ReNew Energy Global Plc (RNW) Q4 2024 Earnings Report, Transcript and Summary

Thank you for standing by and welcome to ReNew Energy Global Plc 4Q FY’24 Results and Long-Term Outlook. All participants are in 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.

Yes, thank you and good morning everyone and thank you for joining us. Today we're going to have a little bit of a different format from our previous earnings call given the meaningful gains the company has made in securing long-term growth, as well as the dramatic improvement in the fundamentals of the Indian renewable energy market. We wanted to share with you our long-term outlook in addition to the normal earnings review and annual guidance for fiscal year 2025. We did put out a press release announcing results for the fiscal 2024 fourth quarter and full-year 2024 ended March 31, 2024 last night and a copy of this press release and earnings presentation are available on the investor relations section on Renew's website at www.renew.com. With me today are Sumant Sinha, Founder, Chairman, and CEO; Kailash Vaswani, our CFO, and Vaishali Nigam Sinha, Co-Founder and Chairperson of Sustainability. After the prepared remarks, which we expect will take about an hour, we will open up the call for questions. Please note our Safe Harbor statements are contained within our press release, presentation materials, and materials available on our website. These statements are important and integral to all our remarks. There are risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. So we encourage you to review the press release we furnish in our Form 6-K and the presentation on our website for a more complete description. Also contained in our press release, presentation materials, and annual report are certain non-IFRS measures that we reconcile to the most possible IFRS measures. And these reconciliations are also available on our website in the press release presentation materials and our annual report. It is now my pleasure to hand it over to Sumant.

