AN INVESTOR PRESENTATION February 2016 · Management (IIM, Ahmedabad); working experience with...

1TECHNO ELECTRIC & ENGINEERING COMPANY LIMITED

AN INVESTOR PRESENTATIONFebruary 2016


TEECL Techno Electric & Engineering Company LimitedIREDA India Renewable Energy Development AgencyPGCIL Power Grid Corporation of India LimitedBHEL Bharat Heavy Electricals LimitedGBI Generation Based IncentiveREC Renewable Energy CertificateCDM Clean Development Mechanism CER Certified Emission ReductionBOP Balance of PlantBOOT Build Own Operate TransferBOOM Build Own Operate MaintainEPC Engineering, Procurement, ConstructionT&D Transmission & Distribution

ABBREVIATIONS USED

TECHNO ELECTRIC & ENGINEERING COMPANY LIMITED 3

SNAPSHOTTEECL is headquartered in Kolkata (India)

Completed and delivered 290+ projects in existence (up to 31 March 2015)

Employs 400+ professionals (engineering, commercial, graduates and post‐graduates)

Core engineering team possesses average experience of 25+ years

Listed and traded on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE)

Enjoyed a market capitalization of INR 27,960 mn (as on 13 Feb, 2016)


TECHNO’S OPERATING STRUCTURE

EPC

Greenpower

Linkages

117.90

Simran WindProjects Limited

100%


OVERVIEWTEECL, one of the most attractive proxies of India’s power sector One of the largest in the power‐infrastructure space in India

Engaged in three business types – EPC/Asset Ownership/Operations and Maintenance

Covers three power sector segments ‐ generation, transmission and distribution

Lifecycle engagement ‐ design to commissioning to handover to maintenance

CPSUs, State‐run utilities and private sector customers (captive power plant and power distribution system for power intensive industries)

Addresses complete solutions for conventional and renewable sectors

Once a customer, always a customer

1980Launched EPC

services

2009Entered renewableenergy generation

2010Entered transmission

segment


RICH PROMOTER EXPERIENCETEECL led by Mr P. P. Gupta, Key promoter & Managing Director

Honours Graduate in Industrial Engineering; post‐graduate in Management (IIM, Ahmedabad); working experience with BHEL; merchant banker with National Grindlays Bank

Partnered in Techno Electric and Engineering Company Ltd in 1980

Grew TEECL into prominent Indian EPC company engaged in power generation and transmission PPP linkages

Engaged with industry associations (IEEMA, Confederation of Indian Industry, IIPW and IIW; Vice President of Indian Electricals and Electronics Manufacturers Association)


ONE‐STOP SOLUTIONS PROVIDERBOOT and BOOM projects (providing annuity income)

EPC (T&D + rural electrification + captive waste heat recovery + solutions for power‐intensive industries (80% of revenues, 31% of EBIDTA, FY15)

Green power generation (16% of revenues, 54% of EBIDTA, FY15)

PPP transmission: capital‐intensive, modest ROE, stable multi‐year income/cash flow, in‐house EPC business, annuity O&M revenuesEPC: Less capital‐intensive, high risk‐reward ratioWind energy: Capital‐intensive, modest IRR, multi‐year stable income/cash flows


GROWING RESPECT AND RECOGNITIONMr. P. P. Gupta receiving the best performance award, 2013

National award for meritorious performance, 2014

National award for meritorious performancein the power sector from the

Ministry of Power, 2014

Best performance award 2015, 2014 & 2013 from Power Grid Corporation

‘Best Under a Billion’ (according to Forbes) –Top 200 small and mid‐cap companies

Named ‘Best Vendor in Eastern India’ by Bharat Heavy Electricals Limited in 2010‐11

Meritorious Performance in Power Sector in 2011‐12 by Ministry of Power

Certificate of appreciation from North Bihar Power Distribution Co. Ltd.

