We May Consider Potential IPO Next Year: Vikram Kailas, MD, Mytrah Energy
Hyderabad-based renewable energy producer Mytrah Energy India is set to close a major financial transaction to fuel its expansion plan and is set to cross the magical number of 2 GW (Giga Watt) of installed generation capacity, both wind and solar, by March 2018. In an exclusive interaction with BW Businessworld, Managing Director Vikram Kailas talked about the company’s plans and the state of Indian wind energy sector. Edited excerpts:
There are indications that Piramal Capital and APG Asset Management will be infusing about $300 million in your company as a part of a debt finance deal. Would you confirm to that?
Yes. We will announce formally at the end of this week. The Rs 1900 crore figure is approximately correct. The IDFC exit would also be a part of this deal.
Does this hint towards a potential IPO?
It would be too early to say. The whole team has been focussing on this particular transaction apart from the other 4-5 similar transactions. Apart from this particular deal, we are also looking at raising funds through Green/Masala Bonds, Private Equity and solar invites. The next one year would be more exciting compared to the last few years. We may consider IPO probably next year.
What about the company’s Rs 6200 crore debt? How do you plan to balance that in future?
The debt would increase as we are adding capacity every year. We would be crossing 2 GW of installed generation capacity, both wind and solar, by March 2018. The infrastructure industry works with the debt with a holistic ratio of 75:25 debt and equity. It’s a norm. Therefore, the overall consolidated debt level would go up but they are all structural 18 years loans. Every year we pay 5 per cent as a typical EMI.
What about the other side of the debt that the wind sector is staring at with factors like grid curtailment, payment delays and most important PPA reneging by authorities?
I would divide it into 2 parts - the existing and future assets. The existing ones have been built on certain tariff assumption, financing structure and capital costs. Renegotiating the new PPAs therefore make no sense. That would lead to NPAs if the utilities start to tinker with the existing PPAs. Fortunately none of our assets are affected in this issue.
What do the lower tariffs mean for the wind industry?
The low tariffs are very good for the future of the industry as the volumes will be higher. The size of the industry would increase from where it is right now. Back in the days, 2000 MW was considered huge. Now with the tariffs, 12-15 GW will get added every year on an average just because it is viable.
But if you see from the developers’ point of view, there is a counter argument of diminishing margins. Has the quality of returns reduced?
Every country has a different way to look at the success of its programme or policy. Unfortunately in our country, tariff is whole sole criteria to determine that. The tariffs do affect the manufacturing, margins, R&D and we need to have a bigger conversation on that. Manufacturers must be able to make money because only then they would be able to invest and bring in the next generation technology and turbines in this case. We might be sacrificing long term growth for short term tariffs. Why is US so successful today? Because they let people make margins and hence invest in technology further.
Post the transition from feed in tariff to auction based tariff, the pace of capacity addition has also slowed down? Has it limited your capacity addition per say?
As far as Mytrah is concerned the capacity addition increases. Earlier, the whole development process was painful in the sense of getting permissions, collecting data and it would take about 2-3 years. This has cut down to 3 months. The transition has reduced the graft and hastened the process with better pricing and higher volumes. But bidding must not be aggressive. That is what brings the disadvantages.
We want to be recognised as the most capital efficient player off scale rather than a big player which is inefficient. There have been days when we have walked away from so many bids. As an IPP we have an advantage, as the revenue flow is constant for us, even if we don’t do projects for 2-3 years. Renegotiation of the PPAs is a problem. Fortunately, none for us.
Any plans of going off-shore?
Offshore the government has to invest. There is a lot of talk but there is hardly any wind offshore and we need to properly measure and understand it. In other countries, the wind is created because of the currents. But in India it is because of the mountains. But nobody has done enough research on the same yet. R&D investment for research and mapping needs to come first, the technology is there already. In India, off shore is at least 5 years away.
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