Thank you, Nathan. Good morning and good afternoon and good evening, everyone. I'm glad to have you all on our earnings call. Turning to the presentation, just to talk about the first couple of pages, we are unwavering in our purpose of creating a carbon-free world, one step at a time. Our focus is on growth that adds value to all our stakeholders and most importantly to our shareholders. As a renewable energy leader in India and the Global South, we aim to further enhance our position in the coming years. We don't pursue scale our market share for its own sake. Instead, we see growth opportunities where the return exceeds our cost of capital. Fiscal year 2024 started off at the bank when the Ministry of New and Renewable Energy, or MNRV, announced 50 gigawatts of annual auctions. This was almost triple what had been auctioned off the prior years. Although the target was to achieve 50 gigawatts, India surpassed this goal, auctioning over 62 gigawatts of RE capacity during the year. Since April 2023, we have won about 8 gigawatts of new capacity, which is around 60% more than our portfolio was as of March 31, 2023. We have signed PPAs for about 2.2 gigawatts of capacity so far in FY’25, increasing our contracted portfolio now to 15.6 gigawatts for the remaining 6 gigawatts or so that we have done and have a letter of award in hand, we expect to sign PPAs over the next six to nine months. Until then, we are going to refer to them as our pipeline. We are on pace to deliver on a pipeline of over 21 gigawatts by 2029, which is more than double the amount we finished fiscal year FY '2024 item. We are further propelled by a very exciting macroeconomic environment. We expect consistency in policymaking and a continued strong push towards renewable energy. On the demand side, we also anticipate a surge in industrial demand growth in sectors such as electric vehicles and data centers, which will not only boost GDP, but also increase power demand substantially. On costs, solar cell and module prices are at an all-time low and battery prices have dropped by about a fourth in just over a year, helping to further improve the returns on projects under construction. The fiscal year ahead promises to be even more exciting and full of opportunities than the one that we just completed. On page seven in this call, we want to address some key items that we believe the market has not recognized and given value for yet. From where we sit today, we see a clear pathway to 16% to 18% annual growth through the end of this decade. Importantly, this growth will be through internal cash flow generation and asset recycling, and we do not intend to issue any new shares. We also expect to meaningfully improve our leverage ratios during this period. As mentioned earlier, our fully contracted portfolio stands at 15.6 gigawatts. However, we have also won an additional close to 6 gigawatts in a very favorable bidding market for which we have letters of award in hand and expect to sign the PPAs in the next six to nine months. Combined, we have over 21 gigawatts, which provides clarity on growth, as well as increased confidence of execution and returns. Importantly, the next 10 gigawatts of growth have significantly high returns than the 9.5 gigawatts we had operating as of March 31. Asset recycling is a key part of our strategy as it not only provides a lower cost of equity to fund growth, but it also enhances returns given the meaningful premium we received over build cost. We can increase the IRR range to 20% to 25% on average after reinvestment of the equity and gains on sales. We expect to monetize around 2 gigawatts of assets by FY ‘29. We also want to address some lack of clarity about our accounts. Put simply, there is a significant amount of investment and costs that we will incur in the near-term, such as debt and unallocable overheads for our platform. However, they create significant comparative advantages and are key to long-term value creation. We will provide some analysis that shows that for our assets operational for over a year, those earn a healthy ROCE or Return on Capital Employed of around 11% versus about 8% at the consolidated level. They contribute about INR17 billion as CFE, compared to our FY '24 consolidated CFE of INR13.7 billion. And these assets only have a net debt to LTM EBITDA ratio of 5.3 times versus 8.2 times at a consolidated level. All of these are meaningfully better than the ratios that would be calculated from our consolidated accounts. As we continue to grow through this decade and more of our assets become operational, the consolidated account ratio will improve materially. Turning to page -- and Kailash will talk about some of these numbers later on. Turning to page eight, since our listing about three years ago, we have delivered about 18% to 19% annual growth in operating megawatts, as well as adjusted EBITDA. With the projects under construction, recently signed contracts, and recent wins that we expect will receive contract in this fiscal year, we believe we can deliver 16% to 18% growth in adjusted EBITDA through the remainder of this decade. We have invested in the technology, our people, and in building a platform that can deliver truly at scale. Our EBITDA growth is outpacing the growth of our operating megawatts and indicates that we expect to improve our margins, even though we are making investments to accelerate growth in future years. We anticipate that our current pipeline, which includes about 6 gigawatts of uncontracted auction wins, will generate approximately INR142 billion to INR150 billion in EBITDA by the end of this decade, once fully operational. This will be over 2 times of the FY ‘24 numbers we just reported and close to 3.5 times growth since our IPO. Turning to page nine. As part of our commitment to create shareholder value, we will continue to pursue the lowest cost capital to fund our growth. We can self-fund about 1.5 to 2 gigawatts of assets on our own with our cash flow to equity without needing to raise equity or recycle capital. What this means is that we can achieve about 17 to 18 gigawatts of operational capacity by FY ‘29 without needing additional equity. However, we have observed that our differentiated development capability is at a premium, both in the bidding market where we are seeing returns above recent historical norms, as well as in premiums to book value being offered for our assets. Therefore, we are pursuing a plan to accelerate our growth by building an additional 500 megawatts to 1 gigawatt each year, which will be funded by asset recycling. This addition is likely to have an exponential growth effect on our CFE and will have a higher growth trajectory as we add capacity. Through recycling, we can build over 19 gigawatts by selling 1.5 to 2 gigawatts, 2.5 gigawatts of assets at 2 times book value, which would case to around 9.5 times EV to run rate EBITDA. We emphasize that our strategy to fund growth through capital recycling. This is important. Not only does it provide a much lower cost of equity than issuing shares, it also enhances the expected IRRs meaningfully after reinvestment. On page 10, we aim to demonstrate that our projects once stable and fully operational are profitable. While Kailash will cover this topic in more detail soon, let me share some key highlights. We started this fiscal year with 7.6 gigawatts of operational assets, excluding the 400 megawatts we sold during the year, which delivered an adjusted EBITDA of about INR63 billion in FY ‘24. The net debt to LTM EBITDA ratio for these projects was about 5.4 times and the return on invested capital was around 11%, and these assets delivered a stable CFE of about INR17 billion. Turning to page 11, our growth estimates. We aim to grow our EBITDA by 16% to 18% annually over the next five years to about INR142 billion to INR150 billion on a run rate adjusted EBITDA in FY ‘30. Additionally, once operational, our 19.4 gigawatts should deliver approximately INR35 billion to INR42 billion in CFE, which would be an annual growth of over 25% per annum. We expect a return on capital employed between 11% to 12% for the consolidated results. We are also mindful of our overall leverage levels and will look to improve the consolidated leverage net debt to EBITDA ratio by about 25% from current levels as well. For FY ‘25, we expect EBITDA of INR76 billion to INR82 billion and to operationalize 1,900 to 2,400 megawatts of new projects. In addition, we also expect to deliver CFE of INR12 billion to INR14 billion, which would be about 30% growth after adjusting for the gain on sale we recognized in FY ‘24. On page 12, we reaffirm our commitment to pursuing only the highest return opportunities where we can deliver returns above the cost of capital. The return on capital employed for projects commission and FY ‘23, which are now delivering stable EBITDA, is around 11%, compared to our weighted average cost of capital of around 8.75% to 9.25%. Additionally, our in-house wind EPC, O&M capabilities combined with digital capabilities empower us to engage in firm power or complex projects that have the highest return and constitute the fastest growing segment of the market. Over the years, we have partnered with both prominent domestic and international investors, who have shown interest in our assets and provided us with equity for growth. This strategy has allowed us to achieve a higher return on invested capital, along with lowering our overall leverage. Now turning to the highlights for the quarter and full-year 2024 on page 14, I am pleased to report that for FY ‘24, we reported our first profitable year since listing, a significant milestone showcasing our inherent cash generation capability. Furthermore, our EBITDA was at the top end of the range for EBITDA and ahead in CFE. We added 1.9 gigawatt of operational capacity in line with projections and excluding the impact of gains from asset sales reported an adjusted EBITDA of INR65.6 billion, compared to the top end of our initial EBITDA guidance range of INR66 billion. Additionally, we exceeded our CFE guidance reporting INR13.7 billion, which includes an INR3.7 billion gain from sales. We are also reporting our first profitable fiscal year since listing with a profit of INR4.1 billion or $0.12 of EPAs. Our contracted portfolio now stands at an impressive 15.6 gigawatts, including the 2.2 gigawatts of recently signed agreements. Turning to page 16, we have a summary of updates from our businesses. Firstly, the current renewable energy landscape is one of the best we have ever seen with over 62 gigawatts of options in FY ‘24 and more than 50 gigawatts additional already in the pipeline for FY ‘25. In addition, high power demand has pushed merchant prices up, which is driving higher auction tariffs as well. The demand for electricity is at an all-time high. Secondly, our differentiated platform positions us as a leader in firm power and complex projects, leveraging our capability to combine wind development with our digital capabilities. There are fewer takers of these firm power or complex projects given the challenges in execution, and hence we see higher return opportunities in these kinds of projects. Finally, our returns are bolstered by the decline in solar module and cell prices alongside a significant reduction in batching prices. On page 18, let me first delve into the auction market. This has been one of the best auction markets we have seen since our inception. There was an over four-fold increase in RE auctions during fiscal year FY ’24, compared to fiscal year 2023. And another 50 gigawatts has already been announced and should be completed in the current fiscal year. The share of firm power projects grew the most with over 23 gigawatts auction in FY ‘24. While the overall market has grown for sure, we notice that the subscription rate, which is a measure of competition levels, is generally low, particularly in the firm power of complex project options. Although there are enough takers for vanilla wind and solar projects, some of the more complex projects saw less than 1 time subscription. We expect this trend to continue due to the limited capital, bandwidth, project size under development, and resources among our peers, and therefore we should see lower competition and hence possibly better returns. Turning to page 19, India's FY ‘24 GDP grew by 8.2% year-on-year, surpassing estimates. Thanks to this GDP growth and expansion in purchasing power of the Indian consumer, we see a consistent rise in power demand, which has also risen around 8% on average over the past four years. Notably, despite a rapid expansion in power consumption, India still has one of the lowest per