ReNew Energy Global Plc (RNW) Q4 2022 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to the ReNew Energy Fourth Quarter Full Year 2022 Earnings Conference Call. All participants are in a listen-only mode. [Operator Instructions]. I would now like to hand the conference over to Mr. Nathan Judge. Please go ahead.

Yes. Thank you, Jason. And good morning, everyone. And thank you for joining us. Last night, the company issued a press release announcing results for fiscal year 2022 as well as the fourth quarter of fiscal year 2022 ended March 31, 2022. A copy of the press release and the presentation are available on the Investor Relations section of ReNew’s website at www.renewpower.in. With me today are Sumant Sinha, Founder, Chairman, and CEO. Our new CFO, Kedar Upadhye; Vaishali Nigam Sinha, our Chief Sustainability Officer and Kailash Vaswani, President of Finance. Sumant will start the call by going through the overview of the company and recent key highlights. Kedar then will go through results followed by an update on ESG from Vaishali. And then we will wrap up the call with Sumant providing guidance for our fiscal year 2023. After this, we will open up the call for questions. Please note, our Safe Harbor Statements are contained within our press release, presentation materials, and available on our website. These statements are important and integral to all our remarks. There are risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. So we encourage you to review the press release we furnished in our Form 6-K and presentation on our website for a more complete description. Also contained in our press release presentation materials and annual report are certain non-IFRS materials and measures that we reconciled to the most comparable IFRS measures. And these reconciliations are also available on our website in the press release, presentation materials and annual report. It is now my pleasure to hand it over to Sumant.

