Orient Green Power Company Ltd Management Discussions.

Company Overview

Orient Green Power Company Limited (OGPL) is one of India’s leading listed Renewable Power producing company focused on developing, owning and operating a diversified portfolio of

Wind Energy Power Plants.

The Company has an installed operational capacity of 417 MW of wind generators as at March 2021.

Headquartered in Chennai, Tamil Nadu, OGPL’s assets are spread across Tamil Nadu, Andhra Pradesh, Gujarat, and Karnataka. In addition, it also owns and operates a 10.5 MW wind power plant in Croatia, Europe.

Further, the Company has diversified off-take agreements and supplies the power generated to SEB’s, Group Captive Customers and Merchant Power as well as through open access. Its customers enjoy attractive tariffs with periodic upward revisions.

OGPL is promoted by M/s. SVL Limited, which has diversified interests in financing, engineering & construction, other manufacturing sectors.

Global Economy Overview

The global economy is recovering steadily from the COVID-19 pandemic, marked by the rollout of vaccination programs across nations, announcement of additional fiscal support in various economies and an improving capability to contain the re-emergence of further virus outbreaks.

Global GDP growth is forecast to touch 6% in 2021, supported primarily by improving prospects in the US, China, and India. Drivers of resilience and growth have been different across economies, with the US being led by household spending, while emerging markets and East Asia are catalysed by industrial production, exports and a commodity boom, Europe is benefitting from a resumption in world trade, while its consumer spending remains constrained.

There could be a spurt in inflation as a result of combination of pent-up demand and accumulated household savings with the easing of restrictions as vaccination progresses. Cost pressures and temporary supply disruptions may emerge due to surging demand and strict containment measures.

The COVID-19 pandemic brought about unprecedented changes in 2020 to the power sector worldwide, with significant demand disruptions, supply chain bottlenecks, decline in fuel prices, changes in energy consumption profiles, asset sales and acquisitions. It imparted the worst ever impact delivered by any crisis on the global economy and the power sector. Global Gross Domestic Product (GDP) posted the biggest decline of -3.3% as per IMF April 2021 report in the past 20 years and the power demand contraction of 1% was the sharpest registered in more than 50 years. Power demand is likely to recover slowly from the COVID-19 disruptions, driven by developing economies such as China and India, which have shown growth resilience and a steady increase in power demand, following the easing of lockdown measures. While the extent of demand revival in 2021 remains to be seen, the roll out of vaccines and policy support-led revival in economic activities (6% world GDP growth projected for 2021 by IMF) create grounds for the recovery of power demand in most countries.

Indian Economy Overview

The Indian economy, which had been beset by a slight growth slowdown in the last few years, experienced a challenge in FY 2020-21 in the form of the COVID-19 pandemic, which led to a strict lockdown enforced by the Government. However, the economy demonstrated resilience and depth by recovering much of the lost ground in the subsequent quarters. However, the challenge posed by the virus had subsided only to come back as a second wave in the first quarter of FY 2021-22.

For India, emerging victorious against this invisible enemy and returning to the path of prosperity will call for concerted efforts by Central and State Governments, the healthcare sector, and the people. Various measures announced by the Government to support livelihoods and incentivize investments are expected to emerge as drivers for sustained long-term growth.

Emergence of the second COVID-19 wave has dampened the outlook for a strong projected rebound in real GDP growth of 10.5% in FY 2021-22, which had been supported by a strong revival achieved in Q4 FY 2020-21 and impact of fiscal stimulus packages under AtmaNirbhar 2.0 and 3.0 schemes, increased capital outlays and the promotion of investments in the Union Budget 2021-22. As a result of the setback caused by the second wave, real GDP growth for FY 2021-22 may finish lower than expected before India returns to robust growth in FY 2022-23 with a projected 6.8% growth over FY 2021-22.

Despite recent developments, India’s economic activity has been gathering strength with demand and supply sides staging an appreciable recovery, improved mobility and optimism due to a sustained vaccination rollout programme, growth-enhancing proposals in the Union Budget and reasonably favourable monetary conditions. However, India’s growth outlook could also depend on the trajectory of global economic recovery, in view of external trade linkages, hardening crude oil prices and competition in the export markets.

India was able to contain the impact of COVID-19 on its economy in FY 2020-21 with combined efforts of the people and businesses as well as the Government. Decline in GDP in FY 2020-21 is expected to be in the region of (-) 7.3% to (-) 7.5%, largely due to the lockdown imposed in the first quarter of the year. However the economy rebounded rapidly after the restrictions eased and posted growth in the fourth quarter simultaneously with the rollout of a nationwide vaccination program.

