Sunsure Energy’s Contrarian Approach Pays Off 

Contrarian IPP makes bets Pay Off In India

Gurugram-based Sunsure Energy has made a virtue of what to many will appear to be a contrarian approach to business as a solar EPC and now, a developer (IPP). Founded in 2014 by Shashank Sharma (CEO),  Sunsure Energy has 500 MW of assets under operation, 2.5 GW of renewable energy capacity under construction, and a target of 5 GW by the end of 2028. Those 6X and 10X targets are well within reach, thanks to the unconventional approach and backing it has from its key, and majority  stakeholder, PE firm Partners AG, and founders going with well laid out plans. Saur Energy spoke to Kartikeya Narain Sharma, Co-Founder and Chief Strategy Officer  on the company’s business approach, and the contrarian bets that have paid off. 

From selling out a majority stake early, to the focus on UP for C&I customers, to managing all key functions including land acquisition in-house, Sunsure has taken the unconventional approach to business.   Sharma, who holds a B.Tech. in Civil Engineering from the Indian Institute of Technology (BHU), Varanasi is also a Certified Data Scientist with extensive training in Town Planning.

As CSO, Kartikeya leads business development, technical asset management, M&A, and marketing. Shantanu Faugaat (COO) and Manish Mehta (CFO) are the other co-founders. 

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Kartikeya Sharma

We start with the decision to focus on the C&I segment by Sunsure right at the outset. 

“We saw that the industrial sector in India contributes hugely to GDP, but we didn’t see a lot of young people contributing to the industrial ecosystem. In 2014, renewable power was already  approaching grid parity, and the share of industrial  power supply is higher than any other segment. So we decided C&I offered a great opportunity, and rooftop solar seemed like the perfect,  ‘edge of the wedge’ product to get in and start adding value to the sector, according to Sharma. 

“We were competing with Tata and Bosch at the time, and selling our projects on the capex model, but we could see that good service, good engineering and high quality deliverables is something that industrial customers are willing to take up. Our rooftop business grew strongly, but we realised that just rooftop business would not cut it, as it could deliver at most 5-6% of corporate or industrial needs. Open access was coming into the market by then, so we jumped into that market”.  

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This also marked the point where Sunsure did the first of its seemingly contrarian moves, by developing skills in land acquisition for instance, a thorny issue for most developers who preferred to outsource it. 

“As a company, we were always biting off more than we could chew. So when we got a 500kW project, we would bid for and win a 5 MW project, if we got that, our next number was 20 MW”. 

“By 2022,  we were able to build almost 400 MW of installed capacity, across 16 states, in the process surviving the pandemic, moving to a turnover of Rs 700-800 crores, in short, building massive value as a firm”, recalls Sharma

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“Post Pandemic, we realised another sea change was happening in the industry, with customers seeking solutions around sustainability now. So even with lesser savings, they sought more scale in renewable energy. With RTC, FDRE coming in as requirements, we decided that now was the time for us to move into IPP mode. We had created the muscle to build the firm. We had our own EPC skills, land acquisition team, regulatory affairs and our own asset management. We were in fact the preferred outsourcing partners for other C&I IPPs,” he adds.

2022 was the year private equity firm –Partners Group AG came in with a huge cheque of $400 million dollars to pick a controlling stake, and back the founders to grow the firm even faster.  

What role does the Partner Group play in the firm’s vision?  Sharma is clear that contrary to a viewpoint that believes financial investors come in with a 3-4 year plan, Partner’s Group has a much more long term vision and expectation from the firm. “They even have a perpetual equity fund, besides patient capital that wants to see our long term bets pay off. This is reflected in the way we appraise potential customers, who not only have to be A-rated or above, but also meet multiple internal criteria for us to commit,” he said.  A significant value he points to is the calibre of the board the firm has today, including Manoj Kohli (Former Country Head, Softbank India), Inderpreet Wadhwa (Founder & Advisor, Azure Power), and Mahesh Makhija, Former Director at Apraava Energy. 

Sharma stresses that even today Sunsure remains an IPP with one of the youngest teams, and a differentiated approach. ”It is essentially our development capability. So previously, where IPPs would sign PPAs and then scout for land, leading to a wait time of 18 months or more for even a 5 MW project, we acquire the land first, and then sign the PPA, crunching the waiting time for a customer significantly to even 6 months.” 

Which is where the UP success story comes in (See 5 UP Myths Busted By Sunsure Energy at end of Story). Sunsure claims to have 125 MW of the active 600 MW of open access projects in UP, giving it a market share of 25%. Then, there is Maharashtra where they have closed around 250 MW of PPAs since October last year. It’s an approach they hope to replicate in Tamil Nadu where an MoU has been signed with the state government entailing a Rs 3000 crore investment on top of around 400 MW in TN. Add to that a 300 MW project won through a SECI’s ISTS tender, and the firm has a clear vision to create a firm that is well diversified in revenue streams as well as geographically. Besides inter state and intra state sale of power, the firm also targets a proportion of sales from merchant power sold on power exchanges eventually, around 10%. 

What About UP’s lack of wind resources? Does that crimp FDRE or RTC opportunities? “In UP, there is a 50% waiver for intra state solar transmission charges. UP, with its banking provisions is able to meet both the economics and sufficient offset upto 50% of power needs for a firm. In any case, going beyond 70% is not economical, which works for most customers. So 50% from intra state solar, and the remaining 20% from ISTS wind works’ he adds. 

Is Sunsure looking at an IPO, considering the receptive market right now? We want to list at a size of at least 5 GWs, says Sharma. “Our view is that the riskiest part in the renewable value chain is the development part. Once you are done constructing, then this sector offers the most predictable cash flows among all infra projects. That is much more exciting for the retail or institutional investor. A lot of the valuations we see right now are due to people being excited to invest in a new sector. So they will temper over time. “However he points out that when a large developer like Adani Green gets the valuations it does , it does end up casting a long shadow. So relative to that, a lot of smaller firms can get high valuations as well. 

Sunsure claims to have over 70% of the land in place for its pipeline of 1.5 GW. Even RoWs (Right of Way)  for transmission lines  is available for over 2 GW, he adds.

Looking ahead, Sunsure looks to participate in utility scale for RTC power, seeing a much stronger case for RTC in utility scale.  “We are working with a lot of industries to use storage, even behind the meter. Storage is a game changer, and is in fact, a necessity for the grid”, he adds. States like Maharashtra and Gujarat are already super attractive even at current storage costs.  

On higher module costs in India, he doesn’t see it as a deal breaker. “Take Maharashtra. Industrial power costs say, Rs 9.50. At current module prices, We are charging say Rs 3.50. After all charges let’s say it is 5.50. So we are still saving money for you”.  So every month that they do not get power, they are losing money. So C&I customers are willing to pay if they can get their power a few months earlier. So all that matters is to ensure we have enough capacity domestically to ensure there are no delays in module supplies.