Yes, thank you, Nathan. And good morning, good afternoon or good evening to everybody depending on where you are in the world. Let me start off by saying that ReNew have been publicly listed on the NASDAQ for almost 10 months now and our opportunity for growth, improving returns, lowering our cost of capital and the strength of our company has noticeably improved over that time period. We do continue to believe that ReNew is one of the most compelling investment opportunities in the renewable energy sector today. And we would like to recap the investment proposition on page five. ReNew’s operations are in one of the most exciting renewable energy markets globally. India's electricity demand is expected to double by 2030 underpinned by strong economic growth, but also improved access to electricity for the rural population. This demand growth will be met by renewable energy as it is the cheapest source of new capacity available in India today. And very importantly, it doesn't pollute India's currently small field air. The Indian government views renewables as a key to reaching energy independence and releasing the $150 billion annual bill for imported oil. The robust levels of consistent sunlight and wind resource can transform India from being a net energy importer, to a supplier of green hydrogen globally. The current government targets are for 500 gigawatts of renewable energy to be installed by 2030 from an operating base of a little more than 100 gigawatts currently. To meet this goal, renewable energy developers of which ReNew is the largest, we need to increase our annual installations by a factor of four times from the expected, from the current levels in a very short period of time. Even if this enormous capacity add is accomplished, the expected increase in electricity demand in India would still not be met by the large plants for the renewable energy addition. Also, the government of India has begun the journey of promoting green hydrogen, which considering government targets to increase the required renewable energy installations by another 100 gigawatts above the 500 gigawatts by 2030 renewable energy targets. Adding a substantial amount of intermittent renewable capacity to the grid poses reliability questions. Recently, reliability has been a focus as India has been experiencing prolonged electricity outages. This summer, particularly during a time when outdoor temperatures are frequently hit 110 degrees Fahrenheit or 43 degrees Celsius or more. There is a need for more value added energy offerings to address these concerns. Intelligent energy solutions such as the round the clock power, scouting and dispatching expertise that ReNew has been leading the development of for some time. There is growing interest by utilities and CLI customers in high capacity factor RE products. These intelligent energy solutions require development and operating expertise across multiple renewable energy technologies where we have a leadership position. We are spending considerable time on digitalization of our portfolio and the grid to provide the leading suite of value added energy options to customers, but clearly commercial and industrial customers as well as people focus on green hydrogen. ReNew as the largest RV Company in India, in our bio operating capacity has scaled to invest in the development of these value added energy products. In addition, ReNew is one of only a couple of companies in India that has the capability to build these high PLF renewable energy projects on a large scale. We believe that as we advance our IP in the energy space, through continued development of artificial intelligence and vertical integration, we will expand our competitive advantages further over the coming years. We are also focused on capital discipline, all of our growth and investments must be value accretive, returns should be comfortably above our cost of capital. Recently, we have taken steps to enhance our returns by pursuing capital recycling, and we expect that we will announce more of these transactions in the future. Turning to recent developments on page six, as I just mentioned, we recently announced a 49% minority stake in our 1,300 megawatt RTC project to Mitsui. This transaction materially increases the returns on the project. But we also believe establishes a clear marker for the value of our assets, which is considerably higher than the current valuation of ReNew in the public markets today. We also signed 2.5 gigawatts of PPAs in the last month, of which 900 megawatts go for existing letters of award we had in our portfolio, and an incremental 1.6 gigawatts for new projects, which including 528 megawatts of acquisitions has brought our total gross portfolio to 12.8 gigawatts. Of this 12.8 gigawatts, about 800 megawatts of LOAs are still awaiting PPAs. With the recent electricity crisis in India with rolling blackouts and soaring spot prices, there appears to be more momentum to getting PPA sign and renewable energy bids to help address this issue. In fact, we just signed PPAs for our 300 megawatts of our second SECI IX project yesterday. We have also made notable progress towards reducing our receivables through several court orders, including an important ruling from the High Court of Andhra Pradesh, maintaining sanctity of PPAs in India. Also during the quarter, we entered into a binding agreement with Indian Oil Company, LLP to create a JV for green hydrogen. IOC in one of the largest consumers of hydrogen in India accounted for approximately 8% of India's hydrogen consumption. Turning to page 7, we are pursuing capital recycling as a way to increase returns on future growth and establish the value of our assets. The 49% minority sell to Mitsui of our 400 megawatt RTC project, which by the way requires about 1,300 megawatts of renewable energy capacity for $200 million, plus about $70 million for EPC created considerable value. As can be seen on the slide, the amount of EBITDA per $1 of your equity has increased by over 25% and we are now expecting that this large project will earn equity IRR of well over 20%. In addition, we believe this provided a marker for the value of our assets. The transaction was completed at a steady state EBITDA multiples of around 9.5x to 10x considerably higher than the 7.6x that ReNew is trading at currently. In fact, during the quarter, use some of the proceeds generated from the sale of our rooftop business earlier this year at an EV to EBITDA multiple of about 9.5x to repurchase about 4 million shares of our stock. There is significant interest in our assets not only from Mitsui, but also other strategic and financial investors. Operating expertise is at a premium in India. And we do believe that the level of interest from the quality of investors such as Mitsui validates our competitive advantages. Every one gigawatt that we sell our minority stake in at a multiple of 9x to 10x EV/EBITDA list our run rate EBITDA per share by 5%. As I mentioned earlier, there has been an electricity crisis in India over the recent months, as seen on page 8. Demand partly driven by a heatwave has risen about 6% to 8% above pre-COVID levels, and supply issues with coal has resulted in rolling blackouts for an average of two to four hours in length throughout India. This electricity supply disruption has pushed up spot electricity prices on the India electricity exchange to the regulated cap of INR 12, or about $0.15 per kilowatt hour for many days over the past quarter. There has been a strong uptick in demand for renewable energy during this electricity crisis, particularly from corporate customers. We are able to offer clean sustainable power and a considerable discount to what these customers can buy off the grid. And it is green and sustainable. Corporate customers prefer value added energy products, such as the high PLF or RTC options, as they pay one fee for access to the transmission line. And the more units that come across the line, the lower per unit cost. With our leading IP value added energy product offerings, we have a significant lead in the sector with little competition at the moment. We recently signed about 500 megawatts of new PPAs with corporate customers last month, and our total portfolio of corporate accounts is now about 1.3 gigawatts, including more than 900 megawatts with PPAs, a threefold increase in about a year. We are currently in discussions with CNI businesses for about 1.3 gigawatts of additional new contracts. The corporate business generally has higher returns than plain vanilla projects and provide is additional confidence in maintaining our16% to 20% equity IRR, investment threshold targets. There has also been increased activity in the traditional ground-mount auctions in recent months. At the moment, we see about 21 gigawatts of auctions in process that should come to bid over the next six months or so. In addition, there is heightened interest in RTC type products. And there is a large six to nine gigawatt RTC auction that is expected near term. In addition, Indian railways the largest single consumer of electricity in India, has announced their interest in contracting for RTC renewable energy supply to meet the net zero targets by 2030. They currently use about 30 gigawatts of baseload power, which could represent a significant amount of renewable energy capacity. Turning to page 10, we are also announcing today that we are increasing our module manufacturing capacity to six megawatts, which will produce about 3.3 gigawatts of AC or PPA equivalent capacity after we consider the additional DC oversizing in projects that we do to enhance term. We expect that this will cost us no more than about 3% to 4% of our three year CapEx forecast. And all of the output is for our own users, to provide security of supply and enable us to achieve our growth targets on our core business, which is renewable energy development. In fact, having this module manufacturing capacity in place could provide us opportunities to capitalize on higher return development projects, as there could be severe constraints in getting modules in India by our competitors. To explain this further, there has been a push by the Indian government to reduce imports from China, which currently represents over 90% of all modules use in India solar projects today. To this end, they announced two protectionist actions in 2020 that were implemented in 2022. A basic customs duty of 40% on any imported module, or 25% on any imported cell, as well as establishing a list of approved modules that can be used for government projects in India, commonly referred to as ALMM. Only India produced modules are on this list. Government targets imply the need for new solar plant development of about 25 to 35 gigawatts per year. But currently, there is only about three gigawatts of AC equivalent of commercially viable module capacity in India today. In addition, most new module manufacturing capacity that has been announced won't come online until about 2024 or 2025. And it appears that a large portion of what is coming on is for self-consumption and the remainder could be exported to foreign markets for the selling price is much higher than in India. All of this could result in a large supply shortage in India which is driving us to make a relatively small investment, but one that would be critical to achieving our growth targets on our core business, which is our redevelopment. Our seven modules are currently under construction and are all scheduled to be operational early next year. We are still awaiting details for the second tranche of the production late incentive manufacturing scheme for solar in the country. The government has set aside $2.6 billion to subsidize solar manufacturing in India. We are therefore contemplating further backward integration into vapor production, if we win some of the allocation as we anticipate that import duties will be implemented on vapor at some point in the future as well. Moving on, we recently entered into a joint ventures with the Indian Oil Corporation, one of India's largest consumers of hydrogen, and LNG, one of the largest EPC companies, if not the largest in India. The idea being to be a leader in the emerging green hydrogen market. We believe that the JV is a highly differentiated, bringing together capture demand by IOC, leading expertise in the implementation of the last mile of a green hydrogen plant by L&T and our leading position in providing high PLF intelligent energy solutions from renewable energy. Today, IOC uses about 0.5 million tons per annum of gray hydrogen, which could be converted into green hydrogen under India's national hydrogen mission. India has recently announced the green hydrogen policy and is only one of the few countries who have announced such a policy. This policy includes major incentives such as free transmission, open access, and provisions to bank power. We believe that the government of India wants major industries to commit to green energy and de-carbonization. And an important step would be a green hydrogen purchase obligation, which is something that the government is contemplating and might introduce at some point in the near future. India can use the advancements in green hydrogen to lower costs, and become normally energy independent, but potentially a supplier of green hydrogen globally. Approximately 70% of the CapEx required for a green hydrogen plant is actually renewable energy, where we expect to contribute our expertise to the joint venture. The very low cost of renewable energy, electricity in India relative to the rest of the world, puts India in a very strong competitive advantage to further green hydrogen production. Overall, we think green hydrogen represents about a $60 billion market opportunity by 2030 or about 100 gigawatts by that time. We expect that there will be numerous bids over the coming years, and we will provide events updates as events unfold. With that, before I pass it over to Kedar to discuss the quarterly results. I would like to use this opportunity to say a few words about Kedar. Kedar joined us about a month ago from Cipla, one of India's largest publicly traded pharmaceutical companies, where he was President and Global CFO. As CFO at Cipla, he headed the Global Finance and Information Technology functions, and worked across multiple geographies, including the US, where he led implementation of several high-impact, cross-functional transformational projects. Before Cipla, he was Vice President and Head, Finance and Investor Relations for the NYSE-listed Dr. Reddy’s Laboratories. Kedar has also held leadership roles at PepsiCo and Thermax before that. We are really, really pleased to have him on board, the ReNew team now. With that, over to you, Kedar.

