Oriana Power Ltd Management Discussions

Economic review Global economic overview

The global economy has faced subdued growth in recent years, grappling with various macroeconomic challenges that have significantly impacted both developed and emerging economies. However, 2023 exhibited resilience, marked by stabilized economic growth and reduced inflationary pressures across many regions. This decline in inflation is projected to alleviate price shocks, particularly in oil markets, despite ongoing geopolitical risks. Both government and private spending have played a role in bolstering the economy, fuelled by improvements in real disposable income.

According to the International Monetary Fund (IMF), the global economy has recorded a growth rate of 3.3% in 2023 and is anticipated to fall to 3.2 % in 2024. Nevertheless, challenges persist, including elevated central bank policy rates, fiscal retrenchment amidst high debt levels, and sluggish productivity growth. Despite these hurdles, measures such as supply-side adjustments and monetary policy actions are expected to mitigate inflationary pressures. Consumer consumption is on the rise, propelled by increased spending from both the public and private sectors. However, risks such as commodity price shocks and supply disruptions remain, highlighting the importance of calibrated monetary policies and structural reforms to sustain growth and stability.

Outlook

The IMF World Economic Outlook for July 2024 predicts a global economic growth rate of 3.3% for 2025, while advanced economies are anticipated to grow by 1.8% in that year. However, there is an expectation for gradual recovery in the Eurozone, supported by increasing income levels. Meanwhile, emerging market and developing economies are foreseen to maintain strength throughout 2024 and 2025 at a growth rate of 4.3%. Global conditions are poised for a positive trajectory in the foreseeable future, buoyed by favourable developments in global supply chains and the easing of interest rates by central banks.

Indian economic overview

India continues to solidify its global standing as the 5th largest economy, staying resilient amidst challenging geopolitical shifts and expansionary fiscal policies. Despite these factors, India maintains robust macroeconomic fundamentals. According to the Provisional estimates by the National Statistical Office, the real GDP is projected to reach 8.2% in FY 2023-24, marking the highest growth rate among major advanced and emerging market economies.

This growth is predominantly driven by strong domestic demand for both consumption and investment, aided by the alleviation of supply-side constraints and consistent government focus on capital expenditure. Throughout the fiscal year 2023-24, the Indian rupee remained stable, supported by macroeconomic resilience and improvements in the countrys external position. Additionally, inflationary pressures have significantly moderated, largely due to proactive supply-side measures implemented by the government.

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Outlook

India is expected to strengthen its resilience against global economic downturns through the cultivation of a more inclusive and sustainable domestic economy, adept at absorbing unforeseen shocks. The focus will be on prioritizing capital expenditure, enhancing infrastructure, promoting sustainable livelihood practices, and fostering the adoption of green energy.

The Government of India has revised its fiscal deficit target for FY25 to 4.9% of GDP, down from the 5.1% target set in the interim budget of February. In the Union Budget for 2024-25, Finance Minister Nirmala Sitharaman announced that the fiscal deficit for 2024-25 is now projected to be approximately 200 basis points lower than the previous years estimate. The government is targeting a reduction of the fiscal deficit to 4.5% or lower by FY26, adhering to its planned fiscal trajectory through FY25-26.

Economic impact overview

The influence of global economics on the renewable sector in 2023 was profound, driving capacity growth, setting ambitious clean energy goals, and underscoring the importance of equitable distribution of renewable energy resources worldwide.

Renewable Capacity Growth

The world saw a remarkable 50% increase in renewable capacity additions in 2023 compared to the previous year, with solar PV accounting for a significant portion of this growth. China played a pivotal role, commissioning as much solar PV in 2023 as the entire world did in the previous year, alongside a 66% increase in wind power additions. Other regions like the US, Europe, and Brazil also experienced record-breaking growth in renewable energy capacity, highlighting the sectors global expansion.

Future Projections

Projections indicate that renewable capacity will continue to rise over the next five years, with solar PV and wind power installations expected to dominate, constituting 96% of new capacity additions. By 2028, global renewable capacity is forecasted to reach nearly 710 GW, more than doubling the levels observed in 2022. Additionally, the COP28 climate talks emphasized the necessity to triple renewable energy capacity and double energy efficiency improvements by 2030, highlighting the urgency of transitioning to clean energy resources.

Challenges and Opportunities

Despite the growth, challenges such as lack of financing persist, particularly in emerging and developing economies, underscoring the need for sustainable financial support. Policymakers are increasingly advocating for frameworks to accelerate the adoption of clean energy and promote a just energy transition, emphasizing the importance of a people positive approach to renewable energy deployment.

