Sustainable Energy Infra Trust Management Discussions

Key Transformations in the Power Sector

- Installed power generation capacity of 442 GW as on March 31, 2024

- 18 GW of renewable capacity addition during FY24, out of which 15 GW is solar capacity addition

- Inter-regional power transmission capacity ~120GW with transformation capacity of 1200 GVA

- Peak demand of ~240 GW during FY24 (increase by 13% YoY)

- Energy requirement of 1100 BU during FY24 (increase by 9% YoY)

- 40GW utility scale RE capacity awarded through tariff-based competitive bidding during FY24

- Firm Dispatchable Renewable Energy (FDRE) tenders gaining prominence over vanilla solar and wind capacity

Policy Support for Renewable Energy growth

- Target to achieve 500GW cumulative non-fossil fuel-based power generation capacity by the year 2030

- Identification of 181.5GW potential Renewable Energy Zones in 8 states viz. Andhra Pradesh, Karnataka, Telangana, Rajasthan, Maharashtra, Madhya Pradesh and Offshore wind at Gujarat & Tamil Nadu with various Hybrid & Solar locations planned with Storage (BESS capacity of 43.6GW)

- Trajectory to CPSEs for bidding out RE generation capacity

- Trajectory for replacement of thermal energy equivalent to solar capacity of 30 GW by FY 2025-26

The Investment Manager

Sustainable Energy Infra Investment Managers Private Limited is the Investment Manager of the Trust. The authorised share capital of the Investment Manager is INR 13,00,00,000 divided into 1,30,00,000 Equity Shares of INR 10 each.

Mahindra Sustainable Energy Private Limited (formerly known as Mahindra Telecom Energy Management Services Private Limited) and the OTPP Sponsor jointly hold 100% equity shares of the Investment Manager where the OTPP Sponsor holds 60% of the equity shares of the Investment Manager and Mahindra Sustainable Energy Private Limited holds 40% of the equity shares of the Investment Manager.

As the Investment Manager, Sustainable Energy Infra Investment Managers Private Limited is primarily responsible for making decisions in relation to investment of Trusts funds in acquiring the underlying assets or projects, managing the Trusts investments and ensuring compliance with all applicable laws and regulations, while generating sustainable returns for all stakeholders.

With a team of qualified and well-trained professionals at the helm, the Investment Manager is committed to operate the Trust with the highest standards of corporate governance, ethical standards and in strict compliance with the framework put in place more than 45 cross-functional policies, guidelines and SOPs since the Trusts formation.

The Investment Manager remains focused in:

- continuing to pursue accretive growth by expanding the portfolio of energy assets

- instituting and maintaining prudent capital management policies and maintaining optimum capital structure to maximise distributions for unitholders

- Implementing a robust Environmental Social Governance ("ESG") and sustainability framework, and

- Continuing to optimise operational efficiencies.

The Project Manager

Green Energy Infra Project Managers Private Limited, a private company limited by shares incorporated on April 30, 2023, is the Project Manager of the Trust. The Project Manager is also 100% held by OTPP Sponsor (60%) and Mahindra Sustainable Energy Private Limited (40%).

The principal objective of the Project Manager is to incorporate standard industry practices employing both preventive and corrective measures in operating and maintaining the projects in order to optimise the long-term performance of the assets.

The Trustee

Axis Trustee Services Limited, a trusteeship company which has been registered with SEBI as a debenture trustee under the SEBI Debenture Trustee Regulations since January 31, 2014, has been appointed as the Trustee for the Sustainable Energy Infra Trust. The Trustee is a wholly-owned subsidiary of Axis Bank Limited.

4. Listing of Trusts units

In line with the draft placement memorandum filed on September 27, 2024, and pursuant to the approvals of the board of directors of the Investment Manager, the Trust undertook initial offer of 226,280,000 Units through a private placement at a price of INR 100 per Unit (the "Offer Price"), aggregating to INR 22,628 million (the "Offer"). The Offer comprised of a fresh issue of 136,500,000 Units, aggregating to INR 13,650 million by the Trust (the "Fresh Issue") and offer for sale of 89,780,000 Units aggregating to INR 8,978 million by the Selling Unitholder (the "Offer for Sale"). Final placement Memorandum was filed with SEBI on January 10, 2024. Units of the Trust were listed on the National Stock Exchange on January 15, 2024.

In this primary issuance and offer for sale transaction, the Trust was able to onboard a diverse set of unitholders including multilateral organisations, insurance funds, large body corporates and private wealth management houses.

5. Financing of the Trust

After listing of its units, the Trust has refinanced the entire debt at project SPVs and has consolidated all borrowings at the Trust level. The Trust raised a 19+ years floating rate rupee term facility of INR 34,000 million from domestic lenders which is rated CRISIL AAA / Stable.

This rupee term facility is repayable in structured quarterly instalments with last scheduled repayment due on March 31, 2043. As on March 31, 2024, consolidated net debt to enterprise value of the Trust (as per SEBI InvIT Regulations) stood at 44.47% basis the fair enterprise value as determined by the registered valuer as on the valuation date of March 31, 2024.

The Trust shall explore new avenues for raising debt finance in future with an objective of striking a healthy balance between fixed and floating rate borrowings and structuring a repayment profile that is accretive to all stakeholders.

6. Summary of the Audited Consolidated and Standalone Financial Statements for the year of the Trust

Since, the Trust was established on July 20, 2023, and acquired its first set of assets effective January 10, 2024, financials of assets are consolidated from January 10, 2024, to March 31, 2024. Accordingly, the comparative figures for the last financial year are not applicable.

A summary of standalone and consolidated financials statements of the Trust are presented below:

Revenue

Consolidated revenue for the Trust for the period July 20, 2023, to March 31, 2024, stood at INR 1,874.58 million. This included revenue from sale of power amounting to INR1,652.39 million which is net of any payment on account of deviation settlement mechanism, rebate, etc. Total income also included income of INR 101.83 million being non-cash items largely pertaining to income accrued on account of claims accepted on change in law and other amortizations. On standalone basis, income for the Trust for this period largely comprises of interest income of INR 1,282.38 million on loans extended to the subsidiaries.

EBITDA

Consolidated EBITDA for the period measured at INR 1,413.16 million (EBITDA margin of 75%) and PBT measured at INR 90.20 million.

NDCF

For the period ended March 31, 2024, the Trust has declared a distribution of INR 336.44 million.

7. Internal Control Systems

Since the formation of the Trust, more than 45 cross-functional policies, guidelines and SOPs have been rolled out to adopt industry best practices. Guidelines and standard operating procedures have been put in place to ensure alignment with the vision, mission and values of the Trust. Measures like SEIT Guard have been implemented to ensure compliance with all applicable laws and regulations.

An internal audit team has also been constituted to ensure strict compliance with the framework and SOPs put in place, in letter and spirit. This shall help in upholding high standards of corporate governance and ethical practices in day-to-day operations of the T rust and project SPVs.

Internal audits are planned to be undertaken at regular intervals at the Trust, Investment Manager, Project Manager and the project SPVs to test the adequacy and effectiveness of the control processes implemented. Finding of these audits are to be presented to the Audit Committee of the Board of Directors periodically for their reviews along with suggested improvements.