Renew Energy Global PLC

NASDAQ:RNW

Earnings Call Analysis

Record Profits and Upbeat Full-Year Projections

The company celebrated its highest quarterly profit after tax at $45 million and highest first half-year profit at $81 million to date. Power generation from wind restored to normal with a 41.3% PLF this quarter, increasing from the previous year's 32.7%, alongside an 8% capacity increase. The firm foresees a slight rise in interest costs due to new projects but anticipates this will be balanced by refinancing savings, despite potential currency fluctuations. Taxes are projected to increase 20-25% for FY '24 as subsidiaries turn profitable. Importantly, the company has raised its FY '24 adjusted EBITDA guidance's lower range by INR 2 billion to INR 62-66 billion after a robust half-year performance and maintains its fiscal year capacity guidance of 1.75 to 2.25 gigawatts.

Leadership and Commitment to Capital Discipline

ReNew Power begins its earnings call with the introduction of Kailash Vaswani, who has been promoted to CFO. Recognized for his extensive knowledge of renewable energy debt markets and contribution to raising close to $15 billion for the company, Vaswani emphasizes his commitment to capital discipline, preferring to deploy capital only when returns are well above the cost. He upholds the validity of the reported numbers and reaffirms his role in leading efforts to deleverage the balance sheet over time without the need for share issues.

Financial Performance and Strategic Efforts

The company prudently manages its debt portfolio by refinancing at lower interest rates, projecting savings by refinancing $850 million in maturing debt. Its asset recycling program receives international attention, aiding in scaling up operations and enhancing returns on invested capital; so far, they raised approximately $93 million from it. Additionally, ReNew reports a record quarterly profit after tax of $45 million and a bi-annual profit of $81 million.

Operational Growth and Market Outlook

Operational capacity grew by 600 megawatts compared to the previous year, an 8% increase. Wind patterns have normalized, leading to improved production levels (wind PLF) during the quarter. While interest costs for the full year are expected to marginally increase due to new project commissioning, this is counterbalanced by refinancing at lower rates. There is a projected tax increase as more subsidiaries become profitable. Adjusted EBITDA for Q2 stands at $256 million, fueled by revenue from new projects and higher wind PLFs, despite lower late payment surcharges due to improved customer payment timeliness and rising operating costs from increased headcount supporting growth.

Improving Liquidity and Debt Management

Focused on fortifying liquidity and leverage, ReNew Power holds a cash balance of nearly $985 million and aims to reduce net debt on operating assets, currently at $4.7 billion. The company navigates maturing debts by refinancing at lower rates, with expectations to refinance $325 million in the subsequent 12 months. ReNew maintains about 59% of its debt at a fixed interest rate, providing a clear view on the refinancing strategies for the remainder maturing in FY '25 and FY '26.

ESG Commitment and Community Impact

The company strongly commits to ESG goals, having released a comprehensive sustainability report. Notably, ReNew generated enough clean energy to power nearly 5 million Indian households and avoided 14 million tons of carbon emissions. It saved significant water volumes through technological innovations, achieving carbon neutral status for the third consecutive year. The social initiatives have affected over a million lives and include the electrification of schools, women empowerment in the energy sector through skill training, and extensive employee engagement in social responsibility activities.

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by, and welcome to the ReNew Second Quarter Fiscal Year '24 Earnings Report. [Operator Instructions] I would now like to hand the conference over to Nathan Judge of Investor Relations. Please go ahead.

[Nathan Judge, executive]

Yes. Thank you, Jason, and good morning, everyone, and thank you for joining us. This morning, we issued a press release announcing results for the fiscal 2024 2nd quarter and the September 30, 2023. A copy of the press release and the presentation are available on the Investor Relations section on ReNew's website at www.renew.com. With me today are Sumant Sinha, Founder, Chairman and CEO; Kailash Vaswani, our newly appointed CFO; and Vaishali Nigam Sinha, Co-Founder and Chairperson of Sustainability. After the prepared remarks, we will open up the call for questions. Please note, our safe harbor statements are contained within our press release, presentation materials and materials available on our website. These statements are important and integral to our remarks, and there are risks and uncertainties that could cause our results to differ materially from those expressed or implied by such forward-looking statements. So we encourage you to review the press release we furnished in our Form 6-K and the presentation on our website for a more complete description.

Also contained in our press release, presentation materials and annual report are certain non-IFRS measures that we reconcile to the most comparable IFRS measures, and these reconciliations are also available on our website in the press release, presentation materials and our annual report. And it's now my pleasure to hand it over to Sumant. Sumant?

