Azure Power Announces Results for Second Fiscal Quarter 2017

Azure Power Global Limited, one of the leaders in the Indian solar industry, announced its consolidated results under United States Generally Accepted Accounting Principles (“GAAP”) for the second quarter period ended September 30, 2016.

Second Quarter 2017 Period Ended September 30, 2016 Operating Highlights:

• Operating & Committed Megawatts were at 1,021 MW, as of September 30, 2016 an increase of 111% over the same date last year
• Revenue for the quarter was INR 895 million (US$13 million), an increase of 40% over the same quarter last year
• Adjusted EBITDA for the quarter was INR 561 million (US$8 million), an increase of approximately 44% over the same quarter last year.

Key Operating Metrics

Electricity generation increased by 112.8 million kWh during the six months periods ended September 30, 2016 to 275.1 million kWh as compared to the same period in 2015 as a result of the increase in operational capacity during the period.

Total revenue grew to INR 1,916.6 million (US$28.8 million) during the six months ended September 30, 2016 from INR 1,211.1 million in the six months ended September 30, 2015, an increase of 58% over the same period in the previous year. The increase in revenue was driven by the commissioning of new projects.

The project cost per megawatt operating for the six months ended September 30, 2016 decreased by INR 2.9 million (US$0.1 million) to INR 58.1 million (US$0.87 million), as compared to the same period in the previous year. The project cost per megawatt has declined in line with decreasing solar module prices and reduction in balance of plant costs. Project cost per megawatt operating consists of costs incurred for one megawatt of new solar power plant capacity during the reporting period.

Operating and committed megawatts increased, as of September 30, 2016, by 536 MW to 1,021 MW as a result of the increase in new projects won since September 30, 2015.

Nominal Contracted Payments

The Company’s PPAs create long-term recurring customer payments. Nominal contracted payments equal the sum of the estimated payments that the customer is likely to make, subject to discounts or rebates, over the remaining term of the PPAs. When calculating nominal contracted payments, the company includes those PPAs for projects that are operating or committed.

The following table sets forth, with respect to our PPAs, the aggregate nominal contracted payments and total estimated energy output as of the reporting dates. These nominal contracted payments have not been discounted to arrive at the present value.

	As of September 30,
	2015	2016
	INR	INR	US$
Nominal contracted payments (in thousands)	123,566,324	247,388,527	3,715,658
Total estimated energy output (kilowatt hours in millions)	19,964	43,345

Nominal contracted payments increased from September 30, 2015 to September 30, 2016 as a result of entering into additional PPAs. Over time, the Company has seen a trend towards a decline in the Central Electricity Regulatory Commission benchmark tariff for solar power procurement. For fiscal year 2011, the Central Electricity Regulatory Commission benchmark tariff for solar power procurement was INR 17.91 per kilowatt hour. It was reduced to INR 10.39 per kilowatt hour for fiscal year 2013, which was further reduced to INR 7.72 per kilowatt hour for fiscal year 2015 and INR 5.68 per kilowatt hour for fiscal year 2016. The overall trend of solar power tariffs is that the tariffs are declining in line with the solar module prices.

Portfolio Run-Rate

Portfolio run-rate equals annualized payments from customers extrapolated based on the operating and committed capacity as of the reporting date. In estimating the portfolio run-rate, the Company multiplies the PPA contract price per kilowatt hour by the estimated annual energy output for all operating and committed solar projects as of the reporting date. The estimated annual energy output of the Company’s solar projects is calculated using power generation simulation software and validated by independent engineering firms. The main assumption used in the calculation is the project location, which enables the software to derive the estimated annual energy output from certain meteorological data, including the temperature, wind speed and solar radiation based on the project location.

The following table sets forth, with respect to the Company’s PPAs, the aggregate portfolio run-rate and estimated annual energy output as of the reporting dates. The portfolio run-rate has not been discounted to arrive at the present value.

	As of September 30,
	2015	2016
	INR	INR	US$
Portfolio run-rate (in thousands)	5,422,172	10,560,382	158,612
Estimated annual energy output (kilowatt hours in millions)	791	1,856

Portfolio run-rate increased by INR 5,138 million (US$77.2 million) to INR 10,560 million (US$159 million) as of September 30, 2016 as compared to September 30, 2015, due to increase in operational and committed capacity during the period.

