adani green energy ltd share price Management discussions

Global economic overview

The global economy grew an estimated 6.1% in 2021 compared to a de-growth of 3.3% in 2020. This recovery is attributed to accelerated vaccine rollout across 4.4 billion people. However, the global economy was affected by prohibitive shipping freight rates, shortage of shipping containers and semiconductor chips in 2021. Inflation was at its highest since 2011, especially in the advanced economies. The commodities that reported a sharp increase in prices comprised steel, coal, oil, copper, food grains, fertilisers and gold. The global economy is projected to grow at a modest 2.6% in 2022 following the Russia-Ukraine crisis.

Regional growth (%)	2021	2020
World output	6.1	(3.3)
Advanced economies	5.0	(4.9)
Emerging and developing economies	6.3	(2.4)

(Source: IMF, World Bank, UNCTAD)

Indian economic overview

Indias GDP rebounded from a de-growth of 7.3per cent in 2020-21 to a growth of 8.7 (Reference: National Statistical Office) per cent in 2021-22, the fastest among major economies.

Y-o-Y growth of the Indian economy

	FY19	FY20	FY21	FY22
Real GDP growth (%)	6.1	4.2	(7.3)	8.7

There were positive features of the Indian economy during the year under review.

The value of goods exported from India delivered 40 per cent growth to a record $417.8 billion during 202122, surpassing the governments target by 5 per cent. Foreign direct investments increased 15 per cent to US$74.01 billion in 2021. The government approved 100% FDI for insurance intermediaries and increased the FDI limit in the insurance sector from 49% to 74% in Union Budget 2021-22. India raised over H97,000 crore through asset monetisation, which was higher than the target.

India was the largest recipient of global remittances.

Indias foreign exchange reserves stood at an all-time high of USD 642.45 billion as of September 3, 2021.

Indias bank loan growth was 11.20 per cent during the year under review, partly reflecting the low base effect of the previous year. India reported improving Goods and Services Tax (GST) collections month-on- month in the second half of 2021-22, peaking at H1.42 lakh crore in March 2022.

India ranked 62 in the 2020 World Banks Ease of Doing Business ranking. The country received positive FPIs worth H51,000 crore in 2021 as the country ranked fifth among the worlds top leading stock markets with a market capitalisation of $3.21 trillion in March 2022.

Indias per capita income was estimated to have increased 16.28% from H1.29 lakh in 2020-21 to H1.50 lakh in 2021-22.

Indias tax collections increased to a record H27.07 lakh crore in FY 2021-22, higher than the budgeted H22.17 lakh crore. Indias tax-to-GDP ratio jumped from 10.3 per cent in FY21 to 11.7 per cent in FY22, the highest since 1999.

However, retail inflation in March 2022 at 6.95 per cent was above the RBIs tolerance level of 6 per cent and at a 17-month high. The fiscal deficit was estimated at ~H15.91 trillion for the year ending March 31, 2022, on account of a higher government expenditure during the year under review.

(Source: Economic Times, IMF, World Bank, EIU, Business Standard, McKinsey, SANDRP, Times of India, Livemint, InvestIndia.org, Indian Express, NDTV, Asian Development Bank)

Indian economic reforms and Budget 202223 provisions

The Budget 2022-23 seeks to lay the foundation of the Indian economy over the next 25 years. The government is emphasizing the role of PM Gati Shakti, Inclusive Development, Productivity Enhancement & Investment, Sunrise Opportunities, Energy Transition and Climate Action, as well as Financing of Investments.

The capital expenditure target of the Indian government expanded by 35.4% from H5.54 lakh crore to H7.50 lakh crore. An announcement of nearly H20,000 crore was made for the PM Gati Shakti National Master Plan to catalyse the infrastructure sector. An expansion of 25,000 km was initiated for the national highways network in FY 2022-23. An allocation of H2.37 lakh crore was made towards the procurement of wheat and paddy under MSP operations. An outlay of H1.97 lakh crore was announced for the Production Linked Incentive (PLI) schemes across 13 sectors.

Outlook

Across the next three years, capital expenditure in core sectors - cement, metal, oil refining and power - should be about H5 trillion. Besides, the governments production linked incentives (PLI)-led capital expenditure should generate an incremental H1.4 trillion in sectors like consumer durables, pharmaceuticals and automobiles. A multi-year revival in capital investments comprises USD 500 billion investments projected for the wind and solar infrastructure, energy storage and grid expansion segments. The Indian economy is projected to grow by 8% in FY23 (World Bank estimate).

