ReNew Energy Global plc

Thank you for standing by, and welcome to Renew Energy Global PLC 4Q FY24 Results and Long-Term Outlook. All participants are 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 1 on your telephone keypad. I would now like to hand the conference over to Mr. Nathan Judge. Please go ahead.

Thank you, and good morning, everyone, and thank you for joining us. Today we're going to have a little bit of a different format from our previous earnings call, given the meaningful gains the company has made in securing long-term growth, as well as the dramatic improvement in the fundamentals of the Indian renewable energy market. We wanted to share with you our long-term outlook in addition to the normal earnings review and annual guidance for fiscal year 2025. We did put out a press release announcing results for the fiscal 2024 fourth quarter, and full year 2024 ended March 31st, 2024, last night, and a copy of this press release and the earnings presentation are available on the investor relations section on Renew's website at www.renew.com. With me today are Simhat Sinha, founder, chairman, and CEO, Kailash Vashwani, our CFO, and and Vaishali Nigam Sinha, co-founder and chairperson of Sustainability. After the prepared remarks, which we expect will take about an hour, we will open up the call for questions. Please note, our safe harbor statements are contained within our press release, presentation materials, and materials 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 furnish in our form 6K and the 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 reconcile to the most possible IFRS measures And these reconciliations are also available on our website in the press release presentation materials and our annual report. It is now my pleasure to hand it over to Samant.

Thank you, Nathan. Good morning and good afternoon and good evening, everyone. I'm glad to have you all in our earnings call. Turning to the presentation, just to talk about the first couple of pages. We are unwavering in our purpose of creating a carbon-free world one step at a time. Our focus is on growth that adds value to all our stakeholders and, most importantly, to our shareholders. As a renewable energy leader in India and the Global South, we aim to further enhance our position in the coming years. We don't pursue scale or market share for its own sake. Instead, we seek growth opportunities where the return exceeds our cost of capital. Fiscal year 2024 started off with a bang when the Ministry of New and Renewable Energy, or MNRE, announced 50 gigawatts of annual auctions. This was almost triple what had been auctioned off the prior years. Although the target was to achieve 50 gigawatts, India surpassed this goal, auctioning over 62 gigawatts of RE capacity during the year. Since April 2023, we have won about 8 gigawatts of new capacity, which is around 60% more than our portfolio was as of March 31, 2023. We have signed PPAs for about 2.2 gigawatts of capacity so far in FI25, increasing our contracted portfolio now to 15.6 gigawatts. For the remaining six gigawatts or so that we have won and have a letter of award in hand, we expect to sign PPAs over the next six to nine months. Until then, we are going to refer to them as our pipelines. We are on pace to deliver on a pipeline of over 21 gigawatts by 2029, which is more than double the amount we finished fiscal year FI 2024 at. We are further propelled by a very exciting macroeconomic environment. We expect consistency in policymaking and a continued strong push towards renewable energy. On the demand side, we also anticipate a surge in industrial demand growth in sectors such as electric vehicles and data centers, which will not only boost GDP, but also increase power demand substantially. On cost, solar cell and module prices are at an all-time low, and battery prices have dropped by about a fourth in just over a year, helping to further improve the returns on projects under construction. The fiscal year ahead promises to be even more exciting and full of opportunities than the one that we just completed. On page seven in this call, we want to address some key items that we believe the market has not recognized and given value for yet. From where we sit today, we see a clear pathway to 16% to 18% annual growth through the end of this decade. Importantly, this growth will be through internal cash flow generation and asset recycling, and we do not intend to issue any new shares. We also expect to meaningfully improve our leverage ratios during this period. As mentioned earlier, our fully contracted portfolio stands at 15.6 gigawatts. However, we have also won an additional close to 6 gigawatts in a very favorable bidding market for which we have letters of award in hand and expect to sign the PPAs in the next 6 to 9 months. Combined, we have over 21 gigawatts which provides clarity on growth as well as increased confidence of execution and returns. Importantly, the next 10 gigawatts of growth have significantly higher returns than the 9.5 gigawatts we had operating as of March 31. Asset recycling is a key part of our strategy as it not only provides a lower cost of equity to fund growth, but it also enhances returns given the meaningful premium we receive over build cost. We can increase the IRR range to 20 to 25% on average after reinvestment of the equity and gains on sales. We expect to monetize around 