Renew Energy Global PLC (RNW) 2023 Q3 法說會逐字稿

Thank you for standing by, and welcome to the ReNew Third Quarter Fiscal Year 2023 Earnings Conference Call. (Operator Instructions) I would now like to hand the conference over to Nathan Judge of Investor Relation. Please go ahead.

Thank you, Jason. And good morning, everyone, and thank you for joining us. This morning, the company issued a press release announcing results for its fiscal third quarter 2023 ended December 31, 2022. A copy of the press release and the presentation are available on the Investor Relations section of ReNew's website at www.renew.com.

With me today are Sumant Sinha, Founder, Chairman and CEO; and Kedar Upadhye, CFO. After the prepared remarks, we will open the call for questions.

Please note, our safe harbor statements are contained within our press release, presentation materials and available on our website. These statements are important and integral to all our remarks. There are risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. So we encourage you to review the press release we furnished in our Form 6-K and presentation on our website for a more complete description.

Also contained in our press release, presentation materials and annual report are certain non-IFRS measures that we reconcile to the most comparable IFRS measures, and these reconciliations are also available on our website in the press release, presentation materials and annual 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 listening on the call. Welcome to the call. Let me start off by saying that the Indian renewable energy market remains incredibly robust, and we see plenty of high-return investment opportunities on the horizon, where we do believe we have a competitive advantage, specifically, in the complex projects and corporate PPA segments.

We have developed a platform that is differentiated not only in India but even when compared to peers globally. We have operational expertise across renewable energy, technology with leading proprietary digital capabilities that creates an optimal and customized products for our customers.

We believe that the world is shifting. Customers are increasingly recognizing the climate change imperative as an existential risk and are moving rapidly to decarbonize. We are one of the few companies globally that can deliver that decarbonization solution for our customers that most other companies are not really focusing on as much. As these solutions require technological leadership, complexity and customization, we believe that we will be the decarbonization leader and will be even better positioned to capitalize on these opportunities more than ever before.

From our perspective, as we look at it today, we believe that our EBITDA will grow at least 50% over the current base as we execute on our entire portfolio in the coming 2 years. We expect to layer further growth on top of this with a particularly interesting round of upcoming auctions over the next year given their complexity.

In addition to this is the evolution of opportunities in digitalization and green hydrogen that provide our investors incredible upside options that many companies are not focusing on as much at this point. We believe that the value of our shares do not reflect one of the best growth in the renewable energy industry combined with equity returns that are among the highest in the world, so much so that we have already bought about $160 million of our own stock, which represents over 15% of the free float in only the last 10 months or so. We have another $90 million of authorization or another 20% of free float approximately. And we have every intention to use that authorization aggressively given by the current share prices.

We believe the value of the company has been highlighted with over $500 million of asset sales over the past 18 months at valuation multiples are consistently higher than new build multiples.

Starting on Page 4, to discuss highlights this quarter. We continue to report strong growth. And for the first 9 months of this fiscal year 2023, revenues from contracts with customers grew 24% year-on-year. Adjusted EBITDA was 18% higher, and cash flow to equity increased 11% from the same period in the prior year. We have commissioned capacities of 7.7 gigawatts operating and the total capacity under construction currently is 5.4 gigawatts and another 337 megawatts is in the process of being acquired, which brings our total portfolio size to 13.4 gigawatts.

So far, the fiscal year our core operations, what we can control, are tracking within a smidge of our internal budget provided at the beginning of the fiscal year. With only about 6 weeks left in this fiscal year, we expect that we will end the year around INR 61 billion to INR 63 billion. The revision in guidance is essentially for reasons beyond our control. This includes delayed completion of the acquisition that we had announced earlier this fiscal year and which is still under process.

Based on where we are in the process, we now expect the acquisition to close early next year. We had expected that this acquisition would add about INR 3 billion or so this year in our original guidance, which looks to be realized in FY '24 and beyond. Even though the acquisition has not contributed to EBITDA this year, it is contributing to our balance sheet.

The lockbox date was set at the beginning of this fiscal year, and we retain the economic value and cash generation, which accrues to our balance sheet. Also, carbon credit sales of around INR 1 billion that we expected to be realized this fiscal year are not likely to slip into early next fiscal year, given the backlog of projects that are in the process for registration at various carbon exchanges.

Also, weather continues to be a bit of a headwind and whilst we capture the majority of the negative hit this year in our guidance at the beginning of the year, the weather, along with a variety of other items, look to end up another INR 1 billion or so worth in our beginning of the year assumptions. We are focused on the long run and still believe that ReNew will be delivering adjusted EBITDA of INR 89 billion to INR 94 billion over the next several years or about 50% higher than this year. Virtually all of this growth is contracted and highly visible.