[Sumant Sinha, executive]

Yes. Thank you, Nathan. Good morning, everyone. I'm glad to have you all in our second quarter fiscal year end of 2024 earnings call. This year has presented the new opportunities for us in avenues that aligns seamlessly with our competitive advantages. The backdrop for Indian renewable energy developers is the best we have ever seen, marked by a significant surge in power demand, shortfalls in energy supply, significant increase in auctions for renewable energy, which is the lowest cost electricity supplies without subsidy, a softening of solar module prices and a shift towards complex projects that is best served by wind, of which we are the largest developer in the country.

I firmly believe that renew with its disciplined approach to identifying the best return opportunities is well positioned to capitalize on the current market. We continue to make progress towards our goals, maintaining capital discipline along the way. We are more confident of achieving our financial guidance set earlier this year and are raising the lower end of our EBITDA guidance by approximately 3%. We now anticipate delivering between INR 62 billion to INR 66 billion in adjusted EBITDA for FY '24. We have put in a majority of our wind turbines and solar panels in our largest projects being commissioned this year, which puts us in good stead to deliver on our guidance of between 1.75 and 2.25 gigawatts of projects to be completed by this fiscal year-end.

We expect the additional capacity should translate to approximately 35% or more per share EBITDA growth next fiscal year. We continue to see consistent flow of options as central agencies such as NTPC, SJVN, SECI, NHPC and some states have announced RV auctions of 65 gigawatts this year, the highest that we have ever seen in the history of our industry. Notably, 18 gigawatts of auctions have already been completed this year, already surpassing the previous year's amount with still about 4 months plus to go. A higher ratio of complex auctions signals the trend that distribution companies want specific electricity supply profiles, which require customized solutions.

The complexity and limited development capabilities in India and on other sales have resulted in less participation by competitors. Broadly, we have seen an upward lift to auction tariffs for the past 12 months and recent auctions indicate that this trend will continue further. We have signed a power purchase agreement, PPA, with GUVNL, which is the Gujarat Distribution entity for 400 megawatts of capacity that we won earlier this year and have received letters of awards for another 2.9 gigawatts that we have won. As a reminder, we do not include projects with LOA into our portfolio until we have a contract, a signed PPA, which indicates another step-up in our long-term earnings potential as the 3.1 gigawatts of projects, one, receive PPAs over the next 3 to 6 months.

Our assets continue to attract interest from investors and strategic partners at favorable valuations. Recently, we concluded the sale of 100 megawatts of solar assets, resulting in a gain. In a little over 2 years, we have raised about $565 million from asset recycling and year-to-date about $93 million. The ability to recycle capital and deploy it in higher return opportunities remains a significant confidence of our capital allocation and value creation strategy. This quarter, we reported a profit after tax of USD 45 million, one of the highest reported [indiscernible] This quarter, for the first time in a while, the wind resource was about close to normal. Win PLS increased to 41.3% in from approximately 23.7% in the corresponding quarter last year. And last three straight years where we have seen improved wind resource, which may portend for more normal weather going forward.

While we remain optimistic about long-term win PLS returning to normal levels, we are choosing to remain conservative at this time about our weather expectations for the remainder of this year in our guidance. Turning to Page 5. In September 2023, we witnessed a record surge in power demand, taking 240 gigawatts [indiscernible] as well as a surge of power prices traded on the exchange, reflecting strong overall growth in power demand in the country. We have seen overall power demand consistently rise at 8% over the last several years and continue to expect sustained growth for the next few years.

While the Indian government is ambitious about achieving the 2030 renewable energy targets, with a 50 gigawatt renewable energy annual auction calendar, our position as a market leader in developing wind remains differentiated. With the shift away from [indiscernible] wind and solar auctions, there is a tilt towards round-the-clock and complex auctions. A significant step towards catering to unique power demand profile of distribution companies with wind as a key differentiator. Our experience in developing complex solutions provides us with significant advantage over others who do not yet have in-house wind EPC capability, digital all AI platforms and strong understanding of the supply chain cycles that enable us in securing returns superior to our peer group.

Turning to Page 6. While the market opportunity is substantial, our commitment to capital discipline remains unwavering. In-house wind and digital capabilities in power has to seamlessly build operate and maintain renewable energy projects, providing us competitive advantages in the market and enabling returns above our competitors and above our cost of capital. Recently, we signed a period with [indiscernible] at a tariff of 2.71 per kilowatt hour for 400 megawatts of solar and letters of awards secured letters of awards for most of our 3.1 gigawatts of auctions win earlier this year at attractive tariffs.

Given the increase of intermittent generation in the country, there is substantial demand for electricity supply that meets more stringent delivery and reliability requirements. More than 60% of the 37.2 gigawatts of auction yet to be completed this year, or complex power solutions. Given our industry-leading win EPC capability, our scale, given the larger size required for complex projects, our ability to source equipment through vertical integration our superior access to the lowest cost of capital and our substantial land bank, we have competitive advantages in delivering these complex RE projects quicker and at a lower cost than anyone else in India.