2 gigawatts of assets by FY29. We also want to address some lack of clarity about our accounts. Put simply, there is a significant amount of investment and cost that we will incur in the near term, such as debt and unallocatable overheads for our platform. However, they create significant comparative advantages and are key to long-term value creation. We will provide some analysis that shows that for our assets operational for over a year, those earn a healthy ROCE or return on capital employed of around 11% versus about 8% at the consolidated level. We contribute about 17 billion rupees as CFE compared to our FY24 consolidated CFE of 13.7 billion rupees. And these assets only have a net debt to LTM EBITDA ratio of 5.3 times versus 8.2 times at a consolidated level. All of these are meaningfully better than the ratios that would be calculated from our consolidated accounts. As we continue to grow through this decade, and more of our assets become operational, the consolidated account ratio will improve materially. And Kailash will talk about some of these numbers later on. Turning to page 8, since our listing about three years ago, we have delivered about 18% to 19% annual growth in operating megawatts as well as adjusted EBITDAs. With the projects under construction, recently signed contracts, and recent wins that we expect to receive contract in this fiscal year, we believe we can deliver 16% to 18% growth in adjusted EBITDA through the remainder of this decade. We have invested in the technology, our people, and in building a platform that can deliver truly at scale. Our EBITDA growth is outpacing the growth of our operating megawatts and indicates that we expect to improve our margins, even though we are making investments to accelerate growth in future years. We anticipate that our current pipeline, which includes about 6 gigawatts of uncontracted auction wins, will generate approximately INR 142 to 150 billion rupees in EBITDA by the end of this decade, once fully operational. This will be over two times of the FY24 numbers we just reported and close to three and a half times growth since our IPO. Turning to page nine, as part of our commitment to create shareholder value, we will continue to pursue the lowest cost capital to fund our growth. We can self fund about 1.5 to two gigawatts of assets on our own with our cash flow to equity without needing to raise equity or recycle capital. What this means is that we can achieve about 17 to 18 gigawatts of operational capacity by FY29 without needing additional equity. However, we have observed that our differentiated development capability is at a premium, both in the bidding market, where we are seeing returns above recent historical norms, as well as in premiums to book value being offered for our assets. We are pursuing a plan to accelerate our growth by building an additional 500 megawatts to a gigawatt each year, which will be funded by asset recycling. This addition is likely to have an exponential growth effect on our CSE and will have a higher growth trajectory as we add capacity. Through recycling, we can build over 19 gigawatts by selling 1.5 to 2.5 gigawatts of assets at two times book value which would get to around nine and a half times EV to run rate EBITDA. We emphasize that our strategy to fund growth through capital recycling. This is important. Not only does it provide a much lower cost of equity than issuing shares, it also enhances the expected ILRs meaningfully after reinvestment. On page 10, we aim to demonstrate that our projects, once stable, and fully operational are profitable. While Kailash will cover this topic in more detail soon, let me share some key highlights. We started this fiscal year with 7.6 gigawatts of operational assets, excluding the 400 megawatts we sold during the year, which delivered an adjusted EBITDA of about INR 63 billion in FY24. The net debt to LTN EBITDA ratio for these projects was about 5.4x and the return on invested capital was around 11% and these assets delivered a stable CFE of about 17 billion rupees. Turning to page 11, our growth estimates. We aim to grow our EBITDA by 16 to 18% annually over the next five years to about INR 142 to 150 billion on a run rate adjusted EBITDA in FY30. Additionally, once operational, our 19.4 gigawatts should deliver approximately INR 35 to 42 billion in CSE, which would be an annual growth of over 25% per annum. We expect a return on capital employed between 11 to 12% for the consolidated results. We are also mindful of our overall leverage levels and will look to improve the consolidated leverage net debt to EBITDA ratio by about 25% from current levels as well. For FI25, we expect EBITDA of INR 76 to 82 billion and to operationalize 1,900 to 2,400 megawatts of new projects. In addition, we also expect to deliver CFE of INR 12 to 14 billion, which would be about 30% growth after adjusting for the gain on sale we recognized in FI 24. On page 12, we reaffirm our commitment to pursuing only the highest return opportunities where we can deliver returns above the cost of capital. The return on capital employed for projects commissioned in FI 23, which are now delivering stable EBITDA is around 11% compared to our weighted average cost of capital of around 8.75 to 9.25%. Additionally, our in-house wind EPC, O&M capabilities combined with digital capabilities empower us to engage in firm power or complex projects that