Clean Energy to drive Global GDP

In 2023, clean energy contributed approximately USD 320 billion to the global economy, accounting for 10% of global GDP growth. This impact is comparable to adding an economy the size of the Czech Republic or surpassing the value added by the global aerospace industry. This analysis, which covers clean energy generation, deployment of clean power capacity, and clean equipment sales, highlights that clean energy technologies, such as solar PV, wind power, and electric vehicles, are significant growth drivers. Notably, clean energy investments were pivotal, contributing 50% of Chinas investment growth and 20% of the U.S. growth. Global investment in clean energy technology manufacturing surged by 75% in 2023, totaling around USD 200 billion, exceeding recent global investments in semiconductor manufacturing.

Industry review

Global Renewable energy overview

Global annual renewable capacity additions surged by nearly 50% to around 510 gigawatts (GW) in 2023, marking the fastest growth rate in two decades. This achievement sets a new record for the 22nd consecutive year. Renewable capacity in Europe, the United States, and Brazil reached unprecedented levels, but Chinas expansion was particularly remarkable. In 2023, China installed as much solar photovoltaic (PV) capacity as the entire world did in 2022 and saw a 66% year-on-year increase in wind capacity. Globally, solar PV alone accounted for three-quarters of the total renewable capacity additions.

G20 nations currently hold nearly 90% of the worlds renewable power capacity. If they enhance the implementation of existing policies and targets, they could potentially triple their collective installed capacity by 2030. This would make a significant contribution toward achieving the global goal of tripling renewable energy. However, to meet this global target, there must also be an accelerated rate of new installations in other countries, including many emerging and developing economies outside the G20. Some of these nations currently lack renewable targets and supportive policies.

Key highlights of world energy outlook

In 2023, amidst geopolitical tension and a volatile energy market, the energy landscape showcased a delicate balance, marked by notable shifts and uncertainties.

4https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2035603

5https://www.iea.org/reports/renewables-2023/executive-summary

6https://www.iea.org/reports/renewable-energy-market-update-june-2023/executive-summary

7https://www.iea.org/commentaries/clean-energy-is-boosting-economic-growth

8https://iea.blob.core.windows.net/assets/96d66a8b-d502-476b-ba94-54ffda84cf72/Renewables_2023.pdf

9https://www.iea.org/reports/world-energy-outlook-2023/executive-summary

• Rise of the clean energy economy: The IEAs World Energy Outlook 2023 indicated the emergence of a new clean energy economy spearheaded by solar photovoltaic (PV) technology and electric vehicles. Clean energy investments surged by 40% since 2020, indicating a robust momentum towards sustainable energy transitions.

• Record-breaking renewable energy capacity: In 2023, over 500 gigawatts of renewable generation capacity were installed, setting a new record and highlighting the global adoption of clean energy.

• Shift in investment trends: Investments in clean energy surpassed fossil fuels, with over USD 1.7 trillion directed towards clean energy initiatives. This substantial investment reflects the growing shift towards cleaner and more sustainable energy sources.

• Downward trajectory of fossil fuels: The declining share of coal, oil and natural gas in global energy supply exhibited a crucial moment in the energy transition. It is indicated that the demand for fossil fuels will lead to depletion of the resources by 2030, propelling the required shift towards cleaner energy alternatives.

• Dominance of low-emissions power: Clean energy investments surged due to robust economics, stringent policy support, alignment with climate goals and strategic industrial initiatives. Notably, nearly 90% of total investment in electricity generation in 2023 was allocated to low-emissions power sources, highlighting the growing importance of clean energy in the global energy landscape.

Global Renewable energy trends

The International Energy Agency (IEA) provides insight into significant trends and challenges shaping the global energy landscape in 2023.

Rising electricity demand

Global electricity demand is projected to rise significantly until 2026, driven by economic recovery, increased electrification in residential and transport sectors, and the growth of data centers. Although China is experiencing structural changes, emerging and developing economies are expected to be key drivers of this increased demand. The IEAs Electricity 2024 report notes a modest slowdown in global electricity demand growth to 2.2% in 2023, primarily due to reduced consumption in advanced economies. However, demand is forecasted to average 3.4% annually from 2024 to 2026. About 85% of this demand growth is expected to come from regions outside advanced economies, with China, India, and Southeast Asia playing major roles. Despite this, record levels of electricity generation from low-emissions sources such as renewables (solar, wind, and hydro) and nuclear power are expected to diminish the reliance on fossil fuels. By 2026, low-emissions sources are projected to account for nearly half of the worlds electricity generation, up from just under 40% in 2023.