To summarize, this is, therefore, one of the best backdrops for Indian Renewable energy that we have seen in a very, very long while. Turning to Page 7. Our ongoing progress remains on track as our projects enter final construction phases. Cheaper solar module prices have enabled us to procure modules at almost half the price as compared to the same time last year. We delayed projects in the past because the then CapEx costs would have resulted in some far IRRs. As we continue to reiterate, we remain laser focused on capital discipline and have been rewarded by our patients. We have saved shareholders by our estimate, about $100 million in lower CapEx by pushing out certain projects.

We have consistently invested small amounts of capital in complementary businesses to enable even greater competitive advantages of our core renewable energy development business. For example, we spent about 10% of our CapEx to develop solar manufacturing given the substantial reductions on imports that are being imposed by the central government. This decision has borne fruit in allowing us to procure high IRR projects in recent auctions that others may not have been able to procure supply for. Investment in transmission is another example.

There are currently chronic delays across India in completing interconnection hubs that allow new projects to connect to the grid. Rather than leave our large projects sitting idle, we decided to invest a small amount of capital, less than 5% of our equity to build a transmission EPC business. Furthermore, we have recaptured most of this equity through capital recycling that have [indiscernible] gain. We successfully commissioned our first transmission project this quarter, which is the connection point for our large peak power project providing 138 circuit kilometers of connectivity.

Before I turn it over to our newly appointed CFO, I'm really pleased that the Board has chosen to promote Kailash to the CFO role. Many of you would have interacted with Kailash previously and know of his experience and extensive knowledge of renewable energy debt markets. Kailash has been with ReNew since the beginning, having joined us in 2011 as one of the founding members of the company and has been instrumental in all of our fundraising efforts both debt and equity. To date, he has helped renew raised close to $15 billion through various sources, including about $565 million raised through asset recycling. I do consider us lucky that we were able to identify someone internally for this position, who has in-depth knowledge about the business as well as a proven track record.

With that, I would like to turn it over to Kailash to go over the latest financials.

[Kailash Vaswani, executive]

Thank you, Sumant. It's my pleasure to be here and interact with all of you. Before I begin my comments on the quarter, I thought I would like to share a little about my view on my commitment to capital discipline in which I'm a strong believer. We live within our means and only deploy capital when the returns on our investments are comfortably above our cost of capital. Having been on ReNew's Investment Committee for some time, I fully supported the $250 million share buyback that was authorized in February of last year, as I saw investing in our shares as one of the most attractive investment opportunities of scale at that time. I still believe that at the current share price, there are a wide area of options that we can use to fund growth without issuing shares.

I have led all of the capital recycling efforts so far and see a significant amount of demand for our projects. I also will lead efforts to deleverage our balance sheet over time. With regard to the veracity of our reported numbers, I fully stand behind them. Turning to Page 9, while the global markets have been impacted by rise in interest rates, we have actively managed our portfolio by refinancing a higher cost debt and ensuring our overall cost of debt is kept within check. In India, the yield spread for [indiscernible has compressed significantly as the sector matures. We can currently raise debt for our projects at sub-9% to large Indian financial institutions.

Importantly, assuming interest rates remain where they are now, we expect to be able to refinance debt maturing of $850 million over the next several years at a lower interest rate, saving an average of 25 to 50 basis points. We have significant access to debt from diversified sources, including from PFC and REC, which is the Power Finance Corporation and the Rural Electrification Corporation, which are known to provide most competitive cost of project debt in the industry. We recently signed an MOU of $8 billion with them. We continue to expect that we will be able to effectively manage our interest costs and ensure the project remain within the targeted range.

Turning to Page 10. Our asset recycling program continues to see interest from international players seeking an offset to the carbon footprint. We believe that asset recycling will effectively provide us with a long-term advantage by helping us scale at faster pace as well as provides us avenues to optimize the build process and enhance returns on invested capital. We completed a sale of 100-megawatt of solar assets in the current period and raised almost USD 93 million through asset recycling year-to-date. About $565 million in aggregate. For growth beyond the current pipeline, we expect that we have operational development capability to be able to build about 2.5 to 3 gigawatts of assets annually, of which we intend to recycle assets, including sales of farm downs of net interest of around 1 to 1.5 gigawatts each year which should generate the required cash flow to fund growth in addition to our internal sources.

This would ensure we have sufficient equity for growth without having to issue shares. Turning to Page 11. We're pleased to report our highest quarterly profit after tax of USD 45 million and the highest first half year profit after tax of USD 81 million till date. We saw a return to normal wind pattern during the current period, and the wind PLF during the quarter was 41.3% compared to 2.7% in the same quarter last year. And we continue to remain cautiously optimistic about recovery in the long-term wind PLF towards the long-term normal levels.

