orient green power company ltd Management discussions

Global Economy Overview

Global economic growth slowed down to 3.4% in 2022 as per International Monetary Fund (World Economic Outlook Apr 2023) compared to 6.2% in 2021. The year saw geopolitical uncertainty with the prolonged Russia-Ukraine conflict and economic challenges leading to disruptions in the global supply chain and elevated inflation with increase in commodity and energy prices. This prompted central banks to aggressively tighten their monetary policy, which further impacted economic activity.

Analysts estimate that 2023 will continue to see the above issues playing out leading to a further slowdown in economic growth and a mild recession in the UK and certain parts of the Euro zone. The UK has been impacted by an increase in cost-of living, dampening households purchasing power and consumption, as well as fiscal and monetary policy. Current estimates project global recovery in the second half of 2023, with moderation in inflation and re-opening of the Chinese economy. We have already started seeing cooling-off of fuel and commodity prices as well as global container freight rates.

However, risks remain to this outlook with the stress seen in banking systems in the US and Europe in the last few months, potentially getting aggravated with extended high inflation levels and triggering further rounds of rate hikes adversely impacting the business environment. There is also continued uncertainty on a resolution of the Russia-Ukraine conflict further impacting energy markets and disrupting the supply demand balance.

Indian Economy Overview

Despite global volatility, the Indian economy grew by 6.8% in 2022 – making it the fifth largest economy globally in terms of nominal GDP (US dollars). This growth has been supported by reduction in Covid-19 cases leading to opening up of the economy, expansion of manufacturing footprint by both global and Indian firms, aided by Government policies (eg Production Linked Incentive (PLI) Scheme, PM Gati Shakti, corporate tax cuts), capex recovery; and cyclical upturn in many sectors (eg. Banking, Auto). Indias digital infrastructure has strengthened in the last few years and the widespread adoption of real-time digital payments is estimated to have unlocked 0.56% of GDP.

However, inflation headwinds were also felt by the Indian economy with increase in crude oil prices and we saw interest rate hikes from the Reserve Bank of India to control inflation. The Indian rupee weakness against the US dollar also added to the inflationary pressures.

According to the International Monetary Fund, Indian economy is projected to deliver robust growth of 5.9% for 2023, highest amongst the emerging economies, driven by strong domestic demand and healthy consumption growth supported by an improvement in labour market conditions, increasing consumer confidence, an expected recovery in rural demand and higher purchasing power with moderating of inflation. In the Union Budget for FY2023-24, the government announced a 33% increase in capex allocation to INR 10 trillion, which is expected to boost private investments. The Budget has also targeted a lower fiscal deficit in FY2023-24 at 5.9% and the government has committed to bring it down to below 4.5% by FY2025-26.

Global economic outlook remain weak impacting exports, with higher volatility in food and crude oil prices, slowdown in private consumption and aggressive monetary tightening by global central banks to moderate inflation.

Indian Power Sector Overview1

As on March 2023, the installed capacity of the country was 415.4 GW, which comprises of 236.68 GW from Thermal (211.8 GW Coal + Lignite & 24.8 GW Gas), 6.78 GW from Nuclear, 171.8 GW from RES (42.1 GW Hydro, 66.8 GW Solar, 42.6 GW Wind, 4.7 GW Small Hydro, 4.8 GW PSP, 10.8 GW Bio-power) (excluding 0.589 GW Diesel based Capacity).

India is the third-largest producer and consumer of electricity worldwide, with an installed power capacity of 415.4 GW as of March, 2023.

With electricity generation (including renewable sources) of 1,359.21 BU in India up to January, 2023 in the current year FY23, the country witnessed a growth of 10.08% YoY. According to data from the Ministry of Power, Indias power consumption increased 11% YoY in December, 2022 to 121.19 BU.

The peak power demand in the country stood at 205.03 GW in December, 2022.

The coal plants registered a PLF of 73.7% for the first nine-months period in FY23 compared to 68.5% in FY22 for the same period.

Renewable Energy Sector2

India stands 4th globally in Renewable Energy Installed Capacity (including Large Hydro), 4th in Wind Power capacity & 4th in Solar Power capacity (as per REN21 Renewables 2022 Global Status Report).

