Detailed narrative
Amravati Plant Performance and Debt Reduction
The company's 1350 MW Amravati power plant, commissioned in 2015, operated at a robust 82-83% Plant Load Factor (PLF) in the last financial year. Management highlighted that the plant's EBITDA has been stable around ₹1000-1100 crores since 2015. A significant achievement was the reduction of balance debt to ₹522 crores as of March 31, 2024, down from ₹1125 crores taken from Kotak in June 2023, with a total of over ₹3500 crores of principal and interest paid off to previous lenders over the last three and a half years.
Regulatory Receivables and Future Cash Flows
RattanIndia Power has accumulated regulatory receivables totaling over ₹2500 crores, which management expects to realize over the next three to four years. These receivables stem from past litigations, primarily related to coal import shortfalls not being passed through by DISCOMs, a matter eventually decided in the company's favor by the Supreme Court. The company noted that the worst of the litigation cycle is behind them, and regular energy bills are now being received on time.
Future Growth Avenues: Capacity Expansion and Renewables
The company is strategizing for future growth, considering two primary options: capacity expansion at the Amravati plant and venturing into renewables. For thermal expansion, they are looking at adding either a 660 MW or 800 MW supercritical unit, which could be a ₹6000 crore project requiring approximately ₹1500 crores in equity. The company also has experience in renewables through a previously sold solar business and plans to finalize concrete plans in the near future, after paying off existing debt.
Sinnar Plant Status and Asset Monetization
The 1350 MW Sinnar power plant project is currently undergoing the NCLT process, which commenced around January or February 2024. RattanIndia Power is exploring options to bid for the plant as a sponsor. Additionally, the company owns 800 acres of valuable land in Mansa, Punjab, under its subsidiary Poena Power, which was originally acquired for a thermal plant. Management is working with the state government to put this land to commercial use, potentially for industrial or agro-commercial purposes, expecting it to yield returns to RattanIndia Power in the future.
Merchant Power Sales Strategy
RattanIndia Power recently commenced merchant power sales in Q4 FY24, procuring coal through Coal India subsidiaries' auctions and selling power on the exchange. This initiative has been successful, with an average realization rate of approximately ₹7 per unit. The company aims to expand its merchant sales capacity from the current 28 MW to up to 100 MW in FY25, leveraging the healthy exchange prices driven by the country's power shortage and limited new capacity additions.
Financial Outlook and Interest Cost Savings
With the ongoing debt reduction, the company anticipates that its profit before tax (PBT) will no longer be negative going forward⏳, as interest costs will continue to decrease. The interest cost for FY23 was around ₹560-570 crores, and Q4 FY24 saw an interest payment of ₹239 crores. Furthermore, due to historical losses estimated at ₹2000-3000 crores, RattanIndia Power expects to have a tax shield for the next few years, meaning future profits will not incur income tax.
Industry Demand and Future Outlook
Management expressed a bullish outlook on India's power demand, noting that the country is operating at almost full capacity, leading to discussions about adding more thermal plants. They emphasized that coal-based power will remain the base load for at least the next 20-30 years, as renewables are intermittent and gas resources are limited. Maharashtra, being the largest power-consuming state and economy, provides a strong market for the company's Amravati asset.