Our operating capacity increased by approximately 600-megawatt over the last comparable quarter in the prior year, an increase of about 8%. For the full year, we expect interest cost to be marginally higher to the prior year on account of new project commissioning. The same is offset by savings in interest rates from refinancing. Of course, this is subject to volatility in the foreign exchange market. Taxes look to be about 20% to 25% higher in '24, as more of our subsidiaries are turning profitable. Turning to Page 12. We reported an adjusted EBITDA of USD 26 million for quarter 2 FY '24. The higher EBITDA is primarily attributable to additional revenue from projects commissioned during the period, higher wind PLS, offset by lower late payment surcharges of about $11 million as more of our customers are paying on time and higher operating costs, reflecting more head count to support our growth. Turning to Page 13. Our DSO continues to improve year-on-year, and we have seen an improvement of 119 days since September 22, an improvement of 26 days since the beginning of this fiscal year.

We continue to work with states and continue to believe that our DSO will continue to improve over time as we continue to focus on getting paid for overdue receivables as well as a salable mix shift where more of our revenues come from central government and corporate customers who pay on time. Moving to Page 14. We are focused on improving our liquidity and leverage. Our cash balance stood at close to $1 billion, almost USD 985 million, and our net debt on operating assets was USD 4.7 billion. Off gross debt, about 59% of our debt has a fixed interest rate. We only have about $325 million of debt maturing in the next 12 months, which we expect to refinance at an average lower rate than what we are currently paying.

We have good ability on how we anticipate refinancing the remaining USD 60-odd million that matures in FY '25 and FY '26. With that, I would like to turn it over to Vaishali to talk about our ESG initiatives.

[Vaishali Sinha, executive]

Thank you, Kailash. Turning to Page 16. Building upon the momentum from the previous year, we remain steadfast in our commitment to establish new benchmarks across all aspects of our ESG vision, performance and transparency. We are leading the way for ESG in our sector. ReNew was released its sustainability report for fiscal year '22, '23, title driving decarbonization. The report is aligned with GRI, CASB and TCFD and externally assured by DNB. Some of the key highlights of the report are: ReNew has generated clean electricity which is 17,386 gigawatt hours, which is enough to power nearly 5 million Indian households. This has also helped to avoid 14 million tonnes of carbon emissions through its operations, which is about 0.5% of India's total emissions.

The carbon intensity of the new electricity generation is about 92% less than the Indian power sector's average. Renew saved about 218,708 kiloliters of water about 48% year-on-year increase through our robotic cleaning and condition-based monitoring system. ReNew achieved carbon net taker for the third consecutive year for a cont greenhouse gas emissions. As mentioned earlier as well, new , we have seen the targets for 2014 more validated by SPI and entails reducing greenhouse gas relations across all scopes by 29.4% by 2027 and by 90% by 2040 to clean energy procurement for operations, electrification of fossil fuel-based equipment encouraging suppliers to set SPTI align target, low carbon footprint raw materials and green logistics for transportation.

So as you can tell, we are deeply committed Social responsibility continues to remain an [indiscernible] part of our business. Our CSR journey, which began in 2014, and since then, we have impacted the lives of over 1 million people across 500-plus villages in India starting across 10 states in the remotest part of our country. Now if you could turn to Page 17, I would like to switch to specifics of some of our efforts for first half of fiscal year '20. Lighting Life, which is 1 of our flagship program is an initiative where we electrified tools with less than 3 hours of electricity using solar of print, Electrification of 50 stool -- and we have also established 50 digital learning centers and all of this is in progress and going well.

Climate curriculum, we are in the process of rolling out client curriculum to about 9,000 students across the country. Women for climate is another program. We are very passionate about is our efforts to include more and more women in the energy sector, and we have programs on [indiscernible] in partnership with UN organization and we are also working on reskilling some of the [indiscernible] and workers in Gujarat to becoming now a solar technician. Nearly 60 women's or sand farmers have been trained and have secured employment.

About 48 trainees have secured employment. Employee engagement is an important part of what we do. We have programmed reside for and led by employees at in our annual volunteering campaign, which is the right bucket challenge, so about 40,000 CVs of rice distributed than India. We have stick started the fiscal year '24 disclosure cycle with the submission of CDP Climate Change 2023 disclosure. We will be disclosing further progress in our forthcoming sustainability report. With this, let me hand it back to Sumant to talk about our annual guidance.

[Sumant Sinha, executive]

Thank you, Vaishali. Turning to our annual guidance. I am happy to report that we have increased the bottom end of FY '24 adjusted EBITDA guidance by INR 2 billion to INR 62 billion to INR 66 billion on account of a better-than-expected H1 performance. We have provided some additional details on how results were compared to our eventual guidance in the appendix of this earnings presentation. We reiterate our capacity of completed guidance for this fiscal year of between 1.75 to 2.25 gigawatts. Regarding our buyback, we have repurchased by now 38.6 million shares in total since February last year which represent approximately 35% of the free float at the time of listing. We have $11 million of authorization remaining, which represents about 4% to 5% of the total free float. With that, we will be happy to take any questions. Thank you.

