ReNew Energy Global Plc (RNW) Q3 2022 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the ReNew Energy’s Third Quarter Fiscal 2022 Earnings Call. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]. 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. On Thursday evening the company issued a press release announcing results for the first nine months and third quarter of fiscal 2022 ended December 31, 2021. 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; and Kailash Vaswani, President of Finance and Interim CFO. Sumant will start the call by going through an overview of the company and recent key highlights. Kailash will then provide an update on the quarter and then we will wrap up the call with Sumant reiterating our adjusted FY22 EBITDA excluding the impact of weather, our forecast of $810 million. 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 reconcile 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 Sumant.

Yeah, thank you Nathan and good morning to everybody on the call. Our company RNW has been publicly listed on NASDAQ for six months and a lot has happened since the last earnings call in November, that we are in excited to recap for you. We continue to believe that RNW is one of the most compelling investment opportunities in the renewable energy sector today. We realized that many investors are new to the story so I would like to provide a quick recap on Page 5. ReNew is one of the leading renewable energy companies in India and also one of the largest renewable energy companies globally. More than 70% of our portfolio is already operating and most of the assets that are in development have PPAs that are for 25 years with fixed tariffs providing predictability. Our portfolio is also balanced between solar and wind. Our scale and vertical integration differentiates us in multiple ways, including being more efficient and lower cost, having great access to cheaper capital, and investing for the future to retain our competitive edge in a young and rapidly evolving market whilst maintaining a higher EBITDA margins. We have a long track record of execution and have delivered equity IRRs of between 16% and 20% consistently over time. We are emphatic about capital discipline as evidenced by our recently announced share buyback. India is now one of the largest and fastest growing renewable energy markets globally. And is committed to increasing the installed capacity of renewable energy by over four fold to 2030. Renewable energy makes sense for the consumer as it is the lowest cost source of new electricity capacity in the country today. The Indian renewables market continues to mature and this is really playing to our strengths. On Page 6 we have provided a broad segmentation of how we view the market today, broken into the Plain Vanilla Renewable Energy which currently has the most competition and return opportunities at the lower end of our targeted range. And the higher return segments in intelligent energy solutions M&A and corporate PPAs that provide higher returns and lower competition. More of our growth will be from segments that have higher returns which ReNew has a differentiated advantage in. Focusing on the Intelligent Energy Solutions segment, for a moment distribution companies are increasingly needing electricity that has a more consistent firm profile. With that expertise across renewable energy technologies including wind, solar, and storage we believe that we are one of the few renewable -- Indian renewable energy providers that can provide baseload power in the market today. In addition, given our expertise and past investments in the Intelligent Energy Solutions segment we believe that we are the lowest cost provider of firm power from renewable energy sources in India today. Our locked in growth remains robust and on track with our previously announced guidance as seen on Page 7. As of today, we have 7.3 gigawatts operating, up from 5.6 gigawatts that we had operating nine months ago. We continue to expect our FY 2022 adjusted EBITDA, excluding the impact of weather which was approximately $55 million in the first nine months of this fiscal year so far, it will be approximately $810 million. I do want to point out that all of our expected FY 2022 EBITDA is coming from operating and completed capacity. We expect to deliver EBITDA of over $1.1 billion annually from our 10.2 gigawatt portfolio which is actually nearly double our EBITDA that we reported last year. We do have confidence in achieving EBITDA that we reported last year. We do have confidence in achieving this growth as about $1 billion of the EBITDA should be generated from commissioned projects or have a signed PPA that are in construction phase. Moving on to Page 8, on recent developments since our last earnings call, there has been some progress in resolving the Andhra Pradesh DISCOM court case. We have also got favorable rulings from the court and regulators in Karnataka and Maharashtra states. Final hearings occurred earlier this month and we anticipate a ruling on the Andhra Pradesh issue shortly. Please not that a favorable ruling would improve our financial position relative to our guidance. Despite all of the interest rate dislocations, we have also just completed a $400 million Green Bond issuance with the U.S. dollar coupon of 1.5%. Net operating costs blended into a straight in INR terms was 8.4%. The initial use of proceeds are expected to refinance near-term maturities saving the company about $5 million of interest expense annually. We continue to see favorable terms to continue refinancing at rates better than we currently have, which we will discuss shortly. We also announced this quarter the sale of our rooftop business for about $90 million adding EV to run rate EBITDA multiple of about 9.5 times. We decided to monetize this business for several