In Conversation With Mr. Moola Ramesh, Chief Executive Officer, Karvy Renewable Energy Projects Limited
Let us start with the recent developments at Karvy Renewable Energy in last one year.
Karvy Renewable Energy was incorporated in January 2015, promoted by the Karvy Group, established in 1979 and headquartered in Hyderabad, India, country’s leading financial service conglomerate. Our vision is to grow Karvy Renewable Energy into among first choice company in India & globally for solar power projects. Within few months of establishment Karvy Renewable Energy has built 20MW tracker based solar power project at Telangana, soon we were successful in winning bids for about 90MW. One of our recent project was 10MW tracker based solar plant commissioned this February at Karnataka. Our strengths and the pillars of success has been the self EPC capability with expertise in house team.
Our focus is to develop large scale solar power projects (both ground mount and rooftop) and offer services to these projects, expand our product.
Karvy Renewable Energy has signed the very first RESCO model rooftop project with TSREDCO (State Nodal Agency – Telangana) & TSRTC (Telangana State Road Transport Corporation) for developing 3MW Solar Rooftop project in the premises of Bus Bhavan, Bus Stations, Workshops & Depots, spread over 69 locations in Telangana, construction of the project is under progress.
Do you think more companies will now enter the market as the economics improve? Will further investments by large strategic investors and global power firms etc. will bring about change in the industry?
Yes, more companies / large corporates are likely to enter in to the sector, across the globe a decisive shift has emerged in favour of adoption of renewable energy largely because solar tariffs have been crashing even below the grid power.
Four years ago, companies installed roof top not only for cost reasons but for sustainability and other benefits but today the savings by themselves are substantial enough which is driving the developer and EPC companies to focus on roof top solar. While interest, economics and resources are in place, regulatory hurdles could still be a challenge to this momentum. Regulatory issues like open access and net metering policies are holding back the boom of this segment.
Within the power and utilities sector, the trend for installing smaller generation plants will continue as the growing economies of scale, combined with government subsidies, support the rollout of greener technologies. The rate at which costs are coming down for these technologies will further support their growth. The energy market will change and become more fragmented than ever before. There will be implications on industry roles, investor landscape, regulatory policies, customer preferences, competitive landscape, etc.
Do you think India is an investor friendly market for this sector? Any specific states you are considering in the industry?
In RE sector, predominantly the solar energy space has fetched the global companies in India in last couple of years mainly attributed to the national policies and guidelines of the segment. Country’s pro – renewable mind set along with 100% FDI has been one of the major incentive to attract large global companies. The local player’s ability to source low cost funding is a challenge in today’s scenario of cut throat tariffs arrived from reverse bidding. We do not differentiate state wise as every opportunity needs to be explored however several states have set their own solar power capacity installation targets in their policies, which gives an idea of the interest shown by these states in solar energy. Some states offer additional incentives other than national policy guidelines and enable easer clearances to facilitate increased participation in the sector.
Will we see more M&A’s in the solar sector?
M&A activity in solar industry remained robust especially the project acquisition, though there was a slight decline in solar demand across the globe in last quarter. Most of the project developers were active acquirers in Q3, 2018 and in the coming time we expect more & more acquisitions in this sector. The financial returns of the running project is much assured and the risks and challenges involved in setting up a project within timelines, dealing local authorities for permissions / approvals, acquisition of land/ conversion etc and timely financial closure of the project is still a big challenge. With M&A we also have an advantage of accessing the low cost funds. Karvy is exploring several options of acquisitions at present.
Already, lot of firms investing in the renewable energy space have raised money from the market by issuing Green Bonds, though, it is yet to become in vogue with local investment community. But, going forward, with the bonds turning out to be the new green shoots in the capital market by delivering an above average return compared to similar instruments, investment funds and high net-worth individuals (HNIs) are expected to lap up the Green Bonds going forward and many more renewable firms waiting on their wings to tap the market.
Are you content with the progress of Indian solar industry and the new policies being introduced by both state and central government? What more would you like to expect from the government policies?
The present policies are encouraging for investments in the sector, in long run the financial health of Discom is always a concern. The policies adopted at national level are highly effective but the implementation in true spirit is lacking in some states. Approval of captive and open access projects, reliefs for change in law, power curtailment/shutdowns of substations are few areas that the government policies should focus and provide relief to the developers.