NHPC LtdQ3 FY23
NHPC Ltd Q3 FY23 Earnings Call Analysis
Revenue, margin, capex, fundraise and order book outlook from management commentary.
Price: ₹80P/E: 20.5Market Cap: ₹77.1K CrSector: Power
Management growth scorecard
Revenue
Category 3
Margin
Category 3
Fundraise
Yes
Order
N/A
Capex
Yes
2 of 4 growth signals are positive.
Full analysisRevenue guidance
Category 3- →NHPC plans commissioning of significant hydro capacity in coming years:
- → - 500 MW (Subansiri Lower Project) by March 2024 (revenue recognition from next year).
- → - Around 2,500 MW expected by March 2025, including Parbati-II (800 MW), Rangit-IV (120 MW), and multiple Subansiri units (1,500 MW).
- →Renewable energy portfolio under construction includes 1,000 MW solar, and projects in subsidiaries totaling over 350 MW, plus a recently won 200 MW solar bid in Gujarat.
- →NHPC maintains focus on hydro but will undertake solar/wind projects targeting a minimum 12% RoE.
- →Generation volume for Q2 FY24 was 9,010 million units, down 11% YoY due to water availability and weather events; future volumes depend on hydrological conditions.
- →Incentive income recognition is deferred to second half, linked to actual plant availability factor (PAF), impacting revenue timing.
- →Overall, steady growth expected driven by capacity additions, subject to hydrological variability and regulatory realizations.
Margin guidance
Category 3- →NHPC's future earnings growth is influenced by its substantial project pipeline, including hydro and pump hydro storage projects, with comfortable equity availability (~Rs. 2,500 to 3,000 Crore).
- →Return on equity (ROE) for hydro projects, including the JV pump hydro storage with Andhra Pradesh, is expected at 16.5%.
- →Generation depends on water availability; despite recent La Nina conditions reducing generation by ~8%, NHPC can claim shortfall per CERC regulations, insulating base returns around 16.5%.
- →Incentive income recognition changes may impact reported earnings timing, with incentives likely accruing in the second half of fiscal years.
- →Cost of equity is estimated at approximately 12%, supporting project financing without substantial equity dilution.
- →Insurance covers unforeseen losses (e.g., Teesta basin flood), mitigating impact on profits.
- →NHPC maintains low-cost funding (loans at ~7.54%) and passes through cost escalations in tariffs, supporting stable profitability.
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Fundraise plans
Yes- →NHPC has sufficient equity available, ranging between Rs. 2,500 to Rs. 3,000 Crore, even after loan repayments and dividend distributions, so is comfortable with equity contribution for upcoming projects.
- →Funding pattern for projects follows 70% debt and 30% internal accruals (equity).
- →Loans are being raised at competitive rates, e.g., Rs. 2,000 Crore at 7.54% interest with flexibility for prepayment without charges.
- →NHPC has no issues with financing; complete loan tie-ups are in place.
- →Equity contribution for subsidiary projects is largely complete (e.g., 100% equity in Teesta-VI, Rangit-IV, Pakal Dul, Kiru).
- →No explicit mention of planned equity dilution; management indicates comfort with internal equity for ongoing and pipeline projects.
- →Overall, no current plans to raise fresh equity; debt fundraising at favorable terms is ongoing to support capex.
Order book
- →NHPC has several ongoing and planned projects, including major hydroelectric power projects like Subansiri Lower Project, Parbati-II, Rangit-IV, and Dibang Multipurpose Project.
- →Subansiri Lower Project: Active construction; commissioning of two units expected by Q4 FY24; remaining units by May 2025.
- →Parbati-II Project: Targeted completion by September 2024.
- →Dibang Multipurpose Project: Several packages awarded; remaining packages to be awarded in current financial year.
- →New MoUs signed with Odisha and Andhra Pradesh for development of pump storage projects and renewable energy, with plans for 2,000+ MW pump storage in both states and 1,000+ MW renewable energy projects in Odisha.
- →NHPC’s renewable portfolio includes under-construction projects: 1,000 MW solar at NHPC, 65 MW at Bundelkhand Saur Urja Ltd, 88 MW at NHDC, and recently won 200 MW solar project in Gujarat.
- →Overall, NHPC’s orderbook involves multi-gigawatt hydro projects under various stages of execution and planning.
Capex plans
Yes- →Current average capex is in the range of Rs. 8,000 to Rs. 10,000 Crore on a consolidated basis.
- →NHPC has fully contributed equity in subsidiaries like Teesta-VI, Rangit-IV, Pakal Dul, and Kiru; minimal further equity needed in these.
- →No significant equity dilution expected; NHPC is comfortable funding equity from internal accruals.
- →Several pump hydro storage (PHS) projects are planned through MoUs with states:
- → - Maharashtra: 4 PHS projects totaling 7,350 MW under development.
- → - Odisha: At least 2,000 MW PHS and 1,000+ MW renewable projects planned.
- → - Andhra Pradesh: 2,000 MW PHS projects in joint venture mode; 950 MW Kamlapadu and 1,000 MW Yaganti in phase one.
- →NHPC continues selective renewable energy projects (solar, wind) maintaining a minimum 12% ROE threshold.
How does NHPC Ltd rank vs peers in Power?
Pro feature1NHPC Ltd
Rev 3Mar 3
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