Thank you, Sumant. Good morning, good afternoon, and good evening to everybody on the call. And thank you for joining us today. Looking at page 13, which provides highlights of fiscal year 2022 and the fourth quarter of 2022. We have 7.6 gigawatts operating as of today, which with the 528 megawatt acquisition that is in the final stages of closing, would bring us to 8.1 gigawatts which is an addition of 2.5 gigawatts since the end of the last fiscal year. This addition was particularly commendable, given the challenges of COVID and supply chain disruptions which we faced. Our fiscal year ‘22 revenues are labeled total income under IFRS rose 27% year-on-year, while our adjusted EBITDA increased more than 32%. And cash flow to equity jumped almost 93%. Turning to page 14 which provides a reconciliation of adjusted EBITDA excluding the impact of weather to our reported results. Adjusted EBITDA excluding the impact of weather, FOREX and the loss of EBITDA from the sale of rooftop business was in line with our guidance after considering the INR depreciation over the year. Weather improved from last year, although it remained below normal levels and had about a $75 million negative impact in this fiscal year. For the current quarter, first quarter of FY23, wind so far has been close to normal. Turning to accounts receivable page 15, when you look into what constitutes our past due accounts receivables. Four state discount account for the vast majority of the overdue. We believe we can improve our payment cycle with these states. As a bit of history many of these contracts with the states were entered before the central government created the Solar Energy Corporation of India or SECI. At the time, we anticipated payment delays and had built in expectations into a higher tariff, which allows us to earn healthy returns despite these delays. However, during COVID, the payment cycles rose considerably which was understandable. However, electricity demand is at a new high, and payments to the discounts are being made in a more timely manner. And so we are taking steps to ensure that our past due bills are prioritized for payment. In particular, we have for the first time ever taken our customers to court for accelerated recovery. We have made some progress towards improving the DSO, which ended at 212 days as at the fiscal year end down meaningfully from the peak in second quarter, which was at 272. After the High Court directed the Discoms in Karnataka to clear all outstanding dues payable, which was about $90 million at the beginning of the calendar year. We have received about $65 million. Maharashtra has also paid about$ 7 million of back old bills, since the state electricity regulator directed the state distribution company to clear all outstanding receivables. We also received a recent favorable ruling from the regulator in Madhya Pradesh or MP on a 60 megawatt project and we are submitting petitions for other facilities in the state as well. We are also pursuing actions in Telangana to expedite payments. Regarding the situation in Andhra Pradesh, which has the largest account of civil outstanding at about $230 million on March 15. The High Court ruled unilaterally in our favor, confirming that there is sanctity of contract in India. Since then, AP has filed request to delay payment and they also have filed requests for appeal of the ruling with the Supreme Court. The Supreme Court is in recess until the end of June, at which time we expect they will decide whether or not to hear the case. In the meantime, the government of AP has written to Ministry of power, the Central Ministry of Power requesting a loan from PFC and RAC which are the lenders of the Ministry of Power to clear dues to the renewable energy generators. We remain confident in receiving full payment from AP over time. While there was improvement in DSO, 212 days is still unacceptable to us. And we will continue to work to improve payment cycles with Discoms. The combination of company initiatives, legal and regulatory proceedings, government support, improvement in electricity demand for distribution companies, and increased exposure towards Central Government agencies that have a strong record of on time payments, is expected to result in a major improvement in DSOs over the next several years. It is worth emphasizing that DSO should fundamentally improve over time as an increasing percentage of our sales will be to central government owned SECI, which pays its bills promptly and on time. Today with 7.6 gigawatts operating about 38% of our assets are with four Discoms that have higher DSO. As most of our future organic projects in our portfolio are with SECI or customers that pay on time. The exposure to these four Discoms will fall to about 24% which would represent an improvement about 55 days in our overall DSO just by itself. We also want to flag that we do expect DSO to have an upward bias a bit for seasonality, which we’ve noticed over the last several years during the first few months of the year. Discoms typically pay a steady amount each month but we deliver more electricity during the monsoon which lifts the DSO, however, we expect that DSO will be better year-on-year every quarter this year. And end FY23 at a lower level than the end of FY22. One of the frequent questions we get asked is about supply cost inflation, which we'll discuss on page 16. The project costs for megawatts added during fiscal ‘22 were at the higher end of our estimated cost provided during our original guidance. While there has been some increase in costs related to budget for projects, we're delivering for the remainder of the year. After considering the lower financing costs that we are realizing, we continue to expect that our projects under construction, we deliver an equity IRR within our targeted range of 16 % to 20%. We would note that most of our solar projects in ‘23 will be cell supplied and our next large orders for wind turbines won't need to be completed until late this year early next year. Turning to slide 17, which highlights how interest rates in India remain favorable and benign, allowing us continued opportunities to reduce our interest cost through refinancing. Currently, we are receiving term sheets for lending at 8% to 8.5% which is about 50 basis point less than a year ago. Overall interest rates on variable debt are about 100 basis points lower since March of last year, which should more than offset any impact of potential rate increases in this fiscal. One example of this refinancing activities or conditional redemption of a $525 million green bond, which carries about 10.5% in Rupee terms. We plan to finance this with the 8% to 8.5% loan from non-bank financial company. About 75% of our debt is fixed with an average period of approximately four years. Every 100 basis point change in short-term borrowing rates for all our debt, which has variable rates will equal only about 2% in the cash flow to equity annually. Thank you. And with that, I will turn it over to Vaishali to update everyone on our ESG initiatives.