As we have reiterated many times, we are focused on creating value. And one of the key determinants of creating value is maximizing returns not only through disciplined bidding and product offerings, but also through execution. In this way, SECI began granting extended construction time line which may present us an opportunity to enhance the returns on these projects under development. Module prices are also down 20% or so in the last couple of months, which allows us to streamline construction schedules for our 5.4 gigawatts under development and potentially bring in plants earlier to capture market sales, which could materially improve the returns on our pipeline.

We are planning to update the market in the next couple of months. But broadly, we do expect that the adjustments will be moderate, and all the projects in our pipeline will be executed as they are all expected to earn return above our threshold minimums.

We are making good progress on our accounts receivables and are seeing regular payments from the state -- from the stack distribution companies that has the highest amount of overdues. Also during the quarter, we added another 300 megawatts of corporate PPAs, bringing that portfolio to 1.8 gigawatts or about 13% of our total portfolio.

Separately, we also received some strong ESG ratings from Refinitiv, Sustainalytics and Carbon Disclosure Project. Refinitiv recently updated their ESG rating on renew, and we are now ranked as the second highest of any electric utility or ITP globally. Sustainalytics ranked us as a top ESG-rated company. We also received the highest rating by the Carbon Disclosure Project among all Indian renewable companies.

On to signing of new PPAs on Page 5. As I said, we have signed another 300 megawatts of PPAs this quarter, and we have also derisked our growth as only 1% of our 13.4 gigawatt portfolio has pending PPAs. The corporate PPA portfolio has nearly tripled from the same time last year. And as I said, it's now 1.8 gigawatts with a growing backlog. We estimate that we have the largest market share by a significant measure in this market, which show that differentiated advantage in this business segment.

Corporate PPAs offer higher returns than Plain Vanilla renewable energy projects, given higher barriers to entry, our ability to partner with corporate customers and provide them energy solutions sooner than our competitors. We continue to believe that ReNew will have a 4- to 5-gigawatt corporate PPA portfolio by 2025.

The volume of auctions for complex projects, such as round the clock and peak power continues to be robust. At the moment, there is about 12 gigawatts of auctions for these complex projects under process. And given our differentiated platform that provides us cost and revenue advantages, we remain bullish that we will be able to capitalize on these at returns that are above our minimum return thresholds.

With regard to CapEx, the prices of materials, modules which go into our CapEx has moved in our favor since our last earnings call last November, and this is discussed on Page 6. On this front, we have seen around a 20% reduction in prices for modules compared to levels in November. Falling prices for wafer and cell prices are likely to also make the delivered prices from our captive manufacturing even more competitive.

From where we stand today, we are even more confident about delivering returns within our targeted 16% to 20% equity IRR range at the project level. We believe there is further opportunity to improve return to capital recycling, further implementation of proprietary digitalization and continued pursuit of operational excellence.

As a reminder, we have locked in wind turbine prices, so there is essentially no material exposure on this front. If in the event that any additional new project has an expected IRR below our minimum thresholds, as you know, we will not proceed. We will remain disciplined with our capital. With that, I would like to turn it over to Kedar to go over the latest quarter financials.

Thank you, Sumant. I'll now move to Slide 8, which provides the highlights of the fiscal third quarter of 2023. We added 66 megawatts this quarter to bringing the total 7.8 gigawatts operating. We signed another 282 megawatts of PPAs, which brings the total amount under construction to 5.4 gigawatts. Our revenues from customers rose 24% year-on-year in the first 9 months of fiscal 2023. EBITDA increased 18% in the 9 months of fiscal 2023 when compared to the same period in the prior year, and our cash flow to equity increased 11%.

While solar generation was better than last year, so wind PLF was about 200 basis points lower than the prior year, which was in keeping with the lower production from wind sites recorded across all of India.

Turning to Page 9, which provides a reconciliation of adjusted EBITDA in Q3, which stands at INR 11.628 million. The wind resource continues to be below normal, a little bit above the lowest witnessed several years ago. And carbon credit sales were below last year, although we expect this will come in the next fiscal. EBITDA through the 9 months ended about 98% of our internal budget and for our core operations, excluding the impact of weather, M&A and the timing impact of carbon credit sales, the full year looks like it will end up being around the same.

With regard to our cash flow generation, on a 9-month basis, our cash flow to equity was 11% higher than the prior year, although CFe this quarter was impacted by the timing of interest payments after refinancing the green bond that paid the interest biannually with domestic debt, which pays the interest monthly. Also worth noting is the strong cash generation from our cash flow statement. Cash flow from operations for the third quarter of FY '23, nearly doubled to $261 million for the same period in the prior year as one of the largest positive contributors was a $122 million reduction in our receivables from the second fiscal of '23.

