ReNew Energy Global plc

Thank you for standing by and welcome to the Renew Energy fourth quarter full year 2022 earnings conference call. All participants are in a listen only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Nathan Judge. Please go ahead.

Yeah, thank you, Jason. And good morning, everyone. And thank you for joining us. Last night, the company issued a press release announcing our results for fiscal year 2022, as well as the fourth quarter of fiscal year 2022 ended March 31st, 2022. A copy of the press release and the presentation are available on the investor relations section of Renew's website at www.renewpower.in. With me today are Sumant Sinha, founder, chairman, and CEO, our new CFO, Kedar Apodje, Vaishali Nigam Sinha, our chief sustainability officer, and Kailash Vashwani, president of finance. Sumant will start the call by going through an overview of the company and recent key highlights. Kedar then will go through results, followed by an update on ESG from Vaishali. and then we will wrap up the call with Samant providing guidance for fiscal year 2023. After this, we will open up the call for questions. Please note, our safe harbor statements are contained within our press release, presentation materials, and available on our website. These statements are important and integral to all our remarks. There are risks and uncertainties that could cause our results to differ materially, from those expressed or implied by such forward-looking statements. So we encourage you to review the press release we furnished in our Form 6-K and presentation on our website for a more complete description. Also contained in our press release, presentation materials and annual report are certain non-IFRS materials and measures that we reconcile to the most comparable IFRS measures. And these reconciliations are also available on our website in the press release, presentation materials, and annual report. It is now my pleasure to hand it over to Samant.