capita electricity consumption rates in the world. On page 20, India's peak demand hit two new highs in May of this year, and with that came outages and spikes in merchant power prices, as well as regulatory caps, evidence that demand is outpacing supply. Despite this high demand, supply will take time to catch up, including that of renewable energy, the fastest and cheapest solution. With the likelihood of continued shortages and upswing in the average merchant prices and lower competition in auctions, it is reasonable to expect auction tariffs will also continue to rise in the medium term. On page 21, due to an increase in power demand and with the mandate to reach its 2030 targets of 500 gigawatts of installed RE capacity, MNRE, the Ministry of New and Renewable Energy, initiated a 50 gigawatt RE auction target last year, appointing four different agencies to bid out this capacity. These agencies, along with the state distribution companies, have surpassed the overall target in the first year, auctioning over 62 gigawatts of renewable energy capacity, nearly a four-fold increase over the last several years and the most ever. We are tracking another 50 gigawatts of auctions that have been announced for FY ‘25. Notably, the amount of firm power complex or complex capacity has seen the largest increase in FY ‘24 over FY ‘23, which as I said earlier about 23 gigawatts of firm power capacity auctioned during the year and around 9.5 gigawatts already announced for financial year ‘25. Given our differentiated capabilities, we have been able to capture more of these higher return projects than our peers. We capitalized on the expansion in auction volume by winning about 8 gigawatts of RE capacity in a single year. This was nearly 60% of our contracted capacity at the beginning of fiscal year ‘24. Of this 8 gigawatts, we have signed PPAs for about 1.8 gigawatts and another 438 megawatt agreement with a single corporate customer. Of these 8 gigawatts, over 5.2 gigawatts of firm power projects, which should have a higher return than plain vanilla products. Turning to page 22, the total addressable market has expanded, but there is limited capability and bandwidth amongst peers for these firm power or complex projects. Most competitors, aside from the top three or four, have struggled to keep up with the rapid increase in auctions, resulting in lower competition as evidenced by falling subscription rates. The vanilla wind solar and hybrid auctions have had oversubscription rates of 2.8 times to 3 times, whereas some firm power projects have been less than 1 time subscribed. Limiting factors such as capital, scale and capability contribute to this trend. But our key differentiator is our in-house wind EPC teams. We have been investing in developing a strong platform that can deliver large scale projects at the lowest cost. Our in-house wind EPC and solar EPC and land acquisition teams ensure seamless delivery on this front. Turning to page 24, which further outlines our differentiated platform and ability for firm power complex projects. Our wind EPC expertise bundled with our digital capabilities provides us with an edge in firm power complex projects. We can deliver these projects at the lowest cost in India and achieve superior returns, which are better than vanilla projects. Our portfolio combined with our pipeline of over 21 gigawatts includes now around [Indiscernible] gigawatts of firm power projects or about a third of our total projects under construction and in the pipeline. Competition in this segment, as I said earlier, is low. And our in-house digital lab further enhances return through determination of the optimum mix of wind, solar, and batteries. Our ability therefore to manage wind EPC and our digital platform enables us to achieve superior returns in this segment of the market. In addition, I should say that we now participate only in central bid as the counterparty profiles enable us to source cheaper financing. And further, we now only take on corporate PTAs of at least 50 megawatts with mostly now marquee international customers. We invest our capital in the highest return opportunities, and currently firm power projects provide that avenue. Turning to page 26, we are the largest wind EPC developer in India with over 4.7 gigawatts of operational wind projects. And our nearest competitor is only about half of our size. Since our inception, India has added about 29 gigawatts of wind capacity with 4.7 gigawatts contributed by us, or almost 17% of the total market share for us. Wind projects are complex due to design intricacies, lead time of site selection, the fragmented nature of sites, and very importantly right-of-way related matters. Despite these challenges, wind has the lowest LCOE for peak demand, even better than solar. That may sound odd as normally peak demand in the U.S. or Europe is during the day. In India, peak demand is during 6:00 a.m. to 8:00 a.m. in the morning and 7:00 p.m. to 9:00 p.m. in the evening, times when solar is really not generating. Our decade of experience and data from over 2,200 wind turbines enables us to optimize bidding models and select the best sites for upcoming projects, providing us with significant competitive advantages. Further, we have realized that we are able to better manage operational projects, and we have found that we maintain projects ourselves at a 25% to 30% lower cost than is outsourced to OEMs. It also allows us to actually generate higher uptime and generation from the wind turbines that we manage ourselves. We will continue the effort of focus on enhancing our wind capabilities and grow this capability by developing more power projects. Turning to page 27, the combination of wind, solar and battery storage is the best renewable energy solution for firm power, particularly compared to solar with pumped hydro alternatives. Wind is a much more cost effective solution than pumped hydro for meeting demand when solar is not producing. With a combination of wind, solar and batteries, we produce the cheapest firm power from renewable energy in the country. Our analysis concludes that the overall cost of pump hydro plus solar is still 10% to 15% percent higher cost than what we can produce with wind plus solar and batteries. Moreover, [PHT] (ph) sites are limited and have lead times of over three to five years, making it challenging to deliver electricity in 18 to 24 months as required by the PPA's terms. While for batteries the fall in prices has ensured that the cost of using batteries as a solid solution is far more economical than it was before and that the likely continued improvement in technology for batteries and reduction in cost. This shift towards wind and solar and batteries is likely to continue to take place in the future as well. Turning to page 28, our digital capabilities provide us with a unique advantage. Our digital lab is able to use complex simulations through triangulation of proprietary data from our over 2,200 plus wind turbines across all of the country, our 16,000 plus solar inverters, and 150 plus windmills. Through this in-depth analysis, our digital engines can do predictive modeling, as well as do backward testing of our models, allowing us to bid more effectively in auction, achieve higher tariffs, and reduce execution rates. Additionally, we can minimize battery use and rely more on wind and solar production, which are cheaper sources of capacity, through our digital analysis. Our digital capabilities enable real-time monitoring of plant performance, optimizing delivery with minimal downtime. We therefore view our digital systems as a significant competitive edge as there is even greater demand for complex power solutions going forward. Separately, ReNew is also the only renewable energy company to have received the prestigious Global Lighthouse Award by the World Economic Forum. And we have received this award not just once, but twice. Turning to page 31, access to transmission interconnection is also critical to ensure on-band delivery for power projects. Our efforts to secure access to connectivity for future projects growth start years in advance with utilizing our proprietary data and local expertise to identify the upcoming substations in a region where we can get the highest PLS or Plant Load Factors by minimizing transmission line addition. Most interconnection access in India has already been allocated through till fiscal year 2027-‘28. Put differently, if you wanted to bid in the auction market today, your project would likely not be able to get access to the grid until FY ‘28 in comparative PLF locations. For seeing this bottleneck, we have secured access to over 10 gigawatts of connectivity beyond our operational projects. We have visibility of interconnection access for not only our projects under construction, but also for our 5.6 gigawatts of uncontracted pipelines. We actively secure access to interconnection hubs or acquire land where hubs are expected to be built, ensuring our projects can be connected once fully built. In addition, having this clarity of interconnection and site development provides us greater confidence while bidding. It also allows us to be more competitive if we have blocked more competitive PLS sites than our competitors. Our in-house project development teams ensure that we are ahead of competitors in securing land, transmission, and interconnection for the bids that we carry out in the future. And this is actually what helps us also get the higher IRRs on our projects, compared to our competitors. Turning to page 32, in terms of returns on our project, one of the most critical factors impacting returns is cost. In the past year, solar module and cell prices, which represent 40% to 50% of the solar project cost, have fallen by over 50% or more, which has resulted in over $100 million worth of CapEx savings on fiscal year ‘24. When looking at our CapEx forecast, do note that we have assumed higher module prices than the current spot prices. If we do indeed realize current spot prices over the next four, five years, our total solar module cap rates will be about 50% to 30% lower than our projections. Battery prices have also fallen significantly as well, and as I said, the trend continues to be downwards for batteries as well. Turning to page 33, supply chain challenges, especially in solar, remain prevalent in India. The implementation of the ALMN, or the approved list of modules and manufacturers, in April this year has restricted most of the imports of modules into India. To provide a solution to ensure security of supply, we now have our own manufacturing facility, which are currently producing modules at cost lower than imports after including import duties, even where imports are possible in a very restricted sense. And of course, for future projects that is not even possible. While India has about 35 gigawatts of capacity, much of it is old, higher cost technology, or is exported, or catered to rooftop and the smaller module requirements, leaving only about 12 gigawatts of supply versus a much higher domestic demand. We are transitioning to top-con technology, which is at least 2% to 3% more efficient than existing monopole technology to further increase our cost advantages over our Indian peers. We are interested over time in monetizing a portion or even all of our solar manufacturing plants as part of our capital recycling strategy, securing of course the supply to our own plants. Our assumptions while bidding include buffers over the spot prices for sales, and this helps insulate us from a possible uptake in prices from execution time. Turning to page 34, interest cost is our biggest annual expense. Over the past year we have ensured that the interest rate of refinanced debt is lowered by refinancing old high-cost debt, as well as by shifting to cheaper domestic financing. Both international and domestic lenders continue to show a lot of interest in our projects. And the domestic debt liquidity at a high, we have signed over $13 billion worth of debt funding MOUs in a single year with very high quality counterparties such as the Asian Development Bank, Societe Generale, and Power Finance Corporation and REC. Additionally, Indian banks are now more open to renewable energy projects and are not only offering competitive terms, but also larger check sizes in line with the larger options and project sizes that we are now doing. We have no immediate refinancing risk, and we continue to be prudent in our approach to ensure that we can optimize our costs through tapping a very, very pool of capital. With that, let me hand it over to Kailash to discuss more about the financing strategy. Kailash, over to you.

