Sterling and Wilson is a global pure-play, end-to-end solar engineering, procurement and construction (EPC) solutions provider, functioning on an asset-light business model. While the company’s portfolio caters to many utility-scale solar projects, it has also expanded into verticals such as rooftop, floating and solar-plus-storage solutions. In addition to turnkey EPC services for utility-scale, rooftop and floating solar projects, Sterling and Wilson provides operations and maintenance (O&M) services, including for projects constructed by third parties. The company has an established global presence, diversified portfolio offerings, a robust pipeline and a promising growth trajectory.
Background and global presence
In 1971, Wilson Electric Works merged with Sterling Investments, a group company of the Shapoorji Pallonji Group, to form an EPC company called Sterling and Wilson. The Shapoorji Pallonji Group’s global presence, industry relationships and project management experience have helped Sterling and Wilson establish a presence in the global market. The solar EPC division of Sterling and Wilson Private Limited, known as Sterling and Wilson Solar Limited, commenced operations in 2011. In the same year, a capacity of 50 MWp was secured for EPC. The company was subsequently demerged in 2017 and then listed on the Indian stock exchange in 2019 following an initial public offering (IPO).
Expanding into different geographic regions has helped mitigate the risk of region-specific business cyclicality and allowed the company to pick up best practices from every region. Aside from India, Sterling and Wilson has established a significant global presence across 25 countries, including prominent markets such as Southeast Asia, the Middle East, Africa, Europe, the US, and Latin America and Australia. The first key milestone in this journey came in 2015, when the company commenced its first international solar project of 90 MWp capacity in South Africa. The company also successfully commissioned a large-scale single-location solar plant in Abu Dhabi, with a capacity of 1,177 MWp.
Sterling and Wilson’s robust EPC portfolio consists of 252 projects with a cumulative capacity of 10.58 GW, including both domestic and international projects. This consists of 202 installed projects with a total capacity of 6,661.42 MW, as well as 50 projects that are currently under installation, which make up a capacity of 3,918.74 MW.
Utility-scale: Sterling and Wilson Solar’s turnkey EPC solutions involve building solar power projects, from concept and designing to commissioning. The company provides end-to-end solutions to customers, including design, engineering, procurement, construction, project management, testing and commissioning, and connecting the plant to the electricity grid. Its balance-of-system solutions comprise all project design and execution services except the procurement of modules and components, which is handled by the customer. Some of the key utility projects in its portfolio are a 580 MWp project in Bhadla, Rajasthan, a 195 MWp project in Andhra Pradesh, a 169 MWp project in Vietnam, a 143.5 MWp project in Gujarat, and a 125 MWp project in Oman.
Rooftop solar: The company ventured into the rooftop solar space in 2016 and has since commissioned over 70 projects in India and overseas. The company’s services in this space include design, engineering, supply, installation and commissioning, as well as O&M. The systems offered include off-grid or stand-alone systems, off-grid-PV-DG synchronous systems, and on-grid or grid-tied systems. These systems range in capacity from 250 kWp to 10 MWp. The company also offers distributed solar PV systems. Sterling and Wilson’s projects use both high tension and low tension lines for evacuation. The key rooftop solar projects in the company’s portfolio include a 500 kWp project in Karnataka, a 910 kWp project in Haryana, a 2.4 MWp carport project at Cochin airport, and a 2.6 MWp project in Jordan.
Floating solar: Sterling and Wilson is one of the first movers in the floating solar segment. Since such projects can be installed on reservoirs, industrial pools, or even small lakes, they have an advantage over ground-mounted projects in terms of land requirement. In 2019, the company commissioned its first floating solar project of 450 kW in Kerala. The company successfully piloted a floating solar project at the Kochi International Airport, and has developed ample technological experience in the segment to be able to explore emerging opportunities. It is currently in the process of constructing a much larger floating solar plant with a capacity of 70 MWp at the Rihand Dam. The services offered by the company in the floating solar domain include anchoring and mooring, project management and planning, module and equipment floating structure installation, maintenance manual and design book issuance, and bathymetric studies.
Solar-plus-storage: Recognising the rising importance of energy storage with increased renewable energy penetration, the company started investing in the segment in 2018. So far, the company has built more than 50 MWh of energy storage systems for solar-based hybrid projects. It has also developed in-house expertise in designing energy storage solutions by partnering with leading battery manufacturers and energy storage solution providers. The company’s solutions in this space include hybrid energy offerings, dealing with a mix of solar, wind, gas, diesel and battery energy storage; stand-alone turnkey battery energy storage solutions; and industrial, island and grid-connected microgrids. One of the key projects installed by the company is a 37 MWh solar battery energy storage hybrid project in Ebonyi, Nigeria, which was established in 2019.
The company is a leading O&M solutions providers. With 168 projects under its belt, the company currently has an O&M portfolio of about 8 GW. It provides O&M services to its existing EPC projects as well as third-party customers spread across 12 countries, with the latter constituting about 47 per cent of the total portfolio. Sterling and Wilson more than doubled its O&M business in 2019-20 by capitalising on the inherent attributes of the business.
The company also recently launched an internationally certified mobile module testing lab in India, which facilitates efficient testing of modules at plant sites. It has a dedicated performance and due diligence team, which conducts regular plant performance analyses to recommend preventive measures and optimise plant yield. The company’s O&M business has witnessed strong growth, with segment revenue increasing from Rs 940 million in 2018-19 to Rs 1,835 million in 2019-20. This translates into a growth of 95.8 per cent.
Business model and financial position
An asset-light business model, which functions on low capital and working capital requirements, enables Sterling and Wilson to provide flexible, scalable and customised solutions for varying customer needs. It also enables the company to respond quickly to changing market conditions. Further, the company has a low-cost advantage and a strong execution track record. However, post the company’s IPO in August 2019, there have been reports of liquidity issues due to a significant deterioration in the credit market. Further, the IPO had a lower-than-expected realisation, though low working capital requirements have limited its impact on profits. Sterling and Wilson’s revenue has been marginally lower in the first half of this financial year than in the previous one.
The company recorded a revenue of Rs 55,750 million in 2019-20 as compared to Rs 82,400 million reported in 2018-19. The EPC business contributed 96.7 per cent to the overall revenue, while the remaining 3.3 per cent was contributed by the O&M business. The lower revenue was due to a slowdown in new order wins, delays in the commencement of certain projects and the impact of Covid-19 on business activities towards the end of the year.
The company’s net profit declined from Rs 794.1 million in the quarter ended September 2019 to Rs 150.9 million in the quarter ended September 2020 – a fall of 81 per cent. However, the company’s total income increased by about 8.7 per cent, from Rs 12,656 million to Rs 13,375 million, during the same period. In spite of the hurdles, there has been a significant rise in the execution of projects in the quarter ended September 2020, leading to an improvement in revenues. Overhead costs also fell owing to cost efficiency measures and a reduction in travelling costs due to Covid-19.
Following a slowdown in growth, partly due to the impact of Covid-19, business activities are in the process of normalising and supply chains have been fully restored. The demand for solar power is expected to increase, and with it, the demand for EPC and O&M services as well. Given the growth in the O&M segment in particular, Sterling and Wilson can continue to improve its presence in this space. To further enhance its competitive strengths, the company is augmenting its data analytics capabilities to improve its preventive maintenance services and plant performance. Investing in emerging segments such as floating solar and energy storage is also a good move on the part of the company. To sum up, although some challenges remain, the company is well placed for growth in the long run.