Thank you, Kedar. And a big thank you to all of you who joined us on this call today. I want to start by saying that at ReNew, our mission is to address climate change through impactful scalable and market driven solutions for creating a sustainable and equitable future. At ReNew, our ESG approach is based on four C's. One, to create a carbon free world; two, our commitment towards sustainability; three, collaboration; four, corporate citizenship. On slide 19, we've thrown some light on the work, we're doing each of these Cs. So for creating a carbon free world, ReNew has avoided about over 10 million tons of carbon dioxide equivalent in fiscal year ‘21, which is 200 times our scope 1 and 2 emission. This translates just to give a perspective to avoiding 0.5% of India's carbon emissions and 1.1% of emissions from the power sector while contributing to 1.5% of India's power capacity. This data has been validated by DNV. ReNew in its upcoming sustainability report, which will be out on September ’22, we'll be disclosing our scope 3 emissions, and we will also align with the TCFD disclosures. In line with our commitment to carbon neutrality of our operations, we are committed to creating a carbon sink. This World Environment Day, we committed to planting 100,000 trees by 2025. And this will be done across 70 sites pan India. Additionally, we are also on the World Economic Forum's Advisory Council for the 1 trillion tree initiative. The goal of this program is to conserve, restore and grow a trillion trees by 2030 across the world. ReNew power is committed to leading this initiative in India. Number two was commitment towards sustainability. From our board to our site, ReNew is deeply committed to sustainability. Here are some of our key ESG related commitments we have made. We aim to be water positive by 2030. One of the examples of our drive towards this goal is that we are replacing our cleaning of our rooftops with robotic cleaning. We have increased our robotic cleaning to about five times compared to fiscal year ’21 and have saved about 332,000 kilo liters of water. We are ensuring zero waste to landfill by 2030. Currently, all EVs and batteries are sent to authorized recyclers. We have an ESG policy and a well-defined three tier ESG governance system, right from the board, to the management and to the working group all the way to our sites. We have also integrated ESG risks in our ERM framework. Additionally, ReNew is also committed to creating a very diverse and inclusive workforce, which we believe is critical as we march ahead to sub conquer the challenges of climate change. At ReNew, we have various initiatives to engage to hire more women. We have a power of W platform, which is for women to get engaged. We have various initiatives for pay parity, we have a leaders’ mentorship program. And we, I'm proud to say that right from a Board to our Chairman and to various management members, we have regular town halls, to sensitize our managers, and to push the envelope to making ReNew a workplace which is inviting for women and engages them in the top leadership roles. On slide 20, we have highlighted the power of the collective, which is required and is critical to tackle climate change with greater edge urgency, and hence for all of us to meet the goals. For this, we are collaborating with civil society, global institutions, Indian institutions, policymakers across the board. ReNew has been driving dialogue globally and nationally around climate action to enable institutions and corporates to scale their net zero efforts and create demand based solutions. For this, some of the roles we play are as founding members, chairs, leaders in high performing institutions and prestigious institutions and platforms, like the COP, World Economic Forum, First Movers Coalition, UN Global Compact to name a few. Engaging and including communities, and taking action on the ground has always been a priority for us. On slide 21, on corporate citizenship, I want to say that we have taken up a target of impacting 2.5 million lives through our CSR initiatives, by 2030. ReNew has already impacted the lives of 650,000 people across 250 villages in 10 states across India. This is discussed in detail in our CSR report, which is public and it's available on our website for you to read. Our flagship social interventions include Lighting Lives, which is in the area of providing electricity via solar rooftops in the remotest parts of the country. We engage the youth here and ensure that they get engaged in this whole movement of climate change, which is happening in our country, and most importantly for the youth who are present in and around our sites as well, to sensitize them to make them aware of the challenges of climate change, and to provide them with the opportunities which are there for them to work and get a job and get engaged. Till date, we have electrified 84 schools using off grid and around 40,000 students across seven Indian states who are benefiting from this initiative. We have various initiatives around climate where women are being engaged. One of them is in the state of Gujarat where we are engaging salt pan workers in the renewable energy sector which will help them multiply their current income. We are working with women who are impacted by the use of poor quality cookstoves to greener cookstoves, and this will benefit about 10,000 women. We are working with international partners for some of these initiatives. We're also supporting climate entrepreneurs who are women through an accelerator program in partnership with IIT Delhi and UNDP. We supporting entrepreneurial ventures led by women in the area of energy efficiency, storage, circularity, sea water desalination to name a few. Community based water conservation is super critical and important for us. And we do a lot of work in and around Rajasthan to ensure that we can run projects and programs to conserve water by using traditional rainwater harvesting methods. We have also till date we have desilted lakes, 100 talukas, and a lot of work to benefit people in the area of Jaisalmer about 25,000 people have benefited from our programs there. This initiative has been recognized by the Ministry of Corporate Affairs, Government of India as a benchmark CSR case study for water conservation across India. Gift Warmth, last but not the least, is a program which is a program where we engage ReNewales. It's a part of our volunteering program because we want all our ReNewales to be engaged in the climate impact what we are doing. And since 2015 -16, we have distributed 200,000 to 400,000 blankets across 10 Indian states. We believe climate change provides a lot of temperature fluctuation, and this program really addresses that. I will not turn it over to Sumant for guidance and closing remarks. Thank you.

