Azure Power Global Limited a leading independent solar power producer in India, announced its consolidated results under United States Generally Accepted Accounting Principles (“GAAP”) for the fiscal third quarter 2021, period ended December 31, 2020.
Fiscal Third Quarter 2021 Period Ended December 31, 2020 Operating Highlights:
- Operating Megawatts (“MW”) were 1,987 MWs, as of December 31, 2020, an increase of 10.0% over December 31, 2019. Operating and committed megawatts were 7,115 MWs, as of December 31, 2020, an increase of 34.2% over December 31, 2019. Committed megawatts include 4,000 MWs for which we have received Letters of Award (“LOA”) but the Power Purchase Agreements (“PPAs”) have not yet been signed.
- Operating revenues for the quarter ended December 31, 2020 were INR 3,521 million (US$ 48.2 million), an increase of 15.6% over the quarter ended December 31, 2019. We estimate that our revenues were negatively impacted by approximately INR 126 million (US$ 1.7 million) on account of adverse weather conditions resulting in low insolation, as compared to our initial estimates, during the quarter.
- Net loss for the quarter ended December 31, 2020 was INR 1,088 million (US$ 14.9 million). During the quarter, our results were negatively impacted by stock appreciation rights (SARs) expense of INR 1,318 million (US$ 18.1 million). Refer to the detailed explanation in the ‘Stock Appreciation Rights expense’ section of the commentary below.
- Adjusted EBITDA for the quarter ended December 31, 2020 was INR 1,563 million (US$ 21.3 million), a decrease of 26.0% over the quarter ended December 31, 2019. During the quarter, our results were negatively impacted by an increase in stock appreciation rights (SARs) expense of INR 1,318 million (US$ 18.1 million). Refer the detailed explanation in the ‘Stock Appreciation Rights expense’ section of the commentary below.
- Non-GAAP Cash Flow to Equity (“CFe”) from Operating Assets for the quarter ended December 31, 2020 was INR 1,231 million (US$ 16.8 million), an increase of 142.0% over the quarter ended December 31, 2019.
Key Operating Metrics
Electricity generation during the quarter and nine-months ended December 31, 2020 was 783.7 million kWh and 2,436.8 million kWh, respectively, an increase of 98.6 million kWh or 14.4%, over the quarter ended December 31, 2019, and an increase of 441.8 million kWh, or 22.1%, over the nine months ended December 31, 2019. The increase in electricity generation was principally a result of an additional 183 MWs of AC (277 MWs DC) operating capacity commissioned since December 31, 2019. Our Plant Load Factor (“PLF”) for the quarter and the nine months ended December 31, 2020, was 19.3% and 20.1% respectively, compared to 17.7% and 18.6%, respectively, for the same comparable periods in 2019, which increased principally due to the addition of DC capacity and improved performance by our plants.
We commissioned 153 MWs AC (236 MWs DC) during the three months ended December 31, 2020 and 179 MWs AC (264 MWs DC) during the nine months ended December 31, 2020.
Project cost per megawatt operating (megawatt capacity per the PPA or AC) consists of costs incurred for one megawatt of new solar power plant capacity during the reporting period. The project cost per megawatt (DC) operating for the nine months ended December 31, 2020 decreased by INR 3.2 million (US$ 0.04 million), or 9%, to INR 31.2 million (US$ 0.43 million) primarily due to lower costs on account of the reduction in solar module prices for the projects commissioned during the period. The project cost per megawatt (AC) operating for the nine months ended December 31, 2020 was INR 45.0 million (US$ 0.62 million), compared to INR 47.9 million, for the nine months ended December 31, 2019, on account of a reduction in solar module prices. Excluding the impact of safeguard duties, the DC and the AC costs per megawatt for the nine months ended December 31, 2020 would have been lower by approximately INR 2.6 million (US$ 0.04 million) and INR 2.7 million (US$ 0.04 million), respectively, and for the nine months in the prior year ended December 31, 2019, the DC and the AC costs per megawatt would have been lower by approximately INR 2.5 million and INR 4.1 million, respectively.