reasons. Structurally the rooftop business is a different business in our large scale ground mount focus and the sale allows us to allocate capital to higher returns, larger utility scale projects. In addition, we saw an attractive opportunity to redeploy capital, to buy back our stock at an EV to run rate adjusted EBITDA multiple of only 7.6 creating significant value for ourselves. This is also a good segment into our 250 million share repurchase program. Earlier this month we announced a share buy back as we found the value of the stock to be our highest return opportunity of scale. We are committed to capital discipline and will allocate capital to the highest return opportunities whether it is an organic growth, M&A, or our own shares. Turning to accounts receivables on Page 9, as December 31, 2021 our outstanding accounts receivables stood at $606 million which we recognize is high. We believe that the DSO however has peaked at the end of the second quarter of 2022 and will continue to improve going forward. And when you look into what constitutes our past due accounts receivables, you will see that four state DISCOMs account for the vast majority of our overdue receivables. We believe that we can improve our payment cycles with these states, in particular we have for the first time taken our customers in Karnataka, Maharashtra, and Madhya Pradesh to court to accelerate recovery. The increase in receivables were understandable during COVID, however, now electricity demand is at new highs and payments to the DISCOMs are being made in a more timely manner. And therefore we have made some progress towards improving our DSOs. In Karnataka the High Court directed the DISCOMs in the State to clear all outstanding dues payable which is about $90 million for us. In Maharashtra the State electricity regulator directed the State distribution company to submit a clear plan to clear all outstanding receivables. Our court case in Madhya Pradesh is proceeding and we expect a ruling later this year. Please do note that full recovery from the States that even a favorable court ruling is likely to be over some period of time. Turning to the court case in Andhra Pradesh or AP, the drawn out case has finally concluded its hearings and we do expect a ruling by no later than the end of March. We believe that we have a strong case and if you win the case, we would look to recover about $200 million over a period of time. The recovery of past due receivables is an upside to our long-term guidance provided last year and we will not need to issue new shares if an outcome in any of these cases is unfavorable to us. The combination of company initiatives, legal and regulatory proceedings, central government support, improvement in electricity demands or distribution utilities, and a shift towards central government agencies that have a strong record of on time payments will result in a major improvement in our DSOs over the next several years. With regard to partnerships we recently announced joint ventures with L&T, India’s leading engineering and EPC company and Fluence, a global leader in battery technology. These initiatives are consistent with our past practices of making small investments now to be a leader in future large opportunities. We believe that these partnerships will provide competitive advantages to us and position us extremely well for the next stage of growth in Indian renewables which should be based around both hydrogen and batteries. And in fact India has recently announced a green hydrogen policy and is only one of the few countries to have announced such a policy. The policy includes major incentives such as free transmission, open access, and provisions to bank [ph]. We believe that the government of India wants major industries to commit to green energy and decarbonization and an important step forward would be a green hydrogen purchase obligation. Overall we think that green hydrogen represents about $60 billion investment opportunity by 2030. Approximately 70% of the CAPEX required for a green hydrogen plant is renewable energy, where we expect to contribute that expertise to the joint venture. L&T has a depth of knowledge on the last mile, the electrolizers connecting to the plant and storage, etc. We believe that this partnership is one of the lowest cost providers of green hydrogen in India. We expect that there will be numerous bids over the coming years, and we will provide updates to all of you as events unfold. We also entered into an agreement with Fluence to provide a market leading energy storage solution in India. Fluence brings significant intellectual property leadership in the battery segment and currently is the only company that has an operational utility scale battery operating in India at the moment. The projected market size is equivalent to about 27 gigawatts by 2030. Before I turn it over to Kailash, I would also like to say a word on our CFO Muthu’s announcement to move on from ReNew Power to pursue other interest. Since joining us in August 2019 Muthu has been a valued member of the ReNew leadership team and played an instrumental role in the company’s listing on the NASDAQ last year. We do express our sincere gratitude for his contribution and wish him the best for his future endeavors. His resignation shall be effective on or around 31st March, 2022. Kailash Vaswani, will be the Interim Chief Financial Officer till the Board appoints our next CFO. As an introduction to Kailash, who most of you would previously have met, Kailash has been a valued member of ReNew’s senior management team, right since the inception, about 11 years ago. Kailash has directly been responsible for all of ReNew’s fundraising and all of our M&A activities as well as our cash flow and treasury management. With that I will turn it over to Kailash to discuss our quarterly results. Thank you.