Yes, thank you so much for that, Vaishali. I'm very happy to report that despite the uncertainty around supply, and COVID issues in 2020 and FY2022, not only were we able to continue to deliver on all of our ESG and sustainability programs, but we were also able to deliver on our guidance for adjusted EBITDA, excluding the impact of weather and foreign exchange movements. Turning to slide 23, we are making some changes to our guidance to be in Indian rupees and also providing guidance on a per share basis. We have been actively buying back stock when we believe it will provide the highest return opportunity. So far, we have repurchased about 4 million shares, since we implemented the buyback, which leaves us with well over $200 million of authorization remaining under that program. Our FY23 EBITDA guidance is for about 20% EBITDA growth above FY22, which translates into between INR 66 billion and INR 69 billion, or INR 155 to INR 160 rupees per share. Our cash flow to equity guidance is INR 21 billion to INR 22.7 billion altogether, or INR 49 on a per share basis, INR 49 to INR 53 per share. On an absolute basis converted to US dollars at the current exchange rate. Our FY23 EBITDA would be in the range of roughly INR 880 to INR 920 million, and our cash flow to equity would be approximately INR 280 to INR 300 million. Our guidance includes an assumption that the weather impact will be about $40 million to $60 million, about half of the impact that we saw this year i.e. FY22 after adjusting for about 20% growth in megawatts. We still expect weather will be normal in future years, but thought it would be prudent to take into account some impact this year as well. So we've just basically taken the midpoint of reversal back to the mean from FY22. So far, through the first two months of this fiscal year, the weather has actually been close to normal. We are on track for our long-term guidance that we have provided previously, and we will provide more information later this year at an Analyst Day that we plan to host. As a closing remark, ReNew has many competitive advantages, and compares very favorably to its global renewable energy peer group. We have leading EBITDA margins. We have competitive advantages and one of the largest, fastest growing renewable energy markets in the world. We have equity funding in place for growth beyond our current portfolio. Our EBITDA and cash flow to equity growth rate is significantly higher than the peer group average. And we have upside option value in green hydrogen and battery storage. Yet, ReNew has a 13% cash flow to equity yield on our current portfolio, and trade at meaningful discount to our global renewable energy peer group. It also trades at a meaningful discount to what we can sell assets for in the private markets right now. The issues that we have heard from investors such as DSO and legacy SPAC issues are being resolved, hopefully fairly soon. And this to our view presents a great investment opportunity at this point. With this, let me conclude, and we will be happy to take questions from all of you. Thank you.