[Operator]

[Operator Instructions] Our first question comes from Puneet Gulati from HSBC. Please go ahead.

[Puneet Gulati, analyst]

Congratulations on good numbers and good profitability as well. My first question is on the wind PLF. So this quarter has been particularly good at 42% PLF. Should 1 consider this to be normal for 2Q? Or do you think it was higher than the normal?

[Sumant Sinha, executive]

Yes, Puleet. No this year's PLF in Q2 was a little bit, but very marginally, I would say, higher than what would be normal. But keep in mind that Q1 is actually significantly lower as well. And so in aggregate, Q1 and Q2 put together is lower than what should have been the case. Okay. Understood. So first half is normal, but Q2 higher Q1 lower Yes. First half is a little bit less than normal, but Q2 is a little bit higher than normal and Q2 was lower. And so therefore, overall, we are ending up a little bit lower than the overall H1 expectation would have been.

[Puneet Gulati, analyst]

Understood. That's helpful. And secondly, can you also update on one of the acquisitions that you announced a few quarters back? What is the progress there?

[Sumant Sinha, executive]

Yes, Kailash can answer that.

[Kailash Vaswani, executive]

Yes, Puneet. So on the acquisition that we had announced, there was a lot of delay which happened in getting the approvals because those assets were sitting in a partnership firm and they had to demerge it into a company and the approval for the demerger took a lot of time. So that deal reached a long stop date and we decided we didn't want it because the entire market had sort of taken so much time for this process to get completed, that we don't want to wait any longer. And we got better opportunities on the bidding side who we decide to allocate capital more on the organic plan.

[Puneet Gulati, analyst]

Understood. And there's no penalties that we had to pay for tax.

[Sumant Sinha, executive]

No, no penalties. There was some transaction costs, which was involved in East cost, which was less than $1 million. That was your total cost that we ended up incurring on it.

[Puneet Gulati, analyst]

Okay. Okay. Okay. And secondly, Sumant, you announced in this year, a lot of EPs have been signed. A lot of bids have been announced tendering has happened. Some PPAs being signed. Do you have a similar number for FY '23 what kind of bids got announced? And how much PT has been in? And what is the backlog for that?

[Sumant Sinha, executive]

So on FY '23, it's very hard for me to give a number because FY '23, we actually hardly won any new capacity. We just have a 3% market share last year -- and -- but I should tell you that our SEC solar, which is the outstanding, which is like we haven't put anywhere in the presentation but therefore Jason, you have to tell me whether I can talk about that.

[Unknown Executive]

Go ahead.

[Sumant Sinha, executive]

Okay. So the second ad, which was an outstanding 200 megawatts, that PP has also got time now. So of the 137 or 8 that we now have, everything is fully signed to you. So there's nothing that is now not time. So the only point I'm trying to make is that old PPAs are now getting supported quite rapidly. And with power demand going up, there is definitely interest among the discounts to go to SECI and try to convert some of the options into from PPA. But you don't believe the process is a long one because the distribution utilities have to, first, of course, go through the commercial implication.

Then they have to go to their local regulator and get the approval of the tariff. That process itself can take a month or two then they come back to the set and then basically go ahead and sign the PSA, after which [indiscernible] with PPA. So that whole process can take several months to get consummated. And in auctions where there is a central acquirer, they have to go to the central regulatory authority. So for example, a couple of bids that we won back in April may are now sitting with the central regulator [indiscernible] for approval, and it's just a process issue, frankly speaking. It just takes a little bit of time. And so the profit of conversion of these bids to PPAs is happening it's in the works. And I think progressively, some of these approvals from the regulators come through, you see some of that getting announced.

[Puneet Gulati, analyst]

And any reasonable expectation of 2.9 left, how many of them should you see PPA getting signed this year itself?

[Sumant Sinha, executive]

I would imagine that most of -- Yes, it's hard to say, but I would imagine most of them should get signed Certainly, some of the more pay Manila 1 should. But then of course, there is also some complex auctions. Complex auctions, as you know, does require a longer lead time to convert to PPS simply because they are, by definition, complex. And therefore, [indiscernible] also take a longer time to understand them and then be able to get their own internal approvals. And then also to that extent, regulators take longer to understand them.

So the whole process of conversion of complex auctions is just a little bit longer. But the reality is that for us, there is no urgency at all right now on some of these because for the capacity that we've won, these are things that are going to construct only in FY '26. And so we have time on our side to get some time. Meanwhile, I should tell you that for all the projects that we've got LOA, we've already blocked transmission capacity. So transmission capacity has been dropped. Land, we have, obviously, we are working on that right now. But eventually, we will convert them into actual sort of deals when the we are signed as we go forward. And keep in mind that our clock to execute starts ticking only once a pacing.