Thanks, Sumant. On page 36, we'll discuss three themes, profitability, leverage, and funding growth. While we’ll showcase the returns from our operating projects, analyze the leverage of our operating portfolio, and outline our growth funding strategy. Firstly, turning to profitability and leverage. On slide 37, based on reported financials, some may view our leverage high and profits low. However, these ratios are distorted by growth, including debt for projects that are not yet completed and producing EBITDA, as well as the cost related to our platform that delivers tremendous value longer term. We will show on the slide that leverage on assets in our portfolio that have been operating for at least one year only have a net debt to last 12-months EBITDA ratio of about 5.3 times. The ROCE or the return on capital employed of the same group is around 11%. On a consolidated basis, the returns of these projects are partially offset by platform costs, new businesses, and our under-construction portfolio. Put differently, as we grow, there will be systematic improvement to leverage and profitability. By 2030, we expect that the consolidated net debt to last 12 months EBITDA will be around 5.5 times or lower, and overall return on capital employed will be double-digits. On page 38, we delve into leverage. The operational portfolio of assets that have been operating one year or more had a net debt to last 12 months EBITDA leverage ratio of around 5.5 times, while the same ratio on a consolidated basis stood at 8.2 times. We want to point out that this higher figure includes debt related to manufacturing, equity contributions by our JV partners in the form of compulsory convertible debt, and debt related to our under-construction portfolio. After these adjustments, our underlying core leverage ratio is about 5.5 times. On page 39, let me follow-up on Sumant’s discussion of funding our growth. Our internal cash flow to equity generation can fund about 2 gigawatts per annum of capacity additions. Adding this up through FY ‘29, we can reach about 17 gigawatts without additional equity. However, the auction market is particularly robust right now, offering some of the highest returns we have ever seen. In addition, given the shortages of development capability combined with strong ESG mandates by global investors, we are able to monetize assets at a premium. This asset recycling opportunity allows us to accelerate our growth without issuing new shares. Turning to page 40, we address our funding requirements and sources. We need approximately $8 billion in CapEx to build out 21.4 gigawatt committed portfolio and pipeline. We plan to fund our equity needs through a mix of asset sales, cash on balance sheet, and internal cash generation. And for debt requirements, we have multiple options available, including the MOUs that we've signed with PFC, REC, Asian Development Bank, and Societe Generale. Now let's turn to our financial performance. On slide 41, we reported our first profitable year since listing, a significant milestone showcasing our platform's inherent cash generating capability. The number of megawatts we brought online was in the middle of the initial FY 2024 guidance, while EBITDA came in at the top range -- top of the range. And the cash flow to equity was slightly higher than the top end of the guidance provided, even after including the 3.7 billion gain on asset sales. On page 42, our contracted portfolio now stands at 15.6 gigawatt, with 2.2 gigawatt of contracts just recently signed. We have an operational capacity of 9.5 gigawatt, having added 1.9 gigawatt during the year. Note that we sold around 400 megawatts during FY 2024, which are no longer included in our portfolio. Of the 1.9 gigawatt added, 1.174 megawatt is solar and 768 megawatt is wind. We saw significant improvement in wind PLS reaching 26.4%, compared to 25.5% last year. Solar PLS was slightly lower mainly due to cyclones on the West Coast of India early last year. Overall, there was about a 3 billion negative impact of weather in 2024 versus our long-term 20-year averages. On page 43, we showcase our cash generation. While not a GAAP metric, cash profits demonstrate ReNew’s strong cash generation for equity invested. During FY 2024, we reported a cash profit of INR26 billion. This marked an 83% increase from the previous year. On page 44, we emphasized our strategy to fund growth through capital recycling. We have raised about $645 million by selling close to 20% of our assets at an approximate 2 times price to book. This equates to almost 9 times to 9.5 times EV to runway EBITDA. This strategy allows us to build assets at lower EBITDA multiples of around 7 times to 7.5 times and sell them at higher multiples, thereby realizing equity gains for faster growth. This equity is reinvested into projects, providing even higher EBITDA on our invested cap rupee by 1.5 times to 2 times approximately. Capital recycling also improves returns meaningfully. Based on our track record of selling about 20% of the company at around 9 times to 9.5 times EV to adjusted EBITDA, the range of expected IRRs improved by 20% to 25% versus our base case. We will continue to maximize the opportunity to recycle the assets and use this lower cost of equity for growth. And we will be disciplined in ensuring that we only access the cheapest source of capital without over-leveraging our balance sheet. On page 45, our days sales outstanding has improved substantially and now stands at around 77 days of receivables on billed revenue, a 61-day improvement year-on-year. We are making good progress on overdue receivables with the states and expect the DSOs stability once these issues are resolved. The Government of India has taken initiatives to streamline recovery through its national power portal, tracking overdue days from states. This payment security mechanism has improved our working capital over the period. With that, let me hand it over to Vaishali for comments on ESG.

