Renew Energy Concall. Sumant Sinha Sees 25 GW Corporate PPA Market In India

Renew Power, or its new listed avatar, Renew Energy Global (RNW) hosted its first earnings call after its Q2 results yesterday. Presenting at the call were Sumant Sinha – Founder, Chairman, and CEO and D Muthukumaran – CFO.

Capacity Additions On Schedule

For Renew, which has positioned itself as the leading renewable energy firm from India, it was also an opportunity to iterate its role as one of the best plays on India’s push for renewable energy, on the back of its local presence, knowledge and professional management. A good mix of Wind and Solar, besides some Hydro in its portfolio also  means the firm is primed for the future, as Hybrid projects become the new normal. The firm has played on this theme brilliantly, using its access to lower cost funds to deliver and lately, acquire projects in the country.

The firm currently has 7 GW of operating assets, with another 400 MW scheduled to be commissioned by early December this year. It has projected 8.2 GW of operational capacity by the end of FY 22, or March 2022.

It’s manufacturing plans remain on course for a 2 GW module plant by 2023, although for further investments into manufacturing, the firm has indicated it will look to the Solar PLI scheme’s expanded version to take a call.

M&A Opportunity, Corporate PPA’s To Be Big

Sinha expressed confidence about the future, guiding for an EBITDA of $810 million for FY 22, and sees a large market opportunity ahead, for organic as well as acquisitions led growth. Placing the opportunity for renewable energy at between $200 to $270 billion for generating within India, he highlighted the 8 to 10 gigawatts of auctions scheduled over the next quarter, with ‘numerous more intelligent energy solution auctions’ in the works. “The M&A opportunity is also very large and we see around 30 to 50 gigawatts of M&A opportunities in the coming time. Currently there is about 6 to 8 gigawatts that is up for sale at this point”.

The corporate market for renewable PPA (utility based) is a particularly attractive opportunity that is emerging now, with Sinha seeing it at 25 GW potentially, driven by strong drivers of commercial rationale and ESG (Environmental, Social and Governance) pressure to change.

On acquisitions, Sinha added that “we are also one of the best positioned to be the consolidator of choice in India”.

Highlighting that the Renew Energy portfolio is fully equity funded with no need any new external equity till the 18 gigawatts target for 2025. “At 18 gigawatts, our cash flow generation should be sufficient to self fund 2.5 to 3 gigawatts of growth annually without raising any external equity, he added”.

Challenges Being Managed So far

On the vexing issue of cost escalations, the management duo were confident that lower cost of funding would cover for the same when it comes to Wind projects, and for solar, they took a wait and watch attitude for projects due in 2023 for which ordering would begin next year. Reflecting the viewpoint we heard in the Adani Green call analyst too.

On its dispute in Andhra, the firm was confident of a favourable outcome and full recoveries of outstanding dues  post the concluding hearing in the case, expected in December this year. The firm also seems ambiguous on the future of its big RTC project, where progress has been slow so far, though it expects many more ‘better designed’ tenders to be coming soon. It’s second RTC win seems to be on schedule though.

With about $1 billion of cash and cash equivalents on the balance sheet, and  net debt stood of approximately $4.4 billion, the firm was is clearly pitching to be seen as the option for choice for investors looking to be part of India’s journey to 500 GW of renewable energy. And among pure play energy firms, it is well placed to do so too.