Shift towards clean energy

By early 2025, renewables are projected to provide over one-third of global electricity generation, surpassing coal. Nuclear power is also anticipated to reach a record high by 2025, with contributions from increased output in France, the reactivation of Japanese plants, and new reactors in China, India, Korea, and Europe. This shift will reduce the share of fossil fuels in global electricity generation to below 60% for the first time in over 50 years of IEA records. The IEA underscores a significant move towards clean energy sources such as solar, wind, and hydro power, with low-emissions technologies expected to meet global demand by 2026.

Promising Trends in Power Sector Emissions and Energy Demand

The power sector currently leads global CO2 emissions, but the rapid expansion of renewable energy and the steady growth of nuclear power are poised to meet the rising global electricity demand over the next three years, according to the International Energy Agency (IEA). The surge in renewable energy, particularly with increasingly affordable solar power, alongside the significant resurgence of nuclear power-which is expected to achieve a record high by 2025-are driving these positive trends. Although further progress is essential and urgent, these developments are highly encouraging.

Role of COP28 in global energy transition

At the COP28 climate summit in Dubai, nearly 200 countries made significant collective pledges on energy to support the Paris Agreements goal of limiting global warming to 1.5?C. For the first time, governments established key global targets for 2030, including tripling renewable power capacity, doubling energy efficiency improvements, drastically cutting methane emissions, and accelerating a fair and orderly transition away from fossil fuels. Focus is now shifting to the implementation phase as countries prepare updated Nationally Determined Contributions (NDCs) under the Paris Agreement. Expected to be submitted next year, these updated NDCs will outline revised ambitions for 2030 and set new goals for 2035, offering a crucial opportunity

l0https://www.iea.org/news/global-electricity-demand-set-to-rise-strongly-this-year-and-next-reflecting-its-expanding-role-in-energy-systems- around-the-world

llhttps://www.iea.org/news/clean-sources-of-generation-are-set-to-cover-all-of-the-world-s-additional-electricity-demand-over-the-next-three-years for countries to solidify their commitments and enhance their efforts to meet the global pledges made at COP28.

The current global ambitions fall short of meeting the goal of tripling renewable energy capacity by this decade. Even if all nations fully realized their existing targets, the world would still be 30% behind the necessary increase to surpass 11,000 GW of renewable capacity by 2030. Both advanced and emerging economies ambitions are misaligned with the COP28 pledge to achieve this tripling of global renewable power capacity. This goal is crucial for aligning with the International Energy Agencys (IEA) pathway to reach net zero emissions by mid-century and limiting warming to 1.5?C.

Outlook

With current policies and market conditions, global renewable capacity is projected to reach 7,300 gigawatts (GW) by 2028. This trajectory represents an increase to 2.5 times the current level by 2030, but it falls short of the tripling goal. To achieve a capacity of over 11,000 GW by 2030, governments will need to address existing challenges and accelerate the implementation of current policies.2 13 The global energy landscape observed a gradual adaptation of renewable energy in the reported financial year. Various reports and initiatives highlighted a 50% increase in renewable energy capacity in 2023.

It is also expected that wind and solar PV installations will increase over the next five years owing to factors such as effective governmental initiatives, technological advancements, increasing social acceptance and global commitments. The advancement in solar energy technologies, including rooftop installations, floating PV, solar carports and hybrid systems, contributed extensively to the expansion of renewable energy footprint. Initiatives like the Global Renewables and Energy Efficiency Pledge played a pivotal role in accelerating the transition to clean energy.

Indian Renewable energy overview

India is positioning itself as a global leader in renewable energy with a goal of reaching 500 gigawatts (GW) of nonfossil fuel-based energy capacity by 2030. As of May 2024, the countrys total installed renewable energy capacity is 193.57 GW, including 84.27 GW from solar power and 46.42 GW from wind power. To support this growth, the Indian government has introduced several initiatives such as the Production Linked Incentive (PLI) scheme to enhance domestic manufacturing and attract foreign investment.

India has set ambitious targets to cut carbon intensity by over 45% by 2030, achieve 50% of its electric power capacity from renewables, and reach net-zero carbon emissions by 2070. The government has also approved the development of 50 solar parks totaling 37.49 GW and established an offshore wind target of 30 GW by 2030, with potential sites identified. Under the Paris Agreement, India is committed to sourcing 40% of its electricity from nonfossil fuel sources by 2030. Additionally, the country aims to establish 450 GW of renewable energy capacity by 2030 and provide 1.7 million solar pumps to farmers through the Pradhan Mantri-Kusum Yojana.

The reported year witnessed India adopting clean energy and taking significant strides in building a sustainable future. Effective policies, supported by vibrant private sector and rapid growth in renewable electricity capacity, enabled India outperform its peers in new capacity additions. India is a global leader in solar power, with solar plants being more economical to construct than coal plants. Solar plants are expected to increase its renewable capacity two-fold by 2026. Indias clean energy transition is notable for its steady policy support, vibrant private sector, and rapid growth in renewable electricity capacity, outpacing other major economies in new capacity additions. Indias ambitious goals include becoming the third-largest ethanol market globally and reaching net zero emissions by 2070, with a focus on scaling up modern bioenergy and other low- carbon technologies like hydrogen and battery storage.