Global renewable energy sector overview

In 2021, in spite of the second wave of the COVID - 19 pandemic, the world continued to shift from carbon- emitting fossil fuels, underlining the significance of renewables in decarbonisation to ensure a smooth pathway to net zero by 2050. The demand for renewable energy remained stable owing to the growing demand for capacity and investments.

Renewable energys share of all new generating capacity rose considerably for the second year in a row. More than 80 per cent of all new electricity generating capacity added last year was renewable, with solar and wind accounting for 91 per cent all of new renewables, as stated in Renewable Capacity Statistics 2021.

The renewable generation capacity across the world increased by over 290 Gigawatt (GW) in 2021 compared to 280 Gigawatt (GW) in 2020, a rise of 3.5% and expected to reach 329.5 GW by 2026. The attention in the renewable energy sector is expected to be centred around advanced photovoltaic (PV), advanced robotics, artificial intelligence, big data, distributed energy storage systems, grid integration, blockchain, green hydrogen, bioenergy, hydropower and wind energy.

China added 140 GW to graduate its total capacity to 2,370 GW, a rise of 7.7% over 2020-21. China, Europe, United States and India together accounted for 80% of the global renewable capacity in 2021-22. By 2026, the global renewables capacity is expected to reach 4,800 GW, a rise of 60% from 2020. China is expected to remain market leader over the next five years, accounting for 43% of global renewable capacity growth, followed by Europe, United States and India. The world aims to limit the global average temperature rise to 1.5?C with over 100 countries making net-zero pledges at the COP26 UN Climate Change Conference in Glasgow.

*Cumulative capacity = installed renewable capacity at the end of each five-year period

Figure: The top ten countries share of total installed renewable capacity, historical and main case forecast, 1991-2026

(Source: renewableenergyworld.com, UN Climate change, ETimes)

Indian renewable energy sector overview

India is the second-largest coal producer in the world and Indias renewable energy sector is the fourth most attractive in the world as of 2021. India is expected to overtake China as the most populous country by 2026. According to Global Climate Risk Index, India is ranked seventh on the list of countries most affected by climate change in 2021.

Fossil fuels pollute the air with greenhouse gases, which have a damaging effect on the environment, This is where renewable energy comes in, Renewable energy is a cleaner, natural, more sustainable, cost efficient and a recyclable alternative for powering homes, gaining traction from the government and businesses. As a result, green energy has now emerged as a favorable alternative to conventional energy and there has been a progressive shift towards renewable sources,

The renewable energy space in India has become attractive for investors and received FDI inflow of US$ 10.02 billion between April 2000 and March 2021. Indias renewable energy industry saw FDI inflows worth $1.03 billion (~H77.55 billion), accounting for 3.4% of the total FDI inflows in the first half (1H) of FY2021-22. With India setting a target of installing a non-fossil energy capacity of 500 GW by 2030, the opportunity is massive for investors.

As of March 2022, Indias renewable energy capacity stood at 156.61 GW, representing ~ 39.2% of the overall installed power capacity and providing a great opportunity for the expansion of green data centres. Solar energy was the biggest contributor in the total renewable energy capacity addition with a share of 34.47% followed by wind with a 25.77% share. Indias continuous push towards adopting green energy, coupled with a rising demand for electricity, could catalyse the growth of renewable energy companies.

The renewable sector added more new capacity than conventional energy sector in 2021 for the third year in a row, clean energy accounting for close to half of the total installed energy capacity in the country. Moreover, India is expected to add 121 GW of renewable capacity over 2021-2026, a 77% increase on existing capacity, making it the third-largest growth market globally after China and the United States. Solar PV leads this deployment (74%), followed by onshore wind (16%) and hydropower. During COP26, India announced new 2030 targets of 500 GW of total non-fossil capacity and 50% renewable electricity generation share (more than double the 22% share in 2020), as well as net zero emissions by 2070. These validate the countrys commitment to energy transitions.

The reason behind the governments encouragement to the renewable energy sector is its growing population, urbanisation and industrialisation. With growing population (1.50 billion by 2030), there will be rapid growth of energy consumption in the country. At the same time, there will be an increasing focus on adverse effects of climate change. India will make up the biggest share of energy demand growth at 25% over the next two decades and it is expected to reach a value of 15,280 TWh by 2040. This could cause a huge strain on conventional energy sources, which could intensify pollution, peoples health and environment health. To safeguard this situation, the government has continued to focus on its renewable energy plans and announced various new projects, implemented power purchase agreements and enhanced import tariffs on green energy products, catalysing the growth of the renewable energy industry. Moreover, the focus is also on strengthening the concept of Make in India and empowering Indian companies to grow their global exposure, highlighting Indias broader potential to accelerate its clean energy transition.