Turning on to Page 10. As we have highlighted many times over the past year, we have been focused on improving collections on the past due receivables from the state distribution companies, and we are pleased to announce that we have made a sizable progress. The Q3 DSO improved by over 2.5 months compared to the end of Q3 in the prior fiscal, and that contributed about $122 million to our cash position as the discounts that have been laid on payments have now been making up payments.

As a reminder, the AP DISCOM, which represented about 42% of our current past due receivables in March 31, agreed in June to pay past dues over the next 12 months in equal monthly installments, has made about 6 to 7 payments out of 12 so far. The other states that were late have also been making payments on past dues. At this point, we are expecting to end the fiscal with further improvement in the DSOs, which would represent a release of cash from working capital of approximately INR 6 billion or more from the prior year.

We continue to expect further improvement in our DSOs over time as an increasing percentage of our sales will be to the central government owned SECI, which pays its bills promptly and on time. Today, with 7.8 gigawatts operating about 50% of our assets are with the 5 DISCOMs that have 5 DSOs as almost all of our committed projects are with SECI or with corporate customers who pay on time. The exposure to these 5 DISCOMs will fall to about 32% by the time we complete the exhibition of the portfolio. This customer mix shift would represent an improvement of 55 days in our overall DSO just by itself. With that, I will turn it back to Sumant for a comment on our ESG initiatives and guidance.

Yes. Thank you, Kedar. I'm taking up ESG on behalf of our sustainability head, Vaishali.

Turning to Page 12. Considering our momentum from last year, we are committed to setting new benchmarks in all fronts of ESG performance and transparency. Our latest ESG rating is called our testimonials to our endeavor on this front. As a validation of our ESG commitment and performance, we recently received a score of 81/100 from Refinitiv, a global provider of financial market data. This core positions ReNew as #1 in India in the electric utilities and ITP category and, as I said earlier, #2 globally in the same category.

Furthermore, ReNew has been recently included in the top-rated ESG Companies list released by Morningstar Sustainalytics for the year 2022, '23. We believe this is a validation of ReNew's ability to identify and manage ESG risk that can impact our operations.

CDP has rated ReNew as B for climate change, which is the best rating among the renewable energy companies in India and higher than the Asia average, which is a C, a B rating from CDP for ReNew reflects that the company is taking coordinated actions for climate change mitigations.

To drive collaborative impact towards a fossil-free future, we continue to work with our employees, communities and partners. Towards this end, ReNew has undertaken the following initiatives. We have pledged to plant 1 million trees by 2030 under World Economy Forum's 1 trillion trees initiative. Our corporate office in Gurugram in India has been recognized as one of the best existing green buildings by GRIHA, which stands for Green Rating for Integrated Habitat Assessment. India's green building rating agency equivalent to the U.S. GBC, United States Green Building Council. Our annual program called Gift Warmth has benefited 275,000 people across 11 states in India this year.

One of our other initiatives, Project Surya, focusing on job training and entrepreneurship development of women and salt pan workers, was showcased in COP27 in the India Pavilion and the G20 EMPOWER Inception event.

Turning to Slide 13. We continue our efforts to achieve our ESG targets with specific initiatives. Earlier last year, we submitted our science-based GHG reduction targets, which have now reached a validation stage by SBTi. Working towards our target to achieve water neutrality by 2030, a feasibility study is currently underway, near our site to identify community-based initiatives to offset our water footprint from our operations.

We also, I should say, have achieved a 12% women representation in our workforce by the end of Q3, and we are working on increasing it substantially to 30% in the next 2 years. We would be disclosing progress across our targets in our forthcoming sustainability reports. I invite you all to engage with our sustainability report '21, '22, which was released in October 2022.

Moving on. With regard to our guidance, this is not beyond the sustainability section. With regard to our guidance outlined on Page 16, we are shifting our FY '23 adjusted EBITDA guidance, as I said earlier, to a range of INR 61 billion to INR 63 billion, which reflects the absence of the expected EBITDA contribution from our acquisition under process; the deferment of carbon credit sales; and some impact of weather, which is deferring some of our EBITDA. Again, we are not revising our portfolio run rate EBITDA, which is about 50% above expected levels this fiscal year and which is essentially fully contracted and should be reached over the next couple of years.

On the buyback front, as I said, we have repurchased about 25 million shares since we implemented the program, which still leaves us about $90 million of authorization remaining. $90 million represents approximately 20% of the currency float at today's share price. We continue to see considerable value in our shares. As we have evidenced by numerous asset sales over the past year, RNW trades at a meaningful discount to what we can sell assets for. As our shares are one of the highest return investments of scale that we can make, we have been actively buying back stock when we believe that it would provide the highest return opportunity for our shareholders. With that, we will be happy to take any questions.

