details and material on our financials. So, I thank all of you, and now we will be happy to take questions from all friends. Thank you.

Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question, you may press star and 1, and they touch room 3. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.

The first question comes from the line of Manish Soumya with Cantor.

Please go on.

Good morning, and congratulations on a strong quarter in the first half. I did have a couple of questions, maybe to kick it off. On IntelliSmart, when should we expect that transaction to close?

Thank you, Manish, for your question. In addition, IntelliSmart, the approval from CCI is pending, and we expect this approval very soon. In fact, we had a couple of meetings with them, and they wanted various information on transactions as well as on the market. We have provided all those information. We also had approval from all the utilities where IntelliSmart has a concession. So we also are required to take their approval. We have secured all those approvals, and we expect the CCI approval very soon, and once we have that CCI approval, we will complete the transaction immediately. So we expect that to happen in the next one month time.

That's super helpful. And then on the legacy smart meter business, you had installations of about $1.3 million in the second quarter. You know, it did show that the quarter was a little bit of a slower deployment. Maybe if you can just help us understand how we should think about the second half deployment And perhaps, you know, what's really happening on the ground that might potentially speed up the deployment in the second half?

Yeah, so, yes, obviously, the deployment on the first half was lower than even our expectation, and those reasons were mainly extended. Yes, but we are working on those, and those reasons are obviously in resistance from people for a smart meter, where we have now ramped up our campaign to educate those customers. The second one was that a few of the distribution companies wanted to focus on a specific type of smart meter installation. So the point in case was that Maharashtra was expecting us to install mainly in ST consumer meters. And once you target a very specific consumer, obviously your speed will reduce because you won't be able to capture that entire geography. And they were wanting to do it for a right reason, because they wanted to complete that energy accounting, at least for real-time energy accounting for ST consumer. So we also supported them, but now that they have asked us to deploy all and every meter, which is pending, so we expect that speed will increase significantly. And similarly, in Bihar, they wanted us to do the tagging of all the customers before we installed that meter. And we also have completed those activities now in Bihar and Maharashtra, where the pace was low. We expect that to increase significantly.

And then just lastly, on transmission, if I can just add one more question. I think you said that the second half capitalization should be much better than the first half, and perhaps if you can just help us understand the two or three projects that might really bump up the second half versus the first half. Thank you so much.

Yeah, so if you see the tech record or the past fewest performance, the CapEx performance obviously is little lesser in first two quarters as compared to second two quarters, and mainly because of the weather conditions, a lot of transmission CapEx get hindered in monsoon and summer. So, we expect to do the total capex of transmission in the range of about 14,000 crores. So, we will be doing about 8,000 to 9,000 crores of capex in another second half, and we are fully lined up for that. All the contracts have been awarded, teams have been mobilized, contractor has been mobilized, and you will see a lot of execution activities on the ground scaling up in the second half.

I'm going to get back in the queue. Thank you so much.

Thank you. The next question comes from the line of Rohan Mehta with Stratezi.

Thank you so much for the opportunity. Good morning. A couple of questions regarding the energy solutions platform. First, so I gather that we have been selling in the merchant market in the previous quarter, and now we'll tie up with MSCDC. So will the margins go down? And second, how do we see the progress of this segment, say, in the H2 and FY28?

So, Rohan, our long-term strategy is to make sure that we have substantial capacity tied up on a long-term basis on both sides. We would obviously not want to want large exposure of market as far as AESL platform is concerned. So, when we started and scaled up this activity, obviously, we started with tying up a generating capacity, and we have now started tying up on the consumer side as well, and you must have seen that we have done this long-term PPA with MSC-DCL, which will start operating from last quarter of this year, And we were fortunate enough that between this period where we start our long-term supply, the market was good, and we have been able to earn a good margin. But in the long run, we wanted to have a stabilized revenue profile rather than creating a volatility based on a market in our P&L.