Thank you Sumant. Looking at Page 12 which provides highlights of the third fiscal quarter, we have 7.3 gigawatts operating as of today after the addition of 1.1 gigawatts this quarter. The 1.7 gigawatt addition this fiscal year was particularly commendable, given the challenges of COVID and supply chain disruptions. Our revenues are labelled total income under IFRS in the first nine months of fiscal 2022 rose 26% on the year, while our adjusted EBITDA increased by more than 27% and the cash flow to equity jumped almost 116%. Turning to Page 13 which provides a reconciliation of weather adjusted EBITDA to our reported results. Weather adjusted EBITDA in the first nine months of FY 2022 was $626 million or about 77% of our FY 2022 weather adjusted EBITDA guidance of $810 million which puts us on track to achieve our guidance. Weather improved from last year although it remains below normal levels and has had about $55 million negative impact in the first nine months of this fiscal year. We do expect our operating capacity will be around 8.2 gigawatt by year end although it is possible that commissioning of some small amount of capacity may slip into the early parts of April. We have recently find binding turn sheets for another 500 megawatts of acquisitions which will add to the above number. One of the frequent questions we get asked is about supply cost inflation which we've discussed on Page 14. The project cost for megawatts added during the first nine months of this fiscal year has very little impact or higher supply costs. Whilst there has been some increase in cost relative to budget for projects, we are delivering for the remainder of the year after considering the lower financing costs that we are realizing in the market today, we continue to expect that our projects under construction will deliver an equity IRR within our targeted range of 16% to 20%. Turning to Slide 15, which highlights our interest rate risk management strategy, the majority of our debt is fixed and only about 15% to 16% of our total debt would have near term impact from increased -- interest rate increases. Every 100 bps change in short-term boring rates for all these variable cost debt, will equal to over 2% impact on the cash flow to equity annually, so again very marginal. Despite the recent increase in interest rates globally we are still seeing very favorable debt sanctions below 8% in the Indian market and from overseas lenders which is less than our average cost of debt. We have finance and refinance debt in excess of $1.5 billion over the last 12 months resulting in decline in our average cost of debt to 8.9% going forward compared to 9.4% we recorded over the past nine months. In recent transactions we have seen rates as low as 6.5% [indiscernible] as well. We are working towards refinancing our floating rate debt to fixed rate for the long-term. With that I'll turn it over to Sumant for guidance and closing remarks.

Yeah, thank you Kailash. I'm very happy to report that despite the uncertainty around supply chain issues and COVID, we do consider to be on track with our adjusted EBITDA guidance for this year. We do believe that we will achieve $810 million of EBITDA after excluding the negative impact of weather which we have said has been about $55 million so far to the first nine months of fiscal 2022. As it looks currently we also should be having 8.2 gigawatts operations by around April or May depending on when our acquisitions closed. Turning to Slide 17, we are also reiterating our guidance on a run rate EBITDA basis. Once our 10.2 gigawatts portfolio is completed over the next 18 months or so, we expect EBITDA will be at least $1.1 billion. We expect that we will have about $5.7 billion of net debt on our books, only 4.9 times debt to run rate EBITDA leverage ratio, once the 10.2 gigawatts is fully completed. We expect our cash flow to equity run rate to improve meaningfully as well to $400 million on an annualized basis once 10.2 gigawatts are operational. Importantly, our portfolio is fully equity funded. In fact, we do not need to issue any new shares to reach 18 gigawatt. And at 18 gigawatt, our cash flow generation should be sufficient to self fund 3.5 to 4 gigawatts of growth annually without raising any external. Now with this let me stop and we will of course be happy to take any questions. Thank you.

Thank you. [Operator Instructions]. Our first question comes from Julien Dumoulin-Smith from Bank of America. Please go ahead.

Hey this is actually Kody Clark on for Julien. Thanks for taking my question. So first, can you give us some additional color on the year and 2022 operating portfolio guidance of 8.2 gigawatts. We have 500 megawatts in acquisition coming down the pipe, maybe they slip a month or two in the remaining 300 megawatts. Is it organic or there are additional…?

No, it is organic. So we will be commissioning another approximately about 300 to 400 megawatts between now and the end of the financial year. And then the balance as we said is the acquisition.

Got it. In confidence in the adjusted EBITDA guidance is not really impacted because these are small contributions to the full year guidance anyways?

That's right, that's right.