As of December 31, 2020, our operating and committed megawatts were 7,115 MWs, an increase of 1,815 MWs compared to December 31, 2019. Committed megawatts include 4,000 MWs for which we have received LOAs but the PPAs have not yet been signed. The Solar Energy Corporation of India (“SECI”) has informed us that so far there has not been adequate response from the state electricity distribution companies (“DISCOMs”) for SECI to be able to sign the Power Sale Agreement (“PSA”) at this stage even though we have a LOA. SECI has mentioned that they will be unable to sign PPAs until PSAs have been signed, and they have committed to inform Azure Power of developments in their efforts with the DISCOMS. Capital costs, interest rates and foreign exchange rates have improved since Azure Power won the 4 GW auction in December 2019 which have resulted in lower tariffs in other recent SECI auctions. We expect these savings likely will be passed on to state electricity distribution companies (DISCOMS). We expect a tariff markdown from the price discovered in the auction, which will facilitate signing of PSAs. We will continue our discussions with SECI towards signing PPAs in respect of the 4GW tender and expect the PPAs to be signed in tranches over a period of time.
Nominal Contracted Payments for Projects with PPAs
Our PPAs create long-term recurring customer payments. Nominal contracted payments equal the sum of the estimated payments that the customer is likely to make, subject to discounts or rebates, over the remaining term of the PPAs. When calculating nominal contracted payments, we include those PPAs for projects that are operating or committed.
The following table sets forth, with respect to our PPAs as referred above, the aggregate nominal contracted payments and total estimated energy output as of the reporting dates. These nominal contracted payments have not been discounted to arrive at the present value.
| As of December 31, | ||||||||||||
| 2019 | 2020 | |||||||||||
| INR | INR | US$ | ||||||||||
| Nominal contracted payments for projects with PPAs (in millions)* | 534,901 | 511,781 | 7,009.7 | |||||||||
| Total estimated energy output (kilowatt hours in millions)* | 155,410 | 150,174 |
* Nominal contracted payments for projects with PPAs do not include the payments for 4 GWs with LOAs since the PPAs have not yet been signed.
Our nominal contracted payments are not impacted for the delays in construction due to COVID-19, as revenues from our PPAs start on the date of commissioning of the project.
Portfolio Revenue Run-Rate for Projects with PPAs
Portfolio revenue run-rate for projects with PPAs equals annualized payments from customers extrapolated based on the operating and committed capacity as of the reporting dates. In estimating the portfolio revenue run-rate, we multiply the PPA contract per kilowatt hour by the estimated annual energy output for all operating and committed solar projects as of the reporting date. The estimated annual energy output of our solar projects is calculated using power generation simulation software and validated by independent engineering firms. The main assumption used in the calculation is the project location, which enables the software to derive the estimated annual energy output from certain meteorological data, including the temperature and solar insolation based on the project location.
The following table sets forth, with respect to our PPAs as referred above, the aggregate portfolio revenue run-rate and estimated annual energy output as of the reporting dates. The portfolio revenue run-rate has not been discounted to arrive at the present value.
| As of December 31, | ||||||||||||
| 2019 | 2020 | |||||||||||
| INR | INR | US$ | ||||||||||
| Portfolio revenue run-rate for projects with PPAs (in millions)* | 24,092 | 23,817 | 326.2 | |||||||||
| Estimated annual energy output (kilowatt hours in millions)* | 6,831 | 6,772 |
* Portfolio revenue run-rate for projects with PPAs does not include the revenue for 4 GWs with LOAs as the PPAs have not been yet signed.
Fiscal Third Quarter 2021 Period ended December 31, 2020 Consolidated Financial Results:
Operating Revenues
Operating revenues for the quarter ended December 31, 2020 was INR 3,521 million (US$ 48.2 million), an increase of 15.6% from INR 3,047 million in the quarter ended December 31, 2019. This increase was driven by the revenue generated from projects which were commissioned during the quarter ended December 31, 2019 until December 31, 2020 and additional revenue of INR 63 million (US$ 0.9 million) for the recovery of Safe Guard Duties and Goods and Service Tax under the change in law provision of our PPAs for four of our projects. We estimate that our revenues were negatively impacted by approximately INR 126 million (US$ 1.7 million) on account of adverse weather conditions resulting in low insolation, as compared to our initial estimates, during the quarter.