The country has set an enhanced target at the COP26 of 500 GW of non-fossil fuel-based energy by 2030. This has been a key pledge under the Panchamrit (a 5point pledge by India at COP26). This is the worlds largest expansion plan in renewable energy.

Indias installed renewable energy capacity has increased 396% in the last 8.5 years and stands at more than 171.8 Giga Watts (including large Hydro), which is about 41.3% of the countrys total capacity (as of March 2023).

The installed solar energy capacity has increased by 24.4 times in the last 9 years and stands at 66.8 GW as of March 2023. The installed Renewable energy capacity (including large hydro) has seen an increase of around 128 % since 2014. India has set a target to reduce the carbon intensity of the nations economy by less than 45% by the end of the decade, achieve 50 percent cumulative electric power installed by 2030 from renewables, and achieve net-zero carbon emissions by 2070.

India‘s target is to produce five million tonnes of green hydrogen by 2030.This will be supported by 125 GW of renewable energy capacity. 57 solar parks of aggregate capacity 39.28 GW have been approved in India. Wind Energy has an off-shore target of 30 GW by 2030 with potential sites identified.

Key Highlights of Union Budget - Renewable Energy Sector 2023-2024 3

• Green Growth identified is one of the nodes in the SAPTARISHI (7 priorities).

• $2.4 Bn National Hydrogen Mission for production of 5 MMT by 2030. $36 Mn additional in Budget

• 4 GWh Battery Energy Storage Systems supported through Viability Gap Funding

• Pumped Storage Projects has received a push with a detailed framework to be formulated.

• $1.02/2.5 Bn Central Sector Support for ISTS infrastructure for 13 GW Renewable Energy from Ladakh

Other Key Points of the of Union Budget:

• The government will set up a National Data Governance policy to unleash innovation and research by start-ups and academia.

• One crore farmers to be facilitated to adopt natural farming.

• Building on Indias success in afforestation, Mangrove Initiative for Shoreline Habitats and Tangible Incomes (MISHTI) announced

• PAN will be recognized for all digital systems

Indian Wind Energy Sector3

In the early 1980s, the Department of Non-conventional Energy Sources (DNES) came into existence with the aim to reduce the dependence of primary energy sources like coal, oil etc. in view of the Countrys energy security. The DNES became Ministry of Non-conventional Energy Sources (MNES) in the year 1992 and from 2006, the Ministry was renamed as Ministry of New & Renewable Energy (MNRE). The growth of Renewable Energy in India is enormous and Wind Energy proves to be the most effective solution to the problem of depleting fossil fuels, importing of coal, greenhouse gas emission, environmental pollution etc. Wind energy as a renewable, non-polluting and affordable source directly avoids dependency of fuel and transport, can lead to green and clean electricity.

With an installed capacity of 42633 MW (March 2023) of Wind Energy, Renewable Energy Sources (excluding large Hydro) currently accounts for 30.1% (125160 MW) of Indias overall installed power capacity of 415469 MW (31.03.2023). Wind installations has share of 34.06% of total RE capacity among renewable and continued as the major supplier of clean energy.

The Government of India has fixed a target of 500 GW of Renewable Energy by 2030 out of which 140 GW will be from Wind. The Wind Potential in India was first estimated by National Institute of Wind Energy (NIWE) at 50m hub-height at 49 GW and the potential has been re-estimated as 695 GW at 120 meter height. One of the major advantages of wind energy is its inherent strength to support rural employment and uplift of rural economy. Further, unlike all other sources of power, wind energy does not consume any water- which in itself will become a scarce commodity. Overall the future of Wind Energy in India is bright as energy security and self-sufficiency is identified as the major driver. The biggest advantage with wind energy is that the fuel is free, and also it doesnt produce CO2 emission.