Okay, and then just to follow-up around valuations for renewables projects, just wondering if you can talk through kind of the strategy of potentially selling minority stakes in assets. It seems like it could be accretive to be able to redeploy the capital into new growth projects or even further support the buyback that somewhere shares are trading, just curious if you have any thoughts there?

Yes, so you are absolutely right. I think currently we see sales in the fall. Assets in India and the private market at about anything from 9 to 10 times. And so there is an opportunity, and we saw that in the sale of our rooftop portfolio which is a 9.5 times. So our view is that we should be for the quality of assets that we have, we should be able to get those kinds of multiples going forward. And frankly, there are a number of people who -- financial investors and others who would like to acquire these assets from us and be in partnership with us. So that is something we can certainly look at doing and recycle our capital and sort of increase the velocity of our capital a little bit. Historically, we have not done that, but I think it's something that we are now looking at doing more of as we go forward. And of course, with the capital that we can get freed up, we can then deploy that into other high return projects or use that for the buyback that we've already announced. So those are obviously uses of that capital. And so that's really what we are looking at, at this point of time. And of course, what that also means is that for the capital that we would have invested in those projects, the IRR on those then obviously tends to go up quite substantially because we have been able to sell minority stakes at much lower than equity IRRs for those projects. So it's actually a fairly positive thing for us to do. It allows us to increase the returns equity on invested capital and allows us to recycle capital at a faster pace and deploy it into whichever areas we feel are giving us the best returns.

Okay, understood that's helpful. And just one last one if I can, just around weather impact, it continued to be a drag in the third quarter and just wondering if you have any updated thoughts on maybe reevaluating the wind resource baseline across your portfolio at year-end?

Yeah, we will certainly look at doing that. As you know, we had not a great year the year prior. And then of course, this year has also not been good. Of course, the years before that were by and large in line with the long-term forecast, but I think having had two years of subpar performance, we will I think over the course of this current year, we will look at relooking at the long-term forecast. We'll hire an external agency to help us do that. We'll probably wait for this current high wind season over the course of the middle of this year to get done so that we have a little bit more data. And I think then we'll reexamine and see whether there is any merit or reason for us to look at changing any of our forecasts. And if there is, of course, we'll be let you all know. But we will do a considered thoughtful exercise on that.

Okay, got it. Thanks so much for the time. Appreciate it.

Thank you. [Operator Instructions]. Our next question comes from Justin Clare from ROTH Capital Partners. Please go ahead.

Hi everyone, thanks for taking the questions here. So, first off on fiscal year 2023, just wondering if you could give us an update on how you're thinking about portfolio growth as we move into next year, if you could share how many megawatts you might add for wind or for solar next year and then how much could come from in-house development versus acquisitions? And then maybe also how you're thinking about the potential for new auctions next year and whether you could win in new auctions and then also add those assets over the next year?

Yeah Nathan, do you want to talk about guidance for next year?

Yeah, hi Justin. So when you look at our expectations for next year, we have essentially going to be bringing on roughly about 18, well, 10.3 gigawatts over the next 18 months from our current level. That does not include the 500 megawatts of binding term sheet acquisitions that we've just announced. So as we look at it today, right now we're expecting that to come on kind of mid-summer of next year. And then we're also continuing to evaluate the M&A market. Clearly, M&A markets are dependent upon valuation and obviously, our share price is at a level that we view positively relative to that market. So we still continue to think there's plenty of opportunity and we'll make that commitment to capital where the highest return is. Sumant, do you want to talk about the outlook for the market?

Yeah, look I think the outlook for the market is extremely positive still. As you all know there was a backlog of PPAs that SEKI [ph] had to still get done. A lot of that backlog is now being cleared in light of new demand that is coming in from the utilities. As we saw over the course of the COVID impacted year, the power demand growth was actually flat more or less. But in the current year -- current financial year, we've seen power demand growth at about 5% to 6%, and the expectation is that that will continue over the course of the next year as India's GDP continues to stay robust between this year and next year. And as that demand is getting manifest, clearly the utilities need to buy more power and that therefore is leading to more demand, which is obviously very fundamental to having more bids. In addition, there are new sources of demand coming in. One, of course, is the corporate PPA market, where there is now increasing pressure on corporates as well as for them and from their standpoint, a potential cost reduction opportunity by buying renewables directly from people like us. So we are seeing that market growing quite substantially. As well as the carbon market, actually, because there are a number of people who are coming in and looking only to buy the carbon portion. And then, of course, there are two other sources of demand. One is the Indian Railways, which has pledged to go net zero by 2030 and consumes almost about 3% to 4% of India's total electricity generation. So that is something that they are also coming into the market now in a fairly big way. And then, of course, the opportunity for green hydrogen, which, as I said in my remarks, the government has now announced a green hydrogen policy and is going to be pushing that rollout quite aggressively. So all of those are going to lead to increased demand. So you'll see probably therefore more bids coming up through the course of this year as the backlog of the old projects gets cleared up. And all of that therefore will result in significantly increasing everybody's pipeline, including our own fall commissioning between one and a half to two years out from this point on. So I think that's how the demand side will develop. It's looking fairly robust at this point in time, and I guess that's good for all of us in the industry. So let me pause there.

