New Delhi: India’s first large-scale manufacturing linked solar tender which was poorly received by most industry players, made ‘economic sense’ to Azure Power, the sole bidder for the tender.
While the tender was termed as inherently flawed by the rest, a decade-long experience in the sector has provided the company an edge which others may have lacked, a senior executive of the company said.
The 10 GW solar tender linked with 3 GW manufacturing was floated by the solar energy corporation of India (SECI) this year, and saw multiple changes to attract project developers.
“I think the government has come up with something that makes a lot of economic sense. We feel we can make this work and that’s why we participated in the auction. We have the longest track record, we were the first ones to enter and develop the sector. So clearly we understand something which others miss,” Inderpreet Wadhwa, CEO of Azure Power told ET in an exclusive interaction.
Around 80% of the solar equipment used in India is imported from China, and most developers felt that the manufacturing that was required to be set up as part of the tender would not be competitive with the imported equipment.
“We are thinking about manufacturing as managing our supply chain better, managing our cost structures better for the business we are in. The government is awarding a very large capacity, and assuring you an off take at a price which is certain. So there’s no uncertainty of market where I will sell,” Wadhwa said. He refused to further divulge the company’s plan on manufacturing business as the bid is still under evaluation.
He said that the contention on solar tariffs being termed aggressive does not hold much ground as projects have been commissioned and are operational at the lowest tariff—.` 2.44 per unit—discovered for solar power in India.
“We’re in a business where the innovation will help you lower your cost considerably. So how do you define aggressive? You have to go under the covers, look at the financial, execution model and then see whether it is aggressive or not. And then there can’t be one number for the industry,” Wadhwa said.
The New York Stock Exchange-listed company is one of the oldest players in India’s renewable energy industry, and has one of the largest project pipeline of solar projects in India at present.
“For us it’s been fantastic. We’ve probably won the highest number of projects this year. People have talked about bad year to raise money, (there were) NBFC issues, RBI issues. You know, we’ve raised almost $400 million in the last four months,” Wadhwa said.
With a portfolio of around 3.1GW solar projects, both operational and under construction, the company has grown organically so far, and would rather build new projects than acquire projects with average quality.
Because we are a technology company, it’s very difficult for us to see how an operating asset will give us a better return than something we build,” Wadhwa said.
Betting strongly on the company’s technological expertise, Wadhwa said that the companies that have made acquisitions are the ones that don’t have the ability to develop projects organically. “They are investors, they are looking for yield. Companies that have done M&A, have either done so for the purpose of showing a much larger portfolio, for let’s say, their IPOs, or because they didn’t have the expertise to build these projects,” he said.
The recent consolidation drive in India’s renewable energy sector saw some of the largest deals including ReNew Power acquiring Ostro Energy for $ 1.6 billion, making it the largest renewable energy player in the country.