Thank you, Kailash. Turning to page 47, as we reflect on the remarkable milestones achieved during fiscal year ‘24, our journey has been marked by achieving our targets and being recognized by top rated ESG rating platforms affirming our leadership globally. We set new benchmarks in our ESG vision, performance, and transparency, which I will elaborate in the upcoming slides. ReNew has been recognized by top ESG rating platforms, including being named among the top rated ESG companies by Sustainalytics and the best in India's electric utilities and IPPs corporate in India by Refinitiv. Our dedication to sustainability is further demonstrated by the increase in our S&P global score, which has gone up to 55 in fiscal year ‘23 from 41 in fiscal year ‘22. We have maintained our B score in CDP climate change and A minus in CDP supply engagement ratings. Last year, ReNew received global recognition for its pioneering achievements in business excellence, digital innovation, and sustainability. Among the most notable accolades were the MIT Technology Review 2023's 15 Climate Tech Companies to Watch for was -- ReNew was included in this, and it was one of the only two renewable energy companies globally to be included in this prestigious list. In the sustainable markets initiative Terra Carta Seal, we were one of the 17 companies in a global list, which is recognized for its efforts towards conservation of water and its operation. The COP28 Presidency Energy Transition Changemaker was an award, which was given to us by the COP28 Presidency. We were the only clean energy company from India to be recognized under the category of renewables, integration, and clean power, and renewables as well. The World Economic Forum's Global Lighthouse Network, we won this for the second time and we found our place in a select list of 21 members of the Global Lighthouse Network, a community of manufacturers that show leadership in fourth industrial revolution technology. These accolades underscore our commitment to setting new benchmarks in ESG vision performance and transparency. Since inception, social responsibility has been central to our business strategy at ReNew. Our CSR journey, which began in 2014, and since then our impact footprint has grown to about 500 plus villages across 10 plus States in India, impacting lives of over 1 million people. Last year, we were awarded the very prestigious CII, ITC Sustainability Award in the CSR category, recognizing our robust processes and consistent impact across our operations around India. Turning to page 48, I would now like to switch to specifics of some of our efforts for fiscal year 2024. Some of the flagship programs that we've been doing work on are, one is Lighting Life, which is an initiative focusing on last mile electrification of government schools with less than three hours of electricity and putting renewable energy sources for electricity in these schools, and advocating for climate action. We have electrified 63 schools and established 66 digital learning centers across five states. Women for Climate is a very important initiative where we are addressing the gap of women's participation in the energy sector, the skilling and entrepreneurship development for rural and urban women. We have trained over 300 saltpan farmers as solar technicians and helped them secure jobs for more than 30% of the trainees. With respect to our site, ReNew does a lot of work actively and a lot of the programs are employee-driven as well. In addition to developing social infrastructure for the communities, our employee engagement initiatives foster a culture of giving and care within the ReNew network of sites. We have provided safe drinking water by building 170 water tanks, desilting 18 lakes and installing over 100 reverse off-smokeless units across communities and schools. At ReNew Sustainability is really about advancing our communities year-on-year and taking the disclosure to the next level. With that in mind, the release of our first integrated support facility plan and assurance of our ESG data is underway. Let me hand it back to Sumant to talk about our guidance now.