Okay, great. No, that was really helpful. And then I guess if we could shift to just the supply chain here, we've heard about delays in wind turbine manufacturing due to challenges with the supply chain and then not being able to get the materials that they need. So can you just give us a sense for are you getting your turbines on time and the equipment that you need to keep projects kind of on track here or are you seeing potential for delays?

So, you know, Justin for the project that we had to commission this year, we've got all the turbines for those projects and those in any case have to be done literally over the next month or two. So those are all under control. For projects that will be commissioned over the course of the next financial year, those deliveries are still a few months out, and at this point we haven't -- at least our suppliers have not indicated to us any delays on their supply schedules. So, I don't have anything specific to report to you on that front right now. But now that you mentioned it to me, I'll keep an eye on it and in fact, proactively going to have these conversations. But so far, frankly, we have not heard anything on that front from our suppliers.

Okay, alright, good. [Multiple Speakers]

The only other thing I was saying is that we have pretty diversified supply of wind turbines coming this year from Vestas and Siemens Gamesa and Envision, so we are not overly dependent on any one of them. And frankly, they have all sort of dialed back on their capacities for India already and those I think are pretty much at least as far as they've indicated to us under control right now.

Okay, good, and then maybe just one more from me on interest expense here or just interest rates generally. I think you have 29% of your debt is variable rates right now. Just wondering if you're considering fixing that, fixing those rates and if you have the ability to do so? And then how are you thinking about interest rate risk for projects that you're still developing or building, any way to hedge interest rate risk or any way -- how are you thinking about that?

Yeah, I let Kailash answer that question. Kailash.

Yeah, Justin. So Justin, as far as the variable rate interest loans are concerned, we have -- we are working on that actively and we expect that out of the 27% to 28%, at least 20% would be fixed in the next 6 to 12-month time period. And what we are also trying to do, wherever we have variable, we're negotiating much lower rates. So, we're seeing rates at even below -- at around 7% or there abouts. And then that was actually then giving us the ability to wait out some of the interest rate increase also which happened. So, we try to manage rates in that fashion where variable rates are at lower rates, at closer to 7 to 7.5. Fixed rates are between 8 to 8.5 and then we lock it in, and there's that 1% differential which we see more or less. To your second part of the question, as far as projects which are under development is concerned, so again, we are borrowing in some of these projects dollar loans where we hedge the dollar exposure and the interest rates out to five years. And that fixes the rate and the upfront spread that we negotiate is relatively lower and that gives us the ability to still end up at the same level because the hedging costs also sort of narrow down a bit as interest rates increase. So, we are seeing those play out at this point. We are borrowing rupee for financing the projects, there again we are borrowing floating to some extent, and wherever possible we are also getting fixed rate loans, we are fixing it for the long term. So through that we are managing. And lastly I'll say that for our projects, which are under development or which we bid in future, we will factor in the interest rate at a higher level, our long term rate interest rate assumptions are closer to 8.75% in that range. So that gives us enough for runway from here now on to absorb any interest rate increases.

Okay.

I think Justin -- Justin let me just add to that and say that in India, interest rates at this point at least have not really gone up. And at its latest policy meeting, the RBI continued to adopt a fairly dovish tone. And Indian education is still within the RBI’s -- they have a band of 4% to 6%. So it's still within that band although at the upper end of that range. So our expectation is that Indian interest rates at least will continue to be not increasing very substantially at this point. And so that gives us the opportunity of shifting a little bit more into rupee borrowing and within that also, as Kailash said, if we do take the risk of variables, we tend to get much lower rates. But as we all recognize interest rates might trend upwards over the next year or two. And therefore, we are looking to fix a substantial part of even the variable rate borrowing that we have. And all of that is happening at rates of around 8%, which is significantly below our current overall cost of borrowing at 8.9%. So there is still an opportunity for us as we continue to fix rates to bring down our cost of borrowing further down from where we are. And of course for new projects as Kailash said, they're already assuming higher rates and so therefore, we are building that into the tariff. So we will not be for new projects at least being impacted by higher rates going forward, because we would have build that into our return expectation calculations. Thanks.

