Concall Transcript
Concall Audio
Cross Border Trading
- Nepal started trading on the platform, pro actively working to bring Bangladesh and Bhutan (They can participate only in Spot Market trading only)
- Power exchanges contribute about 6% of the electricity consumed in the country (last year it was 4.4%)
Regulatory Changes
For Participants
- Power Ministry came up with Electricity (Amendment) Bill 2020 proposing amendments to the Electricity Act 2003 with an aim to unleash the distribution reforms such as de-licensing of the distribution business and facilitating competition in power distribution and supply.
- In December, the Ministry of Power also introduced a proposal enabling the distribution utilities to exit the Power Purchase Agreement after completion of the term of the Agreement. This initiative will accelerate utility procurement besides increased sale of power by the generators on the Exchange platform.
- CERC Power Market Regulations 2021 which allows introduction of electricity contracts beyond 11 days, notification of procedure on the Cross Border Electricity Trade, Merit Order Dispatch & Power Purchase Optimizations Regulations by the State Regulators.
Consumers
- Announcement in the Union Budget 2021-22, to introduce revamped reforms-based, result-linked, power distribution sector scheme. This is set to be launched with an outlay of Rs 3 lakh crores over 5 years. Further, to encourage better
efficiency through increased competition within the distribution segment, the government will introduce electricity connections portability while giving consumers the power of choice. (Customer can choose their supplier) - key development from consumers’ perspective was notification of Electricity (Rights of Consumers) Rules, 2020
New Product Launches
- Longer Duration Delivery Contracts upto 365 days in both the electricity and the green markets. ( 25 to 30 billion units trading opportunity )
Integrated Green Day-Ahead Market
Products pending due to various regulatory / legal hurdles which are expected to be resolved
- REC Trade
- ECERT market i.e. energy saving certificates
Growth Levers
- New Product Launches
- Derivatives Trading on MCX
Conducive policy and regulatory regime besides increasing power demand and consumption, adequate availability of domestic coal , and phasing out of old and inefficient plants, will serve as key growth levers.
Technology In-sights
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The FY’22 will see fruits of our past investments and our continuing efforts and investments towards technology, innovation and automation. Some new initiatives that our market participants will experience are provision of data insights, APIs, adoption of advanced MILP algorithm and most importantly our web-based trading portal launched recently on April 28 will make the trading experience seamless and far more intuitive for our participants.
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Automated bidding option for the customers through the application program interface (API) - customer can connect their IT systems directly with the exchange and place the orders
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Option of auto forwarding their un cleared bids of day ahead market into term ahead market
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FY22 - Mobile based platform will be launches (Web based platform is already up and running )
Process Improvements that benefit customers
Automated intimations of clearing banks, which now enables us to provide payment credit three to four hours faster than what we used to do earlier, which means that we are earlier on most of the time to create this to happen in the second half and now we are able to do that credit in the first half itself so that customers want to utilize that money to invest in the funds or use it for the investment and other working capital investments.
Organisational Process Improvements
AP rollout within the organization, which makes lot of internal processes much more effective and there are lot of business process automation that we have done, which makes the whole market operations
processes, through which we provide the registration and scheduling, settlement facilities to
the customers that becomes much more effective
Key Learning’s
How this platform will help the existing players to save the costs related overdrawing above from their agreed capacity
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If you see absolute number of DSM you will not find major change but if we do deep analysis of DSM numbers we have seen that lot of quantum has shifted from DSM to RTM. What happens in DSM is that you are overdrawing from grid and there are various slabs where drawing is more than 12% and a penalty, then there is a 20% slab penalty which is applicable, up to 12% nothing is applicable. We have to purely pay on the basis of DSM prices, but suppose we go beyond 15% then 40% penalty is applicable and after that 100% penalty is applicable. So, what we have seen in most of the cases, there are certain states which were overdrawing their penalty portion and paying high penalty which has now gone down and that quantum has shifted to RTM market. We have seen in many cases where all of a sudden there is a tripping of one big state plant, particularly in Chhattisgarh, two, three times all of a sudden. One plant which was running at 600 megawatt got tripped for some reason and this state was participating in RTM in a very big way, so to make up for the loss
which has happened on account of this plant being off they had no other option than to come to RTM market. Had this market not been there, this would have been done on DSM market and they would have paid very high penalty by overdrawing from there. So as per our analysis lot of shifting has happened. Only thing is absolute number has not gone down to the extent there is no penalty. "
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August is normally a time when wind season is over in India, and wind generation starts to pick in May and it peaks somewhere in June, July, August and after that it repeats again, so last time we could not take advantage of wind season because by the time we launched this contract, there was not enough wind generation, but this time we are rightly placed and initial five, six months this volume should be very high because of solar which is largely available throughout the year, and wind which is available mostly in the H1.