And what about the long-term strategy, sir?

In terms of volume, we will certainly continue to scale up this. Currently, we have about 2500 MW of MSCDCL PPA. We will be doing another PPA with AEML, where regulatory approval has already been achieved. So, we will be doing that PPA. So, we will continue to scale up this volume, and we will reach to about total aggregate capacity on both sides, about 7,000 to 8,000 megawatt of tie-up over 3 to 4 years. Okay. Thank you so much.

Thank you. Next question comes on the line of Mahesh Patil with ICICI Securities, please go ahead.

Yeah. Hi, sir. So, my first question is on our transmission order book. So, we have reported around 8-70 billion of work in hand. So, I guess this doesn't include the recently won APTA project, right, which is around 120 billion?

This includes Viseg and Satara, which is the recently won.

And, sir, on the transmission commissioning, right, so H1, I think we haven't captioned any meaningful capacity. So, I see in CA data that it's largely due to the ROW issues, some clearances, etc., including some capacity in Khauda. So, are we expecting this project, this three, four projects that have delayed in H1 to get commissioned in H2? Or what are we doing to kind of, you know, accelerate these projects?

So, we recently commissioned one element of phase four, which is the... So, we have recently commissioned one element of phase four Khawda Bhuj recently. The work on Khawda Lakharia. And Khabhda, Halwad is also going on. Halwad is stucked up because of this ROW problem, and we expect resolution very soon. In fact, it is being discussed at government of Gujarat as well as government of India level very frequently. Please. The other project that we expect to commission would be WRSR in this year also, this year, and probably we will complete, we are trying to push that project. We might complete the Navinal project in the current year, or maybe it may spill over in the next year, first half. We will be commissioning WRSR, Khovda Phase 4, Hullward. So these three projects are the short-shot, and now in all, probably we might be able to commission. And in Mahan as well, Phase 1 will get commissioned, and the Phase 2 will be in the second, next year, first quarter. So, as you must have seen, despite these ROW challenges, we have been able to scale up our CapEx deployment as far as transmission is concerned. And with the resolution of this ROW in Gujarat, we are hopeful that we will be able to scale up even further.

Thank you. So, my second question is on the energy solution segment. So, we sold around 12.2 billion units this quarter. So, can we have the breakup of how much of this is sold through our long-term contracts and how much on short-term basis?

In quarter two, we sold about 14,500 million units. Out of this 14,500, about 3,500 is the unit that we take a position and sell in a market, Whether to third-party or exchange. So, there we have a long-term tie-up in terms of supply and sell it in the market. That is 3,500. The second volume, which is about 9,500 million units, where we do power trading. So, we sell on behalf of someone, which is 9,500. And there are about 1,500 million units where we manage or provide the power management services. So, totaling that, 3,500, 9,500, and 1,500. So, that's a total volume of 14,500 million units that we handled this quarter.

But, sir, this quarter, I was just checking the numbers. Out of 25 BU, we have reported in H1 rate, and in Q1, we have reported around 13 BU. So, I thought this quarter, we have sold around 12 BU. But, I think the number is not...

No, sir, the number is 28,540, and the Q2 number is 14,583.

Okay, sir. Got it. And, sir, lastly, in the P&L, we have booked some assets, right, some preferred assets of around 17 billion. Could you throw some light on what is this exactly?

See, there are two companies, MGPTCL and ATIL, where the company has to go to the new tax regime and recognize the past paid MAT assets in the books of account, close to around 1500 crore. Since these are section 62 assets, and therefore, corresponding adjustable recoverable assets has also been created, and to that extent, there is no impact on B&L.

Thank you so much.

This comes from the line of Nikhil Ngania with Bernstein. Please go back.

Thank you for taking my question. My questions are on the energy solutions business.