Okay. Appreciate it. Thank you.

Hi. We've had some yeah, we've had some online questions that I'll pose from here. When -- starting with the first one, there's a list of questions here. So just starting with the first one. Can you talk more about the Intelligent Energy Solutions bidding this year and have we seen new bids with storage coming up?

Yeah, so there one bid that the government has announced for storage, and that is 1000 megawatt storage bid that should be coming up for bidding fairly soon. There are a number of States also that have announced standalone bids as well, of course smaller in size so we're seeing whether we want to participate in those. But I would say that the market for standalone storage bids is also likely to grow quite substantially and so apart from bidding for State renewable energy projects, we will also be bidding for the battery projects. In addition to that, the government has now also announced by the way, a fairly significant build out plan for transmission infrastructure. And that is something that we are also interested in looking at, because they are very often tied into commissioning of our new renewable energy projects. So having control on the transmission infrastructure becomes fairly useful to have. So we're looking at that as another opportunity. So in terms of Intelligent Energy Solutions also, as I think we may have said earlier, there was a 2.5 gigawatt bid that happened last year, that had to be cancelled for some bidding issues, that is likely to get tendered out again in the next couple of months time. So that will be the first bid that will happen. And then as I said, the Indian railways is looking at doing their own round the clock Intelligent solution bids as well. So the first tender that they are likely to come up with is going to be at least 1 gigawatt in size or there about. And keep in mind that each of these Intelligent Energy Solutions requires renewable energy which is almost three times the capacity of the bid itself, because they all require much higher plant load factors. So a 2.5 gigawatts bid, for example, would require an installation of almost 7 to 8 gigawatts of actual renewable energy capacity of wind and solar. So these are actually there for fairly large sized tenders and these are all likely to be coming up in the initial few months of the next financial year, let's say Q1 or there about. So I suspect that there'll be quite a few of these kinds of bids plus green hydrogen also that said, will require solutions which also require more stability of power, and therefore also will require the guaranteed energy solutions. And as we see more of those requirements coming up, those will all feed into the same combinations of wind and solar and storage to optimize the overall cost. So I think we will be -- we do believe that there'll be quite a number of such options and bid that will be coming up over the course of the next 12 months.

And then just if you could follow up with a little bit of color on what you're seeing in the corporate PPA market, we have flagged this as a high return, which makes sense for corporates, it's green and lowers their cost. What are we seeing, are we seeing more enquiries and when can we see a material pickup for this market?

Yeah, we're seeing a lot of inquiries now and frankly, we've been working on this market for the last two years. And, in the beginning obviously the going was quite slow because, it took corporates a little bit of time to understand the regulatory environment and issues, and what kinds of solutions are possible. And, in different -- depending on where the customer is connected in terms of their power supply, different kinds of solutions and depending on the State, the regulatory environment, different kinds of solutions have to be structured for them. And then the selling cycle has been fairly long. But now as I said, getting to the point where we beginning to convert more of these PPAs, and Nathan, I'm not sure that we've announced separate standalone number for how many corporate PPAs we've signed. So if you haven't, then I won't talk about that right now. But certainly, it's something that we'll probably be coming out with at some point in the near future, in terms of how many megawatts of PPAs we have converted. But certainly we are seeing that the level of inquiries is quite good and therefore, I see that the market is likely to grow more as we go forward. And hopefully, over time, we'll be able to give some more tangible numbers about that.

Thank you Sumant. And just to change track here and talk about the wind resource study. Can you give us an idea of how the numbers are trending relative to a 20-year timeframe and what does -- what's the sensitivity to our EBITDA for every 1% change relative to normal over time?