TEECL BUSINESSES


Engineering, Procurement and Construction Services

Transmission projects under PPP model (BOOT and BOOM)

Renewable Energy Generation


OPTIMISTIC OUTLOOK: POWER SECTORTwelfth Plan capacity addition: 100,000 MW (Pvt. sector: 57%, CPSUs: 29%, SEBs: 14%)

Generation capacity > Transmission capacity

Transmission spending to rise: 30p/rupee invested in generation to 50p/rupee

USD 75 bn transmission investment (Twelfth and Thirteenth Plans) inadequate

1.93 bn units supply to SEBs lost in transmission bottleneck

India’s generation capacity to increase to 388 GW by 2022; corresponding transmission investments warranted

Investment in transmission: (projected) USD 35 bn in 12th Five Year Plan

12th Five Year Plan•USD 19 bn by Power Grid; USD 16 bn by private sector•TEECL aiming to capture around 5% of USD 35 bnopportunity•SEB spending INR 600 bn/year


National Tariff Policy 2006; tariff‐based competitive bidding for transmission projects

Transmission projects through increased private sector investments. Estimated investment of INR 1000 bn in the Transmission projects

To increase cost‐effectiveness, improve efficiency and reduce government burden

Techno attractively poised to bid

~50% generation capacity growth in five years; transmission capacity growth only ~30% out of which 35% generation capacity is in private sector where as only 2% is in private sector in the transmission sector

(Contd.)

INR 600 bnPower Grid spending

in 10th Five Year Plan


in 12th Five Year


in 11th Five Year


OUR BOOT AND BOOM BUSINESS

Leveraging EPC knowledge as transmission complements EPC

Long‐term annuity incomes; annuity model enhances valuation and profitable encashment opportunity

Generates operations & maintenance revenues

Asset ownership; enhances scale and stability

Growing government preference for private sector role

Reduces requirement to bid aggressively and therefore decrease participation in unhealthy competition

Why transmission?

1


Techno’s transmission competitiveness

Extension of EPC capability ‐ leveraged knowledge; extended from one segment to another Competitiveness has translated into a higher strike rate in bagging projectsActive solutions orientation • 400 kV to 765 kV substations• Extensive vendor ecosystem ‐ timely project delivery/excellent negotiation ability/quality control400 professionals with diverse skills (EPC and support) Low gearing; high credit rating; low‐cost debtDelivered most EPC and BOOT/BOOM projects on or before scheduleIncreased global interest in our business model


PROJECT ONE: JHAJJAR KT – HARYANA Pioneering BOOT transmission model at state level.TEECL first successful network bidderImplementing agency Jhajjar KT Transco Pvt. Ltd. 51:49 JV of Kalpataru Power Transmission Ltd. and Techno ElectricJV commissioned 400 kV project (March 2012)Project commissioned in record 15 monthsFirst transmission project to receive viability gap funding support from Central GovernmentNational award for meritorious performance from Ministry of Power, 2014

400 kV transmission system comprises Double Circuit Quad Moose Line

Extending from Jharli to Kabulpur, Rohtak (35 KM)

Extending from Kabulpur to Dipalpur, Sonepat (64 KM)

Two substations of 400/220 kV of 24 bays each at Rohtak and Sonepat

Transmission network designed to evacuate 2,400 MW

Will initially transmit 1,320 MW (2X660 MW) from Jhajjar Power Plant


JHAJJAR KT PROJECT DETAILS Using products/sub‐systems from globally reputed manufacturersINR 4440 mn project (debt and equity)INR 2760 mn debt and combined equity (INR 760 mn) from JV partnersINR 920 mn grant by Central GovernmentINR 450 mn income/month without considering inflationCurrent (post‐inflation) revenue of INR 580 mn per annumImplemented greenhouse conceptDBFOT arrangement for 25 years (extendable by 10 years)

Terminal value 60 months of revenue (after 25 years of concession period)


PROJECT TWO: PATRAN, PUNJAB400 kV transmission system

Comprises LILO of both circuits

1,000 MVA evacuation capacity

INR 2000 mn projectBuild, Own, Operate and Maintain (BOOM) transmission networkImplementing company acquired by TEECL from PFC Consulting Designing, constructing, erecting, completing and commissioning responsibilityINR 1750 mn to TEECL EPC arm and expected revenue to O&M agency (TEECL) ofINR 20 mn annuallyProjected INR 10,000 mn income over the complete concession period of 35 yearsFinancial closure achieved at competitive rates; commissioning by May 2016Derived rich O&M experience from Jhajjar KT Project