Indian Power Sector Review

Universal, affordable, and uninterrupted power supply have been the guiding principles of India’s electricity policy. As the third largest global power producer with a combined installed capacity of 382 GW, India still has a long way to go to achieve economic progress and electricity consumption comparable to major economies in the region, if not developed nations. India’s installed capacity has grown at compounded annual growth rate (CAGR) of 8.27% since 2010.

India’s growing urban population, revival in economic activities in the coming quarters after a sizable population gets vaccinated and its quest for affordable, clean and reliable power provide a huge scope for continued growth in power demand.

Access to cost-effective and reliable power supply are the biggest catalysts for inclusive growth. They are critical for industrial growth, ensuring social growth of citizens and a high human development index. Demand for electricity in India is expected to grow at a sustained pace given the government’s massive push towards Make-In-India, increasing industrialization, improving incomes and living standards.

As per the Central Electricity Authority (CEA), peak demand is likely to increase to around 340 GW from the current peak demand of around 190 GW by 2030. The base demand is expected to increase to 2325 BU by 2030. CEA predicts that India’s likely installed capacity by FY 2030 could be around 817 GW, more than double the present installed capacity. In terms of coal-based capacity, CEA estimates capacity addition of over 60 GW till 2030. Further, coal-based power will still be the dominant fuel type in 2030. In terms of the PLF of coal-based plants, CEA studies indicated that high-capacity pit head plants (600 800 MW unit size) could enjoy PLFs of over 70% whilst similar load centre plants could have PLFs of around 50%. It is evident that coal-based power could continue to play a significant role in meeting India’s electricity demand into the long-term.

Renewable Energy Sector

Indian renewable energy sector is the fourth most attractive renewable energy market in the world. India was ranked fifth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2019.

Installed renewable power generation capacity has gained pace over the past few years, posting a CAGR of 17.33% between FY16-20. With the increased support of Government and improved economics, the sector has become attractive from investors perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role. The government is aiming to achieve 227 GW of renewable energy capacity (including 114 GW of solar capacity addition and 67 GW of wind power capacity) by 2022, more than its 175 GW target as per the Paris Agreement. The government plans to establish renewable energy capacity of 523 GW (including 73 GW from Hydro) by 2030.

As of February 2021, installed renewable energy capacity stood at 94.43 GW. The country is targeting about 450 Gigawatt (GW) of installed renewable energy capacity by 2030 about 280 GW (over 60%) is expected from solar. From April 2015 to February 2021, India has added 117.9 GW of power generation capacity, including 64.5 GW of conventional source and 53.4 GW from renewable sources. By December 2019, 15,100 megawatts (MW) of wind power projects were issued, of which, projects of 12,162.50 MW capacity have already been awarded. Power generation from renewable energy sources in India reached 127.01 billion units (BU) in FY20. With a potential capacity of 363 GW and with policies focused on the renewable energy sector.

Wind Energy Sector

Wind installations in India in the first quarter of 2021 (Q1 2021) were up by 25% quarter-over-quarter (QoQ), with 623 MW added compared to 500 MW installed in the previous quarter. Meanwhile, year-over-year (YoY) installations saw a 230% jump, as only 189 MW was installed during the same period last year.

India’s installed wind power capacity was slightly above 39 GW in March 2021 much below the 60 GW target for 2022, which is part of an overall 175 GW aim for all renewable energies. Wind power has been around in India for four decades. The sector experienced a steady growth during the last three decades through 2015. But from 2016-17 onwards, wind energy lost its momentum primarily due to abolition of feed-in-tariff and solar becoming more attractive in cost competitiveness.

Financial Performance

FY21 was a year of consolidation for the Company, a year wherein the Company saw marginal dip in revenues due to delayed onset of wind season and the revision of floor and forbearance price of Renewable Energy Certificates (REC) from Rs.1,000/- to nil. This moderate decline in the top-line understates the progress made by the Company in the past few years. The reduced units generated and decline in revenues resulted in operating de-leverage and impacted EBITDA and resultant profit generating ability of the business. However, efforts have been undertaken to improve efficiencies and a rebound in wind availability. Further the revision of REC floor price is challenged before the Appellate Tribunal for Electricity (APTEL) and the proceedings are in progress, a favorable outcome is expected by the industry.

Revenues during the year amounted to Rs. 255 Crores as against Rs. 323 Crores generated during FY20, lower by 21%. The decline was largely contributed by aforementioned revision of REC floor price. This contributed to reduction in revenue by Rs.45 Crores (66% of the total reduction).