Yeah, and Nathan I presume these are questions from investors as opposed to from you. Just kidding, I was just pulling the leg. Yeah, as -- if you look at the last 20-year analysis for which, we have measured actual wind mark data in India, we find that wind speed has decreased from the first decade of the 2000 to 2010 time period to the second decade of 2010 to 2020. There's been a reduction in wind speed by about 0.9% or about a 1% and that has approximately a 2% impact on the overall generation of wind projects. So, it's sort of within the band of statistical insignificance actually. There is 1% delta, which is why wind assessment companies don't really tend to factor in a decadal drop in wind data. Now, having said that, we know that the last two years particularly have been worse. And so if I factor in the last two years as well, and take the last 20 years, including the last two years, then that drop actually increases from about 7.8% to about 1%. And so -- just a little bit over 1%. So that's really what the overall numbers have been. And because the last two years have particularly sort of been bad and have caused us to have this significant weather adjustments, that is why we intend to now do a deeper dive into this whole issue. And let me also just tell everybody that the way we do our wind forecasts is obviously based on satellite data of the last 30 years, then we put up wind mass, we measure wind actually for at least a couple of years in that site. We triangulate that against the wind -- the satellite data, and we do our own internal assessments first. Then we go to a third party, wind study company like DNV GL or an ArcVera or one of these fairly well known companies that do this globally. And, then only we arrive at what the actual numbers should be. And then, as you all know, but as we go for lending, our lenders also hire their own wind measurement company and get the numbers validated. So there are at least two independent third party companies that tend to look at all of the projects that we have done. And so, what we finally end up going with is I would say, a fairly well analyzed and fairly well studied number. It's certainly not something that we just assign a number to ourselves, and then we just go with that. Now having said that, and despite that, and despite the best efforts of everybody, we do know that the last two years have not been as good as the previous several years before that. And that is why as I had mentioned earlier in the call, at the end of this hiring season, which we will finish around September, we will use that data that will give us then three years of data of the last few years and we will then recommission or rehire these agencies to do a full-fledged study. Now some of you would also know that globally also wind speeds have not been that good. Now, whether this is a sort of an aberration, or if this is a long-term trend, I don't think that anybody has a very, very strong sort of handle or view on that. So I think we will study this, as I said, in more detail and we'll come to whatever is the best conclusion we can come to. We are not fixated in our view, certainly, we want to be as open and transparent on this issue as possible, because we want to arrive at the best answer. And if that merits for us to change our forecasting methodology in any way, we will do that. So -- and we'll then make that adjustment because certainly, we also don't want to continue to have a certain EBITDA number as a target and then report a weather adjusted number which is different from that. So we do want the two to get into alignment as we go forward. So we will put in our best efforts to study this topic in much more detail and arrive at the most scientific and analyzed solution that we can come to.

And Sumant just if I can add to that point as well. If you look at the sensitivity and put that into context, every one percentage point relative to normal is about $10 million. I'm going EBITDA. So we are talking about that kind of size and scale of this study. At the end of the day, it's not likely to have a huge impact on our results, but we'll have to do the study to make sure.

Going to DSOs, can you provide some medium term guidance on DSOs given the changing mix towards Central and recent developments around implementing faster payments?

