Bhel

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CONFERENCE CALL - from Capital Markets

BTG market for FY17 to be flat at 12GW

Bharat Heavy Electricals (BHEL) held a conference call on May 27, 2016 to discuss the performance of the company for the quarter and fiscal ended March 2016. In the conference call the company was represented by its Atul Sobti, CMD, Amitabh Mathur, Director (Industrial Systems & Products) and Chokalingam, Director Finance.

Key takeaways of the conference call

  • Order backlog as end of March 31, 2016 was Rs 110730 crore. Of the total order book about 87% is power sector orders, 6% industrial orders and 7% is exports. Of the total order book 33% is EPC orders and 67% is BTG.

  • The company during FY16 has excluded orders (worth Rs 7429 crore) which are not likely to commence from the order backlog. The company has excluded order worth Rs 3783 crore in Q4FY16. The order excluded in Q4FY16 was the DB Power’s 2X660 MW Singrauli Power Project. The orders excluded from order book during Q3FY16 were largely international orders i.e. the Rs 1800 crore worth Jindal order in Africa, the Iraq order, the Senegal order.

  • Order intake during Q4FY16 was Rs 15652 crore, a jump of 55% from Rs 10095 crore in the corresponding previous period. Order intake in FY16 was up by 42% to Rs 43727 crore from about Rs 30814 crore in the corresponding previous period.

  • Expect same level of order booking in current fiscal. The company is currently L1 or favorably placed for orders with a generation capacity of 12000 MW and of which about 7000 MW is expected to be placed during FY17.

  • The 525 MW Tuticorin project of SPIC Electric Power Corporation (SEPC), the North Chennai TPS extension project, the UPPUR TPS project all in Tamil Nadu and the NTPC’s Karimnagar project in Telengana have all moved to the order book during the FY16.

  • Order where the company is either L1 or favorably placed are the 4X660 MW Barethi STP of NTPC; 2X660 MW Udangudi TPS of TANGEDCO in Tamilnadu, the 4x1000 MW Pudimadaka Project of NTPC; the 1X660 MW Bhusawal TPS of MAHAGENCO and the 1000 MW Pakhadul Hydroelectric Project from Chenab Valley Power Projects in J&K. The company expects the Palamuru – Ranga Reddy lift irrigation project in the state of Telengana is expected to get finalized soon.

  • In case of Barethi the environmental clearance for mines was the issue and now with coal linkage approved for this project NTPC is applying for fresh environmental clearance and the project awarding is expected soon. Udangudi project contract awarding got delayed due to state elections in TN and with election over by now the company is in discussion with TANGEDCO and the order finalization /awarding will happen soon. The Pudimadaka project for which the bid opened in August 2015 the company is in discussion with NTPC and expects things are expected to move shortly. Order finalization of the Palamurur lift irrigation project is expected soon. The bids for Panki opened in April 2016 and things are expected to progress.

  • Utility grade BTG market size in the country was 8 GW in FY15 and 12 GW of FY16. The market size in FY17 is expected to be at same level of last fiscal. The market size of 12 GW expected for FY17 excludes UMPP orders and that will be inadditon to the 12 GW if finalized.

  • About 5000 MW (unexecuted portion is Rs 2800 crore) has started moving from non-moving/stalled in last fiscal. Out of current order book of 110730 crore, orders worth Rs 50000 crore are stressed project. Major junk of this stressed order book of Rs 50000 of the company spread over three projects i.e. Ennore (Rs 9000 crore), Yadagiri (Rs 17950 crore) and Bhadradri TPS at Manuguru (Rs 5000 crore). If these 3 projects start moving the stressed project portion of the current order book will be minimal.

  • Ennore Project – The Company has started work on getting the order but was forced to stop due to case in the court. The hearing at Supreme Court is over and the company has already submitted its final repl. The judgment is expected immediately after the vacation.

  • As far as the 5X800 MW Yadagiri project is concerned, the company even though has not made any financial commitment has commenced engineering design work once the term of reference is obtained. Public hearing is scheduled on May 31, 2016 and the environmental clearance is expected after wards.

  • The 4X270 MW Bhadradri/Manguru TPS is currently stalled for want of environment clearance. The TSGENCO is closely following the Ministry of Environment and that is expected to start moving once the clearance in place. However the 800 mw TSGENCO project is moving on fine.

  • Wage revision is due only Jan 1, 2017. So the staff cost is expected to remain flat for current fiscal.

  • The 525 MW Tuticorin order of SEPC is only for BTG supply.

  • Now things are changing and many projects booked are not with JDU clause. About 7 unit orders booked in FY16 are without JDU.

  • Prices in recent prices were driven down due to competitive environment as well as efforts of the client for design optimization. Optimization in design wanted by client driving cost prices by and large settled.

  • Receivables as end of March 31, 2016 was Rs 35607 crore and advances was Rs 10000 crore. Receivables net of advances from stressed projects is Rs 2139 crore.

  • At Bangalore the company is embarked on brown field expansion of PV cell and solar module mfg capacity from current 26 MW to 226 MW. The capex cost will be less than Rs 300 crore.

  • Neyveli order two packages – TG amd SG order. The company is not well placed.

  • Exchange variation gain is Rs 123 crore for Q4FY16. Rs 356 crore is exchange gain for FY16. This is accounted part of other income.

  • Hydro company SJVNL is thinking of a thermal project in Bihar. Atleast 2-3 UMPP projects are expected to be finalized within this fiscal. Cheyyur clearance is already there.

  • Global installation of BHEL manufactured sets now stands at 170 GW

  • Reduction in level of operation and provision is the reason for yoy decline in PBT.

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