[Operator Instructions] Our first question comes from Justin Clare from ROTH Capital Partners.

Hi, thanks for taking our questions. So first off, you mentioned that you're expecting I think I heard a $40 million to $60 million weather impact for fiscal ‘23. At least that's what you factored into the guidance here. I was wondering is that expected to impact only the wind assets and then the solar assets are expected to perform in line with historical averages? And then along this same line, could you give us a sense for how you expect the PLF to trend in fiscal ‘23 relative to ‘22 for both your solar and wind asset?

Yes, sure. Let me take that. Yes. So look, I think as you know, Justin, the variability of solar assets is a lot lower because of radiation changes, as compared to wind, where the variability does tend to be higher. The number that we've assumed is essentially a number for both wind and solar together, we have not actually differentiated. And to your question of what is the PLF that we expect to get this year, we obviously expect to get normal PLF. But we have just been prudent in assuming a certain impact of weather, which we have assumed as being half of the impact of last year. Frankly speaking, there is no real specific sign to this, as you know, ultimately, we'll have to see how the weather plays out. But just given the long-term pattern where, as you know, two years ago was very bad. Last year was already getting back to closer to normal, but was not fully there. We just assumed that we have a similar improvement this year, without a full reversion back to the [Indiscernible]. So that's the assumption that we made. Ultimately, we'll have to wait and see how the year plays out for us to be able to get a good sense of the performance actually.

Okay, great. That's helpful. And then also on the guide, just wondering, how much of your guidance are you expected to be delivered from the portfolio commissioned as of the end of fiscal ‘22, versus how much is dependent on new assets. So I know, you've also acquired 528 megawatts recently here, and you're expecting the cash flows starting, I believe it was April 1 of this year. So just wondering if that -- if the cash flow and EBITDA from those -- from that acquisition is fully factored into the guide, as well.

Yes, finance, would you? Kedar, would you like to answer that? Kedar or Kailash.

Yes, so the guidance factors the benefit of the acquisition, however, it's subject to closing. So it will come at a period, which is not at the beginning of the year, in the middle part of the year. So I think that's answered your second question. And could you repeat your first question, please?

Yes, just wondering if the guidance is dependent on additional acquisitions or commissioning of projects throughout the year? Or is it really the portfolio starting the year? Will that support your expectations for the year?

Yes, the reliance on the new additions for the current year revenues and EBITDA is quite lower. So I think the sensitivity is far higher to the portfolio that we're carrying from the beginning of the year. If that helps you, we're not quantifying the exact amount. However, the current year revenues and EBITDA are largely shaped by the opening portfolio.

Got it, okay. And then just shifting gears for your manufacturing plan, just wondering how you're thinking about the amount of cell capacity relative to your module capacity, it looks like cell at this point is about 1/3 of module capacity. But looking forward, what is the optimal ratio that you're thinking about there? And then also, just on manufacturing, how much of your supply over the next say, one to two years you anticipate to produce in-house versus how much do you think you need to still potentially procure modules from external sources? And then actually, one other piece on this is just where do you anticipate procuring cells for a given that your module capacity is higher than cell?