Nathan, back to you.

(Operator Instructions)The first question comes from Julian Dumoulin-Smith from Bank of America.

This is actually Morgan Reid on for Julian. Can you first talk about the execution on the corporate PPAs this quarter? It seems like this is clearly an increasing relevant portion of the pipeline. We'll be interested to understand what proportion of the portfolio you think this can kind of become in the next year? I think kind of trying to understand where you are focusing your growth. Clearly, you've talked about this opportunity quite a lot.

Yes. In terms of -- we signed a lot of our corporate PPAs in the last 6 to 9 months and less than that. So a lot of these projects are still under execution. But I think the important thing to note is that we signed most of this 1.8 gigawatts in the last 12 months. And that gives you a sense that the momentum in that part of the market is pretty good and it's picking up. We have also stated earlier that we expect almost about 25% of our future PPAs to come from the corporate market. We have a pretty healthy backlog at this point in time. And so I suspect that, that is something that we should be able to achieve in the near term.

Got it. And then can you also kind of elaborate on the value that you're associating with the decline in module prices? It seems like maybe there's some accelerated development opportunities and certainly some decrease in CapEx. Can you just talk about how we should think about that as we're looking at the current development opportunities?

Yes. Kedar, do you want to take that?

Yes. So I think we spoke about the 20% decline in the module prices from November until now and the new POs that we are placing are at a level which makes us pretty comfortable. If we wait for some more time, there might be a little bit of a further decline as well, although some of these things are not fully predictable. And yes, I think this allows us to manage the CapEx well. This allows us to get the IRRs back in shape because the prices, especially during June to November period, were quite elevated as we know. So we are -- we continue to track and we continue to stagger the orders and deliveries in a manner in which we stay very close to our target range of the IRRs.

Our next question comes from Nikhil Nigania from Bernstein.

On the acquisition front, the quantum of 528 megawatts last time, we see is lower this time. Any reason for that? And also on time lines on completion of an acquisition, if you could give some guidance?

Yes. So Nikhil, this acquisition was another slump sale route, which means you have to change the title to the underlying assets, you have to transfer the PPA, you have to transfer the lease. You have to transfer the title of all other assets. And that's a little -- relatively a little more time involving process compared to a pure share purchase event. And this has given us a lot of learning. But as we said, the lockbox date is already agreed from beginning of this year.

So the cash flow for those PPAs will get to a balance sheet as a reduction from the CapEx. What this has also done is this has allowed us to reflect in terms of the quality of the assets that we are pursuing. And in the next few months, we will make judgment as to what's the right proportion of these assets that we should be finally acquiring. And maybe we'll end up with slightly higher than the half of what we were targeting earlier. But as I said, please take all these tentative guidance at this point of time, will be announcing probably by the full year when we have a clearer picture of the total PPAs that will take over. And maybe by back month, maybe from the time we will approach you for the full year results, we'll have a much better idea on both the number, I mean, the size of the assets that will take over and the time line for full integration.

If I just add to that. Yes. I was just saying that, look, as you know, more trends -- most M&A transactions are as Kedar was saying shares transferred. This one was a slight sale because of the specific situation involved here, and that process has just taken a way longer than anticipated and expected because of the transfer of so many different things. But I think it's something that we're now fairly close to completing, and it is someone that should be finished for early next year. And that will then also allow us to get back to you on exactly what percentage you're going to acquire.

But there were 1 or 2 assets within that, that might be something that we don't really want to go ahead with or harder to close because of all these regulatory issues. And that's why we've decided to sort of decrease the amount that we were acquiring a little bit.

The second question was regarding the asset sale news, which is going around of 1.1 gigawatt to potential entities like Torrent, et cetera, which (inaudible) the news. Any views if possible to share on that, the rationale and any thing on that, sir?

Kedar, let me just -- let me take a stab by taking that. So capital recycling as a strategy is something that we've talked about quite a bit in the past. And I think most global renewable energy companies follow the same strategy, and we are doing the same. I think the idea really is that we can build more than we can necessarily hold or want to hold. And so therefore, building more than allows us to capitalize on value creation or create value in those assets that we're building and then sells them at higher multiples. So I think that's an eminently sensible strategy for us to pursue.

And so Nikhil, you've seen in the future, certainly us looking at selling more assets, which is not to say that our portfolio will not grow. It will grow as well. And look, you can't -- there's a lot of news in the Indian press as you are aware. And so you just have to wait for something specific to be announced by us before -- until that point, we really can't comment, as you well know.