Growth drivers

Demand for energy: India is the worlds third-largest energy consuming country, thanks to rising incomes and improving standards of living. Energy use has doubled since 2000. On a per capita basis, Indias energy use and emissions are less than half the world average, as are other key indicators such as vehicle ownership, steel and cement output. As India recovers from a Covid-induced slump, it is re-entering a dynamic period in its energy development. Over the coming years, millions of Indian households are set to buy new appliances, air-conditioning units and vehicles. India could soon become the worlds most populous country, adding the equivalent of a city the size of Los Angeles to its urban population each year. To meet growth in electricity demand over the next twenty years, India will need to add a power system the size of the European Union to what it has now. (Reference: IEA)

Climate change: According to the Global Climate Risk Index, India is ranked seventh on the list of countries most affected by climate change in 2021. To address the environment commitment, the Indian government is working on energy efficient programs e.g. Gram Ujala, an ambitious programme to include the worlds cheapest LED bulbs in rural areas for H10 each, advancing its climate change policy and boosting its self-reliance credentials. Further, India could reach its target of generating 500 GW non-fossil green energy by 2030.

Cost effective: The renewable energy costs are lower than the marginal cost of other conventional sources of energy. Apart from the initial capital expenditure, renewable energy has zero procurement costs. Following a subtle decline in transmission cost, the one-time installation costs can be easily retrieved through generated revenues.

Geographical advantage: India, being a hot tropical country, experiences high temperature through the year and receives one of the highest levels of solar irradiation in the world. It has an extensive coastline and experiences high wind velocity. India has a significant potential to utilize these natural resources and develop renewable energy resources.

Scalable: Renewable energy is more scalable and a better fit to address global warming. It is cleaner, more sustainable, easier to install and recyclable. It doesnt carry the burden of any catastrophic damages. Therefore, abundance of renewable energy resources in the most underdeveloped areas will result in increasing national productivity.

Government support: The government plays an active role in promoting the adoption of renewables and recognises that green energy is a future-forward alternative to address Indias growing power demand while ensuring environmental sustainability. To promote the growth of green energy, the Indian government introduced solar parks under the Make in India initiative, making customs and excise duty provisions for solar rooftops, among others. The government also offers various incentives and encourages private sector investments to address the growing energy demand and consumption in India.

Favourable foreign investments: The Indian

Governments favourable policy regime and robust business environment has ensured that foreign capital keeps flowing into the country is renewable energy projects. In addition to allowing 100% FDI via the automatic route, the government is encouraging foreign investors to invest in renewable energy- based power generation projects. As a result, Indias renewable energy industry saw FDI inflows worth $1.03 billion, accounting for 3.4% of the total FDI inflows in the first half of FY2021-22.

Energy security concerns: India is the worlds third biggest oil importer and consumer. As a result of increasing demand and stagnant domestic production, India now meets more than 84% of its demand through imports and relies heavily on the Middle East. Given the stiff competition for the procurement of fossil fuels, the prices of petroleum products have been increasing and witnessed volatility in recent years. Therefore, increased use of alternate energy resources can reduce Indias dependence on expensive imported fossil fuels. (Source: IBEF, Mint, mercomindia.com, IEA)

Indian government initiatives

The Government of India is committed to the increased use of clean energy sources and is already undertaking various large-scale sustainable power projects and promoting green energy. In addition, renewable energy has the potential to create employment opportunities at all levels, especially in rural areas.

Incentives

• Modified Special Incentive Package Scheme (M-SIPS) Scheme of Ministry of Electronics & Information Technology: The scheme mainly provides subsidy for capital expenditure - 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs. The Scheme was open to receive applications till 31^st December 2018. The

Scheme inter-alia covers solar PV cells, solar PV modules, EVA, backsheet and solar glass.

• Preference to Make in India in Public Procurement in the renewable energy sector: Through implementation of Public Procurement (Preference to Make in India) Order, procurement and use of domestically manufactured solar PV modules and domestically manufactured solar inverters have been mandated for Govt/ Govt. entities.

