What has been the trajectory for Hero Future Energies in India’s energy transition journey?
The trajectory is something like megawatts to gigawatts. The first time when we all went (for projects), we were doing 20-40MW projects. Today, we are very happily doing a gigawatt (GW) project.
So the point is, the industry has changed, size has changed, and scale has changed. Electricity companies have accepted this (renewable) energy as a good form of energy. They did not like renewables in the beginning. They said it’s intermittent. It’s expensive. But four-five years ago, when the price reached ₹2-3 per unit, they said it was not expensive anymore.
Then there was a problem of intermittency. Then, the projects now are doing wind, solar, battery storage, and hybrid altogether to do maybe a peak power project, or an RTC project, or what I would like to call a high CUF (capacity utilization factor) project.
Further, moving on, the world is witnessing the hottest summer ever. The reality is the world is burning, and climate change is a reality, and net zero transition is not going to happen without tonnes of renewable energy.
Late last year, KKR invested in the company. What is your holding structure as of now?
We continue to hold the majority stake. We continue to control the company. We will have to keep finding new ways of finding capital. The industry is such that our oxygen is capital. And at one time, $100 million was a lot, and today half a billion is not enough.
Is there any fundraising plan that you are working on?
We’ve just closed a deal with KKR. So that money will last us for some time, about two-three years. So, within two-three years, we have to come back to the market. The bond market is very, very bad. It’s been so in the last decade or so.
It’s too early to say how we will raise funds because we still have two years till we need the money. So, we still have a year and a half before we go to the market. You know, it typically takes six to nine months to close a deal.
Do you plan to go public when you next plan to raise funds?
That could be an option. Not in this bull run. Let me put it this way, not in this one. So, it’s good. There’s going to be a correction, and then when it (the bull run) comes back, hopefully, we should be ready by then.
Despite the growth in the solar power segment, we have seen issues like module prices and increasing tariffs. Is the current positive picture a sort of bubble? So, what happened to those ₹2 or sub- ₹2.50 PPAs (power purchase agreements)?
The reality is there was never money to be made at ₹2.30-2.40. People just got excited. The people who are wearing this had a different play in mind. It was about capital raise or something or the other. So that is partly to blame, but it’s not the only thing.
But the other thing is because of covid, the cost of everything has gone up, the cost of transportation has gone up, the cost of steel and the cost of electricity has gone up. So, actually, the cost of modules in the cost of the project has gone up. So, that is the difference. There is nothing else. So, over and above that, geopolitics is working, Fed has tightened (liquidity), and India wants to create its own industry, thereby putting barriers. So that is an add-on.
What is a realistic tariff in the current scenario, and how do you see the trend in tariffs going ahead?
If it is a plain vanilla solar and you are doing a decent size and scale, and in a good region, it is between ₹2.70-3. If you are following the need of the customer or the electricity company and you’re doing a more complicated project where you are using battery storage, then it is ₹4.50 or maybe even ₹4.60.
But you must understand at peak time, most discoms buy power at ₹12. So, they are replacing power at ₹12 with a sub- ₹5 power. So, they continue to make a lot of money. So now, the discoms have said, you give me solar but don’t give it to me when you want it.
Give it to me when I want it. And this is the maturity of the industry, and this is why this is the right way of doing renewables in India, anywhere in the world.
What is your current portfolio?
Our portfolio would be about 2-2.5GW. Maybe you can say another 2GW, which is under development. Overall 4GW.
Where do you see the renewable energy sector going?
It’s very simple. If India is serious about net zero, we have to completely rethink everything that we know. Just imagine how digitization or computers have changed our working life. The same amount of change is going to come to our life because we will choose to live a sustainable life.
So, in everything that we do, when you start putting a sustainability lens, then you’ll need every green molecule you can think of. Think about oil and gas today. By 2050, we will have a chemical industry as big as the current oil and gas industry. It’s as simple as that.
How much debt do you have on your balance sheet?
As far as debt goes, we are among the better renewable companies in the country.
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