Thank you, Vaishali. Turning to our annual guidance on page 50, for FY ‘25 we expect an adjusted EBITDA of INR76 billion to INR82 billion and expect to complete 1.9 gigawatts to 2.4 gigawatts of projects this year. The addition of these projects will enable us to deliver CSE of INR12 billion to INR14 billion in FY ‘25. In addition, we expect that our current contracted pipeline will deliver INR110 billion to INR115 billion on a run rate consolidated basis and CSE of INR30 billion to INR32 billion. On a longer term basis, we expect that we should be able to deliver the full 21.4 gigabit portfolio plus pipeline by the year 2029 -- FY 2029, and reach the run rate guidance by FY ‘30. On a fully constructed run rate basis, after considering planned asset recycling, we should be able to deliver EBITDA of INR142 billion to INR150 billion and a CSE of INR35 billion to INR42 billion. Thank you so much for all your patience and giving us time to go through this presentation. We will be now happy to take any questions from you all. Thank you. Nathan, back to you.

Thank you. [Operator Instructions] Your first question comes from Justin Clare with Ross Capital Partners.

Yes, hi. Thanks for taking our questions here. So first off, you have 21.4 gigawatts that you've won at auction already. And so just thinking through the interconnection constraints here, how are you thinking about participating in new auctions in FY ‘25 and beyond given the size of the pipeline that you already have? Are you looking to participate? And then if so, are you looking at winning projects where the COD dates would be in FY ‘30 or potentially beyond? So how are you thinking about that part of the business?

Yes, so I think Justin, as far as your question of interconnect is concerned, to bid for a new project you need obviously both the interconnect and also the reasonable visibility on how you're going to project the land or the ability to block the land. So this is that and then the PLF will built PLF of the radiation, you make an assessment of where can you bid from with a high degree of certainty that you will eventually be able to do the project there. Now the better -- and you can block interconnect through a couple of different mechanisms. You can acquire land ahead of time and that allows you to block interconnect, or you can give a bank guarantee and block interconnect. But if you do the second, then you have to get the land within a few months after that. Otherwise, you can lose your [Indiscernible] as well. So this is this what we are looking at doing is constantly looking forward and blocking interconnected areas where we know which are good size. And the better size you can get, the more competitive you are in auction. Simply because if you have got better locations than other people have, then obviously you are able to make higher returns at the same tariff, compared to other people. So therefore, the project development becomes very crucial in actually maximizing on the return of the projects that we are bidding for. And so at any given point in time we are extending out this whole project development by anything from 4 gigawatts to 6 gigawatts beyond what we already have in terms of pipeline of projects which is 21.4 gigawatts. So we have therefore many other sites and interconnect areas that we already are holding right now and to which we will now bid for new projects. Now to your question of are these projects going to be beyond 2030? That is something that we will assess as we go forward, because obviously we want to make sure that we stay within the [Technical Difficulty] that we have. And therefore we will bid for projects on a very, very select basis from this point on. And to the extent that we can make those promise back ended during this time period, we would like to do that, so that we are able to manage the capital requirement aspect. And we will conclude a bid, but on a very select basis for projects that we can get even higher IRRs. So that is the review the way we are thinking about at it right now.

Alright, okay, that's really helpful. And then maybe just one on your guidance here. You expect to complete 1.9 gigawatts to 2.4 gigawatts by the end of fiscal ‘25. I was wondering how much of that capacity is expected to be commissioned versus how much will be operational, but not yet commissioned. So it does look like there's a gap between when you operationalize a project and when it actually gets commissioned, how much is that gap? And then considering that, I was wondering how significant are merchant project sales in your fiscal ‘25 guidance?

Okay. So you know, the reason that there was a gap this last year between projects that have started generating revenue and projects that were technically deemed to be commissioned is because of two reasons: One, the grid operator introduced new guidelines and rules that required a much higher stringency of the connects that we had into the grid in terms of they wanted us to do various trial runs and grid matching and all of those kinds of things which actually on a one-time basis in a way delayed all commissions of projects, while they went through this new set of rules and regulations. Now that, that is well known and well understood, it is something that the whole system, not just us, but also the system operator, are now able to sort of buckle down and start minimizing the timeline between the revenue generating, as well as the commissioning, okay? So as we go forward, that gap will keep narrowing. Last year they said the gap was a little larger because of the fact that all these rules are new. This year we are already able to start working a little bit more efficiently on these issues and start factoring in. So I can't tell you exactly where we will be by the end of this year, but the gap will be a lot narrower, okay? But to be honest with you, it matters less to us because once the project starts generating revenue, that's really important from our standpoint. The second thing is that the moment the project is being technically commissioned, we then have to start selling it under the PPA to the end of this call. Whereas when it is still generating revenue, but not yet commissioned, that power we can start selling into the merchant market. And so as you know, it really works out well for us because there has been -- the merchant prices have been higher than sometimes the PPA prices have been. But that gap as I said is narrowing now. So there isn't going to be a big gap going forward. To answer questions separately on merchant sales, I think merchant sales in our portfolio will represent maybe about 10% to 15% of our total portfolio in general. I don't think that number would be more than that. And that will be a function of some of these projects that are being sold into the merchant market on an interim basis, while they are waiting to commissioned. Or there are certain other projects especially for the complex projects where there are several components that are required to be commissioned before the project can be deemed to be commissioned. In which case, if you commission the individual, let's say a wind farm or two or solar farm, then those projects until they’re deemed commissioned can also sell to the merchant market. And so that's the second nature of our sales into merchant market. The third will be overflow of power from some of the RTC projects that we will be executing in the future. And the fourth may be pure merchant projects that may be doing merchant sales for a year or two before we put it into a PPA. But the aggregate of all of that is unlikely to exceed 10% to 15% of our building customers.

Okay, got it. Very helpful. Thank you.

Thank you, Justin.

Your next question comes from Puneet Gulati with HSBC.

Yes. Thank you so much. My first question is on the additional projects that you've run. How soon do you think you'll be able to find PPA? And if you can give some color of out of the 62 gigawatts that government auctioned out, how much has already been found PPA?

Yes, so after 8 gigawatts that we had won last year, as I had the thing I said in my remarks, about 1.5 gigawatts worth of 1.7 gigawatts or 1.8 gigawatts of PPAs have been signed. And therefore the balance 6 gigawatts or thereabouts is still left to be signed. Now there was some slowdown in PPA signing because the code of conduct was in effect as you know for the last couple of months and so some of the government agencies were going a little slow on signing PPAs waiting for the code of conduct to be finished. Now that it's got finished, I expect that some more PPAs will get signed. But I think this process will take a little bit of time. For me, it may take, as I said in six to nine months to get some of the -- to get mostly all of the PPAs signed. Simply because some of them are complex projects and therefore there needs to be a higher degree of engagement between the DISCOMs and the bidding agencies to explain to the DISCOMs and so on. And there has also been a complicated, you know, the discounts have to get approval from their regulatory agencies as well. So that whole process is a little bit longer, especially for the more complex stuff. So that's why my sense is that over the course of this fiscal year, the remainder of this fiscal year, most of the PPAs will get signed.