Second Quarter Period ended September 30, 2016 Consolidated Financial Results:

Operating Revenue

Operating revenue grew to INR 894.9 million (US$13.4 million) in the second quarter period ended September 30, 2016 from INR 640.9 million in the second quarter period ended September 30, 2015, an increase of 40% over the same period in the previous year. The increase in revenue was driven by the commissioning of new projects.

Cost of Operations

Cost of operations increased to INR 75.4 million (US$1.1 million) in the second quarter period ended September 30, 2016, from INR 43.0 million in the second quarter period ended September 30, 2015, an increase of 75% over the same period previous year. The increase was primarily due to increase in plant maintenance cost related to new commissioned projects.

General and Administrative Expenses

General and administrative expenses during the second quarter period ended September 30, 2016 increased by INR 51.2 million (US$0.8 million), or 24.7%, to INR 258.4 million (US$3.9 million) compared to the same period in 2015. This was primarily due to legal expenses incurred on projects and lease rent expense incurred on under-construction projects during the three months ended September 30, 2016.

Depreciation and Amortization

Depreciation and amortization expenses during the second quarter period ended September 30, 2016 increased by INR 71.3 million (US$1.1 million), or 41%, to INR 246.5 million (US$3.7 million) compared to the same period in period ended September 30, 2015. The principal reason for the increase in depreciation was due to new projects which were capitalized during the period from September 30, 2015 to September 30, 2016.

Interest Expense, Net

Net interest expense during the second quarter period ended September 30, 2016 increased by INR 64.3 million (US$1.0 million), or 12%, to INR 583.3 million (US$8.7 million) compared to the same period in period ended September 30, 2015. Interest expense increased primarily as a result of borrowings for new solar power projects operating during the three months period ended September 30, 2016.

Loss on Foreign Currency Exchange

Foreign exchange loss during the second quarter period ended September 30, 2016 decreased by INR 246.4 million or 145% to INR 76.1 million (US$1.1 million) compared to the same period in the prior year.

The closing exchange rate of Indian rupees as of September 30, 2015 depreciated against the U.S. dollar by INR 1.9 to US$1.00 over the closing exchange rate as of June 30, 2015 while the closing exchange rate of Indian rupees as of September 30, 2016 appreciated against the U.S. dollar by INR 0.9 to US$1.00 over the closing exchange rate as of June 30, 2016, respectively.

Income Tax Expense

Income tax benefit increased during the second quarter period ended September 30, 2016 by INR 26.9 million to INR 53.8 million (US$0.8 million). The Company’s effective income tax rate for the second quarter period ended September 30, 2016 was 19% as compared to 7% for the same period in 2015. The increase in income tax benefit and the effective tax rate in the six months ended September 30, 2016 was a result of lower taxable profits generated by AZI, which provides certain engineering, procurement and construction services to its Indian subsidiaries, in the current period.

Net Loss

Net loss for the second quarter period ended September 30, 2016, was at INR 138.9 million (US$2.1 million), a decrease of INR 308.1 million (US$4.6 million) as compared to the same period in the previous year. This was primarily due to an increase in operating revenue by 40%.

Cash Flow and Working Capital

During the three months ended September 30, 2016, the Company generated INR 7,104.6 million (US$106.7 million) from financing activities. This cash inflow was primarily due to proceeds of INR 1,666.5 million (US$25.0 million) from issuance of Series I CCPS, new loan proceeds of INR 7,062.2 million (US$106.1 million) in the form of term loans from banks for the Karnataka 3 and Punjab 4 solar power plants. These inflows were offset in part by INR 1,624.1 million (US$24.4 million) in repayment of loans.

Liquidity Position

The Company raised equity of INR 1,666.5 million (US$ 25.0 million) during the quarter ended September 30, 2016 from a pre- IPO financing round. Subsequent to September 30, 2016, the Company has raised INR 9,081.5 million (US$136.4 million) from its initial public offering and concurrent private placement.

The Company has drawn INR4,970 million (US$74.7 million) of project debt during the quarter and has undrawn project debt commitment of INR17,557.1 million (US$263.7 million) as of the end of the quarter.

The company has secured financing for all committed and under construction projects of 663MW for the calendar year 2017.

Adjusted EBITDA

Adjusted EBITDA was INR 561 million (US$8 million) for the second quarter period ended September 30, 2016, compared to INR 391 million in the second quarter period ended September 30, 2015. This was primarily due to the increase in revenue during the period.