Yes, so let me take that, Justin, as far as our cell capacity is concerned, right now, as you know, we are still doing two gigawatts that will be ready sometime towards the second quarter of next calendar year. And we are just going a little bit slower on cell capacity, but our eventual goal will be to have a balanced cell and module capacity. Because eventually, as you know, India does impose a 25% customs duty on cell imports as well. And our sense is that the cost of production of cells in India will end up being cheaper than imports plus 25%. So eventually, we would like to have a balance capacity of cell and module. We are going a little bit slower on cells rollout because it's a little bit more complex than putting up a module plant is. And so what we wanted to do was to essentially make more headway on the first two gigawatts, get that -- get absolute comfort that everything was under control, and then essentially expand capacity after that, but you should look to, you should assume that over time, we will look to balance out the cell and module capacity as well. Now to your second question of where, how much capacity we will be procuring ourselves from our own supply and how much from outside, look, of our total outstanding solar projects that we have that we are constructing right now, some of those capacities are grandfathered. So those capacities, we can import the modules for and essentially, get us -- get a refund on the customs duty. So some part of our total capacity, we will therefore be doing that. And the bulk of the remaining capacity, we essentially intend to cell supply. And so really, most of that will come from the internal sources. There may be a few 100 megawatts of balancing requirements here and there. But fundamentally, most of the balance will be cell supplied. To your third question of where we will import the cells from? The cells will be imported from the regular cell manufacturing companies, mostly out of China, same companies like LONGi, and Jinko, and GE, et cetera, who we buy, currently our modules from, so we will essentially just buy cells from them instead of modules, so I think that’s basic thinking about it.

The next question comes from Julian Dumoulin-Smith from Bank of America.

Good evening. This is actually Kody Clark offer Julian. Thanks for taking my questions. So just first on, just inflation. And numbers came in at 30 year highs kind of increasing the likelihood for rate hikes, cognizant that rates have remained in the 8% to 8.5% range for now. But looking into the future, how are you thinking about higher cost? And also, if you could just remind us on the sensitivity for return there?

Yes, sure. Kedar, do you want to take the question?

Yes. So Julian, as far as rates are concerned to account for the increasing interest rate, at least as far as the new projects that we bid for, we will obviously factor in higher rates. Even when we were bidding previously, we were not factoring in the very low rates that we were getting before the rate hike cycle began. So all the rates that we were factoring was taking into account some increase in interest rates that would happen in any case. So largely, the projects that we have, which are under construction in the pipeline, those are quite insulated from the interest rate that leads up to another, I will call it another 150 - 200 basis points from here on. And we did become very active in the past when rates were lower. So we did a lot of refinancing activities prior to March 31. And did a lot of fixing of our interest rates in the portfolio. So that way most of the portfolio is fixed, whatever is floating will have a very small impact as far as cash flow to equity is concerned hardly around 2%. And whatever is in the pipeline, there is some buffer which exists. And for new bids, we will factor in the increase in interest rates into our bids. And on that basis, we will bake into our costs to higher rates that may prevail going forward. To your second question as far as sensitivity is concerned. So again, we don't expect the interest rate increases to remain for a long period of time. So two year increase or higher interest rates by 100 basis points allow hardly like a 0.2% equity IRR impact.

Understood, okay, that's helpful. And then thanks for the incremental disclosure around the corporate PPA opportunity set. But just wondering if you can just give a little bit more color on how you plan to capitalize on that potential opportunity. And also, what has been the conversion rate for customers. So i.e. historically what percentage of the capacity that is under discussion ultimately leads to sign PPAs if we're thinking about that 1.3 gigawatts system that you mentioned.

Yes, sure. So sorry, what is your first question? Around color on corporate and secular fund.

Yes. Just so your plan on capitalizing that. You mentioned not too much competition.

Yes.

But I was referring where they are, yes.

Yes, so, look, the corporate PPA market has much less competition than the regular bidding market. And the reason for that is that the actual -- the amount of customization or the conversation that you need to have with corporate customers is quite lengthy. And if you haven't been engaging with corporates for a while, then you can't just sort of barge in and do something. Because the requirements are different. A lot of the corporates have requirements and specific states, they may have specific requirements of water profile of the power that they want needs should be, some of them are connected to the interstate transmission network. And so therefore, the solution for them might be different. So each corp, each customer requires, in some ways, a bespoke solution. And that requires the ability of having development pipelines in a number of different states. And that development pipeline you can only have if you have a sense of what customers really want. And so it's a bit of a chicken and egg, and you have to keep working at both ends quite, over quite a long period of time to be able to get conversions going. And so that's really what we've been doing. And if you recall, I've been talking about corporate PPAs, for the last almost ever since we’ve got listed. So at least a year. But certainly this is a market that we've been working on for quite some time, and developing projects to service this market. And therefore we do have a pretty significant edge in addressing the market as we go forward. Just to let you know, the Indian government came out recently with rules that basically makes open access, green open access for corporate customers a lot easier. Earlier, every state had its own rules and regulations, which actually made it therefore more complex. And some states would try to dis-incentivize corporates from getting out of the grid and buying directly from people like us. Now, the central government has essentially tried to standardize these rules and processes to really encourage corporates to start buying directly a lot more. So that's actually going to be a big, I think, a big positive move to open up the market even further. So we as a company, given our wind and solar capability, our ability to come up with intelligent energy solutions, and all the development work that we've been doing. And all the marketing work that we've been doing have a very significant edge in this now fairly rapidly growing market. And especially as prices are going up and up. The requirement or the desire on the part of corporate customers for this market is a lot better, a lot higher. So we feel that this is going to become a more important segment of our overall capacity going forward. We as I said, have a lot of conversations going on. Now to what extent will conversion happened? It really depends on at what point you look at it, I would say the 1.3 gigawatts that we have mentioned as conversations that we're having is fairly close to being final stage. There are of course, there is of course behind that a pipeline of almost 2x or 3x of that, which is sort of more early stage. So the 1.3 gigawatts really is much more closer to getting consummated. And so that's why we mentioned that number. But behind that there is -- there are a lot of other conversations that we're having. I can't actually give you a specific conversion factor. But just to say that's becoming a very interesting aspect of our portfolio now going forward.