Just 2 more questions quickly then. One is, there news going around that ALMM restrictions might get relaxed in the near term. If that happens, does it help people on time lines for any projects? And related to that, on the RTC project, which is a big one, last time, the guidance was for Q2 FY '24, does that change as it stands today or if that mix has changed?

Yes. So look, as far as the element is concerned, as you know, we sit on both sides of that equation. We have both a developer and we're also looking at getting into manufacturing. So we are fairly neutral to the -- to whichever way it pans out. But will it allow us to commission projects earlier? Not necessarily. And first of all, it hasn't actually come out as a specific policy yet. So we have to wait and see exactly what happens. So I can't say that it will allow us to commission earlier because we'll obviously have to see where we can buy the modules from, what are the delivering time lines and so on.

But to the extent that we can commission some of our projects earlier, certainly, we would like to do that because, as I was saying in my remarks as well, if you're able to commission projects earlier, you are able to sell some of that power into the merchant market. And I think one of the things that is emerging quite clearly it appears is that prices in that market are going to be relatively robust. So that opportunity potentially can open up. But we haven't studied this specifically. So I can't give you any sort of clear cut answer on that.

Your second question on RTC, Q2 commissioning. Look, the RTC project, as you know, is comprised of 5 different or 4 different projects, 3 wind and 1 solar and then, of course, there's a battery component as well. These targets should be commissioned progressively over the course of literally starting pretty much now onwards until the end of, I would say, Q2, Q3. So I think that's what's going to happen.

The whole project -- and so whenever the project is commissioned, revenues can start, whichever part of the project get commissioned. The whole project for us to then sort of go to SECI and say the whole project has commissioned, might take till Q2 or Q3 of this coming financial year, FY '24. So we are largely on track from an execution standpoint.

Perfect. Makes sense. Just apologies, one more last question, it's a small one. I can take it offline, if you don't want to answer now. This is just on the balance sheet, on other noncurrent assets, there's a jump of, I think, about INR 1,000 crores, or $120 million. Possible to give what is the reason for that?

Yes, Nikhil, a couple of items which has gone up. As you know, we have made an acquisition in a digital entity. And we have only a 40% stake in that entity. So part of that gets recorded in the other assets. We have also made some advances to capital creditors as part of the RTC and various projects. So I think some of these things get sort of reflected in the other asset category.

Next question comes from Justin Clare from ROTH MKM. .

So I guess, first off, you had indicated that you expect further improvement in DSOs by the end of this year and then into fiscal '24. I was wondering if you could just give us a sense for how much more improvement might be possible. And then just more generally, could you talk about whether you expect this improvement in DSOs to be maintained? So at this point, has there been a lasting structural change in the market where there's going to be particularly lower risk of DSOs getting extended in the future?

We believe so, I think you must have heard about several pronouncements from the regulators and which is helping us. See, 2 things are happening. One is the old dues are getting cleared and the current deals are getting promptly paid on time. And both these are helping us to get a reduction quarter-by-quarter in the DSOs. And second factor which we mentioned is the mix of off-takers is changing in favor of those who are paying much earlier. So the proportion of corporate obstacles, the proportion of central authorities like safety, that is going up. And the proportion of DISCOMs is going down from 55 to 32. So both the LPS deals specifically and the change in mix of the off-takers is helping us. And we believe this is structural, and this will continue for some time. Compared to the December DSO, we do expect about 15 to 20 days further reduction as of March and similarly going forward as well.

Got it. Okay. And then it looks like the ALMM was recently relaxed for a period of 2 years. And then we've also seen a decline in module cell and wafer pricing. So just given the changes that have happened here, can you talk through your module sourcing strategy? Has there been any change? I think as of now, you're planning to self-supply with about 60% of your projects from your own manufacturing. Has that changed at all? Or you thinking there? Just any update would be helpful.

Yes. So look, at this point in time, we -- first of all, the ALMM has been an announcement by the minister as sort of -- but it's not really come out as official government policy yet. So we have to wait for that to happen and to see if it happens. So I think that's number one. Number two is that we haven't yet been able to make an assessment of how this change might impact us. Keep in mind that the customs duty of 40% on modules and 25% on sales is still there. That is not changing, which essentially means that imports from China, for example, are still not going to possible. From 1 or 2 other geographies like Southeast Asia, it might be. But it's a question of finding out how much availability there is in those markets given that a lot of the modules from there are being shipped to the U.S. and to Europe.