[Puneet Gulati, analyst]

Right. But you have lined for the entire 3.5 which you want to

[Sumant Sinha, executive]

Yes. I mean we don't have to acquire this right now. As long as we have good line of sight into what bandwidth. In some cases, you can walk the line without actually paying any a significant amount of money. But the important thing is as long as you've blocked the transmission capacity, then that's the most critical factor. And with the LOAs in hand, we are, in fact, able to block the transmission capacity. And so for all the capacities that we have all the 3.1 gigawatts that we've won, we have blocked the transmission capacity for all of that.

[Puneet Gulati, analyst]

Understood. That's very helpful. And lastly, any progress on asset recycling? Anything that you did in Q2? And what's the outlook for the second half?

[Sumant Sinha, executive]

Yes, Kailash, could you take that?

[Kailash Vaswani, executive]

Yes. So we have consummated transactions of almost around $93 million till date. And we are working on a few in the pipeline but the timing on asset sales is really hard to say because when the deals get done, so how much will get done in Q3 versus Q4, we are working towards it.

[Puneet Gulati, analyst]

And $93 million would include Genkari acquisition and as we do.

[Sumant Sinha, executive]

That's right into 2 deals or 3 deals rather the [indiscernible] deal, the 100-megawatt sales to Technisolair. And the third one is the amount that we got from Northon for the completion asset.

[Operator]

The next question comes from Justin Clare from Roth MKM.

[Love Sharma, analyst]

So I wanted to ask just about the amount of capacity here. So there's -- it seems a significantly larger opportunity for renewable projects here in terms of the auctions that are expected annually. So I was wondering if you could just speak to the potential for bottlenecks to emerge, given the larger volume of capacity. And then maybe you could speak to your strategy in managing those potential bottlenecks

[Sumant Sinha, executive]

Justin, thank you so much for the question. But you asked me a question that I can spend many hours discussing with you, as you can imagine, because this is obviously a function to our business. But just to give you a very quick sense of that, I think the key issues that are required for executing a project, of course, our PPAs, which as we've discussed, there's ample opportunity for us to bring capacity there. The second is transmission. And there is -- that is not a limiting factor right now because the government is building transmission capacity quite at a quite rapid pace, and as I said, once we win an LOA or we win a bid and get the LOA, then we are able to block the transmission capacity. And if there is no transmission capacity available, then the execution timelines are automatically moved forward. So transmission does not become, therefore, a problem for us to roll out and we should not be some. The third is land. Land, of course, we are working on constantly, and we are always trying to look at what is the forward pipeline, and we're trying to block land for 3 years out, 4 years out projects. And we're also obviously putting up a number of met marks in different parts of the country. We have 700 met marks that are now up and running to measure win.

And in solar, we have blocked by a number of mechanisms, transmission capacity in the state of Rajasthan, which allows us to execute projects even for 2, 3 years beyond our existing pipeline. And there is a lot of land available in the distant for solar projects. So MAM is handled on that basis. And then, of course, there's the issue of people and organization. That is something that you know we have our own in-house capability of execution in both wind and solar. And that is something that we constantly reevaluate and we are looking at scaling that up, but slowly because obviously, we want to build an organization that is high quality and our execution capacity should be sustainably improving rather than this sort of going on a onetime basis.

And then, of course, there is the issue of capital and capital, I think we are looking at between a mix of internal capital and asset recycling to raise capital for funding some of these projects. So I think that's how we're looking at these 5 key areas. The sixth actually is supply chain. And there, obviously, we have as the largest wind player in the country, very key relationships with the important OEMs which go out a few years. And so -- and we get best terms from these wind OEMs because we are, in fact, the largest buyer of winter banks in the country. And as far as solar is concerned, we discussed multiple times with all of you, that's an area where government policy is evolving and changing.

And therefore, we have tried to stay one step ahead of government policy by making sure that we have invested as much as we need to have that security of supply. And that, therefore, also allows us to keep bidding with a high degree of confidence around being able to source and procure our own modules. And that's actually becoming a significant competitive advantage.

Those are some of the issues that we are working on to make sure that we are able to continue to execute 2 to 3 and then sort of gigawatts a year and then try to increase that in years down the road. I hope that answered your question.

[Justin Clare, analyst]

Got it. Okay. Yes, very helpful. And then I guess just on the supply chain. You have your own in-house module manufacturing today. Was wondering if you could share what the cost structure was for the modules that you're producing in-house and how that might compare to what's available in the market, including the cost of the import duty and how this might give you a relative advantage in terms of your cost structure?

[Sumant Sinha, executive]

Yes. Later, we haven't come out with those numbers right now, right? But please reconfirm

[Unknown Executive]

No, not just yet, but I mean if you want to give some ranges, that's fine.