And on your cell and module manufacturing, you seem to have 6.2 gigawatt of module manufacturing, but your own plants indicate roughly 2 gigawatt of annual installation. So how should we think about the balance capacity? Would you be willing to sell it out in the market, export it, or within India? Any thoughts here?

Yes, so with 6-odd gigawatts of capacity we will essentially be producing about 4.7, 4.8 gigawatts of actual module, which will be -- and for our own 2 gigawatts we need given the oversizing about 2.7 gigawatts, 2.8 gigawatts. So the balance we do intend to sell into the market. Now there are two ways in which we are going to sell that. Number one is as pure module, maybe on a tooling basis or whatever. And the second is along with the cell that we are going to commission very soon. Now in the cell as you know there are two different markets that we can sell into. One is the DCR market domestically, which includes the rooftop scheme, the Suraj 1 scheme. And the second is of course the export market as well, where as you know in the U.S. particularly, they are now putting new import curves from -- on Chinese and Southeast Asian cells. So that is likely to become an attractive market for Indian cell. We can of course also sell the cells along with the modules in the domestic market. That is also of course a possibility. So I guess we would be selling about 1 gigawatts to 2 gigawatts a year of modules and all cells potentially separately or together depending on where you get the best utilization. And that number may decrease as we ramp up our own solar execution process.

Understood. And how is your experience doing in terms of operating costs for the module manufacturing so far?

So far it's been very good. Of course we have started module manufacturing for the first time and a lot of people have started up at the same time. And so there is a shortage of the right kinds of skilled workers. So therefore I think ramp up times have been a little bit longer, but I would say by and large, overall within our budget. And I think that everything is now getting to a good level of stabilization in terms of cost and production and quality as well.

Lastly, if you can talk about how much higher IRRs do you think we'll make on hybrid over solar once again, I should make that up?

On complex projects versus solar, you think?

Yes, complex versus solar.

So the thing is, first of all, complex projects have a higher confidence of wind, and wind is much harder to execute for most people. And therefore, we just have fewer bidders. And because you have fewer bidders, therefore the relative competitive intensity is a lot lower. And therefore, you end up usually stopping at tariffs, which are commensurate with the least efficient bidder, right? And therefore, us being in most cases the most efficient bidder, end up making those extra margins on the extra tariffs once the bidding stops.

So in terms of IRRs…

Vanilla solar tends to have more spread. Yes, yes.

Yes, so how much higher IRRs should one, because you used to take 16% to 20% on your Vanilla solar projects. What should be the…

Yes, so I think I'll give you ranges because obviously they tend to move a little bit depending on the bid and so on. But solar typically would be, I would say, 17% to 18% in terms of the equity IRR. Complex projects are probably about 19% to 20%.

Okay. So just 200 bps higher than that.

Yes, so -- yes, yes, yes. That's right.

Okay.

And there is, you know, also that they are harder to execute as well, and that is why you get that extra detail.

Okay, understood. That’s helpful. Thank you so much and all the best.

Thank you.

Your next question comes from Maheep Mandloi with Mizuho.

Hey, hello everyone. Thanks for taking the questions. Sumant and team thanks for the presentation. There's definitely a lot of information there. We'll probably take some time to unpack that. But maybe high level, I think there's some conservatism baked into the long-term guidance here? Just looking at, for example, the 9 times EBITDA assumption on asset recycling that seems lower than the previous sale last year and just where some of these peers or companies are trading in India? So overall, I'm just trying to understand like what buffer do you have on the top end or the bottom end on the guidance here, going forward?

Kailash, do you want to take that?

Yes, sure. Maheep, so obviously these are market-dependent transactions and that's why we are working with a range. We will obviously target the top end of what we are sort of guiding towards, but we just need to be a little bit conservative.

Got it and appreciate that. I mean, maybe in terms of just like the solar module supplier question on selling those internationally, is any of that 1.5 gigawatt to 2 gigawatt per year right now in the guidance? Is that an upside to the guidance here, for the sales to the international markets?

Sorry could you say that again?

Sorry I couldn’t [Technical Difficulty] the question. Kailash, if you did can you answer, yes?

No, I couldn't either. Can you say it again? Maheep?

Yes, no, sure. So I talked about 1.5 gigawatts to 2 gigawatts of solar module change to international market. What your internal consumption is? So I'm curious if that is in the guidance or if that could be upside to the EBITDA guidance?

So, Maheep, I can take that one. So, Maheep, that's not part of the guidance at this point in time.

Got it. And maybe just the last one and I'll catch up later on with you guys. But on the elections, any thoughts on how the new, I mean, obviously it's pretty fresh here, but any early thoughts on how that changes any dynamics on the demand growth or supply or anything else from your point of view?

No, Maheep, I don't think that we expect any change to happen. This government has already been very supportive, and a lot of that comes directly from the Prime Minister, as we all know. But the government overall has also very strong commercial reasons. One, of course, as we talked about, power demand is growing. Renewables is the cheapest, cleanest way to meet that power demand. So there is a very strong economic and commercial reason for the whole renewable energy effort to carry on. But even beyond that, I don't really expect anything to change, because some of the alliance partners are also very strongly supportive of the neighbors and have been in the past when they were earlier in State Governments. So I would expect that the same exact policy will continue and there will be a lot of continuity in policy making in the coming few years.

Thanks for the questions.

Your next question comes from Angie Storozynski with Seaport. Angie, your line is open. Angie Storozynski from Seaport, please go ahead.

