ReNew Energy Global plc

Thank you for standing by and welcome to the Renew Energy first quarter 2023 earnings call. All participants will be in 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, TBC. Please go ahead.

Yeah, thank you very much, Jason, and I'm not TBC, I'm the head of investor relations, but thank you very much, and good morning, everyone, and thank you for joining us. Last night, the company issued a press release announcing our results for the first fiscal quarter of 2023, ended June 30, 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, our founder, chairman, and CEO, Kedar Apadje, our CFO, and Vishali Nigam Sinha, our Chief Sustainability Officer. Sumant will start the call by going through an overview of the company and recent key highlights, and then Kedar will go through the results, followed by an update on ESG from Vishali. We will then wrap up the call with Samant reiterating our 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 measures that we reconciled to the most comparable IFRS measures, and these reconciliations are also available on our website in the press release presentation materials, and annual reports. It is now my pleasure to hand it over to Samant.

Yeah, thank you, Nathan, and good morning to everybody on the call. Let me dive right into the presentation. Starting on page five, we are pleased to deliver a strong set of results above our internal budget for the first fiscal quarter of 2023. And we are on track to meet our FY23 guidance so far this year. Revenues and adjusted EBITDA were up about 50% year-on-year, and our cash flow to equity, or the equivalent to distributable cash flow, more than doubled versus the same quarter last year. Our portfolio grew to 13.2 gigawatts, or 33% up from the prior year, and importantly, nearly 95% of the portfolio has PPAs now, providing therefore greater confidence in our growth. Nearly all of our forecasts of fiscal year 23 adjusted EBITDA should come from operating assets currently operating, giving us confidence that we are on track. Overall, the growth environment remains bullish as renewables are the lowest cost options for new power capacity in India, and we believe that this is really sustainable. Increasingly, our customers are seeking complex power solutions that can be delivered consistently over the full day and we have built this expertise by offering a full suite of renewable products overlaid with digitalization and a proprietary AI technology. We believe that this is a truly differentiated offering in the renewable sector. Given the need for electricity to be delivered round the clock, we have seen increased interest in our intelligent energy solutions. We expect in the near future, about 10 to 12 gigawatts of RPC auctions will occur over the next several months, and there is over 100 gigawatt opportunity by 2030. Importantly, please keep in mind that one megawatt of RPC power actually requires up to three megawatts of renewable energy power. The higher return corporate PPA opportunity is really gaining momentum, and we are seeing a very significant acceleration of interest from corporates now, given the economic advantage of a lower price than alternatives, and an increased focus on sourcing energy from green sources towards corporates in their own net zero journey. Today, corporate PPAs represent about 10% of our portfolio, of our total portfolio of 13.3 gigawatts, up from about 4% a year ago. And this area has represented about 30% of all portfolio additions during the last 12 months. We believe that this growth will continue and potentially could even accelerate over the near term. Our intelligent energy solution has significant potential beyond just the traditional utility customer base, and we are seeing tremendous interest in both the corporate market and also globally now in the green hydrogen space. Talking about the global green hydrogen opportunity, this is a multi-billion dollar opportunity, but it is still very early in the development process. and any contract and material capital commitment are likely still some time away. We will only proceed with making investments if the opportunity clears a very stringent set of requirements, including returns over our cost of capital and payment security. As far as green hydrogen is concerned, we don't see meaningful capital or investment into this area in the near term. Turning to page six, We have a very strong cash position of approximately $850 million and expect that after the CapEx for completing our portfolio of 13.2 gigawatts has been spent, we will still end up with a higher cash balance than today. We have no intention of issuing new shares in our current plan and capital recycling provides additional resilience in our balance sheet. In just the past 18 months, we have raised about $450 million of equity from capital recycling. and interest in our assets is even stronger today, if anything. The lending environment for our renewable energy projects remains robust, and we continue to see rates hold at historically attractive levels domestically. We just put in place a $1 billion facility for our round-the-clock power project, which compares favorably to the current interest rate of debt on our balance sheet. We also refinanced about $600 million in the latest quarter, reducing our annual interest expense on the debt by about $12 million and extended the maturity by approximately three years as well. We have already pre-funded about 80% of debt maturing in the next two years and the remaining $140 million should easily be refinanced and is also amply covered by internal accruals as well as the $850 million of cash on our balance sheet currently. Even if the refinancing market unexpectedly closes, which we certainly do not expect it to at this point in time. As we've highlighted many times over the past year, we have been focused on improving connections on the pass-through receivables from the state distribution companies, and we are pleased to announce that we have made progress in this regard and have reached an agreement on payment schedules from several states in the past couple of months or so. The AP DISCOM, which, as you would know, represents almost 42% of our current pass-through receivables, has now agreed to pay what is past due until June 22 over the next 12 months in equal monthly installments. And I'm pleased to say that they've already paid the first installment of that. This is a significant positive development. We have also just received a favorable order from the regulator in Telangana. The central government has also ramped up pressure on the state through a series of measures to ensure quicker clearance of outstanding dues. So for all these reasons, we do expect an improvement in our DSOs by year end. Turning back to the corporate PPA market on page seven, as I mentioned earlier, this market continues to gather momentum and we want to spend