Earlier, you had said you plan to scale it up to 7,000, 8,000 megawatts in a few years. Just wanted to clarify, you meant that on the sourcing side or on the power sales side, you wanted to scale it up to that level? Nikhil, this is Raj. So, it's largely on the supply stack, say the consumer stack side. Obviously, there would be capacities which will be required to match that demand. So, that would be higher. But yes, this is the consumer stack side. That is what we are targeting. Understood, Raj. And in terms of the entities you are targeting, you mentioned this Maharashtra contract. Beyond that, are we targeting small C&I customers as well, or are we thinking to the large data center kind of opportunities primarily? So we have a diverse set of consumer stack even today. So, one, obviously, you have 2,500 megawatt of the MS-DCL thing, 750 megawatt AML, so that's 3.25. We are targeting multiple data center customers. We are in advanced discussions with them. Then further, we also have close to 400 megawatts of C&I clients, which are smaller ones, as well as we are also managing some of the other demand And provide our services for a competitive power to various internal consumers. So, we are making it diverse to ensure that the margins reflect the complete solutions. Got it, Raj. And on the sourcing side, then, do we also plan to source coal-based generation and pump storage? Or would we largely stick to renewables, solar plus best kind of setup, solar wind best? So, the sourcing would reflect the consumption per se, as we want to match on a long-term basis on both the sides. Obviously, the demand from our consumers is also diverse, as you can understand, based on the mix which we are talking. So, it will be having all kinds of sources, including thermal, PSP, renewables, BES, and whatnot. So, it will be full diverse, including third-party clients and the market sourcing. Perfect. And one last question, when this Maharashtra PPA starts, how much of our best already is contracted or to be contracted would transition to this PPA? So, I would say it this way that within the Maharashtra one, 2,500 megawatts, we have broadly covered 50% right now based on our sourcing. And obviously, we are further in the market discussing with various parties for further sourcing of various types of capacities. That's how we are currently positioned.

Perfect.

Thank you so much. This is across resources, not only the battery. Okay. Solar plus BES. Okay.

Thank you.

Thank you. Next question comes from the line of Shiroam Kapoor with Jeffries.

Hi, sir. Thanks for the opportunity. My first question, you know, carrying on from the energy trading business, you first gave the volume breakups. Would it also be possible to share the revenue and EBITDA breakups as you had given on the last quarter for the three segments within this, the long-term trading, CNI trading, and power management?

See, the average realization as far as trading is concerned is about 5.75 Paisa, and what we sell on exchange on behalf of others, we get about 2 to 3 Paisa per unit.

Got it, sir.

So just to add further, the total sale is about, for the H1, is about 3,800, and that's a purchase and sale revenue. For the rest of the category, we do accounting on a net basis, means it's only a margin part. So the long-term sale that we have done, sale from a long-term contract we have done is about 3,688 crore. And the balance in other category, power trading on those C&I customers and power management, those revenue, which are margins, are about 52 crore, 57 crore and 32 crore, respectively. Got it, sir.

And just secondly, on the – so the EBITDA that you would have earned on the long-term trading would just be – so you're saying two to three PESA as a fair estimate to take on the power management and CNI trading, and the balance is all coming from the long-term trading. Yes, correct. And just secondly, on the transmission business, you know, you mentioned that you're expecting to commission three projects this year, WRSR, Halvad, and Khabra phase four. So, you know, earlier you were given a guidance of around 15,000 crores of capitalization. So, are you revising that downward, given that maybe some projects have been pushed to next year?

Not immediately, because we are still hopeful that we will be able to complete what we plan in the current year, because now we expect the next six months will be a fair season for transmission project working, and we expect those constraints which were there relating to ROW in Gujarat, we will be able to sort it out. In fact, we have started handling that and started working on the ground. As I mentioned, we already completed one element of Khauda Phase 4. Element second, Lakhadiya, is also progressing very fast. In Halwaad, only 50 locations is pending, and we expect that also to get completed very soon. WRSR project is also on a fair end of commissioning. Both the substation on both the side is completed. The line portion is limited issue or balance work is pending, and now we are doing stringing also. So, the last phase of singing there in WRSR, we are starting to be realizing drone to avoid ROW problem for singing. So, we expect that to complete in this year already.

