Continuing Slump

Renewable energy companies report poor quarterly financials

Many companies in the renewable energy sector have been facing a slowdown over the past year. The effect of this can be seen in falling revenues and shrinking profit margins. While the wind sector continues to grapple with the after-effects of a regime change, the solar rooftop segment has been facing obstacles of its own. Further, pressure is building up in the segment with falling tariffs along with policy and regulatory uncertainties. Although policymakers have addressed a number of issues and developers too have learnt to tackle some uncertainties, there is still scope for improvement. Renewable Watch analyses the financial results of select renewable energy companies for the quarter ended December 31, 2019 and assesses their performance and growth prospects…

Azure Power

Azure Power’s revenue for the quarter ended December 2019 was Rs 3,047.3 million, an increase of 25 per cent over the quarter ended December 2018. The net loss for the quarter ended December 2019 increased by Rs 1,522.5 million to Rs 1,357.1 million compared to a net profit of Rs 165.3 million during the same quarter in 2018. Increased losses are primarily due to higher provision for accounts receivable, management transition, write-offs related to solar green bonds issued in the previous quarter and higher income tax expenses, partially offset by higher revenue from the company’s projects. The company had higher losses of Rs 994.3 million in the quarter ended December 2019, on account of a negative impact of power curtailment in Andhra Pradesh and low revenue from the rooftop business, higher interest expenses, and higher general and administrative expenses.

The operating capacity of Azure Power was 1,804 MW as of December 2019, which was an increase of 54 per cent over December 2018. Operating and committed capacity cumulatively stood at 5,300 MW during the quarter ended December 2019, an increase of 73 per cent over the corresponding quarter in 2018. The company experienced lower revenue due to lower plant load factors in the rooftop business and some power curtailment in Andhra Pradesh and related projects. Solar power curtailment in the state of Andhra Pradesh started in July 2019, which relates the Andhra Pradesh state load despatch centre ordering reduced output. During the period, the company exited from a 70 MW project and received a letter of award (LoA) for 2,000 MW of new projects. Subsequently, by the end of the quarter, the company secured orders to exit the LoA for 150 MW of projects, for which power purchase agreements were not signed, reducing the operating and committed megawatts to 5,150 MW.

Inox Wind

Wind energy solutions provider Inox Wind reported a consolidated net loss of Rs 274.7 million during the quarter ended December 2019. For the corresponding quarter of 2018, the company had reported a net profit of Rs 16.9 million. During the period October-December 2019, its total income fell to Rs 1,797.6 million from Rs 3,944.5 million during the corresponding period in 2018. The company hopes to improve its financial results in the future. This is expected to happen with the execution of new orders, along with fresh supplies of wind turbine generators. Morgan Stanley-backed Continuum Power has repeated an order for 250 MW of capacity. The project will be developed in two phases of 126 MW and 124 MW. The first phase of 126 MW of the project is scheduled to be commissioned by the third quarter of financial year 2021 at Dayapar in Bhuj district, Gujarat, and will be executed on a turnkey basis. Inox is also working on multiple deals across independent power producers and retail customers. The company commissioned 150 MW of projects in the quarter ended June 2019 and 50 MW in the quarter ended September 2019. The remaining 50 MW was to be commissioned in the quarter ending March 2020.

OGPCL

Orient Green Power Company Limited (OGPCL) reported narrowing of its consolidated net loss to Rs 396.8 million for the quarter ended December 2019, mainly due to higher revenues. The company’s consolidated net loss stood at Rs 657.4 million in the corresponding quarter of 2018. The total income of OGPCL rose to Rs 430.1 million in the quarter under review from Rs 336.3 million earlier. The company had a relatively stable quarter as the revenue grew at 28 per cent.

OGPCL completed the sale and transfer of its biomass power undertaking at Sookhri village in Narasinghpur district of Madhya Pradesh during this quarter. It also plans to disinvest in its subsidiary Biobijlee Green Power Limited. Further, the company is planning to reduce the face value of its equity share of Rs 10 each to Rs 5 each by reducing the share capital from Rs 7,507 million to Rs 3,754 million. However, this is subject to the approval of shareholders, the National Company Law Tribunal, Chennai bench and other regulatory approvals. The company’s board of directors also approved merger of wholly owned subsidiaries, Orient Green Power (Maharashtra) Private Limited and Bharath Wind Farm Limited with OGPCL, subject to the approval of shareholders and  regional directors and all other regulatory approvals. Being one of the more experienced players in the industry, OGPCL is well positioned to benefit from the improving industry landscape.