some time on this given how important the segment has become to our growth and to our ability to consistently deliver returns above our cost of capital and above our peers. We view the corporate PPA addressable market as around 25 gigawatts today although the total consumption of type corporates in India is over 100 gigawatts. In India, corporate customers pay about between 6 to 10 rupees per kilowatt hour to buy power from the grid, which is significantly higher than what is paid by residential customers. The price to buy power from the power exchanges is also around the same level. Renewal is able to provide power to the same customers at around 3.5 rupees per kilowatt hour, which is, as you would imagine, significantly better for the corporates than other argumenters. On top of this very strong economic initiative, there is an increased focus by corporates globally to source their energy from sustainable sources and move towards net zero carbon emissions goals. As many large companies are able to source low-cost carbon credits from India to offset their emissions goals, We are seeing a significant amount of interest for our India renewable energy projects from non-India-based companies as well. Regulation is also changing to reduce surcharges and penalties on purchasing power from renewable energy projects rather than from response. One item that we are paying particular attention to is the transmission cost waiver from renewable energy to corporates. And if this is ratified by the central regulator, it will make the delivered cost of renewable energy even more attractive. At the end of the quarter, as seen on page 8, the business segment represented about 10% of our portfolio, up from 4% of our portfolio a year ago. We see the potential for corporate ETFs to eventually get to 25% of all portfolio growth for the next several years. Our optimism also stems from our competitive advantages in this sector. Renew has considerable market share leadership in this segment, as we are able to provide value-added, customized solutions to our technological advantages, as seen on page 9. On top of this, the need for companies to partner with renewable energy developers such as Renew means that corporate governance is a significant focus by the highest quality corporate customers, our target audience. All of our largest competitors in the corporate PPA market are private companies. Another critical differentiator that Renew has is the ability to pre-build projects to accelerate the selling cycle. Historically, corporate customers don't like to wait too long to start receiving electricity which is where Renew scores over its competitors in being able to provide customized solutions far more quickly. Given our scale, pre-building corporate projects presents only a nominal amount of our total portfolio, whereas it could be much higher for a number of our competitors in this market. Corporate PPs also have higher returns than bundler projects that most of our competitors focus on. And as we all know, corporate customers also have a history of paying the bills on time, And so our DSOs from this segment are actually fairly low, less than 1% of our total accounts receivable, even though they represent about 8% of our total operating capacity. As the corporate PPA market grows organically, or as corporates grow organically, we will grow along with them, offering us higher long-term organic growth. In addition to that, we believe that there are additional opportunities to enhance growth by cross-selling and offering customized products to our customers. Page 10 also shows that we have a strong liquidity position. The chart on the right shows that after all capex and debt maturities are paid over the next several years, we should end up with even more cash in our balance sheet than we have currently, and this without issuing any new shares. We believe there is limited risk to our capex budget at this point, and we have considered current prices and providing our capex guidance. Even if module classes were to rise even by up to 10% from today's level, our capital would not gain them more than 3% to 4%. Most of our wind turbine classes are already locked in, and so therefore there is no material exposure on Bush Trump. As far as individual projects are concerned, for the future, we continue to target 60% to 20% equity IRAs, and we will continue to remain disciplined with your capital. We also have a high level of visibility for our debt funding. About 50% of all our debt needs for the next couple of years has already been either sanctioned or approved. We are seeing strong indications of interest for the projects that we haven't yet raised debt for. Our interest rate risk is also limited, with fixed rates on 74% of our debt, and 100 basis points increased only impacts our FI currency cash flow to equity by around 2%. On top of all this is the opportunity to utilize capital recycling to enhance the resilience of our balance sheet and ensure ample liquidity, which brings us, in fact, to pay dividends. We have a strong track record of having raised capital for capital recycling. We raised almost a half a billion dollars in the last 18 months by selling minority stakes or, in some cases, entire projects. Going forward, we continue to see a lot of interest in our assets at between 9 to 10 times EV to run rate EBITDA. And given the fact that we are ourselves trading at about 7.6 times run rate EBITDA for our 13.2 gigawatt portfolio, this prevents a significant arbitral opportunity. given also that we have $150 million of authorization left on our share buyback. Turning to page 12, DSOs were about 232 days at the end of fiscal quarter 2023, which was about 30-day improvement from the same quarter in the prior year. Our DSOs are seasonal, and so there is an uptick in quarter one and quarter two, but we do expect that by the end of the fiscal year, our DSOs will be significantly lower than where they are right now. In addition to that, we are also now, as I said earlier, moving more and more to SECI and to corporate PPAs. In fact, of our 13.2 gigawatt total asset base, the total amount from DISCOMs will only be about 34%. And that itself, that shift from 53% to 34% of DISCOMs in our total portfolio itself could lead to an improvement in our DSOs by 55 days from where we are right now. Let me turn it over to Kedar. But before that, let me also just point out that most of our leadership team has been here from the beginning of the Indian renewable sector, and we have lived through many ups and downs. We have a lot of operational expertise and capability, and this does provide a significant competitive advantage. We believe that building a platform such as Renew can't be easily replicated in an emerging market. You need strong operational experience to have a sustainable business in Indian renewables. With this, let me turn it over to Kedar. Kedar, over to you.