Reliance Power reported a loss of Rs 3,558.5 crore in the three months ending March 31, on a standalone basis, mainly on impairments worth more than Rs 4,000 crore recognised by the company on account of its stalled projects. However, the company believes that its operational performance remain sturdy with an EBITDA margin of 50%. K Raja Gopal, CEO, Reliance Power, tells FE s Anupam Chatterjee why he feels that the worst is past for the company. Excerpts from the interview.
What can Reliance Power s revenue falling 33% y-o-y to Rs 1,585.7 crore in Q4, FY19 be attributed to?
Less than expected demand in Uttar Pradesh impacted the dispatch levels of the Rosa power unit, despite having high availability (92%). Revenue fell in the quarter largely due to coal supply shortage at our Vidarbha Industries Power (VIPL) plant in Butibori. During Q4-FY19, under-recovery due to coal shortage was about `200 crore. However, with VIPL s success in the recently concluded SHAKTI auction in May 2019, under-recovery will get fully eliminated. The plant can easily show normative availability of 85% (which would help in recovering fixed costs). The cost of linkage coal under the fuel supply agreement signed with Western Coalfields and cost of top-up coal to supplement potential shortfalls in linkage coal supply, will be fully allowed as a pass-through by the Maharashtra Electricity Regulatory Commission.
Do you think the current regulatory environment also contributed to the dip in revenue?
Both VIPL and Rosa have petitions/appeals pending with respective state regulators/appellate tribunal for electricity (APTEL). There have been inordinate delays in receiving orders/judgments extending up to 1.5 to 2 years. Had the relevant orders/judgments been issued in a reasonable time, the revenue shortfall would have been significantly bridged.
Do you foresee any more significant impairment/write-offs in the ongoing fiscal?
We have taken a conservative view in carrying out valuations in arriving at impairment values. We therefore do not foresee any significant impairments/write-offs relating to gas-based and CSP (solar) assets in the ongoing fiscal. Impairment of gas-based assets has been taken after seven years due to the industry-wide issue of non-availability of domestic gas, which has affected the entire 24,000 MW of gas-based capacity in the country. As you will appreciate, the impairments/write-offs are one-time exceptional items leading to a non-cash loss. Reliance Power continues to show strong operational performance with EBITDA of `4,263 core and EBITDA margin of 50%, which is the best in the industry.
Is Reliance Power still holding on to the Indonesian coal mine which the company had procured for the cancelled 4,000-MW power project at Krishnapatnam, Andhra Pradesh?
The company still owns the coal concessions acquired in Indonesia. However, it is currently actively working on monetisation of these concessions by way of sale. Given operational readiness of these concessions, combined with current coal prices in the seaborne thermal coal market, the transaction is expected to be completed in the next 6-9 months. The power purchase agreement for the Krishnapatnam UMPP stands terminated. As per terms of share purchase agreement signed between PFC and RPower, the special purpose vehicle (SPV) will be transferred to PFC, or an entity identified by PFC, at a buyback price, which will be the same as the price paid by RPower for acquiring the SPV from PFC.