I am sharing some of my observations about financials of Powergrid
If we zoom out and look at the last 10-years, sales have grown at 16.84% and profits have grown at 16.13%. Sales growth has mainly come from transmission charges which has compounded at higher rates (17.16%) whereas consultancy (services) has only grown at 3.8% and telecom at 14.22%.
There has not been a single year where sales or profits have not grown.
| P&L | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY20 | FY21 | FY11-21 Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | 8’612.00 | 10’785.00 | 13’328.00 | 16’146.00 | 18’233.00 | 21’243.00 | 26’581.00 | 30’431.00 | 35’661.00 | 38’671.00 | 40’824.00 | 16.84% |
| Transmission charges | 7’903.00 | 9’544.00 | 12’211.00 | 14’327.00 | 16’999.00 | 19’808.00 | 24’630.00 | 28’844.00 | 33’894.00 | 36’532.00 | 38’499.00 | 17.16% |
| Consultancy - services | 299.00 | 290.00 | 228.00 | 333.00 | 385.00 | 466.00 | 582.00 | 491.00 | 502.00 | 514.00 | 434.00 | 3.80% |
| Telecom | 187.00 | 201.00 | 231.00 | 276.00 | 275.00 | 392.00 | 504.00 | 607.00 | 663.00 | 698.00 | 707.00 | 14.22% |
| Sucharge income | 203.00 | 309.00 | 744.00 | |||||||||
| Incentive income | 217.00 | 427.00 | 481.00 | |||||||||
| PAT | 2’697.00 | 3’255.00 | 4’235.00 | 4’497.00 | 5’046.00 | 5’948.00 | 7’520.00 | 8’198.00 | 10’034.00 | 11’059.00 | 12’036.00 | 16.13% |
Another way to understand growth is to see how transmission assets (length of transmission lines and capacity of substations) have grown. Transmission lines have grown at 7.4% and sub-station capacity has grown at 16.76%. So sales growth of 16.8% has come from growth in assets + realization (or pricing of power transmitted using these assets). Availability has always ben higher than 98.5% leading to incentive income.
| Operational metrics | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY20 | FY21 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Transmission lines (ckm) | 82’355.00 | 93’000.00 | 100’107.00 | 107’574.00 | 116’625.00 | 129’600.00 | 139’709.00 | 148’327.00 | 158’298.00 | 163’222.00 | 168’256.00 | 7.41% |
| Sub-stations (MVA) | 93’050.00 | 125’000.00 | 164’763.00 | 206’338.00 | 234’709.00 | 255’000.00 | 292’543.00 | 332’163.00 | 371’912.00 | 409’898.00 | 438’108.00 | 16.76% |
| IR capacity (MW) | 89’090.00 | 90’090.00 | ||||||||||
| Availability | 99.80% | 99.94% | 99.90% | 99.92% | 99.87% | 99.72% | 99.79% | 99.81% | 99.71% | 99.82% | 99.76% | |
| Reliability (tripping per line) | 1.27 | 0.59 | 0.58 | 0.56 | 0.53 | 0.66 | 0.68 | 0.6 | 0.46 | 0.39 | 0.36 |
How has the quality of balance sheet evolved?
Equity reserves and debt have grown at 12.6% and 13.21%. Cost of borrowing has come down from 10% levels to 6% in FY21. Incrementally, capital has been deployed in lower return TBCB assets which are now being transferred to the Powergrid Invit, hence making Powergrid’s ROE closer to regulated ROEs of 15.5%. ROE over the decade has largely varied between 13-17%. Here are the detailed numbers
| BALANCE SHEET | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY20 | FY21 | FY11-21 Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Receivables | 4’728.00 | 5’041.00 | 3’676.00 | |||||||||
| Equity | 21’351.00 | 23’487.00 | 26’213.00 | 34’413.00 | 38’037.00 | 43’811.00 | 49’807.00 | 54’426.00 | 59’088.00 | 64’695.00 | 69’936.00 | 12.60% |
| Debt | 40’883.00 | 53’402.00 | 66’188.00 | 80’470.00 | 93’845.00 | 106’255.00 | 117’198.00 | 130’503.00 | 142’076.00 | 145’270.00 | 141’410.00 | 13.21% |
| Equity in TBCB | 4’016.00 | 2’736.00 | ||||||||||
| Cost of borrowing | 7.22% | 6.66% | 6.04% | |||||||||
| ROE | 12.63% | 13.86% | 16.15% | 13.07% | 13.09% | 13.58% | 15.10% | 15.06% | 16.98% | 17.09% | 17.21% |
Capex vs capitalization
A key monitorable for Powergrid is how much of capital is being infused into building new assets (capex) vs how much of these assets are being capitalized and generating cashflows. In the earlier part of the decade, Powergrid was putting up new capacity which are now getting commercialized. So the capitalization to capex ratio is improving from 60-80% levels in FY10-15 to 120%+ levels recently. This means higher dividends to shareholders as has been seen in the past few years. CY17/CY18/CY19/CY20 dividends have increased sequentially Rs. 4.35 / 5.25 / 8.33 / 15.
| CAPEX vs Capitalization | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY20 | FY21 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| CAPEX | 12’005.00 | 17’814.00 | 20’037.00 | 23’158.00 | 22’456.00 | 22’584.00 | 24’429.00 | 25’791.00 | 25’807.00 | 15’313.00 | 11’284.00 |
| Capitalization | 7’313.00 | 14’100.00 | 17’213.00 | 15’904.00 | 21’760.00 | 31’788.00 | 31’000.00 | 27’928.00 | 27’325.00 | 18’234.00 | 21’467.00 |
| Capitalization/CAPEX ratio | 60.92% | 79.15% | 85.91% | 68.68% | 96.90% | 140.75% | 126.90% | 108.29% | 105.88% | 119.08% | 190.24% |
Do discoms pay?
This has been a large monitorable for a long time, logic being discoms are under stress and will not pay powergrid which can destroy powergrid’s balance sheet. This has not been true historically with powergrid debt/equity ratio largely being in the 2-2.5x range over the last decade. Here is how billings vs realizations have panned out in the last decade. There are few good years, few bad years and >99.5% of the billed money has been realized by powergrid leading to very low write-offs.
| Billing vs realization | FY11 | FY12 | FY13 | FY14 | FY15 | FY16 | FY17 | FY18 | FY19 | FY20 | FY21 | FY11-21 Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Billing | 7’367.00 | 11’379.00 | 11’839.00 | 14’556.00 | 16’409.00 | 19’178.00 | 25’709.00 | 27’227.00 | 36’881.00 | 34’603.00 | 16.73% | |
| Realization | 10’219.67 | 11’925.00 | 14’393.00 | 15’848.00 | 18’668.00 | 25’548.00 | 26’875.00 | 36’882.00 | 35’910.00 | |||
| %age realization | 89.81% | 100.73% | 98.88% | 96.58% | 97.34% | 99.37% | 98.71% | 100.00% | 103.78% |
Disclosure: Invested