Weakened Financials

Profitability declines as companies adjust to new price dynamics

The Indian renewable energy sector has witnessed significant changes in 2017. The most significant of these has been the transition in the wind energy segment from the feed-in tariff (FiT) regime to competitive bidding. Both the solar and wind segments have witnessed aggressive bidding by developers, which has led to tariffs cascading to unprecedented levels.

The record low tariffs of Rs 2.44 per kWh and Rs 2.64 per kWh in the solar and wind segments respectively are the major highlights of the year so far. Apart from competitive bidding, these low tariffs can also be attributed to the falling prices of global solar equipment and the paucity of tenders, which saw developers trying to win whatever projects were available. The fall in tariffs has, however, necessitated a rethink by renewable energy companies on their strategies to improve the financial efficiency of their operations, especially given their weak financial performance in recent quarters.

Another concern is the renegotiation of power purchase agreements (PPAs) by the state governments in the wake of the recent price discovery in the sector. The refusal of state governments to sign PPAs for contracts awarded at higher tariffs has impacted the confidence of developers to an extent. In terms of financial performance, most renewable energy companies took a hit during the quarter ended September 2017, with a considerable decline in revenues and profits.

However, there has been significant activity in renewable energy financing in the past year with the entry of new domestic and foreign players and the introduction of innovative financial instruments such as bonds and infrastructure investment trusts (InvITs).

Renewable Watch takes a look at the financial results of select listed renewable energy companies during the quarter…

Indosolar Limited

Indosolar Limited registered a loss of Rs 451.7 million during the quarter ended September 2017, a year-on-year increase of 42.89 per cent. Adding to the negative profits, the company’s revenues decreased from Rs 1,073.6 million in September 2016 to Rs 1,006.2 million in September 2017. The company’s revenues have consistently fallen over the past three quarters. However, its cumulative half-yearly revenues witnessed an insignificant increase from Rs 2,012.1 million during the half-year ended September 2016 to Rs 2,083 million in the corresponding period in 2017.

Inox Wind Limited

Hitting an all-time low, Inox Wind’s revenues for the quarter ended September 2017 stood at Rs 795.1 million, a significant decline from the sizeable Rs 8,001.7 million registered in the corresponding quarter of 2016. Compared to the quarter ended June 2017, revenues dipped 24.98 per cent from Rs 1,059.9 million.

The company reported a net loss of Rs 468.1 million during the quarter as against a profit of Rs 564.2 million in the quarter ended September 2016, plummeting by 182.96 per cent on a year-on-year basis. Although the expenses of the company reduced in the first two quarters of 2017-18, it has been churning losses. A year-on-year comparison of the company’s expenses reveals a decline from Rs 7,099.1 million during the quarter ended September 2016 to Rs 1,132.6 million during the same quarter in 2017.

The company’s revenues fell from Rs 12,351.6 million in the first half of 2016-17 to Rs 1,855 million in the first half of 2017-18, a decline of 84.98 per cent. While Inox Wind saw a loss of Rs 858.3 million during the first half of 2017-18, it had earned a profit of Rs 682.4 million in the corresponding period in 2016-17.

Inox Wind won 250 MW of projects out of the total 1,000 MW auctioned by the Solar Energy Corporation of India (SECI) in October 2017. Earlier, in March, the company had won another 250 MW of projects auctioned by SECI.

Orient Green Power Limited

Orient Green Power Limited (OGPL) reported revenues of Rs 1,393.1 million in the quarter ended September 2017, as against Rs 1,737.8 million in the corresponding period in 2016. On a quarterly basis, OGPL’s revenues grew 9.44 per cent from Rs 1,272.9 million in the quarter ended June 2017.

The company’s profits stood at Rs 435 million in the quarter ended September 2017, a 47.2 per cent decline from the Rs 823.9 million recorded in the corresponding period in 2016. On a positive note, OGPL has been able to churn profits from a net loss of Rs 859.9 million during the quarter ended March 2017. A quarterly comparison of profits shows a growth of 383.33 per cent from the meagre Rs 91 million profit made by the company during the quarter ended June 2017.

Revenues stood at Rs 2,666.1 million in the half-year ended September 2017, an 11.17 per cent drop from the Rs 3,001.4 million recorded during the half-year ended September 2016.

Suzlon Energy

Suzlon Energy reported its lowest revenues in the quarter ended September 2017 in over a year at Rs 11,930.6 million. This figure shows a decline of 55.42 per cent as compared to the quarter ended June 2017, which recorded revenues of Rs 26,762.4 million. Revenues dipped by 56.64 per cent year-on-year as against Rs 27,521.2 million registered during the quarter ended September 2016. In the past year, Suzlon’s revenues peaked at Rs 49,993.3 million during the quarter ended March 2017, post which there has been a consistent decline.

The company’s net profit stood at Rs 796.8 million in the quarter ended September 2017, sliding by 67.11 per cent from the Rs 2,423 million recorded in the corresponding period in 2016. However, profits grew from Rs 636.6 million in the quarter ended June 2017 to Rs 796.8 million in the quarter ended September 2017, registering an increase of 25.16 per cent.

Suzlon’s half-yearly profits stood at Rs 1,433.4 million as of September 30, 2017, a significant improvement from the net loss of Rs 127.2 million recorded in the first half of 2016-17. Half-yearly revenues on the other hand declined from Rs 44,072.1 million in the first half year of 2016-17 to Rs 38,693 million in the corresponding period of 2017-18, registering a decline of 12.2 per cent.

In February 2017, Suzlon crossed the 10,000 MW mark in wind capacity installations across the country. However, capacity addition has slowed down in the current fiscal owing to fewer tenders being released and the weakened financial health of the company.

Ujaas Energy

Ujaas Energy, which has traced an impressive growth trajectory in the past two years, experienced a slight dip in revenues to Rs 851.4 million in the quarter ended September 2017, declining from Rs 1,068.7 million in the quarter ended June 2017. Revenues declined by 29.72 per cent year-on-year when compared to the Rs 1,211.5 million recorded in the quarter ended September 2016.

The company’s net profit stood at Rs 46.5 million, down by 52.11 per cent as against a net profit of Rs 97.1 million in the corresponding period of 2016. Profits declined by 37.16 per cent from the Rs 74 million registered in the quarter ended June 2017.

Ujaas Energy was awarded 22.03 MW of grid-connected rooftop solar projects in the quarter under three different tenders. Of the total, 20.03 MW was awarded by SECI, 1.5 MW by the West Bengal Renewable Energy Development Agency and the remaining 0.5 MW was awarded by Oil India Limited.

GET ACCESS TO OUR ARTICLES

Enter your email address