Key policy changes

In 2023-2024, India witnessed significant policy changes in its energy sector aimed at advancing renewable energy, reducing carbon emissions, and enhancing security. These policy changes reflect Indias multifaceted approach towards balancing traditional fossil fuels with a growing emphasis on renewable energy sources, aligning with its commitment to sustainable development, decarbonisation and achieving the climate goals in the evolving energy landscape of 2023-2024.

• Carbon Credit Trading Scheme (CCTS): The introduction of the Carbon Credit Trading Scheme aims to incentivise industries to reduce carbon emissions, accelerating Indias transition towards cleaner energy sources.

• Energy Storage Obligation (ESO): The Energy Storage Obligation mandated an increasing percentage of renewable energy from stored wind and solar power, starting at 1% in 2023. This policy propelled the integration of renewable energy sources into the grid.

l2https://iea.blob.core.windows.net/assets/ecb74736-41aa-4a55-aacc-d76bdfd7c70e/COP28TriplingRenewableCapacityPledge.pdf

l3https://iea.blob.core.windows.net/assets/96d66a8b-d502-476b-ba94-54ffda84cf72/Renewables_2023.pdf

14https://www.iea.org/news/massive-expansion-of-renewable-power-opens-door-to-achieving-global-tripling-goal-set-at-cop28

15https://www.investindia.gov.in/sector/renewable-energy

16https://www.niti.gov.in/sites/default/files/2024-02/Policy%20Paper_Energy_12022024_V4_0.pdf

17https://www.iisd.org/story/mapping-india-energy-policy-2023/

18https://climateactiontracker.org/countries/india/2023-07-06/policies-action/

• Coal and gas expansion: Despite focusing on renewable energy, India is set to raise its reliance on coal and gas during this period by amplifying coal production and expanding coal capacity. The Government aims to increase coal production up to one billion tonnes by opening new mines.

• Global energy leadership: India demonstrated global leadership by steering the G20 towards common goals, supporting global energy security while considering climate objectives, amidst an ongoing energy crisis.

Key Government initiatives

Hybrid systems integrating solar, wind and battery storage are emerging as a key trend, contributing to grid stability and reliability. These initiatives underscore Indias commitment to innovation and sustainability in the renewable energy sector. Various schemes and financial allocations in the renewable energy sector reflect Indias strategic focus on promoting renewable energy, enhancing energy security, reducing carbon emissions and fostering a sustainable future.

The central sector schemes being implemented by the Ministry of New and Renewable Energy in India include:

Production-Linked Incentive (PLI) scheme This scheme focuses on promoting high-efficiency solar PV manufacturing in India. It involves financial outlays and incentives to boost domestic production and reduce reliance on imports. The Production-Linked Incentive (PLI) Scheme for Photovoltaic (PV) Modules is designed to advance Indias solar energy sector through several key objectives. These include enhancing the countrys manufacturing capacity for high-efficiency solar PV modules and introducing cutting-edge technology for their production. The PLI Scheme has marked a significant shift in Indias approach to solar energy. Previously reliant on imports for solar power plant components, the country has transitioned to focusing on local manufacturing. However, the response to bids for polysilicon, ingots, wafers, cells, and modules under the PLI Schemes two tranches has been somewhat moderate.

National Green Hydrogen Mission

With the aim to produce 5 million metric tons of green hydrogen and ammonia in India annually by 2030, the initiative offers incentives for investors and emphasises research and development for higher efficiency in solar PV modules with an outlay of INR 19,744 crores. The National Green Hydrogen Mission has allocated Rs.600 crore for the fiscal year 2024-25 across various initiatives. By 2030, the Green Hydrogen sector is expected to attract investments exceeding C8 lakh crore, which is projected to generate approximately 600,000 jobs. Green Hydrogen holds significant potential to replace imported fossil fuels in several industries, including fertilizer production, petroleum refining, mobility, steel manufacturing, and shipping propulsion.

Battery Energy Storage Systems (BESS) Development and Deployment

India has launched a scheme to develop 4,000 MWh of Battery Energy Storage Systems (BESS) by 2031, with subsidies covering up to 40% of the capital cost. This initiative is pivotal for stabilizing renewable energy supply and improving grid reliability. Additionally, the deployment of BESS has significantly increased, surpassing 14.7 GWh in calendar year 2023.