have the highest return and constitute the fastest growing segment of the market. Over the years, we have partnered with both prominent domestic and international investors who have shown interest in our assets and provided us with equity for growth. This strategy has allowed us to achieve a higher return on invested capital, along with lowering our overall leverage. Now turning to the highlights for the quarter and full year 2024 on page 14. I am pleased to report that for FI24, We reported our first profitable year since listing, a significant milestone showcasing our inherent CAD generation capability. Furthermore, our EBITDA was at the top end of the range for EBITDA and ahead in CFE. We added 1.9 gigawatt of operational capacity in line with projections and excluding the impact of gains from asset sales, reported an adjusted EBITDA of INR 65.6 billion, compared to the top end of our initial EBITDA guidance range of INR 66 billion. Additionally, we exceeded our CFE guidance, reporting INR 13.7 billion, which includes an INR 3.7 billion gain from sales. We are also reporting our first profitable fiscal year since listing, with a profit of INR 4.1 billion, or US dollar 12 cents of EPS. Our contracted portfolio now stands at an impressive 15.6 gigawatts, including the 2.2 gigawatts of recently signed agreements. Turning to page 16, we have a summary of updates from our businesses. Firstly, the current renewable energy landscape is one of the best we have ever seen with over 62 gigawatts of options in FY24 and more than 50 gigawatts additional already in the pipeline for FY25. In addition, high power demand has pushed merchant prices up, which is driving higher auction tariffs as well. The demand for electricity is at an all-time high. Secondly, our differentiated platform positions us as a leader in firm power and complex projects, leveraging our capability to combine wind development with our digital capabilities. There are fewer takers of these firm power or complex projects given the challenges in execution, and hence we see higher return opportunities in these kinds of projects. Finally, our returns are bolstered by the decline in solar module and cell prices, alongside a significant reduction in batching prices. On page 18, let me first delve into the auction market. This has been one of the best auction markets we have seen since our inception. There was an over four-fold increase in RE auctions during fiscal year FI24 compared to fiscal year 2023, and another 50 gigawatts has already been announced and should be completed in the current fiscal year. The share of firm power projects grew the most with over 23 gigawatts auctioned in FI24. While the overall market has grown, for sure, we notice that the subscription rate, which is a measure of competition levels, is generally lower, particularly in the firm power of complex project auctions. Although there are enough takers for vanilla wind and solar projects, some of the more complex projects saw less than one time subscription. We expect this trend to continue due to the limited capital, bandwidth, project sites under development, and resources among our peers, and therefore we should see lower competition and hence possibly better returns. Turning to page 19, India's FI24 GDP grew by 8.2% year-on-year, surpassing estimates. Thanks to this GDP growth and expansion in purchasing power of the Indian consumer, we see a consistent rise in power demand which has also risen around 8% on average over the past four years. Notably, despite a rapid expansion in power consumption, India still has one of the lowest per capita electricity consumption rates in the world. On page 20, India's peak demand hit two new highs in May of this year, and with that came outages and spikes in merchant power prices, as well as regulatory caps, evidence that demand is outpacing supply. Despite this high demand, supply will take time to catch up, including that of renewable energy, the fastest and cheapest solution. With the likelihood of continued shortages and upswing in the average merchant prices and lower competition in auctions, it is reasonable to expect auction tariffs will also continue to rise in the medium term. On page 21, due to an increase in power demand and with the mandate to reach its 2030 targets of 500 gigawatts of installed RE capacity, MNRE, the Ministry of New and Renewable Energy, initiated a 50 gigawatt RE auction target last year, appointing four different agencies to bid on this capacity. These agencies, along with the state distribution companies, have surpassed the overall target in the first year, auctioning over 62 gigawatts of renewable energy capacity, nearly a four-fold increase over the last several years and the most ever. We are tracking another 50 gigawatts of auctions that have been announced for FI25. Notably, the amount of firm power complex or complex capacity has seen the largest increase in FI24 over FI23. With, as I said earlier, about 23 gigawatts of firm power capacity auctioned during the year, and around 9.5 gigawatts already announced for financial year 25. Given our differentiated capabilities, we have been able to capture more of these high return projects than up years. We capitalized on the expansion in auction volume by winning about eight gigawatts of RE capacity in a single year. This was nearly 60% of our contracted capacity at the beginning of fiscal year 24. Of this 8 