Key takeaways of the conference call

Consolidated sales jumped by 95% to Rs 116.3 crore and the operating profit jumped up by whopping 144% to Rs 65.9 crore facilitated by higher sales and 530 basis point expansion in operating margin. But the PBT was lower by 30% to Rs 6 crore after accounting for lower other income, higher interest and depreciation cost. Other income was lower by 47% to Rs 5.52 crore. The interest cost was up by 123% to Rs 39.36 crore on the back of increased loan exposure for expansion and depreciation was up by 133% to Rs 26.04 crore due to increased capacities. However on the back of lower tax incidence the fall in PAT was just 1% to Rs 4.29 crore but hurt by higher minority interest (up 136% to Rs 2.03 crore), the net profit (after minority interest) was lower by 35% to Rs 2.26 crore.

Revenue from biomass was higher by 93% to Rs 61.38 crore and its EBITDA [before unallocable exp (net of income)] was higher by 127% to Rs 13.6 crore. Similarly the revenue of wind business was higher by 143% to Rs 73.85 crore and its EBITDA [before unallocable exp (net of income)]was higher by 147% to Rs 60.67 crore.

Higher sales for the quarter is on the back of improved PLF, increased capacities and better than expected wind performance. The company expects the Q2FY13 PLF to be about 35-40%.

REC revenues for the quarter is about Rs 18.3 crore and of which majority was from Biomass assets which accounted for a revenue of 11.80 crore with balance Rs 6.52 crore coming from wind assets. The company has sold about 55438 RECs together by both the Wind and Biomass businesses at an average price of Rs 2313 per REC. The company is eligible to get about 50000 RECs during July 2012 and the number of unsold RECs as of July 2012 was about 22376 nos.

The company has commissioned about 23.4 MW of new wind assets in Q1FY13.

Biomass Division: Power sales (in volume terms) for the quarter were higher at 85.3 million units (PLF 74.9%) as against 54.3 million units (61.4%) in corresponding previous period. Power sale in rupee terms stood at Rs 49.6 crore compared to Rs 29.7 crore in the corresponding previous period. Average realisation improved to Rs 5.81 per KwH from Rs 5.46 per KwH in Q1 FY12 on the back of supplies to third parties in Tamil Nadu. Revenue from REC for the quarter stood at Rs 11.80 crore with average realisation of REC traded being at Rs 2313/REC. Fuel Costs remained high at Rs 3.38 per KwH. However, O&M and other costs at Rs1.71 per KwH were lower as compared to Rs 1.96 per KwH due to better PLF.

Wind Division: Generation increased to 159.88 million units (PLF 23.4%) from a level of 73.6 million units (PLF18.9%) in Q1 FY12. Average sales realisation for old wind assets increased from Rs 4.08 per KwH to Rs 4.37 per KwH as a result of tariff increase w.e.f. 1st April 2012 which was partially nullified by increase in transmission, distribution and O&M charges. Sales revenue touched a high of Rs 66.7 crore (against Rs 30 crore in Q1FY12) aided by improved PLF and generation from new capacities Revenue from REC for the quarter stood at Rs 6.52 crore with average REC realisation being Rs 2148 per REC.

During July 2012, exited the 90% JV under implementation in Sri Lanka for 10.5 MW in order to focus on the Indian market.

Lower interest cost on sequential basis is largely on account of one time charge in Q4 FY12.

The impact of the REC scheme is not yet to be fully in place with State Utilities are not yet in to the market significantly. But the current year has started off well with significant demand for RECs in April/May'12. Moreover the REC realisation has been higher compared to the same period last year at Rs2,200 / Rs 2400 per REC ( LY Rs 1500 per REC). Although there would be increase in supply of RECs going forward, improved compliance is expected to drive the trading in the coming sessions.

Wind generation capacity addition for FY13 is estimated to be about Rs 192.25 MW as against a capacity addition of 125.83 MW achieved in FY12. In Q2 / Q3 FY13 the company will add wind assets of 24.85 MW in Tamil Nadu, 45.0 MW in Andhra Pradesh and 25.20 MW in Gujarat. With this the global wind capacity of the company to reach about 420.41 MW by Q3FY13 against 325.36 MW as of 30th June 2012.

The new wind assets in Tamil Nadu are expected to generate a PLF of 25-26%.

REC Registration is expected for all new capacities in Tamil Nadu except for 32 MW.

Biomass fuel cost in Q1FY13 was at Rs3.38 per unit (Rs 3.27 per unit in Q1 FY 12). It was lower as compared to Q4 FY12 due to sourcing of cheaper mix of fuel during the quarter. However, fuel prices are expected to remain high for some more time. The company's other initiatives like bulk sourcing of fuel, RDF and deployment of the crawler for Juliflora harvest are expected to provide results in coming quarters by way of moderation in the cost.

Refinancing of loans (pertain to two biomass units) aggregating to Rs 55 crore results in lower interest rate by 1.75 % p.a.

Sale from Hanumangarh plant presently through power exchange is resulting in low tariff. Plan to go bilateral in order to improve on tariff in the second half of FY 2013. However, in the short term, the concern of low tariff shall continue in this unit.

New biomass generation capacity addition suffered due to projects has been delayed primarily on account of issues associated with connectivity to the grid and resistance of States in allowing units to opt for REC Mechanism. While the Marikal (7.5MW) and Kishanganj (8 MW) is now expected to be commissioned by Q2FY13 and that of Narsingpur (10MW) and Kolhapur (20 MW) by Q3FY13. Commissioning of this plant will take the total biomass capacity of the company to 106.0 MW by end Q3 FY13.

Company is continuing with its initiative at reducing interest costs through other refinancing avenues and generally to deleverage the business and same is expected to impact business positively in the second half of the year. After repayment, the company expects the total debt to settle around Rs 1900-1950 crore at the end of the year.

Tamil Nadu : The banking charges increased effective August 12 for wind power. Levy of increased banking charges and transmission charges by TNEB could impact margins in coming quarters but the impact could be mitigated to the extent the company is able to pass on the burden to consumers. Similarly for Biomass the cross subsidy for all third party sales has been proposed and implemented effective July 2012. The impact of cross subsidy will have a marginal impact on 3rd party sales realizations of the company.

Gujarat : As per the latest regulations, the company could be forced to go for 50% under average Power Purchase Cost (APPC) plus REC and 50% under Feed in Tariff (FIT) respectively for the entire capacity of 50.40 MW Suzlon machines. Since FIT proposed to be increased to Rs 4.23 per kWh from present Rs 3.56 per kWh the blended tariff may not be significantly affected.

Transmission inadequacy continues to be an issue in Tamil Nadu. It is expected that grid back down will impact to the tune of 10-15% in this season also as in last year.