So, we don't see

a requirement currently as of now to revise the chemical outline, and we hope that we'll be able to do it in the next six months of this year.

And lastly, in your smart meters business, so, you know, you're already guided for about 10 million installations this year itself. You've done 3.4 in the first half, so just wondering whether you're still on track for meeting that 10 million this year?

3.5 million.

So, we plan for about 80 to 90 lakh meters this year, and the balance about 40, 40, 45, we hope that we will be able to complete in the next half year.

Got it, sir. Thanks. I'll come back in with you for further questions.

Thank you. Next question comes from the line of Vishal Perival, the PL Capital. Please go.

Yes, sir. Thanks for the opportunity. Sir, on this energy solution platform, I think the contract where we take a position, last quarter we have done almost like 3.3 billion units where the spread is higher, margins are higher, and this time we have done 3.5 billion units. So, can you give some perspective, like, I mean, at the end of the year, maybe on a quarterly basis, how this ramp-up can happen on this particular portfolio for us?

So, I think two points which are very relevant here. One is, as we answered earlier, we are ramping up this particular portfolio starting end of the last quarter, we would be having capacities going to Maharashtra. So, that's where a lot of this capacity, which is currently available with us, would be deployed towards and the margins would reflect the PPA, which is what is our long-term strategy. And you will see that the volumes would, what you see today, are expected to only increase as we ramp up more capacities on the sourcing side. So, this is broadly the business model that you would find as we tying up the capacities prior to our deployment. So, that's what you would see in our results.

Okay, so basically the three and a half billion quarterly run rate, a jump is expected in quarter four. And in terms of, I mean, like, you know, because if you do that working of one, two pesa in other portfolios that we make, then, I mean, we are making more than like, you know, two rupees, 20 pesa in this particular side of the business. Then in RERTC, the numbers are in similar trajectory that is there for us, for the Manashtar one, or probably it is a little different.

So, you see, I think one first question on the volume, as I mentioned that there will be a steady increase in our volumes as we increase our tie-ups on both the sites. So, what you see today, obviously, there is seasonal weather variations, but at the same time, on a trajectory basis, we are expected to increase the volumes. Now, margins is a question of what the underlying tie-ups are on both on supply as well as the deployment side. The margins in the PPAs are reflecting the long-term return profile of those PPAs, and you will see that happening. But we believe that we will continue to maintain healthy margins in our businesses across the diversified consumer base, and that's what you will see.

Okay, okay, okay. And then just maybe one last question is on the SMART meeting. I think we are, I mean, like I said, has already given a clarification target for this year, next year. But in terms of further buildup of order book, I mean, are you seeing activities on the ground, any tendering opportunity that is kind of, I mean, like, you know, probably scaling up or maybe are bidding any colors that can be provided will be helpful, sir?

So, on the SmartFinder side, yes, the market right now is still untapped for large capacities to be coming for the auctions. There are already current auctions which are there in the market. We are participating, and we believe that we ramp up because the market is seeing the benefits of it coming in, And we are fully positioned to actually tap that opportunity.

And there could also be an opportunity of acquisition in the market on top of what we get through bidding. Okay. Okay. Good.

Shorter, I think that's all from my side. And thank you.

Thank you. Next question comes from the line of Vivek Rajamani with Morgan Stanley. Please go ahead. Mr. Rajamani, please go ahead.

Thank you very much for the opportunity and congratulations. Just to kind of clarify on the question on the previous participant, obviously, the new contracts that you have will scale up from 4Q of 2027, and the portfolio mix will obviously change going into fiscal 28. Could you just give us a sense that from the very strong quarter that we've witnessed, will the Fed say that there could be some softening as we get into the more cooler periods from a merchant perspective, So, given that you have more longer-term volumes within the E-commence, meaningfully, you know, from fiscal 28 onwards, is that a fair statement?

