Gayatri Projects is setting up a 1,320 megawatt (MW) power plant in Krishnapatnam, which is in an advance stage of construction, says TV Sandeep Reddy, managing director Gayatri Projects.
Gayatri Projects is setting up a 1,320 megawatt (MW) power plant in Krishnapatnam, which is in an advance stage of construction, informs managing director TV Sandeep Reddy.
Talking to CNBC-TV18, he says that out of 1,320 MW, the company had bid for 500 MW a couple of years back which has been finalised now. The company has signed a power purchase agreement (PPA) with the Andhra Pradesh government for 25 years.
Here is the edited transcript of the interview with CNBC-TV
Q: We have not heard people signing PPAs in quite a while now. Can you take us through the details of this Andhra Pradesh discom and what it means?
A: This is one significant milestone in our power business. As you know, we are setting up this 1,320 megawatt (MW) power plant in Krishnapatnam, which is in advance stage of construction. We are expecting to start by April-May of 2014.
Out of 1,320 MW, we had bid for this 500 MW about a couple of years back. So this bid has taken a long time for revaluation and finally they had finalised the bid now and we had signed the PPA with the Andhra Pradesh government for 25 years.
Q: Can you give us an idea of what is the cost per unit and whether there are escalation clauses?
A: Levelised tariff of approximately Rs 3.70 paisa as we quoted and basically this price includes partly-fixed component and variable component, which is the coal component, which is payable as per the actual pass through of escalation
Q: Is there any other escalation? I am asking you because there are so many cases before the Central Electricity Regulatory Commission (CERC) especially with respect to even the forex loss?
A: We have quoted (prices) with domestic coal.
Q: What if you didn’t get the coal, as nobody quoted on the basis of the imported coal. They ended up buying imported coal because domestic coal is falling short. What if you were in the same boat?
A: In the CERC bidding you can bid as a domestic coal or imported coal, so we have to show the source of coal. We have shown domestic coal as a source of coal.
Q: There is a news report that indicates that Krishnapatnam plant is up for sale and in fact the majority partner in that project, which is NCC, will be looking at exits with a couple of bids, one from Singapore. Is this true?
A: No, that actually is not for sale. We have two joint ventures – first one with Sembcorp where we have 51:49 and that is called Thermal Powertech and the second power project what we are doing together with NCC in Krishnapatnam itself is – both of us have invested approximately Rs 700 crore which constitutes around 35 percent of the equity required for the project.
We are not trying to raise the balance 65 percent equity through a strategic sale, so we are in advance stages of discussion with a strategic player. Nothing concrete has come out of it as of now.
Q: Are you also wanting to sale stake?
A: I don’t think so. I saw some news reports, but I don’t think there is any confirmation on any of those. We basically are looking for a partner for the balance 65 percent of the equity, so that we could complete the project. That project we have achieved notice-to-proceed about a year ago. It is actually going to commence commercial production only in March 2015.
So right now, with the equity we have brought in, the debt drawdown is going on. Construction is in full swing. So, we are now hoping to close the equity deal by the end of this year to complete the project.
Q: Why are profits lower?
A: Profits are lower for two reasons, one being higher interest cost and the second, there is forex loss on FCCB, and so we had to take a hit on the balance sheet. We had foreign currency convertible bonds (FCCB), which we paid back in September.
Q: How did you manage FCCBs? Had you to taken a fresh loan to repay that?
A: We took a mix of both – we took a fresh commercial borrowing (ECB) to some portion of it and the balance, we paid off from internal accruals.
Q: What will your interest cost be for subsequent quarters? You are running at about Rs 36-40 crore in terms of a quarterly interest outgo. What will it jump to?
A: We have a total debt of Rs 1,300 crore including ECB, which we had taken for the FCCB. We are trying to reduce the debt quarter-on-quarter. That is our endeavour.
Q: How will you do that?
A: More internal accruals. For example, in the last two years we had a rights issue; we also did a Qualified Institutional Placement (QIP) and raised money. So some debt has come down, but not significantly. We are hoping that interest costs in the next four quarters will also come down by at least 100 or 200 basis point (bps), which will improve profitability.
Our topline growth, we expect to do because we have an order book of totally about Rs 9,000 crore out of which about Rs 3,000 crore was from irrigation projects in Andhra, which will start off from next September.
They were dormant because of lack of funding and other things from the Andhra Pradesh government, but the government is now starting to take up these projects.
Q: The second point here is that you had already done a QIP. If you come out with another equity issue, then dilution would be an issue?
A: We are not going to do any more equity issues.
Q: If you are not doing the equity issue, have you have rolled over your FCCBs with a bit of domestic debt and ECBs?
A: No, domestic debt.
Q: What will your interest outgo be looking ahead?
A: I can’t give you the figure.
Q: No,will it increase is my point?
A: No, it won’t increase. We are going to contain debt at this time. Out of Rs 1,300 crore debt, we have around Rs 600-700 crore working capital, equipment loans, and then the FCCB debt what we had taken. So, we have some short-term debt of about Rs 200-300 crore, which we used probably to invest into our road and the power projects.
Q: You are not selling any of your stake in build-operate-transfer (BOT) projects to bring down the debt?
A: As of now, we are not looking at divesting any of our BOT projects. We have six BOT projects, out of which about five have already achieved COD. So, there also, we are looking at probably reducing interest rate, so some amount of capital will get unlocked, so that is another way we can probably reduce the debt on the parent company – that is the third level.
So, in the next one year we will not be looking at too much investment, as I told you our first project is now fully funded. The scond project, that is NCC project we are not looking at taking any more equity exposure, we are looking at a partner to complete the project. Road projects are fully funded.