Solar Sector Initiatives in India

Indias solar energy strategy integrates several key initiatives to promote widespread adoption and enhance the sectors growth. The Solar Park Scheme aims to establish 50 large-scale solar parks with a total capacity of about 38 GW by 2025-26, serving as central hubs for solar energy generation and investment. Complementing this, the government has introduced rooftop solar incentives, including a subsidy scheme and the Surya Ghar Muft Bijli Yojana, which offer financial support and revised subsidies to encourage residential rooftop solar installations. Additionally, the National Rooftop Solar Portal has been launched to simplify the subsidy application process, enabling users to apply online, track progress, and receive benefits efficiently. To further advance clean energy adoption, the Free Solar Electricity Initiative targets providing 300 kWh of free solar electricity per month to ten million households, thereby reducing electricity costs and promoting renewable energy.

Hybrid solar-wind battery storage scheme

Hybrid setups combining solar and wind have gained momentum. These integrated systems offer a diversified

l9https://www.acmesolar.in/assets/pdf/Industry-Reports/Crisil-Industry-Report.pdf

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21https://energy.economictimes.indiatimes.com/news/renewable/boosting-innovation-the-impact-of-pli-schemes-on-renewable-energy-technologies/107256169

22https://pib.gov.in/PressReleseDetailm.aspx?PRID=2039091 energy mix, bolster grid reliability and harness power from multiple renewable sources. The emergence of hybrid systems underscores the progression towards cleaner and more sustainable energy solutions. The Renewable Energy Implementing Agencies (REIAs) Solar Energy Corporation of India Ltd (SECI), NTPC Ltd, SJVN Ltd, and NHPC Ltd have issued tenders for various hybrid projects, including solar-wind hybrids, solar-wind hybrids with guaranteed peak-hour supply, and round-the-clock (RTC) renewable power. As of December 31, 2023, approximately 1.44 GW of these hybrid projects have been commissioned. Battery storage can be integrated into hybrid projects to mitigate the variability in output power from wind-solar hybrid plants. This enhancement allows for higher energy output for the given capacity (bid/sanctioned capacity) at the delivery point by adding extra wind and solar power capacity. Additionally, it ensures the availability of firm power for specified periods.

Outlook

Indias installed generation capacity has increased from 356 gigawatts (GW) in 2019 to approximately 442 GW by March 2024. This growth is primarily driven by significant additions in renewable sources such as solar, wind, and hybrid technologies. In fiscal year 2024, renewables (excluding large hydro) represent about 33% of the installed capacity, up from 22% in fiscal year 2019, while coal-based capacity has decreased to around 49% over the same period. From fiscal years 2024 to 2029, conventional power generation is expected to add approximately 52-55 GW of new capacity to meet rising demand.

However, project announcements are limited as companies focus on inorganic growth through acquisitions at favorable valuations, with 4.8 GW of stressed power assets still pending debt resolution. Nuclear power is also projected to grow, with 6-7 GW of new capacity expected from ongoing projects at Kakrapara, Kalpakkam, and Rajasthan. Unit 1 of the Kakrapara Atomic Power Plant (KAPP) began operations in January 2024, and Unit 2 is expected to be operational by the end of fiscal year 2024. Flexible generation capacity will be essential for managing quick demand shifts and intermittent renewable generation. CRISIL MI&A-Consulting forecasts that 29- 30 GW of coal-based power will be commissioned during this period, mainly by central and state sectors, while major private generators are concentrating on expanding renewable energy capacity.

Indian solar sector

As of March 2024, solar energy constituted 43% of the total renewable energy mix (including large hydro). The solar power sector has experienced significant growth over the past five years, with approximately 60 GW of new capacity added from fiscal years 2018 to 2023, reflecting a compound annual growth rate of around 24.8%, albeit from a low base. Despite challenges posed by the second wave of COVID-19, fiscal year 2022 saw the addition of about 14 GW in solar capacity. To support developers, the Ministry of New and Renewable Energy (MNRE) extended project deadlines by seven and a half months for those impacted by both waves of the pandemic.

Between fiscal years 2018 and 2023, approximately 55 GW of solar capacity was commissioned, falling short of the anticipated 60-65 GW. This positive trend persisted into fiscal years 2023 and 2024, with substantial additions of approximately 13 GW and 15 GW, respectively.

Declining Module Prices and Fiscal Incentives

In 2023, module prices decreased due to increased production of upstream components, dropping from $0.23 per watt-peak in January to $0.15-$0.20 per watt-peak between April and November. This reduction has alleviated some of the capital cost pressures for fiscal year 2024. By the fourth quarter of fiscal 2024, mono facial module prices had reached USD 0.20 per watt-peak. CRISIL MI&A Consulting forecasts that module prices will range from USD 0.21-0.23 per watt-peak for imported mono-crystalline modules and USD 0.22-0.24 per watt-peak for domestic mono-crystalline modules in fiscal year 2025, due to limited scope for further discounts at the manufacturing level. Additionally, the cost of solar glass, a crucial input, has declined due to lower soda ash prices resulting from reduced demand. Despite strong long-term demand driven by ambitious renewable energy goals, the current oversupply is expected to continue into fiscal year 2025.

