Power company CESC reported a near-flat net profit of Rs 244 crore in the quarter ended March 31, 2015 against Rs 243 crore from a year ago period. Discussing the result, chairman Sanjiv Goenka said the company is aiming that by the end of the next 12 months it should be able to provide electricity connections on the same day.
The company reported a loss of Rs 490 crore at a net level for FY15 which reflected in its results. “Going forward, we expect it to be better that but until the power purchase agreement (PPA) is actually signed and delivered as in approved by the Uttar Pradesh Electricity Regulatory Commission (UPERC), we cannot say but we do expect it to happen in the next three to six months,” he added.
Below is verbatim transcript of the interview:
Q: Just take us through the numbers this quarter, how much of the benefits of the profits are on account of the multi-year tariff order which was recently approved by the West Bengal regulatory commission?
A: Tariff remains constant, there has been no change in tariff despite an order. Therefore, there is no additional profit from tariff. The profit is on account of additional efficiencies and stricter control on costs and higher incentives and that has led to higher profits.
Overall, we are satisfied with the way the year has gone and for us what is very satisfying is as a consumer-centric company yesterday for the first time we were able to give an electricity connection within 24 hours of application.
Our goal has been and will be that by the end of the next 12 months we are able to give electricity connections the same day. However, yesterday was the first case that we could process and that is a matter of immense pride for us.
Q: If you could tell us the performance of Spencer for this financial year and whether you were able to achieve breakeven on that or will you be able to achieve breakeven next year and any listing timelines for that?
A: Spencer continues its journey forward. Sales have been better, revenues per square feet have been better but we still make losses at a company level even though we still make reasonable profits at our store level.
We are still not covering our entire corporate costs. Going forward, we expect to start doing that. The impact of e-commerce has slowed down the rate of growth to an extent and so, we were earlier expecting second or third quarter of this year for breakeven.
Q: What exactly has the plant load factor (PLF) been for this quarter and what could be a sustainable level in the quarters to come?
A: January-March is always a low quarter because units go down for maintenance and it is winter months so city consumes a lot less power than it consumes right through the year. So overall our PLFs have been about 87 percent for the year. Some stations have done very well and some have done less well.
We strictly started following a merit order dispatch system. We had an agreement for purchase of power from State Electricity Board.
There have been times when we had to back down our stations to accommodate power from state electricity board. Going forward, we hope that situation will not arise. We may not need to back down our own stations to accommodate the state electricity board.
Q: On account of multi-year tariff which was approved by the West Bengal regulator earlier this quarter, have you made some under recoveries out of that? Could you tell us how much contribution has come in quarter IV numbers just on account of that?
A: The quarter IV bottom-line the average tariffs remain the same. There is no change in the average tariff per se. So there is no additional profit because of the multi-year tariff. When you have a recovery on account of past years it improves the cash flows but it doesn’t improve the bottom-line.
Q: What is the outlook now on the Chandrapur plant? Your coal block has been cancelled, when is it likely that the company will sign a PPA? There is a lot of news flow of you trying to sign up something with the Noida State Electricity Board (SEB). Could you give us the timeline on that because that will be one of the keys that the state would want some clarity on it as far as FY16 is concerned?
A: Firstly, we didn’t have a coal block so there was no question of cancelling any coal block for Chandrapur. We had a linkage which was stuck in an issue over change of name and change of ownership.
Hopefully that will get resolved but we that as it may yes there is an agreement with a Greater Noida power company which the regulator had issues with. Then we went to Appellate Tribunal for Electricity (APTEL) and APTEL has re-directed the state electricity regulatory commission to re-examine this whole purchase agreement under sec 62.
Q: In case things move at the pace that they are moving now, what will be the likely losses that the company makes as far as the Chandrapur unit is concerned for FY16? Is there any number that you can give us that we can work with for the next fiscal?
A: What is factored in already into the FY15 numbers is a loss of Rs 490 crore at a net level and that actually means the cash loss of about Rs 350 crore; that has already reflected in the results.
Going forward, we expect it to be better that but at this point in time until the power purchase agreement (PPA) is actually signed and delivered as in approved by the Uttar Pradesh Electricity Regulatory Commission (UPERC), we cannot say but we do expect it to happen in the next three to six months.
Q: Moving on to the Sarshatali coal block, is there any clarity from the West Bengal commission on the thousand crore additional levy, will you be able to pass that on in terms of higher tariffs to the consumers, is that a likelihood and my second question being, have you been able to start any kind of additional merchant sales in the quarter gone by from this coal block?
A: Up till March 31 the coal block was with us anyway as in from the old dispensation. It is only on the April 10 that the mine was given to us afresh and the new conditions are applying now onwards and clearly merchant’s sale of power will be one of the avenues, definitely that is something that we will be looking at and looking at aggressively.
Q: FY16 has already started, have you begun some merchant sales on this on say maybe about 0.5 million tones, that will be the surplus cola capacity that you can use for merchant sales, have you begun anything on that?
A: We have begun the process, sales have not yet got affected but yes the process is very much underway.
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