Patiala‐Kaithal 400 kV double circuit triple snow bird line at Patran (5 kilometres)

400/220kV substation with 14 bays in Patran


Projected portfolio of3‐4 projects, 2017

Execute 1‐2 project

annually

From 20% of EPC orders from PPP projects in 2012 to 10% in 2015 to 25‐30% (est.) by 2017

Generate increasing insourcing of EPC contracts

Increased competitiveness is translating into project selectivity

(high IRR)

Increasing expertise and focus in setting up substations

Diversified incomes; annuity and upfront fees

Building efficient evacuation facilities for the nation

ROAD FORWARD


Transmission and distribution

Power generation Industrial sector (including

power intensive industries, aluminium smelter, refineries)

Turnkey solutions to captive power plants

Balance of Plant

EHV substations

•EHV substations up to 765 kV

•STATCOM installation upto250 MVaR

Distribution

•Distribution systems management (APDRP)

•Rajiv Gandhi GraminVidyutikaran Yojna(RGGVY)

• Power distribution systems to power intensive industries

• Offsite piping systems

• Naphtha and diesel system for turbine based power plant

• Oil handling plant for power station and process industries

• Water and allied systems

• Fire protection systems

• Plant electrical and illumination systems

OUR ENGINEERING, PROCUREMENT AND CONSTRUCTION (EPC) SERVICES BUSINESS2


Techno’s EPC competitiveness

Promoter‐driven for 35 years

Three‐decade experience (including BOP packages)

Respected for project management, timeliness, completion and cost‐effectiveness

Management of customer expectations and contractual obligations

Respected for graduating to next technology and embracing challenges

Robust vendor eco‐system

Pioneered power distribution solutions for aluminium smelters (360 kA busbar systems, 2013)

Quicker project completion than industry standard

60% share of 765 kV EhV substation segment

Efficient working capital management


Techno’s operating philosophy

Focus on PAT/retained cash (not size of order book)

Cash rich; high liquidity; low gearing; income mix (lumpy and annuity)

Project execution synced with project cash cycle; zero penalty record; realized retention money within 6 months of project completion

Marginal working capital outlay

De‐risked: bid with own cash; work for CPSUs or bilaterally/multi‐laterally funded SEB projects

Conservative accounting policy

82‐day receivables, quicker than industry standard

Quality assets for national benefit

No‐penalty record


Core business

84% of overall FY15

revenues

80.4% ROCE businessas on 31 March,

2015

Order book

INR 19050 mn

(as on 31 Dec, 2015)

Revenue visibility of

24months

Annual cash surplus of more than

INR 700 mnfrom EPC

Currently receivables

82 daysof turnover;

industry’s lowest

Selective project bidding

High growthfor three years

Clients Power Grid, BHEL, Indian Oil, NTPC, Reliance, Vedanta, NTPC, Hindalco, GE among others

Well‐planned projects executed in sync with cash flow and contractual obligations

Conservative accounting treatment

Timely projects closure and retention money inflow


TECHNO’S EPC ORDER BOOKSegment ‐ wise order book as 31 Dec, 2015

As on 31 Mar, 2013

INR

10000million

As on 31 Mar, 2014

INR

12000million

INR

19050million

As on 31 Dec, 2015

GenerationINR 2,435 million

TransmissionINR 13,790 million

DistributionINR 2,825 million


ORDER BOOK – 31 st December, 2015

Name of the client Amount %

Power Grid Corporation Ltd. 8,900 46.72

North Bihar Power Distribution Co Ltd 2,825 14.83

NTPC Ltd. 2,130 11.18

Rajasthan Rajya Vidyut Prasaran Nigam Ltd. 1,545 8.11

Bihar State Electricity Board 1,510 7.93

Patran Transmission Co Ltd 780 4.09

APTRANSCO 505 2.65

Meja Urja Nigam Ltd 320 1.68

Others 535 2.81Total 19050 100.00

(INR in mn.)