Regulatory initiatives

In February 2024, the Central Government launched the PM Surya Ghar: Muft Bijli Yojna, a scheme with a proposed budget of Rs. 75,000 crore aimed at providing up to 300 units of free electricity per month to 1 crore households. The scheme offers subsidies for residential solar installations, with Rs. 30,000 per kW for up to 2 kW and Rs. 18,000 per kW for additional capacity up to 3 kW. The Ministry of New and Renewable Energy (MNRE) specified that only applications received after February 13, 2024, will be considered for Central Financial Assistance (CFA) under this new scheme, as all previous schemes have been discontinued. The capacity of the scheme was increased from 20,000 MW to 40,000 MW in March 2017, aiming to establish at least 50 solar parks by fiscal year 2022. These parks help reduce construction and execution risks by providing contiguous land, evacuation infrastructure, and necessary utilities. As of December 2023, 58 solar parks with a combined capacity of 40 GW have been approved in 13 states, with 10,504 MW of solar projects commissioned across 20 of these parks.

Technological advancements

Solar power is becoming increasingly attractive due to falling module prices and improved efficiency, driven by excess manufacturing capacity in China and technological advancements. Developers are showing a growing preference for bifacial modules, which offer higher efficiency and are compatible with tracker technology. In 2023, the share of bifacial modules in imports rose from 8% in Q1 2022 to 37% in Q4 2023. Meanwhile, multi crystalline modules are being phased out due to their lower efficiency and higher degradation rates, with their import volume being negligible in 2023.

Global Economic Impact on Indian Renewables

Indias success in renewable energy has inspired other nations, and the government is promoting innovative technologies like demand response to address challenges such as renewable energy curtailment and grid efficiency. The global economics directly influenced the renewable sector in India during 2023-2024 and its impact on the economy are:

Clean Energy Investments

Indias clean energy investments have surged in the past three years, driven by ambitious targets. In January 2023, India entered the sovereign green bond market, issuing two tranches of bonds worth USD 1 billion (INR 80 billion) primarily to local investors. These bonds, intended to fund renewables, metro rail projects, and low-carbon hydrogen production, were oversubscribed by over four times. This push has significantly boosted Indian clean energy investment, which hit USD 68 billion in 2023, nearly 40% higher than the 2016-2020 average.

About half of this investment focused on low-emissions power generation, including solar photovoltaic. Meanwhile, fossil fuel investment rose by 6% to USD 33 billion in 2023, driven by increased demand for fuel and coal-fired power. Clean energy investment is projected to double by 2030 under current policies. However, to fully align with the countrys energy and climate objectives, investment would need to increase by an additional 20%. Mitigating risks that elevate capital costs will be crucial for achieving these goals.

Key Trends in Indias Renewable Sector Clean Energy Transition and Coal Reliance

The transition to clean energy is progressing, but coal dependence remains substantial. Electricity demand is anticipated to grow alongside GDP, driven by local activities and the impact of El Nino in the first half of the year. Despite a 60% year-on-year increase in total capacity addition, coals share in generation is expected to decline slightly from 74.3% in 2023 to 73.2% in 2024, largely due to significant non-fossil fuel capacity additions.

Domestic Fuel Supply and Gas Production

Improving domestic fuel supply, including coal and gas, is a key priority to meet the rising demand. India is projected to exceed 1 billion metric tons of domestic coal production in 2024, reducing the need for imported coal. Additionally, domestic gas production is expected to grow, spurred by new gas pricing reforms.

Focus on Green Hydrogen and Ammonia

The emphasis on green hydrogen and ammonia will shift towards fostering local demand and managing excess costs. The launch of two new schemes under SIGHT (Components 2A and 2B) aims to aggregate demand from public sector units and major consumers like refineries and fertilizer plants. However, increased green hydrogen uptake will require either monetizing the green component or receiving government budgetary support to subsidize procurement.

Positive Power Market Sentiments and Reforms

The power market is likely to remain positive, with softer market prices and ongoing significant reforms. Reforms for DISCOMs are expected to enhance short-term financial discipline and reduce AT&C losses. The government will also focus on improving market liquidity and compliance through market coupling and the first phase of MBED. For large-scale renewable capacity additions, reforms will aim to improve business conditions for C&I consumers to meet sustainability targets.