Suzlon

Suzlon Energy reported widening of the consolidated net loss to Rs 7,429.1 in the quarter ended December 2019, mainly on account of lower revenues. The company had reported a net loss of Rs 400.7 million for the corresponding quarter in 2018. The total income from operations declined by nearly 40 per cent to Rs 6,729.9 million in the quarter ended December 2019 from Rs 11,120 million in the quarter ended December 2018.

During the quarter, 632.1 MW was cancelled from the order book due to teething troubles of land, power evacuation and other constraints. Wind turbine generator business operations continue to be at a subdued level with nominal allocation of capital as Suzlon is working towards a holistic debt resolution with the lenders’ consortium. Its operations and maintenance services business continues to deliver strong profitability and high machine performance for customers. The forging and foundry business also continues to deliver good performance and is currently earning almost 100 per cent of its revenues from external customers. Liquidity constraints continue to impede operations, although the company is focusing on cost optimisation across the board including the cost of goods sold and other fixed costs.

Sterling and Wilson Solar

Sterling and Wilson Solar, a Shapoorji Pallonji Group company, is a global pure-play, end-to-end solar engineering, procurement and construction (EPC) solutions provider. The net profit of the EPC company fell by 27.3 per cent, from Rs 418.2 million in the quarter ended December 2018 to Rs 303.9 million in the quarter ended December 2019. However, the company’s total income declined by about 52.89 per cent, from Rs 20,376.1 million to Rs 9,598.3 during the same period.

After the launch of the company’s initial public offering in August 2019, the promoters have found it difficult to deliver on payments due to the significant and rapid deterioration of credit markets, resulting in a significant liquidity crisis. During this quarter, the revenue was impacted due to the delay in the commencement of a few projects. Currently, the company has over 7.4 GW of solar power projects with active service contacts as part of its portfolio. The company’s portfolio also includes a 1.17 GW single-location project in Abu Dhabi.

Conclusion

Companies such as Azure Power, Inox Wind, OGPCL and Suzlon experienced weak financials during the quarter ended December 2019. Azure Power and OGPCL saw an increase in their incomes, although still reporting losses. OGPL has, however, managed to narrow its losses. Sterling and Wilson, which recently got listed, started off strong, still maintaining a net profit. However, falling revenues have led to a decline in profits over the previous quarter as well as the quarter ended December 2018. Even though Azure Power’s revenue in this quarter increased, it was offset by an increase in the net loss. Inox Wind, which had a relatively small yet positive profit last year, registered a net loss in the quarter under consideration. Meanwhile, Suzlon has been struggling to stay afloat, managing to reduce its net loss by a small margin over the previous quarter. Overall, renewable energy companies continue to slip into a slump, with revenues either declining, or increasing only marginally, while their net losses are piling up.

Wind energy solutions provider Inox Wind reported a consolidated net loss of Rs 274.7 million during the quarter ended December 2019. For the corresponding quarter of 2018, the company had reported a net profit of Rs 16.9 million. During the period October-December 2019, its total income fell to Rs 1,797.6 million from Rs 3,944.5 million during the corresponding period in 2018. The company hopes to improve its financial results in the future. This is expected to happen with the execution of new orders, along with fresh supplies of wind turbine generators. Morgan Stanley-backed Continuum Power has repeated an order for 250 MW of capacity. The project will be developed in two phases of 126 MW and 124 MW. The first phase of 126 MW of the project is scheduled to be commissioned by the third quarter of financial year 2021 at Dayapar in Bhuj district, Gujarat, and will be executed on a turnkey basis. Inox is also working on multiple deals across independent power producers and retail customers. The company commissioned 150 MW of projects in the quarter ended June 2019 and 50 MW in the quarter ended September 2019. The remaining 50 MW was to be commissioned in the quarter ending March 2020.

