NHPC to Commission Four Units by March 2027

NHPC Limited — Q4 FY’26 Earnings Conference Call (Quarter & Year ended Mar 31, 2026) | May 18, 2026

1. Overall Tone of Management: Optimistic

• Management highlights strong operational momentum and commissioning progress, e.g., “very pleased and proud” and “commissioned four units… remaining four units… till March’27.”
• Financial performance is framed positively: “PAT… 25% higher” and revenue “about 12% higher.”
• Even when discussing headwinds (PAF down, insurance/DTL reversals), responses emphasize recoverability and regulatory pass-through.

2. Key Themes from Management Commentary

• Generation growth driven by commissioning
• FY’26 generation +16% to 29,619 MUs, attributed to Parbati-II, Parbati-III, Karnisar Solar, Subansiri Lower (part), Uri-I, and NHDC.
• PAF softness explained by planned outages/repairs
• FY’26 PAF 74.75% vs 78.87%, mainly due to shutdowns for MIV repair works and gate/restoration activities.
• Large hydro project execution with phased COD
• Subansiri Lower: 4/8 units commissioned; remaining expected one-by-one till Mar’27.
• Dibang: major contracts awarded; “Nal la diversion” achieved; completion Feb’32.
• Teesta-V restoration: expected to resume generation June’26.
• Renewables expansion continues
• CPSU solar: 300 MW commissioned; remaining tranches expected by Jun’26 / Dec’26.
• Additional solar projects expected by Oct’26 / Mar’27 (small scale) and grid-connected projects by Jun’26 / Dec’26.
• PSP pipeline remains in DPR/PFR stage
• “Currently, we have 18 GW PSPs… at DPR/PFR stage” and expectation to start Indira Sagar–Omkareshwar (640 MW) in FY’26.
• Regulatory accounting as a key driver of reported profitability
• Multiple Q&A points revolve around tariff petitions, interim tariff, and conservative revenue booking (80% AFC).

3. Q&A Analysis

Theme A: Adjusted vs Reported PAT; one-off tax/regulatory accounting

• Core questions
• How to compute Adjusted PAT for the quarter; what is the adjustment magnitude?
• Management response
• Adjusted PAT differs due to DTL reversal from opting for lower tax regime (Sec. 115BAA): impact “around Rs. 1,156 Crore… net impact… around Rs. 900 Crore.”
• “If you reduce Rs. 900 Crore from the Reported PAT, you will arrive at Adjusted PAT.”
• Notable signals
• Clear quantification; no evasion. Also confirmed as applicable standalone and consolidated.

Theme B: Project-level profitability (Parbati-II, Subansiri Lower) and reasons for quarter vs full-year swings

• Core questions
• Why Parbati-II shows profit in Q4 but loss for FY; what drives improvement?
• Status of petitions; billing % and under-recovery.
• Management response
• Parbati-II Q4 profit attributed to booking shortfall recovery: “shortfall of energy… Rs. 200 Crore… booked under revenue.”
• Billing: Parbati-II already billing 75% based on interim tariff; Subansiri Lower awaiting interim tariff.
• Under-recovery quantified:
  • Parbati-II: booked revenue at 80% of AFC; gross-up implies ~Rs. 300 Crore under-recovery.
  • Subansiri Lower: ~Rs. 150 Crore under-recovery.
  • Total: ~Rs. 450 Crore not booked vs tariff petition filed.
• Evasive/partial elements
• Some answers are accounting-centric; less discussion on operational drivers beyond tariff/energy shortfall.
• Strong/transparent elements
• Quantification of under-recovery and explicit billing policy (“80% AFC booked conservatively”).

Theme C: Teesta-V restart and impact on top-line

• Core questions
• When Teesta-V will restart; impact on FY’26 and under-recovery.
• Management response
• “June onwards… power station will start generation.”
• “there is no revenue, only expenditure” in Teesta-V; under-recovery framed via AFC: “total AFC… around Rs. 500 Crore… ~Rs. 400 Crore excluding tax.”
• Notable signals
• Confident restart timing (“June onwards”) but still conditional on restoration completion.