So, I think, yes, see, we are, as we have said in the earlier answer as well, we are transitioning more and more merchant volumes, which are currently available with us, to long-term PPAs. We will again, in future, are likely to have timing mismatches, and we will have the volumes available to us for those timing mismatches as we type capacities in advancement of over-deployment. Now, what we realize on that, that machine capacity is based on the market conditions, and we obviously try to maneuver our strategy in a manner that we are able to realize healthy returns on those things. Thanks. Now, within that framework, obviously, there are PPAs which we want to tie up, and we already have roughly 3.25 gigawatt of PPAs, which also have very healthy returns. So, with volumes picking up and all of the PPAs coming in, we expect to maintain a very good EBITDA margin in this business. So, Vivek, as I said earlier,

in the long run, we would We do not want major volatility in our C&I profitability, and therefore, we would not take a long-term or large volume exposure to the market. So, we will continue to tie up capacity on both sides on a long-term basis so that we have stability in revenue as well as profitability. And obviously, to leverage the advantage of having this diverse portfolio of supply as well as the numerous side, we will keep certain capacity open, but it will not be a significant one. So what you will see in the long run is a steady and growing cash flow as well as volume and profitability.

Mr. Rajmani, I request you to join back in the queue for more questions. Thank you. Next question comes from the line of Apoor Vapahatoor with IIFL Capital. Please go ahead.

Hi, thanks. That's one question. Adani Green has added more battery capacity in 2Q.

Just wanted to know if we are going to take that over as well and then operate for the rest of the year.

See, I think we are in active discussions with multiple parties, including Adani Green, for whatever capacity they deploy. If they find it attractive to tie up with us independently based on the market benchmarks, they would do with us. So, obviously, we connect with them as well for these capacities, and you would see some of those happening in the near future. But purely on the market benchmarks where the value is available for both the entities, if at all those transactions happen.

So if we do take over, it need not necessarily be at the 4.85 rupee tariff, I believe?

I won't stick to a particular number. Number is a result of where the market benchmarks are. It could be lower, it could be higher, depending upon how the market costs are moving. What you should be looking at is whether I am tying up at the numbers which are market benchmarks or not, so whether it is SECI, NDPC, or other bits which are available to me, or similar players are available to me when I am going in the market and tying up with them, versus what opportunities they may have in their own folio. So that's where I think there is a good meeting of minds happening, and we have been able to tie up large capacities, and based on that understanding in past, where they get their market returns, and we get capacities at that thing, and they're able to do this without having risk of SECI PSA tie-ups or any of those things which you see in the center. At the same time, we are able to tap large resources. So it's a mutual win-win. At the same time, both parties would decide based on how the market venture marks are For a similar trade profile, for a similar long-term tie-ups, and similar temp storms and conditions.

Okay. Sure. Thanks.

Thank you. Next question comes from the line of Vinci with Philip Capital. Please come back.

China is putting a ban on solar tech. Possibly it could lead to a slowdown in solar in India. So can you see a reduction in

the need for transmission lines going ahead if that happens?

Sorry, Philip, you said they are putting a ban on solar.

They are putting a ban on export of technology in solar, so India is still not fully integrated in the solar well chain. So if that leads to a possible slowdown in solar capacity addition, do you see there will be a lesser need for adding new transmission light?