TECHNO ELECTRIC & ENGINEERING COMPANY LIMITED 24TECHNO ELECTRIC & ENGINEERING COMPANY LIMITED 24

TECHNO’S IMPRESSIVE CLIENTELEHelped build 50% of India’s National power gridHistorically engaged with more than 50% NTPC projects (various capacities)Multi‐year engagements with Power Grid Corporation, BHEL, Indian Oil, NTPC and HindalcoAssociated with power distribution solutions for major oil refineries (Bina, Paradip, Bhatinda, Panipat among others) and aluminium smelters (Hindalco, Nalco among others)


EPC FINANCIALS 3MDec15 3MDec14 Change

(%age)9MDec15 9MDec14 Change

(%age)

Revenue 3,128.1 1,582.2 97.7 6,924.3 4,514.3 53.4

Operating Exp 2,785.7 1,380.9 6,024.8 3,919.4

EBIDTA 342.3 201.4 67.6 899.5 594.3 51.2

EBIDTA (%) 10.9 12.7 13.0 13.2

ROCE –Annualised (%)

101.3 59.0 88.5 63.1

(INR in mn.)


EPC FINANCIALS2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

Revenue 6,488.20 7,040.50 5,158.90 5,705.10 6,680.90EBIDTA 1,006.40 1,081.20 572.90 601.60 938.30PAT 736.20 828.50 392.10 500.50 662.60Cash surplus 744.60 836.70 400.20 509.60 675.40ROCE (%) 89.70 90.40 52.50 62.40 80.50

(INR in mn.)

Increasing order book 25‐30% in the

next 2‐3 years (external and

captive)

Growing EPC business 25‐30% annually till 2017

• Leveraging transmission expertise

• Focusing on high‐value, high IRR projects

• Building India’s national grid; reducing power deficit


EPC – ROAD FORWARDGREEN ENERGY CORRIDOR

Government plans to roll out green energy corridor’ project at an estimatedcost of INR 430 bn to facilitate the flow of renewable energy into thenational grid.

Techno was amongst the first few companies to get order worth INR 3700mn for substation package at Chittorgarh, Tuticorin & Ajmer associated withGreen Energy Corridors : Inter‐State Transmission Scheme (ISTS) – Part A.

Germany has committed developmental and technical assistance of €1billion for the project through their financial body, KFW.

Techno is hopeful of getting more orders under Green Energy Corridorproject


EPC – EMERGING OPPORTUNITIES

STATCOM INSTALLATION

Government plans to install 50 nos of STATCOM having a total investment ofINR 80 bn over a period of 3‐5 years.

Techno won the first STATCOM installation at 400 kV substation at Solapur,Satna & Aurangabad in joint biding with Chinese Company RONGXIN.Techno’s scope of work is worth INR 2680 mn.

Techno being the pioneer in installation of STATCOM will have first moveradvantage.

SUB TRANSMISSION SYSTEM IN NORTH EASTERN STATES

PGCIL has been given mandate to build sub transmission systems of 220/132kV in 6 North East States at an estimated investment of INR 150 bn over aperiod of 3 years.


OUTLOOKWind power 8.5% of India’s power capacity

6000‐8000 MW to be commissioned annually

21,136.40 MW installed capacity

Targeted 100 GW capacity (2022, National Wind Energy Mission)

RENEWABLE ENERGY GENERATION3

GOVERNMENT ROLEIndia first to commission a Ministry of Non‐Conventional Energy Resources (early 1980s)

Wind energy exceeded 10th Plan (2002‐2007) and 11th Plan (2007‐2012) targets

MNRE reference capacity addition target 15,000 MW, realistic target 20,000 MW and aspirational target 25,000 MW for the 12th Five Year Plan


GOVERNMENT CATALYSTSRENEWABLE ENERGY CERTIFICATES1000 units of green electricity sold generates one REC which can be sold in the Power Exchange with a floor price of INR 1,500 and forbearance price of INR 3,300

TECHNO SOLD 77,000 RECs IN 2014‐15 AT AN AVERAGE REALIZATION OF Rs 1,500 EACH

TECHNO HAD A TOTAL OF INR 85 mn INFY 2014‐15 ATTRIBUTABLE TO GBI

GENERATION‐BASED INCENTIVES INR 0.5/unit produced available to wind power producers over base tariff upto a maximum of INR 6.2 mn/MW upto a period 10 years from commercial operations

CLEAN DEVELOPMENT MECHANISM INCENTIVESProjects in developing countries can earn Certified Emission Reduction credits (CERs) which can be sold to developed countries to meet their emission reduction targets

TECHNO IS ENTITLED TO 325,000 CERs ANNUALLY


CURRENT ASSET OVERVIEW

Sold 44.45 MW of wind power assets at an effective valuation of INR 2150 mn during the current financial year.