So we'll have to make that assessment, which we have not been able to do yet because this is obviously still not an official policy and the part of the government. And as far as our own supply is concerned look, our module plants will be up and running in the next few months. And once it's stabilized, then of course, we expect that to supply to us and for most of our supplies to come from there. But again, some of our projects are in fact grandfather because we have won them before this duty and the ALMM were announced. And so therefore, for those projects, we are able to import modules from China or anywhere else for that matter.

And so I think it will depend on really at what point does the plan get stabilized, what are the specific rules at that point in time and in bases that we take the most optimal decision. I think behind all of this, you have to keep in mind that the good news is that module prices and cell prices also have come down dramatically. And therefore, whichever the way we look at it, I think our module costs are going to be lower than we had potentially sort of anticipated, and that's going to be good for us.

Now I can't give an exact sense of how much will come from our own supply versus how much will be imported and from which geographies because that's still a little bit uncertain at this point in time, given the uncertainty a little bit around government policy and on supply sources.

(Operator Instructions) Our next question comes from Amit Bhinde from Morgan Stanley.

I have 2 questions, one with the wind PLF situation right now and be thinking of reassessment, how are we looking at the near-term forecast? And any update on the reassessment that you were planning?

Yes. Those are both good questions. So look, as you know, in the guidance that we've given for the current financial year, we had already assumed a lower sort of wind speed or lower wind forecast for this year. And that is something that is almost being met as far as the wind speed of this year is concerned, although, of course, it is significantly below what you might consider to be the long-term mean.

The chances are that we carry on with the same kind of -- the same level of forecast into next year as well. We are unlikely to sort of change that substantially from the current level because I think it's still -- it's sensible to be prudent. We've had, as you know, now 3 not good years of wind in a row, and that's a fairly rare event, but it is not that it is unknown to happen. It has happened in the past in other geographies as well.

Typically, when, that kind of thing happens, then there is at some point it bounce back, but it's hard to say when that might happen and how much that might be. So I think we will, therefore, from a prudency standpoint, just carry on with the very conservative guidance that we deal that we gave this year into next year as well.

As far as the long-term proper assessment is concerned, that is something that we're working on right now. We are discussing with a number of the wind forecasting agencies. And I think the good news in some of the early conversations we've had with them is that the technologies, the methodologies and the science that we use to forecast long-term wind in India is no different from what they use anywhere else in the world. And so therefore, I would feel that, as we go deeper into this work, that we should be able to get a good sort of view on a lot of these issues. And we should be able to come back to all of you, I think, very soon on this matter.

But I think the other thing I should also say is that because of the experience of wind in the last 2, 3 years, we've already become very conservative in our forecast for wind in the future as well, not just for our existing assets but also the assets that we're going to build in the future. So a lot of that conservatism we're already building into our future forecast.

So I think that you won't really see any big data from the current year into next year and on so on simply because, as I said, we've already reduced our forecast quite substantially. And for our future projects, we are also being already quite careful about the forecast that we're now doing. So I would not anticipate any further reduction from this level in terms of our guidance. But as I said, we will just cross-check and re-corroborate all of this with the wind agencies and get back to all of you with more specific and firm sort of views from them, from these forecasting agencies in about -- the next time that we interact with you all, hopefully, in the next few months' time.

Just anecdotally on this one now, the government is planning an 8-gigawatt auction on wind. So first thing that they also have this criteria that it should not be concentrated in some states. So it would be diversified across states where the wind variability could be more. So how do you see approximate tariff impact when you look at 2 aspects? One, wind PLS already speeds -- already impacted and other you would have to diversify into a different state where the wind speed may not be very optimal for the auction. So how do you see that?

I don't think -- yes. So look, I don't think that will have any impact, frankly, simply because we are, for example, as a company already operating in most of these 8 states, and so we have already good experience in terms of wind forecasting in all of those states. And look, eventually, even if the wind quality is lesser in one state compared to another, that gets reflected in the tariff that people bid because the tariff just end up being higher in the states that have lower wind speed.

What the government intends to do is to bundle all the wind bids -- all the wind products together from across various states and offer a single pool tariff to the end buyers of the power. So it actually doesn't matter at which state you put up the capacity in.

Okay. Perfect. And another question that I had was on this domestic manufacturing of modules. Now that the module prices on cell and module prices are declining, if we look at the financial aspect of it, how much would be the differential? Like how much would be the output -- price of the output from our own manufacturing versus, say, imports plus custom duty, for example, like say, around $0.20, $0.25 for imported module with the custom duty. And maybe, I mean, whatever is the price for the domestic one? How much would be the differential between the 2?

Yes. So I can't give you an exact answer at this point, nor do I want to be very specific on this issue right now. I think the only thing is, as you know, that import duties are 40% and -- on modules and 25% on cells. And any modules that we make in India ourselves that we make in India are going to be significantly, significantly less than the protection of the duty that the duty provides.