Cost of Operations (Exclusive of Depreciation and Amortization)
Cost of operations for the quarter ended December 31, 2020 increased by 14.6% to INR 306 million (US$ 4.2 million) from INR 267 million in the quarter ended December 31, 2019. This increase in the cost of operations was primarily due to an increase in operational expenses from projects commissioned during the quarter ended December 31, 2019 until December 31, 2020.
The cost of operations per megawatt during the quarter ended December 31, 2020 is INR 0.16 million (~US$ 0.002 million), in line with the same comparable period ended December 31, 2019.
General and Administrative Expenses
General and administrative expenses for the quarter ended December 31, 2020 were INR 1,652 million (US$ 22.7 million), an increase of INR 983 million (US$ 13.5 million) compared to the quarter ended December 31, 2019. Higher general and administrative expense in the current quarter was primarily due to an increase in stock appreciation rights (SARs) expense of INR 1,259 million (US$ 17.2 million) compared to the quarter ended December 31, 2019, partially offset by lower provisions against receivables of INR 69 million (US$ 1.0 million), absence of management transition expense of INR 126 million, absence of interest charges on the safeguard duty on the import of modules by INR 82 million incurred during the same comparable period in 2019 and lower other cost due to cost reductions initiatives in travel, professional and other administrative expenses.
Stock Appreciation Rights Expenses
Stock appreciation rights expenses for the quarter ended December 31, 2020 were INR 1,318 million (US$ 18.1 million), an increase of INR 1,259 million (US$ 17.2 million) compared to the quarter ended December 31, 2019. The increase in SAR expense was primarily due to a change in accounting for capitalisation of SAR expense for the prior two quarters as well as a 37% increase in the share price during the quarter ended December 31, 2020, compared to the quarter ended September 30, 2020. During the quarter ending December 31, 2020, 175,000 SARs were exercised. As of December 31, 2020, 1,795,000 SARs were outstanding of which 1,642,500 SARs are not exercisable until 2024 on which the Company will not incur any cash payments until that time. Also, we have provided an updated statement of beneficial ownership of our key managerial personnel below.
Depreciation and Amortization Expenses
Depreciation and amortization expenses during the quarter ended December 31, 2020 increased by INR 80 million (US$ 1.1 million), or 11.2%, to INR 796 million (US$ 10.9 million) compared to the quarter ended December 31, 2019. The increase primarily relates to the additional depreciation on capital expenditures from projects commissioned between December 31, 2019 until December 31, 2020.
Interest Expense, Net
Net interest expense during the quarter ended December 31, 2020 decreased by INR 485 million (US$ 6.6 million), or 19.5% compared to the quarter ended December 31, 2019, to INR 1,996 million (US$ 27.3 million). The decrease reflected the absence of charges in the same quarter a year ago including INR 385 million of prepayment charges to settle existing loans from the proceeds from the issuance of a solar green bond, INR 124 million related to the extinguishment of a debt facility, and INR 96 million relating to the refinancing of a loan partially offset by an increase in interest expense (net) of INR 141 million related to projects commissioned during the past 12 months.
Gain/ Loss on Foreign Currency Exchange
The Indian Rupee (“INR”) appreciated against the U.S. dollar by INR 0.53 for every US$ 1.00 (or 0.7%) during the period from September 30, 2020 to December 31, 2020. During the quarter ended December 31, 2020, the Company did not report a foreign exchange gain or loss compared to an expense on foreign exchange loss of INR 60 million, during the quarter ended December 31, 2019. During the current fiscal year, the Company refinanced a foreign currency loan of INR 3,099 million (US$ 42.4 million) into an INR denominated loan, which should reduce the impact of Gain /Loss on Foreign Currency Exchange going forward.