OGPCL

Orient Green Power Company Limited (OGPCL) reported narrowing of its consolidated net loss to Rs 396.8 million for the quarter ended December 2019, mainly due to higher revenues. The company’s consolidated net loss stood at Rs 657.4 million in the corresponding quarter of 2018. The total income of OGPCL rose to Rs 430.1 million in the quarter under review from Rs 336.3 million earlier. The company had a relatively stable quarter as the revenue grew at 28 per cent.

OGPCL completed the sale and transfer of its biomass power undertaking at Sookhri village in Narasinghpur district of Madhya Pradesh during this quarter. It also plans to disinvest in its subsidiary Biobijlee Green Power Limited. Further, the company is planning to reduce the face value of its equity share of Rs 10 each to Rs 5 each by reducing the share capital from Rs 7,507 million to Rs 3,754 million. However, this is subject to the approval of shareholders, the National Company Law Tribunal, Chennai bench and other regulatory approvals. The company’s board of directors also approved merger of wholly owned subsidiaries, Orient Green Power (Maharashtra) Private Limited and Bharath Wind Farm Limited with OGPCL, subject to the approval of shareholders and  regional directors and all other regulatory approvals. Being one of the more experienced players in the industry, OGPCL is well positioned to benefit from the improving industry landscape.

Suzlon

Suzlon Energy reported widening of the consolidated net loss to Rs 7,429.1 in the quarter ended December 2019, mainly on account of lower revenues. The company had reported a net loss of Rs 400.7 million for the corresponding quarter in 2018. The total income from operations declined by nearly 40 per cent to Rs 6,729.9 million in the quarter ended December 2019 from Rs 11,120 million in the quarter ended December 2018.

During the quarter, 632.1 MW was cancelled from the order book due to teething troubles of land, power evacuation and other constraints. Wind turbine generator business operations continue to be at a subdued level with nominal allocation of capital as Suzlon is working towards a holistic debt resolution with the lenders’ consortium. Its operations and maintenance services business continues to deliver strong profitability and high machine performance for customers. The forging and foundry business also continues to deliver good performance and is currently earning almost 100 per cent of its revenues from external customers. Liquidity constraints continue to impede operations, although the company is focusing on cost optimisation across the board including the cost of goods sold and other fixed costs.

Sterling and Wilson Solar

Sterling and Wilson Solar, a Shapoorji Pallonji Group company, is a global pure-play, end-to-end solar engineering, procurement and construction (EPC) solutions provider. The net profit of the EPC company fell by 27.3 per cent, from Rs 418.2 million in the quarter ended December 2018 to Rs 303.9 million in the quarter ended December 2019. However, the company’s total income declined by about 52.89 per cent, from Rs 20,376.1 million to Rs 9,598.3 during the same period.

After the launch of the company’s initial public offering in August 2019, the promoters have found it difficult to deliver on payments due to the significant and rapid deterioration of credit markets, resulting in a significant liquidity crisis. During this quarter, the revenue was impacted due to the delay in the commencement of a few projects. Currently, the company has over 7.4 GW of solar power projects with active service contacts as part of its portfolio. The company’s portfolio also includes a 1.17 GW single-location project in Abu Dhabi.

Conclusion

Companies such as Azure Power, Inox Wind, OGPCL and Suzlon experienced weak financials during the quarter ended December 2019. Azure Power and OGPCL saw an increase in their incomes, although still reporting losses. OGPL has, however, managed to narrow its losses. Sterling and Wilson, which recently got listed, started off strong, still maintaining a net profit. However, falling revenues have led to a decline in profits over the previous quarter as well as the quarter ended December 2018. Even though Azure Power’s revenue in this quarter increased, it was offset by an increase in the net loss. Inox Wind, which had a relatively small yet positive profit last year, registered a net loss in the quarter under consideration. Meanwhile, Suzlon has been struggling to stay afloat, managing to reduce its net loss by a small margin over the previous quarter. Overall, renewable energy companies continue to slip into a slump, with revenues either declining, or increasing only marginally, while their net losses are piling up.

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