Yes, thank you, Gitan. And good morning, good afternoon, or good evening to everybody, depending on where you are in the world. Let me start off by saying that Renew has been publicly listed on the NASDAQ for almost 10 months now. and our opportunity for growth, improving returns, lowering our cost of capital, and the strength of our company has notably improved over that time period. We do continue to believe that Renew is one of the most compelling investment opportunities in the renewable energy sector today, and we would like to recap the investment proposition on page five. Renew's operations are in one of the most exciting renewable energy markets globally. India's electricity demand is expected to double by 2030, underpinned by strong economic growth, but also improved access to electricity for the rural population. This demand growth will be met by renewable energy as it is the cheapest source of new capacity available in India today. And very importantly, it doesn't pollute India's currently small-field air. The Indian government views renewables as a key to reaching energy independence and reducing the $150 billion annual bill for imported oil. The robust levels of consistent sunlight and wind resource can transform India from being a net energy importer to a supplier of green hydrogen globally. The current government targets are for 500 gigawatts of renewable energy to be installed by 2030 from an operating base of a little more than 100 gigawatts currently. To meet this goal, renewable energy developers, of which Renew is the largest, will need to increase our annual installations by a factor of four times from the expected, from the current levels, in a very short period of time. Even if this enormous capacity add is accomplished, the expected increase in electricity demand in India would still not be met by the last plan for the renewable energy addition. Also, the government of India has begun the journey of promoting green hydrogen, which, considering government targets, will increase the required renewable energy installations by another 100 gigawatts, above the 500 gigawatts by 2030 renewable energy target. Adding a substantial amount of intermittent renewable capacity to the grid poses reliability questions. Recently, reliability has been a focus as India has been experiencing prolonged electricity outages. This summer, particularly, during a time when outdoor temperatures have frequently hit 110 degrees Fahrenheit, or 43 degrees Celsius or more. There is a need for more value-added energy offerings to address these concerns. Intelligent energy solutions such as the round-the-clock power, sculpting and dispatching expertise that ZENU has been leading the development of for some time. There is growing interest by utilities and CNI customers in high-capacity factor RE products. These intelligent energy solutions require development and operating expertise across multiple renewable energy technologies where we have a leadership position. We are spending considerable time on digitalization of our portfolio and the grid to provide the leading suite of value-added energy options to customers, particularly commercial and industrial customers, as well as people focused on green hydrogen. Renew, as the largest RE company in India by operating capacity, has scaled to invest in the development of these value-added energy products. In addition, Renewal is one of only a couple of companies in India that has the capability to build these high PLF renewable energy projects on a large scale. We believe that as we advance our IP in the energy space through continued development of artificial intelligence and vertical integration, we will expand our competitive advantages further over the coming years. We are also focused on capital discipline. All of our growth and investment must be value-added. Returns should be comfortably above our cost of capital. Recently, we have taken steps to enhance our returns by pursuing capital recycling, and we expect that we will announce more of these transactions in the future. Turning to recent developments on page six, as I just mentioned, we recently announced a 49% minority stake in our 1,300-megawatt RTC project to Mitsui. This transaction materially increases the returns on the project, but we also believe establishes a clear marker for the value of our assets, which is considerably higher than the current valuation of Renew in the public markets today. We also signed 2.5 gigawatts of PPS in the last month, of which 900 megawatts were for existing letters of award we had in our portfolio, and an incremental 1.6 gigawatts were for new projects, which, including 528 megawatts of acquisitions, has brought our total gross portfolio to 12.8 gigawatts. Of this 12.8 gigawatts, about 800 megawatts of LOAs are still donating PPAs. With the recent electricity crisis in India, with rolling blackouts and soaring spot prices, there appears to be more momentum to getting PPAs signed and renewable energy bills to help address this issue. In fact, We just signed PPS for our 300 megawatts of our SECI 9 project yesterday. We have also made notable progress towards reducing our receivables through several court orders, including an important ruling from the High Court of Andhra Pradesh maintaining sanctity of PPS in India. Also during the quarter, we entered into a binding agreement with Indian Oil Company, L&T, to create a JV for green hydrogen. IOC is one of the largest consumers of hydrogen in India, accounting for approximately 8% of India's hydrogen consumption. Turning to page 7, we are pursuing capital recycling as a way to increase returns, fund future growth, and establish the value of our assets. The 49% minority sale to Mitsui of our 400-megawatt RTC project, which, by the way, requires about 1,300 megawatts of renewable energy capacity for $200 million, plus about $70 million for EPC, created considerable value. As can be seen on the slide, the amount of EBITDA per $1 of your equity has increased by over 25%, and we are now expecting that this large project will earn equity IRRs of well over 20%. In addition, we believe this provided a marker for the value of our assets. The transaction was completed at a steady-state EBITDA multiple of around 9.5 to 10 times, considerably higher than the 7.6 times that Renewal is trading at currently. In fact, during the quarter, we used some of the proceeds generated from the sale of our rooftop business earlier this year at an EBITDA multiple of about 9.5 times to repurchase about 4 million shares of our stock. There is significant interest in our assets, not only from Mitsui, but also other strategic and financial investors. Operating expertise is at a premium in India, and we do believe that the level of interest from the quality of investors such as Mitsui validates our competitive advantages. Every one gigawatt that we sell a minority stake in at a multiple of 9 to 10 times EV EBITDA lifts our run rate EBITDA per share by 5%. As I mentioned earlier, There has been an electricity crisis in India over the recent months, as seen on page 8. Demand, partly driven by a heat wave, has risen about 6% to 8% above pre-COVID levels, and supply issues with coal has resulted in rolling blackouts for an average of two to four hours in length throughout India. This electricity supply disruption has pushed up spot electricity prices on the India Electricity Exchange to the regulated cap of 12 rupees, or about 15 cents per kilowatt hour, for many days over the past quarter. There has been a strong uptick in demand for renewable energy during this electricity crisis, particularly from corporate customers. We are able to offer clean, sustainable power at a considerable discount to what these customers can buy off the grid, and it is green and sustainable. Corporate customers prefer value-added energy products such as the high PLF or RTC options, as they pay one fee for access to the transmission line, and the more units that come across the line, the lower the per unit cost. With our leading IP in value-added energy product offerings, we have a significant lead in this sector with little competition at the moment. We recently signed about 500 megawatts of new PPAs with corporate customers last month, and our total portfolio of corporate accounts is now about 1.3 gigawatts. including more than 900 megawatts with PPAs, a threefold increase in about a year. We are currently in discussions with CNI businesses for about 1.3 gigawatts of additional new contracts. The corporate business generally has higher returns than plain monolith projects and provides us additional confidence in maintaining our 16% to 20% equity IRR investment threshold targets. There has also been increased activity in the traditional ground mount auctions in recent months. At the moment, we see about 21 gigawatts of auctions in process that should come to bid over the next six months or so. In addition, there is heightened interest in RTC-type products, and there is a large six to nine gigawatt RTC auction that is expected near-term. In addition, Indian Railways, the largest single consumer of electricity in India, has announced their interest in contracting for RTC Renewable Energy Supply to meet their net zero targets by 2030. They currently use about 30 gigawatts of baseload power, which could represent a significant amount of renewable energy capacity. Turning to page 10, we are also announcing today that we are increasing our module manufacturing capacity to 6 gigawatts, which will produce about 3.3 gigawatts of AC or PPA equivalent capacity after we consider the additional DC oversizing in projects that we do to enhance returns. We expect that this will cost us no more than about 3% to 4% of our three-year CAPEX forecast, and all of the output is for our own users to provide security of supply and enable us to achieve our growth target on our core business, which is renewable energy development. In fact, having this module manufacturing capacity in place could provide us opportunities to capitalize on higher return development projects, as there could be severe constraints in getting modules in India by our competitors. To explain this further, there has been a push by the Indian government to reduce imports from China, which currently represents over 90% of all modules used in India's solar projects today. To this end, they announced two protectionist actions in 2020 that were implemented in 2022, a basic customs duty of 40% on any imported module, or 25% on any imported cell, as well as establishing a list of approved modules that can be used for government projects in India, commonly referred to as ALMM. Only India produced modules are on this list. Government targets imply the need for new solar plant development of about 25 to 35 gigawatts per year, but currently there is only about three gigawatts of AC equivalent of commercially viable module capacity in India today. In addition, Most new module manufacturing capacity that has been announced won't come online until about 2024 or 2025. And it appears that a large portion of what is coming on is for self-consumption, and the remainder could be exported to foreign markets where the selling price is much higher than in India. All of this could result in a large supply shortage in India, which is driving us to make this relatively small investment, but one that would be critical to achieving our growth targets on our core business which is already in development.