Yeah, so I can't give a specific sort of a numerical number, but I will try to give some directional guidance. So, as all of you know, as our portfolio shifts more and more towards SECI as our as our off taker, and out of the 10.2 gigawatt portfolio, 50% is with SEKI as the off taker. Our DSOs will naturally tend to trend downwards, because SEKI -- our SEKI portfolio we don't really see any delays at this point in time. And so therefore, there is going to be a structural improvement in our DSOs just on account of that one factor as we go forward. Because clearly, as we go from 10 gigawatts to 15 gigawatts, most of the additional 5 will be either SECI or corporate off takers, which both tend to pay on time. The existing capacity that we have directly with State off takers, which is currently about 5 gigawatts, that will then become a smaller part of our portfolio, and therefore the overall weighted impact average of that will come down. So that's point number one. The second point is that there are four States in particular that account for the bulk of our receivables, almost about 80% of our receivables. And those are States that we're obviously actively working on right now. We've decided, as we have said earlier to go to court on enforcing the contract that we have with these States for payments on time. And wherever we are going to the courts, the courts are inevitably ruling in our favor. Two such rulings we have already got from the State of Karnataka and the State of Maharashtra. We are now in a third court in the State of Madhya Pradesh and a fourth State in Telangana, which is one of the other states, also has now been admitted for hearing. So there are all these cases are going on and these cases, ultimately, as I said, get ruled in our favor and that does discount then are instructed to essentially pay us over a period of time. Now, what that leads us to is the fact that the discounts, obviously don't have the capacity to pay immediately. Although now under court pressure, they will have to. And so therefore we have to work out a bit of a payment mechanism or a payment timeline with them, which is something that they can then stick to. So that is really what we do after we win the court case and we have to agree on a certain timeline of payments over a few months, so that these people have the ability to make those payments happen. So I think over the course of the next several months, you will see that on the balance case that we don't have such rulings and we will get those rulings. And then the payments will begin to start and then hopefully, some of the drawback on the existing DSOs will then begin to happen. So I think that is the second aspect. The third is that the central government is also putting pressure on the DISCOMs quite substantially as I've talked about many times earlier. And they have given a specific exemption to state governments, that they will be allowed to borrow more than their usual borrowing limits, primarily to fund their DISCOMs. And so between that and preventing access of the DISCOMs to the exchanges, they are trying to essentially persuade the DISCOMs to become more current on their payments. So that is also to some extent helping. And the last point in that I would say is the case of Andhra Pradesh or AP, which is a special kind of a case where the case as we all know, had been dragging on for a long time. The hearings of the case concluded finally in the high court earlier this month, and we expect that by the end of next month, the judge will pass a ruling. Now, this is a ruling on a technical matter, that ruling could be appealed further and so it may take a little bit longer before that whole situation leads to a -- comes to a final conclusion. So this is really where we are on the AP situation. And so that is really the whole DSO scenario right now. I would say that structurally we will have an improvement in some of the states where there are significant over dues, we will have court rulings in our favor that would improve our payment situation, and therefore guide the DSOs downwards. In AP as well, I would say that once the ruling comes out, it should be heading towards a speedier resolution after that, because then from that point on it will go to the Supreme Court if it is appealed, and there usually rulings are faster. So I would say that over the course of this year we'll continue to see a -- excuse me, by the end of the year a significant improvement but that improvement will probably be gradual and spread out over the course of the next several months.

And Sumant as you were answering that question, I just got another one that comes in that's related and it's just about the risk of renegotiation that is possible given the current environment?

No, that is not a risk Nathan at all in India. None of the DISCOMs is at this point talking about renegotiating any contracts. As I said, the only one that is there is Andhra Pradesh, which has been going on for the last two years. None of the other states has picked up on that or has chosen to take that particular -- that same approach forward. And forget renegotiation of contracts, courts are ruling in our favor on late payments. And so therefore, there's fairly well established case law on enforcement of these contracts, including the payment, let alone renegotiation of the tariffs or anything. So I think that's not something that is at all a possibility in the Indian context at this point.

And then finally, on the final question, was related to the Electricity Act, which has been pushed out to the winter session in Parliament and how do you see that play in context of reforms focused on consumer tariffs as well as the distribution -- as well as on the distribution side?

Yeah, so that's -- the Electricity Act actually had a number of positive proposals, including a stronger regulatory environment, and so on. The government, I think, has chosen to not push that forward or push that forward in a slightly more watered down way. But I think at the same time, what they are doing is that they are taking the different elements of this -- of the Electricity Act, and trying to push that through separately. So for example, the whole issue of having a national renewable purchase obligation projection, which was earlier being contemplated in the Act, is not something that the government is trying to push separate from the Act. And the Minister, in fact, in recent conversation with people from the industry was saying that there would be eventually in the future, a national RPO trajectory which would then not give States the luxury or the freedom to have their own trajectory. There will be one central national trajectory that all the States will then have to pursue. So those kinds of things are happening, even outside of the Electricity Act. So I think, look, the reality is that the central government is very, very supportive of our sector. They recognize that deeper electrification, and the greening and the decarbonization of the electricity sector is absolutely fundamental to meeting our demands, our electricity demand or energy demands in the future, at the lowest -- in the newest cost manner possible. It is also consistent with commitments that the Prime Minister has made in Cop 26. And it also is essentially an opportunity for the country to decrease our energy dependence. We currently as you would know, import almost $150 billion worth of fossil fuels every year, including coal, we import almost $20 billion worth of coal every year as well. And so this is a way that the government realizes is a way to cut dependence on the fossil fuel imports. So there is that all branches and levels of the government very significant push forward for decarbonizing the entire energy value chain in India. So I think that is something that underlies a lot of the actions that the government will be taking in recent months, and will continue taking the future as well.

Thank you Sumant. That's the end of our questions. We really appreciate everybody joining and please feel free to reach out to us. My email is Nathan.judge@renewpower.in and really appreciate everybody joining.

Yeah, thank you, everybody.

That does conclude the conference for today. Thank you for participating. You may now disconnect.