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" For all the renewable plants you will find that all the renewable generators have some sort of arrangement with either the consumers or with the distribution companies where they are supplying under certain terms and conditions, so most of these are under long-term PPA, which is up to 25 years, but there are many small generators where they have small quantum PPAs with the consumers in the C&I segment particularly for one year or so. So today we have participation of over 10 generators at our platform already where they have participated and whatever surplus quantum they had, they have started, and in fact there are two, three opportunities for us - one opportunity is where they have tied up very short-term tie-ups and there are many where they have tie-up of one, two, three years. We are targeting those generators because here the realization is pretty good and they can explore this option as well, that is one. Second is there is another set of generators where as per the PPA terms they have to maintain certain utilization in a year so sometimes what happens is, and now particularly because of newer technologies, because of some good year where their
generation is more and they exceed those previous numbers, what we are trying to tell them is when they are going beyond their PPA commitment they can also come to this platform and start selling their surplus power and realize the market prices that are available. But large part of the transactions which are happening today, here the sellers are distribution companies, there are many distribution companies in the country today those who have surplus, there are states like Karnataka which is surplus in both solar as well as non-solar, AP is surplus in both solar and non-solar, Telangana is surplus with solar, Tamil Nadu is surplus with non-solar, Gujarat is surplus in one of the two, similarly Rajasthan is also surplus, so many distribution companies are there who are surplus and we are trying to get
them onboard so that sell side liquidity can be maintained and on the buyer side there is no dearth of demand because since REC trading is not happening most of these buyers they are willing to buy green energy itself for the purpose of getting their RPO and prices are also quite decent"
How IEX can help Discoms / Generators when there is shortage or more supply
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if you have shortages you come to market and second important thing is when the cheap power is available in the day ahead market many distribution companies today they start to bring down their own generation hence come to this market to optimise on their power cost. Similarly, if the prices are down, if there is ample availability in the market, we see lot of C&I participation increasing and when the prices are down their break even viability
increases and they participate.
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On IGX Stake Sale
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We have almost sold now closer to 45% stake and there is no price discovery, can we expect the
remaining stake to be sold at premium?
We have divested about 46% and we do not intend to sell further 30% in the near future so we still have to take a call when we will be doing it and at what premium that will be done so I cannot say anything on that because the Board will take a call, but overall the investment is not going to happen beyond this anytime soon. So currently what is there maybe next some small investment can happen to one of the strategic investors, which can happen maybe in a month or so, but beyond that we are not looking for any further investment and premium we will seek as we go along.
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Dividend Policy
- Company is sitting on 600 Crores of cash (expecting a lot of other opportunities because of the way the platform market and the way the sector is progressing, we are looking at the upcoming opportunities and we will take a call subsequently)
- Management guided they want to give 50% of net profit as dividend going forward, for this quarter this will be decided in upcoming AGM
Seniors if you can post some detailed explanation of REC issue (Case is resolved and they are waiting for the supreme court order, if someone explain in detail about this REC , opportunity etc… if there is a link to understand in detail please post here - Thanks )