Theme D: Tariff timeline for revenue recognition at 100%

• Core questions
• CERC tariff hearing/order timelines for Parbati-II and Subansiri; when 100% revenue recognition can occur.
• Management response
• Parbati-II: hearing “25th of this month”; expecting order by “30th of June”; if order comes within a quarter, differential revenue + interest could be recognized in that quarter.
• Subansiri Lower: interim tariff expected first; then final order “within… not more than six months” (qualitative expectation).
• Credibility note
• They provide a specific Parbati-II hearing date and a June order expectation—more concrete than prior quarters’ generalities.

Theme E: PSP/renewables pipeline; monsoon/El Niño generation risk

• Core questions
• When PSP construction starts; any slowdown in RE tendering/PPA signing; El Niño impact on generation; normative PAF.
• Management response
• PSP: “not started any construction… very early”; only expectation to start Omkareshwar PSP construction in current fiscal.
• REIA/PPA: no recent tendering; previously awarded ~23 GW; hoping ~13 GW for PPA/PSA with ~7 GW signed; expects more clarity “in months to come.”
• El Niño/monsoon: “No” slowdown expected; snow-fed stations reduce monsoon dependence.
• Normative PAF: consolidated 82%, standalone 80%; actual lower due to Teesta-V inclusion (75% with Teesta-V; ~80% excluding it).
• Notable signals
• RE narrative is more cautious than earlier optimism: emphasizes PPA bottlenecks (connectivity timing, discom preference for storage/RTC).

Theme F: Cost escalation pass-through in regulated regime

• Core questions
• Will construction cost increases be passed through or hit margins?
• Management response
• “cost plus… everything is allowed by CERC”; beyond-control increases are passed on; examples include geological surprises/design changes.
• Strong signal
• Direct regulatory assurance reduces perceived margin risk from cost overruns (at least for allowed costs).

4. Guidance / Outlook

Explicit guidance (quantitative / time-bound)

• Subansiri Lower commissioning
• “four units… commissioned… remaining four units… till March’27.”
• Teesta-V restoration
• “start generation in June’26.”
• Solar (CPSU Tranche-II)
• 100 MW Andhra Pradesh: expected by June’26
• 600 MW Gujarat: expected by December’26
• Solar other projects
• 40 MW Ganjam, Odisha: expected by October’26
• 50 MW Floating Solar, Kerala: expected by March’27
• Grid-connected PV in Gujarat (RE Park Khavda): expected by June’26 and December’26 (stage-wise)
• PSP
• Expect to start construction of Indira Sagar–Omkareshwar (640 MW) “in the current financial year.”
• Parbati-II tariff
• Hearing: 25 May
• Expect order: “by 30th of June”
• Dibang / Teesta-V / other hydro schedules (from opening remarks)
• Dibang completion: Feb’32
• Teesta-VI commissioning: Sep’29
• Rangit-IV commissioning: Nov’26
• Ratle commissioning: Nov’28
• Pakal Dul commissioning: 4Q FY’27
• Kiru commissioning: 4Q FY’27
• Kwar commissioning: Mar’28

Implicit signals (qualitative)

• Revenue recognition remains constrained by tariff approvals
• Continued conservative booking: “booking… at 80% of the AFC” until interim/final tariff orders.
• Operational risk exists but is framed as manageable
• Cost escalation “inherent” in hydro, but “allowed by CERC.”
• RE growth may be bottlenecked by PPA/PSA signing mechanics
• Connectivity availability (2029–30) and discom preference for storage/RTC are cited as friction points.

5. Standout Statements (direct / highly revealing)

• Subansiri execution confidence
• “commissioned four units… remaining four units are expected to be commissioned one-by-one till March’27.”
• Tariff-driven accounting policy
• “we are booking… at the rate of 80% of the tariff filed… conservative approach.”
• Quantified under-recovery
• “Parbati-II and Subansiri Lower… Rs. 450 Crore of revenue has not been booked…”
• Teesta-V restart
• “June onwards… we are very much sure… operation to get resumed.”
• Regulatory pass-through assurance
• “cost plus… everything is allowed by CERC… there is no such concern.”
• RE PPA bottleneck explanation
• Discoms hesitant due to “connectivity… coming in 2029-30” and desire for “solar with the battery… 24-hour… RTC.”