So, I think, Philip, per se, we do not see the equipment bans in China because it's largely on a high-tech side that there have been some reservation in exporting technology outside China. I'll largely focus on, I would rather say, more towards the ingot and vapor or the earlier part of the value chain in the solar manufacturing. But at the same time, if you look at India, per se, India is today on the solar side, manufacturing side is an overcapacity market, which is available in the A11 schedules and all of that. Those are available. So, we do not necessarily see any impact on solar, but I don't think that is the way we should be looking at transmission. The transmission opportunity is coming from multi-faces, not only based on solar deployment. You have a huge amount of pipeline right now which is coming from the states upgrading their networks because they need to absorb capacities for their increased demands. A lot of cities are now looking for solutions to bring more power to their own consumption centers. You can see a lot of demand coming from the Mumbai area as well or Maharashtra area as well. Similar things are getting replicated in other metros. Obviously, the third phase is also now coming up with more than 100 gigawatt of capacities coming on thermals. That entire thing is also pushing the capacities on the transmission side, a requirement of that. Similarly, you have PSPs coming in in a very big way. So, solar is one component. At the same time, we do not see any meaningful slowdown in solar for the reasons which you just alluded to. So, it's basically a market where we can decide how much opportunity we want to tap in rather than there is any dearth of opportunity.

The thought on thermal, this 100 gigawatt of thermal, I think the bulk of it is brownfield expansion, where I think transmission lines are already present. So, if we move more towards thermal to, you know, offset any reduction in solar, do you see the overall transmission pipeline shrinking a bit than what it would have had in between?

No, no, it's not correct because even though it is a brownfield expansion, the original transmission line plan for that original capacity. And obviously when you add that capacity, you will also require additional transmission capacity for that. So for whatever capacity is getting added in new or brownfield, the capacity requirement as far as transmission would be the similar one.

Sure, but would it trend more towards a 400kV line rather than a 765kV or a HVDT line? Because it will be incremental transmission capacity that can come.

No, no, no, no. I don't think it will also be pushing towards a 400kV line because those brownfield expansions are also a large scale. So, if the two units are getting added, then it's 1,600 megawatts. And, obviously, there are multiple thermal projects getting developed in the vicinity. So, probably, it will also require a similar kind of a solution like HVDC. Recently, you must have seen one megaproject that has been approved by the Government of India, which itself is more than 80,000 crores. That is from east to north transmission corridor.

So, as Raj said, the transmission

demand is coming from various sectors, and now you will see a lot of transmission opportunities coming from the project, which is aimed at a system upgradation and also on a consumption side, and mainly around the city areas.

Thank you for this.

Thank you. Next question comes from the line of Shirom Kapoor. Would Jeffries please go ahead?

Hi, sir. Thanks for the opportunity. Just a clarification, you mentioned that you have about 3.25 gigawatt of PPA signed up already on the energy trading. So that would be a 2.5 gigawatt MSEDCL and 750 megawatt AML. Is that correct? And are those both? Is the AML1 operational already, or is that also yet to be operationalized?

In terms of timelines and the capacity, two and a half gigawatt MSCD still signed. The capacity starts being deployed from end of February this year, 1,000 megawatt, then 1,000 megawatt from end of April, and another 500 end of July in the next year. As far as 750 megawatt is concerned, that's already approved by the regulator, all process already done. We are in the process of executing that, expect that to happen over the course of next three to four weeks. The capacity in that particular PPA would be two years from the date of signing that PPA, so that flexibility is there in terms of deployment. Hope that answers your question.

That's clear, sir. And just secondly, on coming back to the transmission side, if you could quantify, You recently won an intrastate project as well a few weeks ago. Could you quantify what the project value for that would be and what is the pipeline ahead, this 1.4 trillion tender pipeline that you're talking about, how much of that is intrastate versus intrastate, and how you see the progress on the intrastate side specifically?

So, both the projects that we have won last quarter, one is Satara, as well as second is Pandurthi, both are interstate projects.

And right now, see, I think the tendered pipeline itself at the country level is around 1,40,000 crores. It's spread across the states and the central. Obviously, central includes a lot of some of the HVDCs as well, so the tilt is in favor of the center in terms of the portion of the centers which are out, but as we mentioned earlier, there is a significant amount of capacity built out, and the new GEC2 category as well, which has been recently approved, is more focused towards creating interest rate networks. So, this breakup is more evolving breakup and would have its own spread as we move forward. So, we obviously decide where it is more suitable for us, which projects are more suitable for us, and focus on them to ensure that we make value for our bids and add value.