Other Expenses/ (Income)
Other expenses/ (income), primarily consists of income from current investments and other incidental expense. During the quarter ended December 31, 2020, the Company has reported other expense (net) of INR 9 million (US$ 0.1 million) compared to other income (net) of INR 24 million, during the quarter ended December 31, 2019, primarily due to lower income earned in current quarter from current investments.
Income Tax Income/ Expense
Income tax income during the quarter ended December 31, 2020 was INR 150 million (US$ 2.1 million), compared to an income tax expense of INR 236 million in the quarter ended December 31, 2019. The company recognised an INR 427 million (US$ 5.8 million) deferred tax benefit during the quarter ended December 31, 2020 related to higher SAR expenses which was the primary reason for the year on year improvement in the Company’s net tax expense.
Net Loss
Net loss for the quarter ended December 31, 2020 was INR 1,088 million (US$ 14.9 million), a reduction of INR 270 million (US$ 3.7 million) compared to a loss of INR 1,358 million for the quarter ended December 31, 2019. The loss in the quarter ended December 31, 2020 included higher expense of INR 1,259 million (US$ 17.2 million) related to stock appreciation right expenses.
The year-on-year improvement reflected higher revenues from projects commissioned over the past year as well as the absence of charges in the same quarter last year of INR 385 million of prepayment charges to settle existing loans from the proceeds from the issuance of a solar green bond, INR 124 million related to the extinguishment of a debt facility, INR 96 million relating to refinancing of a loan, INR 126 million related to management transition, and INR 82 million of interest charges on the safeguard duty on the import of modules.
Cash Flow and Working Capital
Cash flow from operating activities for the quarter and nine months ended December 31, 2020 was INR 435 million (US$ 5.9 million) and INR 2,866 million (US$ 39.3 million), respectively, compared to INR 777 million and INR 1,840 million, respectively, for the prior comparable period. The cash flow from operating activities during the quarter was lower on account of an additional semi-annual payment of INR 352 million (US$ 4.8 million) of bond interest on the new US$ 350 million solar green bond issued in September 2019 offset by additional revenue. The cash flow from operating activities during the nine months was higher on account of additional revenue partly offset by higher interest payments.
During the quarter ended December 31, 2020, working capital outflow was INR 766 million (US$ 10.5 million), compared to an inflow of INR 123 million, for the quarter ended December 31, 2019, primarily on account of an additional semi-annual payment of interest on the green bonds described above. During the nine months ended December 31, 2020, the working capital outflow was INR 1,632 million (US$ 22.2 million), compared to an outflow of INR 436 million, for the nine months ended December 31, 2019 primarily on account of the same additional semi-annual payment of interest on the green bonds partially offset by better collections of accounts receivables.
The Company’s days receivables during the current quarter were 113 days, as of December 31, 2020, as compared to 119 days as of December 31, 2019, reflecting improved collections.
Cash used in investing activities for the quarter ended December 31, 2020 was INR 5,689 million (US$ 77.9 million), compared to INR 6,574 million for the same quarter in 2019, primarily due to lower investments in mutual funds by INR 4,107 million (US$ 56.3 million) partially offset by higher capital expenditures for new solar projects of INR 3,231 million (US$ 44.3 million), as compared to the same period in 2019. Cash used in investing activities for the nine months ended December 31, 2020 was INR 12,863 million (US$ 176.3 million), compared to INR 21,940 million for the same period in 2019, primarily due to lower capital expenditures for new solar projects amounting to INR 3,951 million (US$ 54.1 million) and lower investment in mutual funds amounting to INR 5,100 million (US$ 69.9 million), as compared to the same period in 2019.
Cash flow from financing activities for the quarter ended December 31, 2020 was INR 4,974 million (US$ 68.1 million) compared to a use of INR 13,855 million, as compared to the same period in 2019, primarily due to proceeds of short term debt taken for purchases of modules during current period, whilst there was a INR 19,419 million of loans repaid in the year ago quarter post the issuance of a solar green bonds in September 2019. Cash flow from financing activities for the nine months ended December 31, 2020 was INR 8,330 million (US$ 114.1 million) compared to INR 15,911 million, as compared to the same period in 2019, primarily reflecting an equity raise of INR 5,314 million (US$ 72.8 million) and net proceeds from the issuance of solar green bonds amounting to US$ 350 million and other term loans during same period in 2019.