Exited the assets at the same price at which investment was made.

Intend to divest balance portfolio of 162.9 MW wind assets to improve strength for bidding more PPP projects in transmission sector, improve ROCE & focus on EPC, that is our core‐competency.


CURRENT ASSET OVERVIEWTechno Electric Simran Wind Project Limited

Capacity 45 MW 6 MW 111.90 MW

Date of Acquisition/Commissioning

During 2009‐10 During 2009‐10 March 31, 2011 ‐ February 24, 2012

Location Karnataka (12 MW) and Tamil Nadu (33 MW)

Karnataka Tamil Nadu (111.90 MW)

No. of turbines 30 turbines at 3 wind farms 4 turbines at 2 wind farms 67 turbines at 2 wind farms

Capacity 30 turbines * 1.5 MW each 4 turbines * 1.5 MW each 48 turbines * 1.5 MW each19 turbines * 2.1 MW each

PLF 18% ‐ 26% 19% ‐ 26% 19% ‐ 26%

Tariff INR 3.40 (Karnataka) and INR 3.39 (Tamil Nadu)

Preferential tariff –INR 3.40

APPC tariff – INR 2.63 (TN) for 111.90 MW


Techno Electric Simran Wind Project Limited

Capacity 45 MW 6 MW 111.90 MW

Project cost – – INR 6650 mn*

O&M Free for first 5 years; 5% escalation from INR 1 mn/MW

Free for first 5 years; 5% escalation from INR 1 mn/MW

Free for first 4.5 years; 5% escalation from INR 1 mn/MW

CDM benefit 33 MW registered with UNFCC

‐ 111.9 MW registered with UNFCC

GBI benefit ‐ ‐ 111.9 MW registered with IREDA

*IFC invested 3.38% in Simran Wind Project Ltd. for $5 million at INR 40/share in lieu of 5,625,000 equity shares; Project debt of $85 mn (INR 4165 mn) raised at average 6.5% from IFC, DBS and Standard Chartered Bank. One of the longest (10.5 years) non‐recourse project financing undertaken for a wind energy project in India (without credit guarantees or credit insurance)

(Contd.)


GREEN ENERGY FINANCIALS3MDec15 3MDec14 Change

(%age)9MDec15 9MDec14 Change

(%age)

Revenue 38.7 219.9 (82.4) 788.0 1,218.1 (35.3)

Operating Exp 11.4 39.3 51.2 125.2

EBIDTA 27.3 180.6 (84.9) 736.8 1092.9 (32.6)

EBIDTA (%) 70.6 82.1 93.5 89.7

ROCE –Annualised (%)

6.44 12.15 5.9 6.8

(INR in mn.)

Financials of current year are not comparable with previous year as 44.45 MW of Wind Mills have been sold during the current financial year.


GREEN ENERGY FINANCIALS2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

Revenue 677.90 1,158.20 1,842.40 1,379.80 1258.10

EBIDTA 646.00 1,115.20 1,773.40 1,323.60 1143.20

PAT 106.70 194.50 635.20 338.00 283.30

Cash generated 406.00 746.80 1,282.10 995.40 873.70

ROCE (%) 6.30 7.10 10.00 6.50 7.00

Units generated (in mn)

202.53 291.28 471.89 344.60 300.44

Realisation/unit (INR)

3.35 3.98 3.90 4.00 4.19

(INR in mn.)