Yes, I'm here. I'm So sorry about it. So my first question, I noticed that the complex projects are now built and they came online and I know that they are not commissioned yet and not dispatching under the PPAs, but I'm just wondering if for the last couple of months that they're operational, are you seeing that the dispatch or the output from these assets is in line with your expectations? Again, I understand that they're now merchant, but again, is there any, you know, sort of confirmation of your theoretical models of how these assets might be working under the PPAs?

Yes, so Angie, you know, what is commissioned right now is just the plain Vanilla wind project. So it's very hard to extrapolate from there about how the whole thing would work once it comes together. It's just like a wind project just like any other. And right now whatever producing we’re selling into the exchange. So it's very hard to even forecast from there. I think it's only once the solar project comes on stream and the batteries come on stream that we will actually be able to then combine the whole thing and start getting a better sense. But for the last one year we have been doing that in our digital trading. So we have been able to replicate the performance of the plant as if it were running over the course of the last year. And therefore we've been able to fine tune the design and so on this aside. So I would say that even once the whole plant comes on, there would not be very significant, if at all, any deviation from what we’ve anticipated, because of this digital suitability that we've been developing.

And my other question is for your existing wind assets, are you seeing any issues with performance, especially of those older assets? Any changes, for example, in the PLFs, not because of weather patterns, but because of aging of these assets. And I mean, obviously, we're seeing a lot of repowering of wind assets here in the U.S., and I'm just wondering if the same could be true for your assets, and more importantly, if there is any deterioration or aging of these assets reflected in basically lower output?

No, Angie, so far we have not seen any meaningful data from the earlier, from the design terms. Keep in mind our assets are -- wind assets are only about 12, 13-years old right now. So the oldest assets that we have. So, it's not, we have not seen any wide dispersion yet. But you know, even if we were to replace them with newer turbines, it could not really be cost effective to do that. And the PPA terms very often require us to continue with the same wind turbines that are installed. So I don't think that repowering here is going to be a possibility, at least until the time the PPA is outstanding. Maybe subsequent to that we could use the same interconnect that we have, the same land that we have, and so on, to then put up new wind turbines and connect those to the grid. And then depending on whether the merchant market makes sense or some other PPA market makes sense, we can then look at that. But we are still at least a decade away from that.

And then the last one, when you show us projections of EBITDA and net debt or leverage, those are reflective of asset sell-downs. And so basically it's your share of EBITDA and your share of net debt after accounting for minority interest. Is that right?

Kailash?

So as of now, we are reporting the gross numbers for both the debt and the EBITDA.

But when you show projections like 15 gigs to 16 gigs of assets, and you show me the range of that EBITDA, would that reflect already assets, divestitures to finance this incremental EBITDA stream?

So only the assets which are sold 100% those get taken out fully from both that EBITDA and profits. The rest of the assets are consolidated on a gross basis, and then there's a minority interest takeout at the bottom.

At the net income level. Okay, thank you. Thanks.

Yes.

Your next question comes from Nikhil Nigania with Bernstein.

Yes. Thank you for taking the question. I just had one question, there are two big events happening on the transmission front. One happened last year with implementation of GNA and second coming next year with possibly free transmission going away, interstate transmission going away for renewables? I wanted to understand what implication is it having on your strategy and be, even in the industry, do you see a change in behavior due to these two events?

Yes, so Nikhil, so far we haven't seen a significant change in behavior, but especially the second event is likely to have an impact. Because if in fact, let's say if I win a project today that is going to be commissioned three, four years from now after the full transmission charge has been empty-leveed, and therefore as a buyer of that power I have to pay, let's say, a INR50 for the transmission charge. Then I have to add that to the pure generation charge or the bidding tariff. Now, in a number of cases, that number may end up being more than if I were to produce that power in my own state. And therefore, there will be different views that different states will emerge with. One set of states will say, you know what, it does makes me no sense for me to buy from some other state. I'll do it within my own state, right? And a second set of states, even despite the transmission charge, will still not be competitive. Or the land cost may be too high, or there may be some other costs that I may set that don't compensate them. So for them, the cost will just go up of purchasing renewable energy and there's nothing that can be done about that. But as a result of this, in some of the states which have reasonably good renewable energy resource, but which is not the best, there they may be the development of an STU-based market or an intrastate connectivity-based approach. Now some of those states like Gujarat for example, may have a relatively good enough off-taker credit quality that they will be able to do intrastate bids. But there may be others that may not have a good enough credit quality. And therefore, they may have to get the bidding agency to do state specific bids where the bids are set up for the STU within those state governments. And we've seen things like that in the past when Rajasthan for example had done a second big [Technical Difficulty] in Rajasthan for the local market. So we could have that kind of thing. So what will happen is that there will be a shift in some of the non- [Indiscernible] RE rich states where they start doing own procurement from within their own state. And therefore, we are now looking at how we need to shift our own connectivity strategy to make sure that we block reasonable amount of good sites in state government, even though on an absolute basis they may be more expensive than putting a project let’s say in Rajasthan, no indicator solar. But with the transmission charges it may not be viable. So those are the kinds of things that we are now working on to figure out exactly how this whole dynamic is going to change the spread of renewable energy projects across the country. And basically working to fix our development strategy along with that.

That makes sense. That's very helpful. Just one related question. Once the charges are implemented, I think now the concept of oversizing the asset would supply RTC power or dispatchable power. Would that imply that the transmission charges would be as per the oversized capacity or as per the contracted capacity for the buyer?

They would be as per their contracted capacity, because that's really what you are going to be using. And so the issue is going to be actually that co-located projects may actually make more sense rather than distributed projects. So right now as you know we are putting up wind separately and solar separately, right? Because transmission charges are free. But once you start getting charged for the transmission, then it may make sense to use the transmission line more efficiently to bring down the transmission charges. And that may be the more effective, the more cheaper way of doing it than to be putting it up in the better areas. And so that's the second way in which we are now relooking about project development strategies, which is how do we get places which have both, have good both wind and solar, so that we can think about co-locating and therefore begin on the transmission charge.

Makes sense. Very helpful. Thank you so much for answering my questions.

[Operator Instructions] There are no further questions at this time. That does conclude our conference for today. Thanks you for participating, you may now disconnect.