Renewable Energy and Capacity Addition

Renewables will remain central to Indias climate policy, with 2024 anticipated to witness record capacity additions exceeding 20 GW. Global declines in module costs and tender backlogs will contribute to this growth. The prominence of hybrid renewable tenders is expected to continue, along with increasing requests for stand-alone storage tenders to manage variable generation and grid stability.

Carbon Credit Strategy and Domestic Carbon Policy 2024 is set to define Indias domestic carbon strategy. Following the 2023 Carbon Credit Trading Scheme (CCTS) enactment, the voluntary segment is unlikely to launch until the compliance segment begins in 2025-26. Decisions on international participation and the development of the voluntary segment will be pivotal. Additionally, the Green Credit Programme (GCP) will establish a framework of mitigation and conservation schemes, with further details expected in 2024.

International Climate Influence and Investments

Indias achievements at G20 and COP28 have bolstered its global influence. The countrys climate action agenda will continue to attract foreign investment and supply chain partnerships. India is also anticipated to provide budgetary support for the initial phase of the India-Middle East-Europe Corridor (IMEEC), including funding, infrastructure planning, and operational strategy.

Company overview

Established in 2013, Oriana Power Limited specialises in providing solar energy solutions to industrial and commercial clients. The Company focuses on delivering low-carbon energy solutions through on-site solar projects installations, including rooftop and ground-mounted systems, along with off-site solar farms known as Open Access. The Company operates in two primary segments i.e., the Capital Expenditure (CAPEX) model and the Renewable Energy Service Company (RESCO) model.

Under the CAPEX model, the Company undertakes engineering, procurement, construction and operation on behalf of the client investing in the capital expenditure. Conversely, the RESCO model, operated through its 18 subsidiaries, involves Oriana Power handling the investment, commissioning and maintenance, selling power to end consumers through Power Purchase Agreements. This model provides monthly recurring revenue for the period of Power Purchase Agreement (PPA) tenure. Financially, the company has observed net positive cash flow in the recent years. The companys total income has been increasing steadily, reaching 13,395.37 lakhs in the financial year 2023. Oriana Power has maintained a healthy current ratio, debt- equity ratio and return on capital employed, reflecting the companys sound financial position.

26https://www.iea.org/reports/world-energy-investment-2024/india

27https://www.spglobal.com/commodityinsights/en/ci/research-analysis/top-trends-in-2024-for-indias-power-and-renewables-markets.html

Key offerings

• Renewable energy solutions: The company specialises in the development, installation and maintenance of renewable energy systems, including solar, green hydrogen and compressed biogas.

• Energy storage solutions: Oriana Power offers state- of-the-art energy storage solutions, such as battery storage systems and grid-scale energy storage, to optimise energy usage and grid stability.

Market focus

Oriana Power serves a diverse range of markets, including residential, commercial, industrial and utility based. The solutions are tailored to meet the unique needs of each market segment, encompassing reducing energy costs for homeowners, improving grid reliability for utilities or achieving sustainability goals for businesses.

Financial highlights

Oriana Powers financial performance remains robust, marked by steady revenue growth and prudent financial management. Revenue increased by 184.2%, rising from C134.72 Crores in FY23 to C382.87 Crores in FY24. This growth is attributed to the companys diverse solar energy project portfolio, which enhances financial stability and supports ongoing initiatives. EBITDA also experienced a substantial boost, climbing by 311.8% from C20.11 Crores in FY23 to C82.78 Crores in FY24, driven by expanded operations, lower solar panel costs and efficient order-book execution.

Consolidated Financial Highlights Revenue from operations

During the FY 2023-24 the revenue from operations stood at Rs 382.87 crore.

EBITDA and EBITDA margin

During the FY 2023-24, the operating EBIDTA increased by 412% to Rs 82.78 crore in comparison to Rs 20.80 crore in FY 2022-23. The EBITDA margin for FY 2023-24 for 21.62%

PAT and PAT margins

The Company registered an increase in PAT to Rs 54.28 crore in FY 2023-24 from Rs 10.56 crore during FY 2022-23. The PAT margin for FY 2023-24 stood at 14.18%

EPS

The company recorded earnings per share of Rs 33.41 per share in FY 2023-24 as compared to Rs 16.91 per share in FY 2022-23.