Consolidated revenue, EBIDTA, Profit after Tax and Earning Per Share

0.00

1,000.00

2,000.00

3,000.00

2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

1,937.202,421.00 2,552.10

2,045.20 2282.5

EBIDTA (Rs/mln)

0.00

500.00

1,000.00

1,500.00

2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

1,127.80 1,216.10 1,224.50

886.6 1062.7

Profit after Tax (Rs/mln)

0

10

20

30

2010‐11 2011‐12 2012‐13 2013‐142014‐15

19.8 21.2 21.1

15.3 18.4

Earning per Share (Rs)

6,000.006,500.007,000.007,500.008,000.008,500.00

2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

7,166.10

8,198.70

7,001.30 7,084.90

7938.9

Revenues (Rs/mln)


Ratios**

* Company dividend payout policy‐at least 20% of PAT

** Ratios are calculated based on consolidated figures

0

10

20 15.7 14.8 17.512.5 13.4

PAT Margin (%)

0

10

2019.3 17.7 19.6

13 15.7

PBT Margin (%)

0

20

40 27 29.5 36.528.9 28.8

EBIDTA margin (with otherIncome)(%)

0

100

20098.5 117.3 134.9 146.6 160.2

Book Value per Share (Rs)

0

20

4010.1 14.2 14.2 19.6 21.7

Dividend Payout Ratio *


Consolidated Income Statement

2010‐11 2011‐12 2012‐13 2013‐14 2014‐15

Revenues 7,166.10 8,198.63 7,001.25 7,084.85 7,938.93

Growth % 2.07 14.41 (14.60) 1.19 12.05

Operating expenses 5,513.70 6,002.30 4,655.10 5,159.60 5,857.60

Other income 284.84 224.63 205.87 119.91 202.36

EBIDTA 1,937.20 2,420.95 2,552.06 2,045.23 2,282.52

EBIDTA % 27.03 29.53 36.45 28.87 28.75

Depreciation 307.60 560.51 654.93 666.54 603.21

Interest 249.48 411.48 521.72 454.39 431.32

PBT 1,380.08 1,448.96 1,375.41 924.30 1,247.99

PBT % 19.26 17.67 19.65 13.05 15.72

Taxes 252.26 232.98 151.01 37.62 185.30

PAT 1,127.82 1,215.98 1,224.40 886.68 1062.69

PAT % 15.74 14.83 17.49 12.52 13.39

CONSOLIDATED FINANCIALS(INR mn)

Both Techno Electric and Simran Wind are under MAT


Consolidated Balance Sheet

March 31, 2011

March 31, 2012 March 31, 2013

March 31, 2014 March 31, 2015

SOURCES OF FUNDS

Shareholders’ funds 5,622 6,696 7,700 8,371 9,147

Minority interest ‐ 167 188 193 199

Loan funds 521 4,164 5,172 4,785 3,967

Deferred tax liabilities 6 7 7 9 7

Other liabilities and provisions 1,464 1,070 844 513 185

Total 7,600 12,104 13,910 13,871 13,505

APPLICATION OF FUNDS

Net fixed assets 8,615 11,506 11,036 10,728 10,248

Investments 384 384 384 384 380

Loans and advances 1,148 109 233 297 367

Current assets (a) 3,150 3,910 5,281 5,088 5,820

Current liabilities (b) 5,684 3,805 3,024 2,626 3,310

Net current assets (a – b) (2,534) 105 2,257 2,462 2,510

Total 7,613 12,104 13,910 13,871 13,505

CONSOLIDATED FINANCIALS(INR mn)


9M FY 16 FINANCIALSSTANDALONE CONSOLIDATED

Dec 2015 Dec 2014 Change (%age)

Dec 2015 Dec 2014 Change (%age)

Revenues 7,101.1 4,708.7 50.8 7,712.2 5,727.6 34.6Operating expenses 6,030.8 3,949.6 6,065.9 4,035.4

EBIDTA 1,070.3 759.1 41.0 1,646.3 1,692.2 (2.7)EBIDTA (%) 15.1 16.1 21.3 29.5Other income 83.0 169.2 512.6 110.9Depreciation 101.6 115.9 354.6 518.3Interest 93.6 129.0 271.8 333.4PBT 958.1 683.4 40.2 1,532.5 951.4 61.1PBT (%) 13.5 14.5 19.9 16.6Taxes 206.5 113.8 410.7 113.8PAT 751.6 569.6 32.0 1,121.8 837.6 33.9PAT (%) 10.6 12.1 14.5 14.6


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AN INVESTOR PRESENTATION February 2016 · Management (IIM, Ahmedabad); working experience with...

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