Key takeaways of the conference call

Consolidated operating income for the quarter ended Sep 2012 more than doubled (up 115% ) to Rs 151.56 crore and the EBITDA was higher by 143% to Rs 101.16 crore facilitated by higher sales and expansion in operating margin to 66.7% compared to 59.1% in the corresponding previous period. The PBT before (un-allocable overheads) was higher by 220% to Rs 30.94 crore. Un-allocable overheads (net of income) was lower by 39% to Rs 0.22 crore and thus the PBT was higher by 211% to Rs 31.15 crore. Eventually the PAT (after MI) was higher at Rs 22.54 crore compared to mere Rs 2.00 crore in the corresponding previous period.

The operating income of wind business was higher by 107% to Rs 106.02 crore and its EBITDA was higher by 132% to RS 95.38 crore. Operating income of Biomass business was higher by 136% to Rs 45.55 crore and its EBITDA was at Rs 5.78 crore (compared to just Rs 0.49 crore in the corresponding previous period).

Strong growth in sales can be attributed to improved PLF, generation from new capacities as well as improved unit realization. Sales realization continued to improve for both businesses with increase in tariffs and shift in sales mix from PPA to merchant.

Spike in other operating income (up 825%) is largely on account of income from sale of REC, which stood at Rs 19.93 crore in Q2FY13.

Other income was high during the quarter at Rs 20.09 crore due to gain on sale of equity stake in Sri Lankan subsidiary (Rs 2.75 crore) and foreign exchange gain upon taking hedge of ECB amounting to Rs 9.60 crore).

Gross power generation from wind for the quarter stood at 234 million units (124.85 MU in Q2FHY12) and the PLF stood at 32.9% compared to 27.27% in corresponding previous period. The average realization too has improved from 4.24/unit in Q2FY12 to Rs 4.55/unit in Q2FY13. Grid back down although continued in the quarter as well, PLF improved significantly due to better than expected wind availability. Realization was higher compared to previous year due to increase in tariff effective April 2012 in TN.

Overall generation capacity as end of Sep 30, 2012 stood at 397.91 MW including 337.41 MW in Wind and 60.5 MW in Biomass. Current wind capacity of 337.41 MW is expected to reach about 420.41 MW by end of Q4 FY13 with additions of 12.8MW in TN, 45MW in AP and 25.2MW in Gujarat.

Power exported by Biomass business in Q2FY13 was 59.02 MU (compared to 39.20 MU in Q2FY12) with PLF improve to 52.1% compared to 38.6% in the corresponding previous period.

One of the north based plants was shut down temporarily in Q2FY13 and also there is lack of availability of dry fuel across units due to monsoon. This resulted in lower generation on sequential basis, but for this, the performance would have been even better.

Blended realization of Biomass stood higher at Rs 6.31 per KwH (compared to Rs 4.51 in Q2FY12) with TN based plant switch over from grid to third parties. Consequently the realization of all Tamil Nadu units continued to be robust.

The tariff of biomass is higher due to TN units, where the realization is higher around Rs 7. And when the mix changes with increased contribution from northern units this will drop otherwise it is sustainable.

Benefits of tariff increase in TN were to large extent were offset by increase in transmission charges by TNEB.

In wind about 70% of generation will happen in H1 and 30% of only generation in H2.

AP wind feed-in- tariff revision from 3.50/unit to Rs 4.75/unit, this will positively impact the wind capacity to be commissioned in AP going-forward.

Hanumangarh bio-mass plant's realization continued to be an area of concern due to low prices in the exchange. The company is taking efforts to move away the plant from Power exchange effective November 2012 and this is expected to improve realization and margins of this plant. Similarly exploring alternatives to revive the Kotputli plant which is presently not operational due to very high fuel cost in order to arrest the cash losses.

All four biomass units in Tamil Nadu and Sanjog in Rajasthan continue to get REC benefits during the quarter. Total REC revenues during the quarter aggregated to Rs. 83 Million with cumulative REC revenues for H1 FY13 being at Rs. 201 Million

Fuel Cost of biomass stood at Rs. 3.49 per unit (Rs. 3.27 per unit in Q2 FY 12) due to less availability of dry fuel. These prices are expected to remain high for some more time. Biomass - Raw material availability is also cyclical and in non seasonal the price of RM will be higher.

PLF of new wind assets was 28% and that of old assets was about 18-19%.

The company looking to refinance for existing debt as applicable for infra through ECB. The company is taking efforts to refinance its current debt with low cost rupee as well as ECB loans with more staggered tenors. This will lead to improved cash flows going forward.

REC registered– Currently 42.5 MW in biomass and 115 MW in Wind is registered for REC. That will go up to 140 MW in case of Wind and 70 MW in biomass by end of this fiscal. Thus REC trading volumes likely to increase for the company in the coming quarters leading to improved margins. Despite low demand the company mange to trade all its REC barring 13000 RECs as end of Sep 30, 2012.

The company originally planned for 300 MW capacity in TN but due to lack of grid capacity shifted 50% of it to other states so the land acquired for it is unused. Unless there is grid availability the expansion will not happen that can be put in block to raise resources. The proceeds from this will might be used to deleverage balance sheet.

Renewable Purchase Obligation has not been implemented by most States resulting in low demand for Renewable Energy Certificates with RECs trading at floor price in recent trades. While petitions seeking to exempt from RPO by some obligated entities has been rejected by Rajasthan High Court, in Maharashtra MERC has given time till Mar.'13 to meet 2011-12 obligations. In Tamil Nadu High Court has given stay on RPO Compliance on a host of petitions by Open Access Customers.