And directionally, you will see a lot of new project and opportunity coming from state side, as I said earlier. So there will be a lot of projects that will have to be developed on a consumption side, and especially for those areas where huge amount of consumptions in terms of data center or manufacturing are coming up. And also, around those cities, which is growing, like this year, we see consumption increase in the city of Mumbai of the order of 11 to 12%. So, those kinds of consumption growth in the cities will also push for need of additional transmission capacity around those city areas.

Right, sir. But just, you know, continuing on the intrastate pipeline, you're saying there's, you know, directionally we'll see more opportunities coming up. How is the competitive landscape in the intrastate side versus interstate? And do you see, you know, your typical project IRRs, ROEs being a little bit lower on the intrastate side versus the typical intrastate ROEs?

So, intrastate, typically it is a little better as compared to intrastate, because obviously, you know, those developers will see as a state regulatory versus central regulatory landscape. So, typically in state, the ROI would turn a little better.

Got it, sir. Thank you so much.

Thank you. Next question comes from the line of Vishal.

Sorry for interrupting.

Mr. Biraya, we cannot hear you. Can I speak a little louder?

Yeah. Sir, could you restate the capitalization target for FI 27 and 28, please, for the transmission business?

See, as we said in the earlier question, we actually expect to incur additional capacity And the capitalization

also would be of the order of 8,000 to 9,000 crores. So, if we take WRSR, Khaavda Phase 3, that's the halvut project, and Khaavda Phase 3, If we take these three only, then it will be close to 9,000 crore.

And next year we should be closer to 10,000 crore, sir?

In terms of capitalization or capital? Capitalization. Capitalization would need to be about, give me a minute now. That will be of the order of 10,000 crore. We'll jump after subsequent years after next year because of commissioning of those HVGCE projects. That will add capitalization in lump.

Agreed. One question on the borrowing side. Of the total net debt of 41,000 crores odd, how much is from ECB?

On the borrowing side, ECB is around 10%. On the overall debt of 51,000 crore, 10% is around from the ECB.

10% is from the ECB. Okay. And this year, the currency is hedged, as you had mentioned earlier. But is the interest rate also fixed for a few years? Yes. Or that is completely variable?

No, no, no. All our USD bonds and ECBs, the interest rates are fixed. So, 70% to 80% of our, you know, debt portfolio is on fixed coupon basis.

Okay. Thank you.

Thank you. A reminder to all the participants that you may have a star and want to ask a question. Next question comes from the line of Anuj Upadhyay with Investec. Please go back.

Hey, hi, sir. Thanks for the opportunity. Just for clarification, the 4.6 gigawatt tie-up and 3.5 gigawatt of battery storage is entirely from Adani grid, right? There is no tie-up which includes Adani power as of now.

So, there is no tie-up with Adani power as of now, but out of the total capacity around 700 is from 3rd party as well, 650.

Okay, and you mentioned that of the total volume which we traded under the energy solution,

close to around 3.5 billion was on

the merchant basis, and rest was on a trading where we earned around 2 to 3 by size of margin. So, you just mentioned what was the margin on the merchant basis, sir?

The margin on the merchant basis? Yeah, yeah, of the order of 170 to 2 rupee.

Okay.

And, you know, previous interaction, sir, you have mentioned that, you know, we will be eyeing close to around 10 gigawatt of PPA with the CNI and data center category, where the average spread could come in the range of 80 paisa to 1 rupee. Now, the supply side PPA, which we are, the off-ticker side PPA, which we are signing as on date, it's like with AEML, we have signed 700 megawatts. With MSCDR, we have signed 2.5 gigawatt. So, even on this 3.5 gigawatt, we expect to have similar kind of a margin, or margins out here are more of a, like, regulated basis where it would be much lower?