gigawatts, we have signed PPAs for about 1.8 gigawatts and another 438 megawatt agreement with a single corporate customer. Of these 8 gigawatts, over 5.2 gigawatts were firm power projects which should have a higher return than plain vanilla products. Turning to page 22, the total addressable market has expanded, but there is limited capability and bandwidth amongst peers for these firm power or complex projects. Most competitors, aside from the top three or four, have struggled to keep up with the rapid increase in auctions, resulting in lower competition, as evidenced by falling subscription rates. The vanilla, wind, solar, and hybrid auctions have had over-subscription rates of 2.8 to three times, whereas some firm power projects have been less than one time subscribed. Limiting factors such as capital, scale, and capability contribute to this trend. But our key differentiator is our in-house wind EPC teams. We have been investing in developing a strong platform that can deliver large-scale projects at the lowest cost. Our in-house wind EPC and solar EPC and land acquisition teams ensure seamless delivery on this front. Turning to page 24, which further outlines our differentiated platform and ability for firm power complex projects. Our linked EPC expertise bundled with our digital capabilities provides us with an edge in firm power complex projects. We can deliver these projects at the lowest cost in India and achieve superior returns, which are better than vanilla projects. Our portfolio combined with our pipeline of over 21 gigawatts includes now around 21 gigawatts of firm power projects. or about a third of our total projects under construction and in the pipeline. Competition in this segment, as I said earlier, is low, and our in-house digital lab further enhances return through determination of the optimal mix of wind, solar, and battery. Our ability, therefore, to manage in wind EPC and our digital platform enables us to achieve superior returns in this segment of the market. In addition, I should say that we now participate only in central bids as the counterparty profiles enable us to source cheaper financing and further, we now only take on corporate PTAs of at least 50 megawatts with mostly now marquee international customers. We invest our capital in the highest return opportunities and currently firm power projects provide that avenue. Turning to page 26. We are the largest wind EPC developer in India, with over 4.7 gigawatts of operational wind projects, and our nearest competitor is only about half of our size. Since our inception, India has added about 29 gigawatts of wind capacity, with 4.7 gigawatts contributed by us, or almost 17% of the total market share for us. Wind projects are complex due to design intricacies, lead time of site selection, the fragmented nature of sites, and, very importantly, right-of-way related matters. Despite these challenges, wind has the lowest LCOE for peak demand, even better than solar. That may sound odd, as normally peak demand in the US or Europe is during the day. Peak demand is during 6 to 8 a.m. in the morning and 7 to 9 p.m. in the evening, times when solar is really not generating. A decade of experience and data from over 2,200 wind turbines enables us to optimize bidding models and select the best sites for upcoming projects, providing us with significant competitive advantages. Further, we have realized that we are able to better manage operational projects, and we have found that we maintain projects ourselves at a 25% to 30% lower cost than if outsourced to OEMs. It also allows us to actually generate higher uptimes and generation from the wind turbines that we manage ourselves. We will continue, therefore, to focus on enhancing our wind capabilities and grow this capability by developing more firm power projects. Turning to page 27, the combination of wind, solar, and battery storage is the best renewable energy solution for firm power, particularly compared to solar with pumped hydro alternatives. Wind is a much more cost-effective solution than pumped hydro for meeting demand when solar is not producing. With a combination of wind, solar, and batteries, we produce the cheapest firm power from renewable energy in the country. Our analysis concludes that the overall cost of pumped hydro plus solar is still 10 to 15% higher cost than what we can produce with wind plus solar and batteries. Moreover, PHD sites are limited and have lead times of over three to five years, making it challenging to deliver electricity in 18 to 24 months as required by the PPA's terms. While for batteries, the fall in prices has ensured that the cost of using batteries as a solid solution is far more economical than it was before, and with the likely continued improvement in technology for batteries and reduction in cost, this shift towards wind and solar and batteries is likely to continue to take place in the future as well. Turning to page 28, our digital capabilities provide us with a unique advantage. Our digital lab is able to use complex simulations through triangulation of proprietary data from our over 2,200 plus wind turbines across all of the country, our 16,000 plus solar inverters, and 150 plus wind moths. Through this in-depth analysis, our digital engines can do predictive modeling as well as do backward testing of our models, allowing us to bid more effectively in auctions, achieve higher tariffs, and