EBITDA for the year stood at Rs. 170 Crores as against Rs. 280 Crores reported during last year, lower by 39%. Margins for the year stood at 65% as against 73% delivered during FY20, lower by 800 bps. Focus on improving operational efficiencies and cost containment resulted in margin compression of only 2%, despite revenue de-growth of 18%.

Depreciation for the year amounts to Rs. 91 Crores as against Rs. 92 Crores, lower by 1%.

Interest outgo for the year stood at Rs. 138 Crores as against Rs. 153 Crores lower by 11%. Our efforts in recent years have been largely directed towards addressing the liability side of the business. We have been in constant discussions with the bankers towards refinancing part of the debt negotiating towards extending the loan tenure and lowering the interest rate. The efforts started yielding results with commitment from lenders to reduce interest rates. Further, the Group had repaid Rs.127 Crores and availed moratorium on certain borrowings granted as part of Covid-19 relief measures, and interest payable of Rs.101 Crores was converted as long term loan. Taking cognizance of the above efforts and in an attempt to further ease up the financial and liquidity position the promoters continued to waive off the interest on their loans extended to the Group.

Loss after tax for the year stood at Rs. 57 Crores as against profit of Rs. 20 Crores generated during last fiscal. The Fixed charges reimbursements of Rs.46 Crores last year and REC floor price revision during the year contributed to the difference. However, the business fundamentals remain strong and the company is hopeful of obtaining reduction in interest rate to aid in improvement of performance.


The company revenue to the extent of Rs. 21 Crores is in escrow pending the disposal of a stay granted by the Supreme Court of India on the order issued by Central Electricity Regulatory Commission (CERC) on reduction of floor price of REC’s. This has been pending for over four years.

The Central Energy Regulatory Commission (CERC) in its order dated June 17, 2020 determined forbearance and floor price for the Renewable Energy Certificates (RECS), revised the floor price and forbearance prices of Non Solar RECS as Nil and Rs. 1,000/- respectively. Indian Wind Power Association moved the Appellate Tribunal for Electricity

(APTEL) challenging the said order and the proceedings are underway. The impact of this is a reduction on reported revenues of Rs. 25 Crores and a corresponding impact on cashflows.

In addition, an ongoing dispute with the AP discom has resulted in a sum of Rs. 54 Crores being held up for over a year. The combination of these issues has made cashflows particularly challenging for the company this year.

Human Resources

Our employees are our most important assets. As of March 2021, OGPL has a workforce of 134. We believe the quality and commitment level of our professionals is at par / highest amongst the power generating companies. OGPL continues to focus on key drivers of employee engagement like career growth, learning opportunities, fair performance and rewards and employee well-being by enhancing its HR processes for scale, agility and consistent employee experience.

Further, it also organizes workshops enhancing the skill sets of its employees and promoting their overall involvement. Frequent and outcome oriented session has resulted led to superior employee experience. The Company also assigns individual goals to the employees, consistent with the overall objective of the business which not only acts as a strong motivator but also contributes towards improving the overall efficiencies of the business.

Lastly, the Company’s transparent working environment wherein employees can raise their concerns and opinions results in high engagement levels and lower employee turnover ratio.

Internal Controls and adequacy

The Company has an independent Internal Audit Practices with well-established risk management processes both at the business and corporate levels. Internal Auditor submits their reports, directly to the Chairman of the Audit Committee of the Board of Directors, which ensures process independence.

The Company believes that every employee has a role to play in fostering an environment in which controls, assurance, accountability and ethical behaviour are accorded high importance. This complements the Internal Audits conducted to ensure total coverage during the year.

The overall aim of the company’s internal control framework is to assure that operations are effective and well aligned with the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information.

Management’s Responsibility Statement

The management is accountable for making the Company’s consolidated financial statements and related information mentioned in this annual report. It believes that these financial statements fairly reflect the form and substance of transactions, and reasonably represents the company’s financial condition and results of operations in conformity with Indian Generally Accepted Accounting Principles / Indian Accounting Standards.

Safe Harbour

Some of the statements in this Annual Report that are not historical facts are forward looking statements. These forward looking statements include our financial and growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our business and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward looking statements. These risks include, but are not limited to, the level of market demand for our services, the highly competitive market for the types of services that we offer, market conditions that could affect our services, our ability to create, acquire and build new businesses and to grow our existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market fluctuations in India and elsewhere around the world, and other risks not specifically mentioned herein but those that are common to any industry.