One of India’s largest independent power producers in the renewable energy domain, ReNew (previously ReNew Power) has grown rapidly with the backing of key international investors since it was established in 2011. As per ReNew’s earnings review for the third quarter of financial year 2023-24, released on February 17, 2023, the economic shareholding of the company is split among the Canada Pension Plan Investment Board (CPPIB) (37.3 per cent), the Abu Dhabi Investment Authority (14.4 per cent), Goldman Sachs (13.8 per cent), JERA (7 per cent), founding entities (3.9 per cent) and public shareholders (23.6 per cent). Over the years, Goldman Sachs has sold its shares in ReNew. As of August 2021 (listing date), Goldman Sachs held 35.57 per cent of the shares. Recently, in March 2023, CPPIB bought $268.6 million worth of shares at a price of $4.8 per share from Goldman Sachs, becoming ReNew’s majority owner with over 51 per cent stake. According to media reports, the reason for Goldman Sachs’ stake sale is to comply with laws in the US that do not allow financial institutions to own securities in any company beyond 10 years.
As per ReNew’s third-quarter earnings review for financial year 2023, the company has a portfolio of 13.4 GW, showing a 30.2 per cent increase year on year. The total portfolio includes solar (6.9 GW), wind (6.4 GW) and hydro (0.1 GW). Of the total portfolio, 7.8 GW has been commissioned (3.7 GW for solar, 3.9 GW for wind and 0.1 GW for hydro) and 5.6 GW has been committed (3.2 GW for solar and 2.5 GW for wind). Only about 1 per cent of the total portfolio is still awaiting power purchase agreements (PPAs). The total portfolio comprises 11.5 GW of projects that have PPAs with central and state counterparties, with the remaining 1.9 GW being tied up in PPAs with corporate counterparties. Of the corporate PPA portfolio, around 660 MW has been commissioned, with the rest to be completed over the next 18 months. In the third quarter of financial year 2023, ReNew signed new corporate PPAs for approximately 282 MW of capacity. The company’s target is to reach a 4-5 GW corporate PPA portfolio by 2025-26. Its key corporate customers include Amazon, Toyota, Suzuki and Mahindra.
In December 2022, ReNew signed a renewable energy agreement for 150 MW of capacity with Microsoft India. As part of the arrangement, ReNew will produce 150 MW of clean energy from a recently commissioned solar site near Bikaner. In the same month, ReNew signed a contract with Jindal Stainless to develop a utility-scale captive renewable energy project for the supply of power to Jindal’s facility in Jajpur, Odisha. In August 2022, DCM Shriram agreed to source 50 MW of renewable energy from ReNew for its manufacturing facility in Bharuch, Gujarat.
Onus on sustainability
ReNew has committed to becoming a net-zero carbon emitter by 2040 and has pledged to meet a broader range of environmental, social and governance goals including achieving carbon-neutral status with respect to Scope 1 and Scope 2 greenhouse gas (GHG) emissions every year till 2025, developing science-based targets (for scope 1, 2 and 3 GHG emissions) that are validated by SBTi, achieving water positivity by 2030, procuring renewable energy for operations and achieving zero waste to landfill. Further, it aims to impact 2.5 million lives through corporate social responsibility initiatives, train 1,000 salt pan workers under Project Surya as solar panel/pump technicians by 2024, and ensure 30 per cent representation of women in the workforce. As of the end of the third quarter of the current financial year, it had achieved 12 per cent representation of women in the workforce.
As per the company’s sustainability report 2021-22, ReNew generated 14,263 GWh of clean electricity that year – enough to power approximately 4 million Indian households – and helped eliminate 11 million tonnes of carbon emissions through its operations (0.5 per cent of India’s total emissions). The report states that the carbon intensity of ReNew’s electricity generation is 95 per cent lower than the Indian power sector’s average. The company also disclosed Scope 3 GHG emissions for the first time, and achieved carbon-neutral status for the second consecutive year for Scope 1 and 2 GHG emissions.
Recent financial performance
For the third quarter of financial year 2023, ReNew reported a total income (or total revenue) of Rs 16,077 million – an increase of 19.4 per cent over the third quarter of financial year 2022. The adjusted EBITDA for the third quarter of financial year 2023 was Rs 11,628 million – an increase of 10.2 per cent over the previous year’s third quarter. Meanwhile, the net loss for the current financial year’s third quarter was Rs 4,013 million, compared to a net loss of Rs 6,384 million for the same quarter in the previous year. The cash flow to equity for the current quarter was Rs 2,682 million – a decrease of 47.3 per cent over the preview year.
ReNew has also released the financials for the first nine months of financial year 2023. According to these, the company’s total income (or total revenue) was Rs 63,493 million, an increase of 23.1 per cent over the corresponding nine months of the previous financial year. The adjusted EBITDA was Rs 49,995 million, an increase of 17.8 per cent over the same period of previous financial year. Meanwhile, the net loss was Rs 5,103 million, compared to Rs 12,573 million in the previous year. The cash flow to equity was Rs 19,810 million, an increase of 10.6 per cent over the previous year.
In January 2023, the new Norwegian Climate Investment Fund, managed by Norfund in collaboration with KLP, Norway’s largest pension company, announced that it will make its first investment of Rs 900 million in a ReNew transmission project in India. Norfund and KLP will invest approximately Rs 900 million in ReNew for a 49 per cent ownership stake in ReNew’s transmission project in Koppal district of Karnataka, with plans for additional joint investments.
In November 2022, ReNew Energy Global Plc signed an agreement to acquire 3E, a renewable energy asset performance management platform, from KLP Kapitalforvaltning AS and Norfund. In August 2022, ReNew entered into an external commercial borrowing project finance loan agreement with 12 international lenders, led by Rabobank. In June 2022, ReNew signed definitive agreements to acquire over 500 MW of operating wind and solar assets.
In January 2022, ReNew sold 138 MWp of its distributed rooftop solar portfolio to Fourth Partner Energy, a rooftop solar energy company, for Rs 6.72 billion. Furthermore, ReNew Energy Global Plc announced that India Clean Energy Holdings, a Mauritian entity, and its wholly owned subsidiary ReNew Energy Global Plc, had raised $400 million at 4.5 per cent by issuing senior secured dollar notes.
The way forward
The way forward for ReNew is the diversification of its business into the green hydrogen, energy storage, hybrid projects and solar manufacturing verticals. In November 2022, ReNew announced the signing of a framework agreement with Egypt for building a green hydrogen plant in the Suez Canal Economic Zone at an investment of $8 billion. In May 2022, the Maharashtra energy department and ReNew signed a Rs 500 billion agreement for setting up renewable energy projects in the state over the next six to seven years. In January 2022, Fluence and ReNew announced a partnership to form a new company to address the country’s rapidly growing energy storage market.
Going forward, in a bid to ensure security of supply for solar components, approximately 60 per cent of ReNew’s solar projects that are under development will be self-supplied. To this end, the company is currently setting up two module plants of 2.1 GWAC and 1.2 GWAC capacity, which have achieved 67 per cent and 19 per cent completion respectively. It is also constructing a cell plant of 1.1 GWAC capacity, which is 39 per cent complete. The company committed Rs 8 billion and Rs 20 billion in capex for manufacturing in 2023-24 and 2024-25 respectively.
All in all, taking risks and exploring new business avenues is expected from a company like ReNew. It will be interesting to see how it navigates key challenges relating to land acquisition, pending dues from distribution companies, and power curtailment.