• Domestic Content Requirement (DCR): Under some of the current schemes of the MNRE, namely CPSU Scheme Phase-II, PM-KUSUM and Grid-connected Rooftop Solar Programme Phase-II, wherein government subsidy is given, it has been mandated to source solar PV cells and modules from domestic sources.

• Imposition of Basic Customs Duty on the import of solar PV cells & modules: The Government announced the imposition of Basic Customs Duty (BCD) on the import of solar PV cells and modules with effect from 1.04.2022.

• Production Linked Incentive (PLI) Scheme for High Efficiency Solar PV Modules: MNRE issued the Scheme Guidelines for Production Linked Incentive Scheme National Programme on High

Efficiency Solar PV Modules, with an outlay of H4,500 crores for supporting manufacturing of high efficiency solar PV modules by providing Production Linked Incentive (PLI) on sales of such solar PV modules. Letters of Award were issued to the eligible successful bidders to the extent of funds allocated (i.e. the present scheme outlay of H4,500 crore). An additional outlay of H19,500 crore was announced in the Budget 2022- 23 on 1^st February 2022.

• Incentives to domestic manufacturing in Wind sector: The Government put in place a system of Revised List of Models and Manufacturers, and only equipment manufactured by manufacturers in the list was allowed to be used for wind energy projects. It also mandated that Hub and Nacelle assembly / manufacturing facility shall be in India. More than 70 percent of the equipment was manufactured in India.

• Renewable Energy Research and Technology Development Programme of Ministry of New & Renewable Energy (MNRE): The Ministry of New & Renewable Energy (MNRE) supports a scheme Renewable Energy Research and Technology Development Programme through various research institutions and industry to enable indigenous technology development and manufacture of new and renewable energy in the country. MNRE encourages research and technology development proposals in collaboration with the industry and provides up to 100% financial support to Government/ non-profit research organizations and up to 5070% to industry, start-ups, private institutes, entrepreneurs and manufacturing units. An amount of H62.47 crore was spent in the last three years for this Scheme.

(Source: https://www.pib.gov.in/PressReleasePage. aspx?PRID=1808349)

Rules and policies Policies & Incentives:

• Waiver of Inter-State Transmission System (ISTS) charges for the inter-State sale of solar and wind power for projects to be commissioned by 30.06.2025,

• Keeping in view Indias long-term goals of decarbonising its electricity systems, achieving energy security and in keeping with our international commitments, in July 2016, long term Renewable Purchase Obligation growth trajectory, uniformly applicable to all States/UTs up to the year 2021-22, was notified. Further, the Ministry of Power on 29.01.2021 included a Hydropower Purchase Obligation (HPO) within Non-Solar Renewable Purchase Obligation (RPO) and notified the long term updated RPO trajectory from 2019-20 to 2021-22, including HPO till 202930.

• Competitive bidding guidelines for the procurement of solar and wind power have been notified under section 63 of Electricity Act, 2003. These guidelines provide for the standardization and uniformity of the procurement process and a risk-sharing framework between various stakeholders, encouraging investments, enhancing bankability and improving profitability. The guidelines also facilitate transparency and fairness in the procurement processes, which resulted in a drastic fall in solar and wind power prices over the past few years.

• To build investor trust by ensuring payment security and tackle risks related to delays in payments to independent power producers, DISCOMs were mandated to issue and maintain letters of credit (LCs);

• Efforts have been undertaken to strengthen and expand the domestic manufacturing ecosystem. Schemes, namely PM-KUSUM, Solar Rooftop and CPSU, have a precondition of Domestic Content Requirement, directly creating a domestic demand of more than 36 GW solar PV (cells & modules). In order to curb proliferation of imported solar PV cells and modules, a Safeguard Duty was imposed from 30.07.2018 for two years. It has been extended for one more year at the rates of 14.90 per cent for imports during 30.07.2020 to 29.01.2021; 14.50 percent was for imports during 30.01.2021 to 29.07.2021. The Government decided to impose Basic Customs Duty (BCD) on the import of solar PV modules @40% and on the import of solar PV cells @25% with effect from 1.04.2022.

Hydrogen Mission:

In the Independence Day speech on 15.08.2021, Indias Prime Minister announced the launch of National Hydrogen Mission and stated the goal to make India a global hub for Green Hydrogen production and export. The draft National Green Hydrogen Mission document is under inter-ministerial consultation.