So I think that ultimately, the comparison really, in some ways, is not for imports because those will always be more expensive with the duty. But in some ways, the comparison should really be with what is being manufactured in India otherwise by other companies. And I think in that respect, we will be very, very competitive simply because of our scale and also because of the fact that we have much more modern plants with the latest technology.

For that ballpark, it would be around $0.25 or something, the domestic manufacturing output? I know I mean, as you said you can't exactly give us these, but approximately.

No, we can't. No, I hate to generalize because it really depends on, for example, the input cost of either cells or wafers, depending on what you're buying. And that price is moving around a little bit. So therefore, it's hard to give us a fixed number on that at this point.

Our next question comes from Puneet Gulati from HSBC. .

My first question is, you haven't been very, very actively participating in the utility scale auctions. Is there a differentiated strategy that you now to adopt to focusing more on corporate than on utility scale?

So Puneet, as you know, there haven't been that many auctions. A lot of the auctions that have happened have either been state level bids or bids where -- which we have been for Plain Vanilla either wind or solar. Those ones, as we have stated in the past, we don't intend to participate in because we don't really want to take a lot of direct state exposure or we don't want to participate in Plain Vanilla auctions, very frankly speaking, because we feel that our competitive edge lies in the more complex auctions.

So I think we are focusing on the more complex bids. And as we stated, we expect a lot of those to come down. And so therefore, there will be enough for us to bid for. Also, the corporate PPA market, as we've mentioned many times, is very active. And so between the RTC/big power bids, on the one hand, in the corporate PPA market. Frankly, we have our hands full, and that is why we are choosing not to participate in the Plain Vanilla auction or the state level actions.

Understood. And did I hear it right, you said that you will not be revising estimates on account of weather, and your EBITDA guidance is already prudently capturing that.

That is right Puneet and yes, that's what we've said.

Okay. understood. And then last one, when I look at your CapEx guidance this quarter versus last, the manufacturing linked had been slightly slower in FY '23 and now more move towards FY '24. Why would that be the case? And then what are the time lines for completion now for your module and cell manufacturing capacities?

Yes. So look, our module plant is running about a couple of months behind schedule. It was supposed to be commissioned by end of Q1. It will probably just spill over into early Q2 -- early Q1 of next financial year. So there's not a significant delay there, frankly. The 7 module plants are pretty much running as they were supposed to run in Dulahara, where we're putting them up. So there should not be a significant difference in CapEx, actually, there may just be some payment or phasing issue more than anything else.

All right. Yes. And on the carbon credits, can you explain what really happened there? You've reduced your guidance on account of carbon credits as well. Is that permanent rate? Or is it more short term and what part of your EBITDA at portfolio level guidance is attributable to carbon credits?

Kedar, do you want to take that.

Yes, yes. So Puneet, these are basically RE credits now. Going forward, we hope to have more voluntary credits, nature-based solutions and things like that. But as of now, these are RE credits. What we understand is the global agencies, which sort of registered the projects as eligible for carbon credit, there is a lot of backlog. So actually, some of this is beyond our control, right? Just the timing deferral from quarter 4 of this year to probably first half of next year. And the amount is roughly a little less than INR 1 billion.

But as I said, primarily current composition of our credit is RE in nature. And going forward, the idea is to get to a little more higher proportion of the voluntary credits.

And at the portfolio level EBITDA, what sort of contribution have you assumed, INR 89 to INR 94 billion EBITDA.

Not very high.

Yes, yes. So it won't be -- it would be in mid- to high single digits, not more than that.

Mid-to high single-digits, okay.

So in fact, Puneet, if may say, in general, now that carbon credits on our existing portfolio is, in some ways, really sort of winding down because of the way the Q2 protocol has been phased out. And so really, there isn't a lot of carbon credits that we are assuming will be available in the future. There are some markets that are developing where those carbon credits may still have some value like in the Middle East and so on, but we don't know how those markets are going to develop over time. So at this point, we've been very conservative on making any assumption about any revenues coming in from carbon credit in the future from the renewable energy projects.

As Kedar said, there are -- there's a whole separate stream of work that we are doing right now on developing carbon credit based on nature-based solution, but that's a whole different thing altogether. That's not really in some ways, that's not part of this INR 89 million to INR 94 billion guidance that we gave, which is really revenues based on -- or EBITDA based on our 13.4 gigawatt portfolio.

Okay. And when you say an nature-based solution, basically, the ForEx that you may building those will be ultimately contributing to the credits, that kind of stuff?