[Sumant Sinha, executive]

Okay. So, Justin, the thing is that, as you know, import duties in India for solar modules are about 40%, and that gives us sufficient protection against the imported modules. The cost differential between what we produce in India and what we produce in China, just for the modules in our estimation is about 10% to 15%. And so the 40% protection is sufficient to allow us to not have that as an issue for us. The second thing is keep in mind that from that where we also have the approved list of models and manufacturers, which is really a hard barrier to imports which the government had imposed from this April that had deferred it for a year, and it is coming back in April of next year, which will then prevent any imports from coming in at all, notwithstanding any duties and everything else.

And so at that point, it will not even just become a cost issue, it will become an availability issue because anybody who has access to models will be able to continue to execute projects and people who don't, obviously, will not be able to. Our sense is that module supply next year will be in deficit because obviously, while capacity is coming up. It does take time to essentially get it to a level where people have good quality and stable production in place. Having said that, our sense also is, although there is no specific data that is there that allows us to point to, but just based on people that are working with us and so on, our cost of production is very competitive among other Indian companies. So that is really also same that we would like to benchmark ourselves to.

[Operator]

And Sumant, there's actually an inbound e-mail question from Garish at Morgan Stanley that is related to that. So if I could just ask this. Basically, are we open to selling a minority stake in our solar manufacturing and there seems to be an overcapacity coming online in India given strong response to BLI. What are our thoughts about those?

[Sumant Sinha, executive]

Yes. So no, we certainly are open. We're not willing to keeping 100% of the solar plant. As we've stated many times, the reason that we've said it out is to assure ourselves of supply security. And as long as we're able to do that, we are -- that leads our primary objective. As far as [indiscernible] capacity is concerned, in the Indian market, that is something that we'll have to wait and see because, obviously, while there are a lot of people who announced plan, how many of those actually certify we'll have to monitor and the second thing is also that a lot of the earlier capacity that have been set up are actually going to become uncompetitive because we just won't have either the efficiencies of production or the ability to make the latest generation of module. So to some extent, some of the earlier capacities will have to be discounted in the calculation of the capacity that are coming up. Yes. So that's my response

[Operator]

And our next question comes from?

Go ahead and finish your thoughts.

[Sumant Sinha, executive]

Yes. No, no. The only other thing I would say is that also keep in mind that a lot of modules are being exported, shipped out of India to the U.S. and other region and so that also adds to the deficit and we'll add to the deficit in the country next year.

[Operator]

Our next question comes from Nikhil Nigania from Bernstein.

[Nikhil Nigania, analyst]

Yes. Congratulations on a good set of numbers. My first question is regarding the RTC and peak power projects. Good to see the guidance being maintained but just wanted to clarify that transmission is not a bottleneck for these 2 assets. So when they are commissioned in Q4, power evacuation and the decision should start happening.

[Sumant Sinha, executive]

Yes. Nikhail, I can categorically confirm that to you that transmission is not a bottleneck largely because we are actually building a lot of it ourselves. The very first project of in RTC, there are 3 different wind projects and one solar project. The first wind project was akin to a substation that we are some and that we have more commission and that has been charged. And so therefore, we're just now going for the connectivity protocols now to connect the first project into that corporate substation that is we did. The second one also we are building, actually, which is the other substation. And so therefore, obviously, we have for understanding and control of when those substations are coming up.

The third one is getting connected to a substation that was being made by a third party, which we are closely monitoring and we impacted them. And that also looks like it's on track. So that should not lead to any problem to that. So I don't anticipate any transmission-related issues in commissioning these projects.

[Nikhil Nigania, analyst]

Got it. Good to hear that. I think the related question then is transmission. I think point slightly a little to during the discussion earlier, is transmission is being seen as a constraint in India ramping up to 30- to 40-gigawatt of renewable installation. Are you seeing that as a constraint in reaching that higher renewable installation numbers for?

[Sumant Sinha, executive]

I would say the government has been so far quite proactive in building our transmission capacity. And I think a lot of transmission capacity exists in the country that can allow for the opening. The only thing is, of course, that the transmission capacity is not necessary areas that people who want to set up that maybe there's some constraints in places like Rajasthan or [indiscernible] and so on. And there, there might be bottlenecks as we go forward. But when I say bottlenecks, I mean that the bottleneck will emerge after 30 gigawatts or gigawatt come rather than 10 or 3 gigawatt. So there is a lot of room to go before we actually start having constraints really enlarge -- so I would say that at least for the next 2, 3 years, we should not be seeing any transmission bottlenecks and the government is, as you very well know, trying to really speed up the construction of transmission projects in the auctions of transmission projects. So they are very closely evaluating what the issues are and are trying to debottleneck that.

[Nikhil Nigania, analyst]

Got it. And my last question then is there was this one big tender or PCI tender, I think, for more than 2 gigawatts, which I think has been doing the round for quite some time. Any update that could be shared on that from ReNew new site?

