'Total generation cost post gas price hike to be Rs 5/unit'

“We have Rs 6,000 crore worth of cash on books. Energy, airport debts are self- liquidating. We do not see any requirement for capex in near-term. We are looking to bring down corporate debt by 15-20% in FY14 and by 45-50% in the next 12-18 months.” He added.

GMR has invested Rs 700 crore in Ahmedabad–Kishangarh highway. GMR Energy IPO listing is also under evaluation.

Below is the edited transcript of Madhu Terdal interview on CNBC-TV18

Q: What is the power sector shortfall of gas at this point in time and what is the variable and total cost of generating power at USD 8 per mmbtu?

A: The current gas prices are indicated at USD 8.20 cents. It should translate into Rs 3.5-4 depending upon each projects’ capacity and the efficiency, and add to that about Rs 1-1.5, maximum Rs 1.10 paise, in fact it maybe even 80 paise depending upon the project cost. So, that should come anywhere between Rs 4.5 and 5, which could be overall tariff, at Rs 5 today.

Tamil Nadu signed at Rs 4.91 and there are other examples of Rs 5-plus also. However, the government is also looking at blending of the prices with Reliance Industries with the administered price and once that happens we should be in a decent position to dispatch the gas, especially looking at the uncertainty prevailing on the coal side. Of course it is a question of time when we will be able to get the gas and when we will start achieving 65 percent or 85 percent plant load factor (PLF), which we have been planning about.

Q: Is there a slip also in terms of availability because what analysts tell us, we haven’t heard this from Reliance themselves that scaling up at KG basin is going to take its while and the most optimistic numbers was 20 mmscmd for FY15. If that is the case, there are enough claimants before that – fertilizer and there will be a bit of steel, there are other claimants. In terms of capacity utilisation at the moment what is your best guess for your plant?

A: Apart from Rajahmundry we have got another two power plants, GMR Energy as well as Vemagiri where we have got around 600 mega watts. We believe that the excess surplus that is been produced by Oil and Natural Gas Corporation (ONGC), Cairn India and Gujarat State Petroleum Corporation (GSPC) should give overall between 10-12 mmscmd surplus during the next one-two years.

So, we believe that we should be able to operate at least around 30-40 percent PLF on the back of these two plants. Your guess is as good as mine. I believe the best part in these two gas plants is -- they are completely debt free; we have completely repaid the debt in GMR Energy and Vemagiri; Vemagiri is 388 MW and GMR Energy is 200 MW. So, between this we should be able to make a decent sum of money and we believe that Reliance also may spring some surprise but I do not want to hazard a guess there.

Q: Because you have not been operating Vemagiri, would you be claiming Rs 480 crore in terms of fixed cost from Andhra Pradesh (AP) Discom. I understand that you have that option?

A: Yes, that is there, it is under discussion.

Q: You have already put in a request?

A: Absolutely.

Q: And you haven’t heard from them?

A: It is under discussion.

Q: Is the government looking at any kind of subsidy-based mechanism from the power sector because we have seen many from the industry make such representations to the ministry?

A: I think with gas being at what it is now priced, I believe certain amount of subsidy may be required but there will be enough of demand. Today let us look at this – when you are going at 4.5-5 percent as against 8-9 percent, all these prices are subdued. The moment you start picking up 7 or 8 or 9 percent, I think the demand will start picking up, in fact even four-five years when we are talking, people were talking anything above Rs 250 is an unviable proposition. Today Rs 4.5 is an accepted norm. I think these things will change once we get into the growth momentum.

Q7: Shifting to infrastructure space, this morning things are in the news because Jayanthi Natarajan has put in her papers so there is a hope, of course it will take a lot of time, there is a hope that a lot of these stalled projects will now come back on track. Since you are a key participant in this industry and you have borne the brunt of this delaying of projects, do you see any revival at all and how is the situation on the ground now?

A: I do not want to comment on the environment ministry but it is a fact that lot of projects are stalled on account of various clearances, not only environment but variety of other clearances as well. However, what is important is that we have been noticing that a very clear trend is visible in achieving the progress at all levels but immediately what is needed is some amount of support from the Reserve Bank of India (RBI) and banking industry because that is where all the infrastructure developers are having a stress because there is an increase in project cost, there is delay in projects, at least in GMR case we have completed all the projects, there is no capex involved now.

I do not have any capex project. I have all the approval in place. What I need is only the fuel supply agreement in respect of Chhattisgarh as well as a power purchase agreement (PPA) on the back of it will be able to do. So, in our business at least GMR is very well positioned. I do not have any capex requirements, our equity is completely met except for maybe couple of 100 crore. We do not have anything. So, that is where we feel that the hockey stick turn has happened at least in our case, we are not seeing any much progress.

So, for 2014 in our opinion it should be one of the good years on the back of whatever is happening on the ground, in fact if you look at it, people always talk about debt and debt laden company, I think lot of time these words are used in a very loose fashion. If you take our look, we have got overall around Rs 45,000 crore of debt, of that there is Rs 6,000 -7,000 crore of cash -- and our real problem in any project – real problem should be on the corporate debt, which is not backed by the cash flows. Projects, out of Rs 45,000 crore, we have got about Rs 11,000 -12,000 crore in airport, they are completely self liquidating, absolutely no issue.

There is Rs 5,000-6,000 crore in roads and that is self-liquidating. What we have got is around Rs 20,000 crore debt in energy. A small company will have Rs 5,000 crore, a big company will have Rs 50,000 crore. The size of debt should not matter. All the energy projects are self-liquidating, for example if I have a 10-year repayment because of the increase in the project it will get cleared in 11 or 12 years. It will not have a per se impact upon internal rate of return (IRR).