I mean -- yes, they're 2 separate things, of course. I mean, the tress and all that we are planting are really from an ESG standpoint, not for profit in a sense. But there are other projects that are emerging that are at very early stages, things that we are just testing out right now. So it's not something that we can really talk about in detail. But should there be some of those, and that's going to be additive to any of these things.

That's fair. So lastly, since you're there, what are your thoughts of going out of India and do renewable projects there? Or are you likely to focus in India only?

That's a very interesting question, Puneet. Look, it's something that we've debated at length. We believe that, as a company, we have some pretty significant strength that can be leveraged in other countries as well. Obviously, access to equipment, access to low-cost execution, mindset, engineering and execution capabilities, all of those are things that we do believe will have value in other geographies from an execution standpoint as well.

And in addition, of course, we already have significant scale, given that we are at least globally also ex-China among the 10, 12 largest companies in the world. Having said that, I don't think that we've taken a specific decision at this point that we want to go overseas or not. It is something that I think we will evaluate. And if it makes sense, then, of course, we will come back and discuss it with everybody, and I think, think about it at some point in the future. But it is not something that is immediately on the cards.

Having said that, as you all know, we're also looking at green hydrogen projects. Those are all at very, very early stages that I would hasten to add right now. And so in that sense, for some of those kinds of projects, yes, we are looking at development opportunities outside India. But again, I must add that those are at very early stages. And before we make any investments, obviously, a lot of work needs to happen behind those.

Our next question comes from Angie Storozynski from Seaport.

So I just wanted to ask a bigger picture question. So given all of the scrutiny surround Adani Green and their financing, I understand that there's very little comparison between your stock and theres even before the sale-out as far as multiples are concerned. But I'm just wondering is there any change to the competitive landscape to questions that you're being asked by future lenders for your renewable power projects? are you -- do you feel like this turmoil surrounding at Adani Green is giving you an edge in bidding for some assets? And again, any lessons learned from how you can improve your disclosures going forward?

Yes. So Angie, look, I think, frankly speaking, as you said in your own question, we are a very different company from Adani in terms of a whole variety of different factors. I would say that in terms of our operating situation, nothing really has changed as such. I think that we have already considered I think a very high quality company in terms of ESG issues and that continues to be the case. It's also reflected in all the ratings that we've got. There haven't really been any bids that have happened post this full situation that one can point to and therefore say that this is how the situation might change. But I think, what will happen is that there will be an appreciation for high-quality, well-governed companies that are truly following the whole ESG methodology in everything that they do. And so in that sense, I would be hopeful that people will look at us with slightly, what should I say, a higher degree of attraction perhaps.

But let me leave it at that because I don't know how the -- what impact it might have on the Adani Group in terms of how their situation evolves. It's something that I don't know and I'm not aware of. And it's really too early to be able to comment on whether we've seen them change their behavior in the marketplace and so on. So let me just leave it at that. Kedar, I don't know if there's anything that you'd like to add.

No, I would just say that since we're listed on U.S., we do follow very extensive 6K and 20-F disclosures, which are both for financial and operational data and management commentary, pretty extensive in nature. And we will continue to enhance those disclosures.

Okay. And then an unrelated question, if I may. So you mentioned that the SECI is granted extensions to CODs for some of the assets. And I don't think I fully understood what you were trying to say. You were suggesting that you actually might bring projects early on to capture merchant's earnings and just use the fact that there could be an allowed delay in official COD? Or is it about just the fact that the component prices are falling and so the economics of the projects might get improved if you were to delay them?

Actually, Angie, it's both. And so each case might be different. Wherever it has allowed for us to postpone, and we feel that in the postponement, we can get lower prices that will allow us to potentially postpone the project and lower the CapEx and still meet SECI's commissioning requirements. So that is one potential strategy that we could follow.

The second potential strategy is that we could potentially commission projects earlier and sell them in the merchant market and then sort of lay them off to SECI based on the SECI commissioning extension that we've got. So the point is that it gives us a lot more flexibility to optimize the project cost or revenues. And so we fully intend to use the flexibility that we've been given to maximize on the returns of our projects. So it will allow us to increase the return either -- by using either 1 of these 2 strategies.

And then lastly, in your prepared remarks, you talked about projects that exceeds the minimum return threshold, but you do have a range. So are we talking about projects that are at least 16% in the IRR or -- because you were talking about that?

Yes, yes, yes. That's right. That's what I'm saying that all the projects, therefore, are within our threshold rate. And now that we have this extra little bit of flexibility that just gives us high degree of confidence of -- and comfort of being able to meet those threshold requirements. And of course, for future projects, we continue to be disciplined, as you know, and we will not bid for projects where we feel that we are not likely to make those IRRs.

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