[Sumant Sinha, executive]

On the -- I'm not sure which tender specially talking about?

[Nikhil Nigania, analyst]

The one that coal was also now to be blended coal-fired generation.

[Sumant Sinha, executive]

Okay. Okay. No, listen, I haven't had about that tender for quite some time. So I'm not sure that it is live right now. But as you know, in the meantime, a number of other RTC auctions have happened, [indiscernible] was the first one that happened that is for 100 megawatts of inline capacity, which, as you know, translates to about 3.5 gigawatts of actual capacity. Then SDVNs recently did another 200 megawatts the tax, which is not actually say subscribe to in which we won 184 megawatts and then the RLCL tender as well. So there such tenders in the last few months. And as you know, a number more are teed up to be coming up in the next few months.

[Operator]

Our next question comes from Angie Storozynski from Seaport.

[Agnieszka Storozynski, analyst]

So just 2 simple questions. One, you do lots of capital recycling in existing and future projects. And so I'm just wondering if the gains that you record on that are reflected in your EBITDA. So that's number one. And number 2 is, when you show us EBITDA and debt projections, just wanted to make sure that this is proportional EBITDA and proportional net debt meaning the portion of both that you keep us renew net of those divestitures or asset recycling.

[Sumant Sinha, executive]

Yes. Kailash?

[Kailash Vaswani, executive]

So the gain on the asset sales have not been reflected in the EBITDA line as of now. I think the accounting transaction happened subsequent to the end of the previous quarter. So that's the reason why I think it will get accounted in a subsequent period. To your second point, where we consolidate the full EBITDA where we own to see 1% majority of the assets, there the full debt also gets consolidated with us into the balance sheet. So we don't consolidate on a proportionate basis because if we are in control of the asset, than the entire EBITDA and that sort of stays with us.

We take out the minority interest on account of the joint venture partners' interest in the project. Yes. Yes. sorry. Just to clarify on our guidance that you see there, that is just our net. So if you look at the debt.

[Agnieszka Storozynski, analyst]

So it is net of minority interest.

[Unknown Executive]

So those are actually net to shareholders. Actually recorded, we would be taking out the net or the minority position in the minority interest line. But as a projected in our guidance is concerned, it's all net of what we currently own.

[Agnieszka Storozynski, analyst]

Okay. That's good. And then just going back to the gains on capital recycling. So again, I mean, you've done a couple of those strong transactions in the past. And I'm just wondering, I mean, have those been a meaningful contributor to the EBITDA. I understand the -- this is the difference in the timing of recognition of the gain for the latest transaction, but I'm just wondering how big of a component of EBITDA this has been or can be again, just -- I know that, that's an ongoing business, but I'm again, wondering how big of a position of the EBITDA this is.

[Sumant Sinha, executive]

So see, again, there's an accounting value to it. What tends to happen is that we book cost basis and accounting calculation on the capital expenditure also include some margins at the EPC levels. When we consolidate them, they get knocked off. When we sell those assets, those assets are marked at a higher value in our books because of the -- because we are sort of selling those assets. So to that extent, the gains are smaller, but the cash flow impact is larger.

[Unknown Executive]

And also remember that most of the larger transactions were related to projects that are under construction, right? So our peak power and our RTC projects, right? So and those gains would be -- well, commercial gains, but accounting gains are de minimis because they haven't been actually selling of operating assets. That's where you would see can so far, there's not been much.

[Agnieszka Storozynski, analyst]

Okay. And then lastly, and again, by now you probably see where I'm going with it. I'm trying to compare you to other renewable power developers that there's been some differences and how debts and EBITDA are shown. So you guys do project financing. And I'm just wondering if there is any reasons for your -- for you to change that stance. Like, I don't know, as the balance sheet grows? Would you consider balance sheet financing. Again, any changes in how you finance new build?

[Sumant Sinha, executive]

Yes. So again, there, what happens is that, obviously, we have an existing portfolio, which is quite sizable. We have existing debt, which is quite sizable. So to change everything to balance sheet, it will take time, and it requires a certain type of market environment which is relatively easy money policy type of market where the rates are lower, in which market you can obviously get transactions done by borrowing balance sheet and then repaying the debt at the OpCo level.

But given that market conditions are what they are, investors are very focused on getting security on specified assets. And then the lenders typically wouldn't want to consolidate or have in their entities where they hold the security under construction risk because then the risk [ weightages ] for them also changes. So we are not moving to a balance sheet type of financing anytime soon. For us, this model really works. And also in the Indian context, the lenders are project finance lenders to specific assets, and they want the full security of that asset without sharing it with any other lenders. So from a bankruptcy remoteness point of view also, that is the preferred model in India. So it seems like we'll have to sort of continue with that.

[Operator]

There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.