Financial Performance

FY 23 is a moderate one in terms of wind availability with a dip in generation. FY 22 witnessed a one-time income of Rs. 25 crore due to resumption in REC trading. Adjusting this, the EBITDA comparable for the year is marginally lower by Rs.86 lakhs, despite lower generation. Our efforts to reduce the finance cost and prompt loan servicing resulted in improved ratings and helped us in refinancing Rs. 721 crores of debt at reduced rate of interest from Indian Renewable Energy Development Agency (IREDA) Limited and the disbursement is received during April 2023.The interest savings from this refinancing will be visible from FY 24. In addition, the Late Payment Surcharge (LPS) scheme introduced by the Ministry of Power helped in realizing the long pending dues from State owned discoms. These positive attributes are expected to improve our cash flows and enable us to focus on capacity expansion.

Revenues for the year amounted to Rs. 258 crore as against Rs. 311 crore during FY 22, lower by 17%. The reduction is mainly attributed to lower wind availability during the year and there is a one-time income of Rs. 25 crore included in the other operating revenues for the previous year.

EBITDA for the year stood at Rs. 203 Crores as against Rs. 228 Crores reported during last year, lower by 11%. Margins for the year stood at 70% as against 72% in FY22, lower by 200 bps. The reduction is mainly on account of lower revenues as explained above.

Depreciation for the year amounts to Rs. 83 crores as against Rs. 89 crores, lower by 6%.

Interest outgo for the year stood at Rs. 108 crore as against Rs. 121 crore, lower by 11%. The reduction is mainly attributed to timely serving and improved ratings. As at March 31, 2023, the ratings of the company and its material subsidiaries having debt were rated "BB". Out of total borrowings of Rs. 1,078 Crore, Rs. 721 Crore were refinanced at an interest rate of 9.4% which is lower by 300bps. The impact of this refinancing shall be visible in the profitability of the company from FY 24.

Profit after tax for the year stood at Rs. 33 Crore as against a profit of Rs 36 crore during last fiscal. The reduction is mainly on account of lower wind during the year and one time income from REC trading amounting to Rs. 25 crore last year. This is substantially made up by the reduction in finance cost and expenses from discontinued operations.


The company receivables to the extent of Rs 21 Crores is in escrow pending the disposal of an appeal filed before the Honorable Supreme Court of India in the matter of reduction of floor price of RECs . This has been pending for over Six years.

SWOT Analysis Strengths

1. We are a renewable energy wind power generation company with 402.3 MW of installed capacity.

2. We operate in the rapidly growing renewable energy sector, which benefits from increasing demand for electricity and regulatory support.

3. We have a flexible business model that is scalable and sustainable and that enables us to deliver predictable growth from a diversified and balanced portfolio of projects.

4. We have an experienced management and operating team with relevant industry knowledge and expertise, includingtheabilitytoimproveoperationalperformance.

5. Long association with established track of good service with customers gives us the advantage of being the most preferred suppliers for them.


1. Revenues from our business are exposed to market based electricity prices

2. Our business is seasonal in nature and is dependent on weather conditions that are unpredictable and beyond our control.

3. We rely on Original Equipment Manufacturers (OEMs) and other service providers for maintaining our windmills.


1. Government of India has set an ambitious target of 500 GW for renewables by 2030 and this is expected to give ample opportunity for growing the business.

2. Increasing demand from C&I customers for power from Renewable sources to reduce their carbon foot print will provide us with opportunity to expand our business.


1. Transmission, evacuation constraints and grid back down issues

2. Changing government policies with regard to pricing, RPO obligations, incentivizing other modes of renewable energy.

3. Technological advancements in the renewable energy sector such as reduction in cost of solar & new wind power may make our plants obsolete/unviable.

4. Delays in recovery of dues from state owned distribution companies (Discoms) may result in acute working capital shortages.

5. Repowering old windmills involves significant capital expenditure.

6. The companys capital structure include significant amounts borrowed from various banks and financial institutions. Increase in the interest rates affects the profitability of the company.

Human Resources

Our employees are our most important assets. As of March 2023, OGPL has a workforce of 126. 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 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 Companys 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 independent Internal Audit team 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 company developed a robust internal control framework which ensures the operations being carried effectively and are aligned to the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information.

Managements Responsibility Statement

The management is accountable for making the Companys 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 companys 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.