Liquidity Position
As of December 31, 2020, the Company had INR 8,915 million (US$ 122.1 million) of cash, cash equivalents and current investments. In addition, the Company has INR 4,594 million (US$ 62.9 million) of short-term restricted cash at December 31, 2020 that we expect to be utilised primarily for capital expenditures over the next twelve months. The Company had undrawn project debt commitments of INR 12,574 million (US$ 172.2 million) as of December 31, 2020.
Adjusted EBITDA
Adjusted EBITDA is a Non-GAAP metric, please refer to the reconciliation of Net Profit/(loss) to Adjusted EBITDA in this document.
Adjusted EBITDA was INR 1,563 million (US$ 21.3 million) for the quarter ended December 31, 2020, compared to INR 2,111 million for the quarter ended December 31, 2019. The decrease was primarily due to higher stock appreciation rights expenses of INR 1,259 million (US$ 17.2 million) during the quarter ended December 31, 2020, partially offset by the increase in revenue and lower corporate overhead.
Cash Flow to Equity (CFe) from Operating Assets
CFe is a Non-GAAP metric, please refer to the reconciliation of total CFe to GAAP Cash from Operating Activities in this document.
Cash Flow to Equity from Operating Assets was INR 1,231 million (US$ 16.8 million) for the quarter ended December 31, 2020, an increase of 142% compared to INR 509 million for the quarter ended December 31, 2019. The increase in Cash Flow to Equity from Operating Assets was primarily driven by higher revenues from the completion of new projects during the previous 12 months and cost reductions in corporate expenses.
COVID-19 Update
We are continuously monitoring the COVID-19 situation and taking the requisite steps to address the situation. Our project construction activities are gradually coming back to normal levels. Our operational and maintenance activities continue to perform at normal levels.
Other matters
During the current quarter, the Company has converted RSU issued to its Board members into Restricted Shares (RS) at the then current share price on the date of conversion. There is no material financial impact on the statement of operations and the liability related to Restricted Shares is reclassified to equity.
Guidance for Fiscal Year 2021 and 2022
The following statements are based on our current expectations. These statements are forward-looking and actual results may differ materially. For fiscal year ending March 31, 2021, we expect MWs operational and revenues will be at the lower end of the previously guidance range. For the fourth fiscal quarter of 2021, we expect revenues of between INR 4,335– INR 4,435 million (or US$ 59– US$ 61 million at the December 31, 2020 exchange rate of INR 73.01 to US$ 1.00) and a PLF of between 22.0% and 23.0%.
For the fiscal year ending March 31, 2022, we expect MWs operational to be between 2,900 – 3,115. We expect revenues of between INR 17,900 – 18,900 million (or US$ 245 – 259 million converted at the December 31, 2020 exchange rate of INR 73.01 to US$ 1.00).
Webcast and Conference Call Information
The Company will hold its quarterly conference call to discuss earnings results on Thursday, February 11, 2021 at 8:30 a.m. U.S. Eastern Time. The conference call can be accessed live by dialing +1-866-746-2133 (in the U.S.) and +91-22-6280-1444 (outside the U.S.) and reference the Azure Power Fiscal Third Quarter 2021 Earnings Conference Call.
Exchange Rates
This press release contains translations of certain Indian rupee amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise stated, the translation of Indian rupees into U.S. dollars has been made at INR 73.01 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2020. The Company makes no representation that the Indian rupee or U.S. dollar amounts referred to in this press release could have been converted into U.S. dollars or Indian rupees, as the case may be, at any particular rate or at all.
About Azure Power Global Limited
Azure Power is a leading independent solar power producer in India. Azure Power developed India’s first private utility scale solar project in 2009 and has been at the forefront in the sector as a developer, constructor and operator of utility scale, micro-grid and rooftop solar projects since its inception in 2008. With its in-house engineering, procurement and construction expertise and advanced in-house operations and maintenance capability, Azure Power manages the entire development and operation process, providing low-cost solar power solutions to customers throughout India.