No, no, it would not be much lower, but it would also not be this high, because this is because of market conditions prevalent to these two.

Hello. Hello. There is some background noise coming. Yeah, sir.

Yeah, so we don't expect, as I said earlier, we would not want to have this kind of market volatility, that in certain quarter, because of market condition, you have a And maybe subsequently you may not have that significant margin. So we will tie up on a long-term basis where those margins will be in the order of 80 pesa to 1 rupee on a consistent basis.

Okay, and is it fair to assume based on the tire which we have as of now on the supply side, that is from Adhani Green and the 6700 from the third party, the available volume which we have to trade on a merchant basis would be in the range of 13 to 14 billion on an annual basis based on the current contract. You know, because just on a very simplistic calculation which I did, on a 4.6 gigawatt, that gives us close to around 10 billion of unit to be traded, and 3.5 gigawatt hour of battery, assuming, you know, that battery, again, it starts through the power, if we take it from the grid at a very lower rate during the solar hour, it gives somewhere close to 14 billion of unit, and, you know, just going by your quarterly run rate, this quarter is sold somewhere in the range of 3.3 billion on a merchant basis. So, it is fair to assume based on our current buy-ups, we have this quarterly run rate of 3.3 or 3.5 billion of units available to be traded on merchant. Till that time, the PPA gets it.

You are right. But again, we have to be mindful of the fact that renewal, both wind and solar will be a seasonal profile. But on an overall basis, it would be of the order of 3,500 million units per quarter.

And this MS-CDC, about 1,000 megawatt will, you know, start supply towards the end of February. So some part will go there.

Got it, got it, sir. I saw that. Thank you.

Next question comes from the line of Ishan from Antic.

Hi, sir. Thank you for taking my question. Just wanted to understand that our contracts with Adani Green are on take-or-pay basis. So, given the curtailment is a larger issue, so if the power is not scheduled or the grid backs are down, who bears the cost?

It's basically whatever they are giving me the power, I am paying that the cost for that power. So on the generation side, obviously, the grid issue is with the generator. We are like any other buyer, like they would have PPAs with like Secchi or anyone else. They pay for the power which is provided.

If the power is not reaching to you, then Ardani Green would be paying for the settlement, is it?

Yeah, that's the risk they have in their business.

So, essentially, how it is being done is that in any PPAs that you would have, whether it is with AESL or whether it is with any utility, generator is to schedule that power, and once it is scheduled, that becomes your responsibility to obtain. And pay for that. Currently, they have not been able to schedule corresponding to the curtailment that is being enforced. So our responsibility starts the moment power is scheduled.

Got it. Secondly, sir, you mentioned that there is no PPA rate with running power, but I believe the MSDC and PPA also include some thermal component to supply the round-the-clock

So, in MSCD, CL, PPA, there is no compulsion that we need to have a thermal. There is a full flexibility. It is energy supply contract rather than a conventional PPA tied up with a particular source. So, I can do any kind of combination there. But obviously, we will require a thermal capacity, and we are exploring various other options of taking capacity, thermal capacity on a long-term basis. It could be Pazani power, it could be other as well, and we have been talking to third-party for thermal PPA as well.

Okay. So, at this point, we cannot quantify how much of thermal will be required for this particular PPA?

Correct. And we also don't want to, you know, lock those kind of a capacity in a way that we wanted to retain that full flexibility on a supply side. So, I can liberate that entire supply stack in a most optimal manner, both in terms of technical and commercial side.

Thank you, ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I now hand the conference over to Mr. Ashok Jagetia for closing comments.

Thank you, everyone, for taking time out and joining this call. If any other questions left out, you please share one-to-one and we will be happy to answer that. Thank you.

Thank you.

On behalf of Adani Energy Solutions, that concludes this conference. Thank you for joining us. You may now disconnect.