Absolutely, understood. And just lastly, for me, curious how you're viewing the timeline for new utility scale auctions, what steps should we be looking at for from SECI? And especially in the current power backdrop, as you highlighted?

Yes, so I think there are a lot of conversations going on between SECI and the states. SECI after their previous experience of taking longer to sell the power is just making 100% sure that the Discoms are lined up. And that's why they are taking a little bit of extra time on finally coming out with the bids. But they've already announced a fairly large amount of projects that are coming up for bid. And that's the number we talked about that 21 gigawatts has already been sort of put into the pipeline. And over the next few months, we'll start seeing all those bids coming in for first on and second on submissions very soon. And a larger proportion of those bids now really is around the clock intelligent energy solutions, because most of the states are really moving in the direction of wanting that kind of thermal power, as are the Indian railways, which as I mentioned also is the single largest customer for power in the country currently for almost 5% of total power consumption in India. So all of those are the entire sort of Indian railways demand and a number of states now moving in the direction of RTC power. So in the 21 gigawatts, therefore, you will see a lot more of the round the clock power type auctions.

The next question comes from Nikhil Nigania from Alliance Bernstein.

Hi, thanks for taking my question. My question relates to sale of power on the power exchanges in the short term market. So I could see the new selling some power in the short term market as well. So, a, wanted to get a sense of what percentage of Q4 revenues broadly came from that area? And b, are there any plans to set up a merchant based plant or some open capacity to leverage time similar to the current one where exchange prices are really high to get an upside on the investments?

Yes. Nikhil, I’ll let my finance team answer the first question, but the second question, I'll quickly answer first. So essentially, right now, you're absolutely right, power prices have gone up dramatically, given the shortage of power. And our sense is that going forward, this shortage is going to continue, simply because power demand is growing quite substantially at 6% to 7% a year. And there is very little new capacity being added beyond renewable energy capacity. And renewable energy capacity is also going at a certain pace, which is not going to be sufficient to meet the demand growth. In addition to that, the alternative supply of power, which is very coal based power, we've of course, seen coal prices go up very substantially, and are likely to stay elevated for a considerable period of time, given what's happening to power prices globally. So I would think that prices in the merchant market are likely to stay fairly robust, for some considerable period of time. And therefore, we have been contemplating looking at increasing the exposure that we have to that segment of the market. Now some exposure we get naturally, because we commissioned certain projects before the PPA supply dates start. So therefore, those megawatts we were able to sell into the merchant market, there is some overflow power, as you know, from our RTC project that we will be selling into the merchant market. But we're also looking at setting up now one or two dedicated projects to sell into that market. And see how that goes. So I think we'll, of course, keep the overall exposure limited to perhaps less than 10% to ensure that we don't over expose ourselves, but we'll see how that market goes. And over time, we will potentially, then take a decision based on our experience and so on. On the first part, finance team, do you guys have an exact answer or general answer?

Yes, I have the numbers, in terms of quarter four.

Yes, go ahead. Sorry, go ahead, Kedar.

Yes, no, I was just saying the quarter four total income is about $232 million, or INR 1,762 crores and the contribution is still in single digits. So we can get you an exact number, Nikhil, but the contribution is in low to mid-single digits.

Jason, we'll go ahead. I say there's one more question on the line. Go ahead and take our next question.

Yes, I'm sorry. My line was muted. The next question comes from Amit Bindra from Morgan Stanley. Please go ahead.

Hello. I just wanted to understand your funding plan for the CapEx plan that you have laid out for our FY23. $194 billion of CapEx, $82 billion cash at hand and excluding EBITDA. So how much receiving liquidation or debt I think do we expect in the next year and the use of cash towards other activities like any buyback plans, continuing on the buyback plans et cetera.

Yes, hi, this Kailash. So, as far as you know, the total debt required for the near term CapEx is somewhere around $1.3 billion in the next 12-month period of time largely for the RTC project and the peak power project, which will see a lot of construction activity in the current fiscal year. And we have already tied have debt for both of these projects. Again, for the RTC project we're borrowing dollar loans and for the peak power project, we will be borrowing from one of the domestic NBFCs.

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