(Figures in Lakhs

Particulars	FY 2023-24	FY 2022-23	%growth
Revenue from operations	38287.49	13471.72	184.21%
Other Income	292.03	112.00	160.74%
Total revenue	38579.52	13583.72	184.01%
Total expenses excl. D&A & Finance Cost	30,300.85	11573.13	161.82%
EBITDA	8278.67	2010.59	311.75%
EBITDA margin (%)	21.62%	14.92%	44.88%
Depreciation & Amortisation	203.75	116.60	74.74%
Finance Cost	517.69	298.05	73.69%
Share of net profit of joint venture accounted for using the equity method
Profit before tax and exceptional items	7557.23	1595.94	373.53
Extra ordinary items	-6.10
PBT	7563.33	1595.94	373.91%
Tax	2134.97	539.64	295.63%
PAT	5428.35	1056.29	413.91%
PAT margin%	14.18%	7.84%	80.82%
Diluted EPS	33.41	16.91	97.55%

(Figures in Lakhs)

Assets	As on 31-03-2024	As on 31-03-2023
(1) Non-Current Assets
(a) Property, Plant and Equipment and intangible assets
(i) Property, Plant and Equipment	13534.80	2904.79
(ii) Capital Work in Progress	5160.67	4637.77
(iii) Intangible Assets	12.84	0.30
(b) Non-current Investments	1110.33	618.24
(c) Long term loans and Advances	90.88	33.30
(d) Other non-current assets	427.96	421.73
(2) Current Assets
(a) Inventories	1548.95	605.59
(b) Trade receivables	7852.03	3665.66
(c) Cash and bank balances	2209.64	157.86
(d) Short term loans and advances	7438.39	1185.94
(e) Other current assets	1632.23	182.05
TOTAL	41,018.72	14,413.23

 

EQUITY AND LIABILITIES	As on 31-03-2024	As on 31-03-2023
(1) Shareholders Funds
(a) Share Capital	1918.26	671.00
(b) Reserves and surplus	12,701.65	2500.35
Minority Interest	246.16	9.57
(2) Non-current liabilities
(a) Long-term borrowing	13272.47	5652.61
(b) Long term Provisions	57.28
(c) Deferred tax liability(net)	422.51	211.29
(3) Current Liabilities
(a) Short term Borrowings	5080.11	1423.13
(b) Short term Borrowings
- Total outstanding dues of micro enterprises and small eneterprises; and	570.00
- Total outstanding dues of creditors other than micro enterprises and small enterprises	3549.13	2338.90
(c) Other current liabilities	1140.41	1055.08
(d) Short term provisions	2060.73	551.29
TOTAL	41018.72	14413.23

Risk factors

• Regulatory risks: The company operates in the renewable energy sector, subjecting itself to various regulations, policies and governmental incentives. Changes in regulations, withdrawal of subsidies or unfavourable policies could impact the Companys operations and financial performance.

• Market risks: The solar energy market is competitive and dynamic, with factors like technological advancements, pricing pressures and market demand, influencing the companys growth and profitability. Fluctuations in market conditions could affect Oriana Powers revenue and market share.

• Project execution risks: The companys business involves proper solar projects executions, including engineering, procurement and construction. Delays or cost overruns in project execution, supply chain disruptions or quality issues could impact project timelines and profitability.

• Financial risks: The companys financial performance is subject to cash flow fluctuations, debt levels and access to capital. Any adverse changes in financial metrics, inability to manage debt effectively or lack of adequate funding could affect Oriana Powers operations and expansion plans.

• Technology risks: The company relies on solar technology for its operations. Risks related to technological obsolescence, equipment failures or inadequate maintenance could impact the efficiency and performance of the Companys solar projects.

• Operational risks: The companys operations are exposed to risks such as equipment failures, natural disasters, cybersecurity threats and operational disruptions. Failure to mitigate these risks effectively could lead to operational interruptions and financial losses.

• Environmental risks: As a renewable energy company, Oriana Power is exposed to environmental risks related to climate change, natural disasters and environmental regulations. Any adverse environmental impact or noncompliance with environmental standards could harm the Companys reputation and operations.

• Geopolitical risks: Operating in multiple locations exposes Oriana Power to geopolitical risks such as political instability, changes in governmental policies and international trade issues. These factors could affect the Companys projects, investments and overall business performance.

Human resource

The company has introduced a variety of HR initiatives to foster a supportive and dynamic work environment. Employees now have access to an anonymous suggestion box for submitting ideas and feedback, contributing to ongoing improvements. Training programs on health and safety are regularly conducted, and appropriate personal protective equipment (PPE) is provided to ensure worker safety. Regular health check-ups are arranged for field staff, and strict safety standards are maintained across all operations to prevent accidents. Cultural and social events are organized to promote inclusiveness and community. Additionally, comprehensive POSH training is provided, alongside tailored departmental and induction training to address specific needs and ease new hires into the company. External engagement and SAP training are supported to drive innovation and operational efficiency. Regular sessions with top management align team efforts with strategic goals and strengthen unity. As of March 31, 2024 the Company operates with a workforce of 104 employees.