reduce execution rates. Additionally, we can minimize battery use and rely more on wind and solar production, which are cheaper sources of capacity, through our digital analysis. Our digital capabilities enable real-time monitoring of plant performance, optimizing delivery with minimal downtime. We therefore view our digital systems as a significant competitive edge, as there is even greater demand for complex power solutions going forward. Separately, Renew is also the only renewable energy company to have received the prestigious Global Lighthouse Award by the World Economic Forum, and we have received this award not just once, but twice. Turning to page 31. Access to transmission interconnection is also critical to ensure on-time delivery for power projects. Our efforts to secure access to connectivity for future projects Growth starts years in advance with utilizing our proprietary data and local expertise to identify the upcoming substations in a region where we can get the highest PLS or plant load factors by minimizing transmission line additions. Most interconnection access in India has already been allocated through till fiscal year 2027-28. Put differently, If you wanted to bid in the auction market today, your project would likely not be able to get access to the grid until FY28 in competitive PLF locations. For seeing this bottleneck, we have secured access to over 10 gigawatts of connectivity beyond our operational projects. We have visibility of interconnection access for not only our projects under construction, but also for our 5.6 gigawatts of uncontracted pipelines. We actively secure access to interconnection hubs or acquire land where hubs are expected to be built, ensuring our projects can be connected once fully built. In addition, having this clarity of interconnection and site development provides us greater confidence while bidding. It also allows us to be more competitive if we have blocked more competitive PLS sites than our competitors. Our in-house project development teams ensure that we are ahead of competitors in securing land, transmission, and interconnection for the bit that we carry out in the future. And this is actually what helps us also get the higher IRRs on our projects compared to our competitors. Turning to page 32, in terms of returns on our projects, one of the most critical factors impacting returns is cost. In the past year, solar module and cell prices, which represent 40 to 50% of the solar project cost, have fallen by over 50% or more, which has resulted in over $100 million worth of CAPEX savings on fiscal year 24. When looking at our CAPEX forecast, do note that we have assumed higher module prices than the current spot prices. If we do indeed realize current spot prices over the next four or five years, our total solar module capex would be about 15 to 20% lower than our projection. Battery prices have also fallen significantly as well, and as I said, the trend continues to be downwards for batteries as well. Turning to page 33, supply chain challenges, especially in solar, remain prevalent in India. The implementation of the ALMM, or the approved list of modules and manufacturers, in April this year has restricted most of the imports of modules into India. To provide a solution to ensure security of supply, we now have our own manufacturing facilities, which are currently producing modules that cost lower than imports after including import duties, even when imports are possible in a very restricted sense. And of course, for future projects, that is not even possible. While India has about 35 gigawatts of capacity, Much of it is old, higher-cost technology, or is exported, or caters to rooftop and the smaller module requirements, leaving only about 12 gigawatts of supply versus a much higher domestic demand. We are transitioning to TopCon technology, which is at least 2% to 3% more efficient than existing monopole technology to further increase our cost advantages over our Indian peers. We are interested over time in monetizing a portion or even all of our solar manufacturing plants as part of our capital recycling strategy, securing, of course, the supply to our own plants. Our assumptions while bidding include buffers over the spot prices for sales, and this helps insulate us from a possible uptake in prices come execution time. Turning to page 34, interest cost is our biggest annual expense. Over the past year, we have ensured that the interest rate of refinance debt is lowered by refinancing old high cost debt as well as by shifting to cheaper domestic financing. Both international and domestic lenders continue to show a lot of interest in our projects and the domestic debt liquidity at a high. We have signed over $13 billion worth of debt funding MOUs in a single year with very high quality counterparties such as the Asian Development Bank, Societe Generale, and Power Finance Corporation and REC. Additionally, Indian banks are now more open to renewable energy projects and are not only offering competitive terms, but also larger check sizes in line with the larger auctions and project sizes that they are not doing. We have no immediate refinancing risk, and we continue to be prudent in our approach to ensure that we can optimize our costs through tapping a very varied pool of capital. With that, let me hand it over to Kailash to discuss more about the financing strategy. Kailash, over to you.