The Mission proposes a framework inter alia, for creating demand for Green Hydrogen in sectors such as petroleum refining and fertilizer production; support for indigenous manufacturing of critical technologies, Research & Development activities, and an enabling policy and regulatory framework. The proposed steps will lead to the development of additional renewable energy capacity for Green Hydrogen production.

One Sun - One World - One Grid (OSOWOG):

A tripartite Memorandum of Understanding (MoU) was signed between the Ministry of New and Renewable Energy (MNRE), the International Solar Alliance (ISA) and the World Bank on 08.09.2020 for a study on the OSOWOG initiative. Currently, the implementation plan, road map and institutional framework is being developed by a consultant appointed for this purpose. The inception report was already been submitted by the consultant in September 2021. The complete study is expected to be completed by mid 2022.

(Source: https://pib.gov.in/PressReleaseIframePage. aspx?PRID=1785808)

Solar projects

• To encourage rooftop solar (RTS) throughout the country, notably in rural regions, the Ministry of New and Renewable Energy plans to undertake Rooftop Solar Programme Phase II, which aims to install RTS capacity of 4,000 MW in the residential sector by 2022 with a provision of subsidy.

• The Indian government introduced Gram Ujala in March 2021, an ambitious programme to include the worlds cheapest LED bulbs in rural areas for H10 (US$ 0.14), advancing its climate change policy and bolstering its self-reliance credentials.

• India announced an addition of 30 GW of renewable energy capacity along a desert on its western border, covering Gujarat and Rajasthan, in 2021.

Union Budget FY 2022-23

Under the Union Budget 2022-23, the allocation for the Solar Energy Corporation of India (SECI), which is currently responsible for the development of the entire renewable energy sector, stood at H1,000 crores (US$ 132 million).

The Indian government allocated an additional ?19,500 crore for Production Linked Incentives for manufacture high efficiency solar modules to meet the goal of 280 GW of installed solar power by 2030.

The government plans to develop a Battery swapping Policy and formulate inter-operability standards.

The government announced that it would issue Green Bonds to mobilize resources for green infrastructure for public sector projects to reduce carbon emissions and promote the use of energy storage, grid storage and battery storage systems.

The basic customs duty of 40% on modules and 25% cells become effective from April 1, 2022.

Company overview

Adani Green Energy Limited (AGEL/ Company) is one of the largest renewable companies in India with a current project portfolio of 20,434 MW, AGEL strives to provide a better, cleaner and greener future for India. The Company deploys the latest technology to build, own, operate and maintain utilityscale grid-connected solar, wind and hybrid (wind-solar) power projects. The Company supplies green power to Central and State government entities and government-backed institutions. AGEL also leveraged capabilities and expanded its presence across 11 Indian States with the help of long-term Power Purchase Agreements (PPAs) across a 25-year period with Central and State government entities. The Company has 5,410 MW operational projects and 15,024 MW under construction and locked-in growth projects at the close of 2021-22.

Financial performance, 2021-22 (Consolidated)

Revenues: Revenue during the year under review stood at H5,133 crores compared to H3,124 crores in FY2020-21.

Interest and finance costs: Net interest and finance costs increased to H2,617 crores during the year compared to H1,953crores in previous year.

Profit after tax: The Company registered a profit after tax of H489 crores compared to a loss of H183 crores in the previous year.

Key matrix		(Rs. in crore)
Particulars	2020-21	2021-22
Revenue	3,124	5,133
EBITDA from power supply	2,207	3,530
EBITDA margin	90.6%	91.8%
Cash profit	1,250	1,854

Human resources

AGELs human resource practices helped reinforce market leadership. The Company invested in formal and informal training as well as on-the-job learning. It emphasised engagements with employees by providing an enriched workplace, challenging job profile and regular dialogues with the management. The Company enjoyed one of the highest employee retention rates in the industry; it created leaders from within, strengthening prospects. As on March 31, 2022, the Companys employee base stood at 2,355.

Internal control systems and their adequacy

The Company has strong internal control procedures in place that are commensurate with its size and operations. The Board of Directors, responsible for the internal control system, sets the guidelines and verifies its adequacy, effectiveness and application. The Companys internal control system is designed to ensure management efficiency, measurability and verifiability, reliability of accounting and management information, compliance with all applicable laws and regulations, and the protection of the Companys assets. This is to timely identify and manage the Companys risks (operational, compliance-related, economic and financial).

Cautionary statement

This statement made in this section describes the Companys objectives, projections, expectation and estimations which may be forward-looking statements within the meaning of applicable securities laws and regulations.