6. Red Flags / Positive Signals

Red flags
– Profitability is heavily shaped by regulatory/timing adjustments
– Multiple Q&A admissions: under-recovery due to conservative revenue booking; DTL reversal impacts Adjusted PAT.
– Teesta-V remains a swing factor
– “no revenue, only expenditure” in FY’26; restart timing is crucial for future earnings.
– RE growth depends on PPA/PSA signing and grid readiness
– Connectivity timing mismatch could delay revenue realization.

Positive signals
– Commissioning momentum
– Multiple units commissioned/near-COD across hydro and solar.
– Clear, quantified tariff/accounting mechanics
– Under-recovery and billing percentages are explicitly stated.
– Regulatory confidence on cost pass-through
– Strong stance that CERC allows beyond-control cost increases.

7. Historical Comparison & Consistency Analysis (vs prior calls)

a. Change in Tone Over Time

• Current (Q4 FY’26): More Optimistic
• Strong commissioning language and “very pleased and proud.”
• More concrete tariff timeline (Parbati-II hearing date; June order expectation).
• Prior (Q3 FY’26, Feb 6 2026): More cautious/operationally focused
• Emphasis on recovery of PAF and project progress; tariff recognition discussed but less “closure” tone.
• Shift drivers
• By Q4 FY’26, more assets are already commissioned (Subansiri units, solar), reducing execution uncertainty.

b. Tracking Past Commitments vs Outcomes

• Subansiri Lower commissioning (from Q3 FY’26)
• Past: “commissioned and declared COD of two units… third… within this week… fourth… by end of March’26.”
• Current: “commissioned four units… remaining four… till March’27.”
• ✅ Delivered (at least for 4 units by Mar’26; remaining extended to Mar’27).
• Teesta-V restoration / generation restart
• Past (Q3 FY’26): Teesta-V described as progressing; geological issue in HRT; targeted commissioning 2029 (project-level schedule).
• Current: “start generation in June’26” (near-term restart).
• ⏳ Partially Delivered / Narrative shift (from long-term commissioning framing to near-term generation resumption; suggests earlier restoration progress but still not “full” contribution).
• REIA/PPA signing optimism (from Q3 FY’26)
• Past: REIA discussion acknowledged demand drying down but still hopeful for PPA signing in “next 2–3 months” (Feb 2026 call).
• Current: still cautious—no recent tendering; only ~7 GW signed out of ~13 GW hoped; “clarity in months.”
• ⏳ Delayed / Not fully resolved (less optimistic than earlier hope).

c. Narrative Shifts

• From “project pipeline” to “tariff/accounting mechanics”
• Earlier calls focused heavily on construction milestones and CAPEX.
• Current call Q&A spends significant time on under-recovery, billing %, interim tariff timing, and DTL/DTAs.
• Teesta-V narrative tightened
• Earlier: restoration/project progress.
• Now: explicit earnings impact (“no revenue, only expenditure”) and restart month.

d. Consistency & Credibility Signals

• Medium credibility
• Strength: consistent explanation of conservative revenue booking (80% AFC) and regulatory pass-through.
• Weakness: reliance on timing of CERC orders and interim tariff hearings; outcomes depend on regulator schedules (Parbati-II order “by 30th June” is a near-term bet).
• No major contradictions, but recurring “timing difference” framing can mask earnings volatility.

e. Evolution of Key Themes

• Demand/Generation
• Stable: snow-fed assets reduce monsoon risk; Teesta-V remains the exception.
• Margins/Profitability
• Volatility explained via regulatory/tax adjustments and under-recovery rather than operational cost control.
• Expansion
• Improving execution: more commissioning achieved vs earlier pipeline emphasis.
• Regulatory/tariff
• Increasing prominence: more questions on when 100% revenue recognition happens.

f. Additional Insights (cross-period intelligence)

• Earnings quality is improving operationally but not “cleanly”
• Reported PAT is up, but a meaningful portion is tied to DTL reversal and timing of tariff/energy shortfall bookings.
• RE growth is structurally constrained
• The connectivity year mismatch (2029–30) and discom preference for storage/RTC suggests NHPC’s RE monetization may lag capacity additions unless grid/storage requirements align.