Adani Energy Solutions Q4 FY25 earnings call

Adani Energy Solutions Limited (AESL) reported a remarkable FY25, with total capex doubling to Rs 11,444 crores from Rs 5,613 crores in the previous year. The company achieved a healthy EBITDA growth rate of 23% and aims to outgrow this level for the next 4-5 years. Operational availability remained high at 99.7%, contributing to an incentive income of Rs 132 crores, underscoring robust operational efficiency.

AESL currently holds a strong order book of approximately Rs 60,000 crores, expected to be executed over the next 4-5 years. The company also highlighted a significant pipeline, with Rs 54,000 crores already under bidding at the ISTS level. Additionally, state-level opportunities, such as Maharashtra's plan of Rs 150,000 crores over six years, are expected to further bolster the pipeline, particularly for green power evacuation projects.

For FY26, AESL projects a consolidated capex of Rs 16,000-18,000 crores, demonstrating continued investment in growth. This includes Rs 1,600 crores for AEML, Rs 4,000 crores for smart metering, and Rs 12,000-13,000 crores for transmission. The company plans to commission seven transmission projects totaling Rs 15,000 crores in FY26, with the significant Mumbai HVDC project targeted for commissioning by December 2025.

By the end of FY25, AESL had installed 32 lakh smart meters and has significantly accelerated its installation rate to 27,000 meters per day in April 2025. The company targets deploying at least 70 lakh new meters in FY26, aiming for a cumulative total of minimum 1 crore meters by the end of FY26. The per-meter capex is estimated at Rs 5,500-5,800, with a Rs 900 subsidy from the central government to state DISCOMs aiding project funding and contributing to an estimated annual EBITDA of Rs 1,350 per meter.

The Mumbai Utility (AEML) demonstrated strong operational performance with a 6% growth in energy sales and a significant reduction in distribution losses to 4.7% in FY25, down from 5.29% in the previous year. Renewable penetration in Mumbai Utility reached 36% in FY25, reflecting a commitment to green energy. AEML has consistently been ranked as the number one distribution utility in the country for three consecutive years, highlighting its operational efficiency and customer service.

AESL maintains a comfortable financial position with cash and equivalents of approximately Rs 8,500 crores and a net external debt of around Rs 32,000 crores, resulting in a net debt-to-EBITDA ratio of 3.2x. The cost of debt for under-construction projects is around 9.5%, which is expected to decrease to 8-8.5% once projects become operational due to improved credit ratings. The company is actively planning the refinancing of its Adani Transmission 2026 bond, with options to be activated 6-9 months prior to maturity.

The company confirmed that major projects like Khavda Phase II Part-A (Rs 1,300 crores) and Mumbai HVDC (Rs 7,000 crores) are progressing as per schedule. While some project delays due to system dependencies were noted, management stated these are not company-specific and are mitigated by regulatory provisions allowing for 'change in law' for lost periods. Funding for under-construction projects is tied up with Indian banks, and the company is confident in its ability to fund future projects through growing EBITDA and disciplined capital allocation, ensuring it only takes on projects that fit its financial and execution metrics.

Beyond its existing operations, AESL is closely monitoring privatization opportunities in the distribution sector, particularly in Uttar Pradesh. The UP DISCOMs are actively pursuing privatization, with a transaction adviser appointed and bidding documents expected within a month. This initiative, if successful, could serve as a precedent for other states, potentially opening up new avenues for AESL to expand its distribution footprint.