ReNew Energy plc(RNW) - 2022 Q4 - Annual Report

Report Overview Company and Filing Information This is the Form 20-F annual report for the fiscal year ended March 31, 2022, with securities on Nasdaq and financials prepared under IFRS - This is an annual report for the fiscal year ended March 31, 2022, filed under Section 13 or 15(d) of the Securities Exchange Act of 1934[2] - The company's Class A Ordinary Shares and Warrants are traded on The Nasdaq Stock Market LLC under symbols RNW and RNWWW[3] - The company is a non-accelerated filer and has used International Financial Reporting Standards (IFRS) as issued by the IASB to prepare its financial statements[11][13] Outstanding Shares as of March 31, 2022 | Share Class | Number Outstanding | | :--- | :--- | | Class A Ordinary Shares | 282,469,171 | | Class B Ordinary Share | 1 | | Class C Ordinary Shares | 118,363,766 | | Class D Ordinary Share | 1 | | Deferred Share | 1 | | Redeemable Preference Shares | 50,000 | Forward-Looking Statements The report contains forward-looking statements based on current expectations that are subject to various risks and uncertainties - The report includes forward-looking statements identified by terms like "believes," "expects," "plans," etc., which are based on current expectations and are subject to risks and uncertainties[26][27] - Factors that may impact forward-looking statements include business strategy, changes in the renewable energy industry, COVID-19 impacts, estimates of future revenue and capital requirements, and general economic conditions[28] Key Information Risk Factors The company faces significant business, operational, financial, India-specific, and security-related risks Risks Relating to the Group's Business Business risks include customer concentration, fixed-tariff PPAs, project development uncertainties, and substantial indebtedness - The COVID-19 pandemic has impacted project timelines and customer payments, with some customers invoking force majeure clauses in their PPAs[34][35] - The company is exposed to customer concentration risk, with 74% of total income for the year ended March 31, 2022, derived from PPAs with central and state government-utility companies[37] - A Supreme Court of India order mandating the undergrounding of transmission lines could impact 1,813.8 MW of operational capacity and 2,375 MW of under-development capacity as of March 31, 2022[43] - As of March 31, 2022, the company had gross trade receivables of Rs. 46,791 million, with Rs. 44,120 million due from government-owned or controlled entities, indicating significant counterparty credit risk[46] - The company faces risks from its in-house EPC operations for solar and wind projects, including construction cost overruns and equipment defects[98][99] - The company faces competition from conventional and other renewable energy producers in areas such as project bidding, financing, and acquiring qualified personnel[101][102] Total Borrowings as of March 31, 2022 | Category | Amount (Rs. in millions) | | :--- | :--- | | Total Borrowings | 444,260 | | - Compulsorily convertible debentures | 1,213 | Risks Relating to India Operating in India exposes the company to risks from land acquisition laws, regulatory changes, uncertain land titles, and tax complexities - The company is subject to the risk of compulsory land acquisition by the Indian government under the Land Acquisition Act, which could disrupt projects[131] - A substantial portion of the business is in India, making it subject to regulatory, economic, social, and political uncertainties, including changes in government policies affecting the renewable energy sector[133][139] - The business benefits from government incentives like tax holidays, accelerated depreciation, and preferential tariffs, the continuation of which is not guaranteed[144] - India's property record system is not fully computerized, leading to uncertainty of title for land used for projects, which could result in disputes or claims[146] - Changes in India's taxation system, including GST, Minimum Alternate Tax (MAT), and rules regarding Place of Effective Management (POEM), could adversely affect business operations and profitability[159][161][164] Risks Relating to the Company's Securities Securities risks include price volatility from potential share sales, reduced disclosure as a foreign private issuer, and U.K. law restrictions - Sales of a substantial number of shares by existing security holders could cause the price of Class A Ordinary Shares and Warrants to fall[172] - The company is a "foreign private issuer" and follows certain home country (England and Wales) corporate governance practices in lieu of Nasdaq requirements, which may result in less information being available to investors[182][183] - English law requires the company to have sufficient distributable profits to declare dividends or repurchase shares, which may restrict capital return to shareholders[190] - The company's Articles of Association designate the courts of England and Wales as the exclusive forum for most shareholder complaints, and the U.S. District Court for the Southern District of New York for complaints under the Securities Act or Exchange Act[191] - There is a risk that the company could be considered tax resident in a jurisdiction other than the U.K., which could subject it to taxation in multiple jurisdictions and affect dividend payments[192][194] Information on the Company History and Development of the Company The company is India's largest utility-scale renewable energy provider, growing to 7.57 GW commissioned capacity by March 2022 since its founding in 2011 - ReNew Energy Global plc was incorporated in England and Wales on February 23, 2021, and re-registered as a public limited company on May 12, 2021[201] - As of March 31, 2022, the company had a total commissioned capacity of 7.57 GW and an additional 3.12 GW of committed capacity across approximately 150 renewable energy projects in India[202] - Total income increased from Rs. 53,303 million for the year ended March 31, 2020, to Rs. 69,195 million for the year ended March 31, 2022[203] Business Overview The company develops, builds, and operates a diversified portfolio of renewable projects, selling power through long-term PPAs - The company is India's largest utility-scale renewable energy solutions provider by total commissioned capacity, with a portfolio of 10.69 GW (7.57 GW commissioned, 3.12 GW committed) as of March 31, 2022[205][240] - The company has expanded into the hydropower sector and is exploring new areas like green hydrogen, electricity transmission, and battery storage[205][81][83] - Key competitive strengths include market leadership with an 11% share of awarded capacity since April 2017, extensive in-house EPC and O&M capabilities, and a diversified portfolio with 46% of offtakers being central government agencies[212][213][219] - Strategic goals include deepening its value chain presence by developing solar cell and module manufacturing facilities, and investing in future solutions like green hydrogen and energy storage[230][231] Portfolio Breakdown by Status (as of March 31, 2022) | Particulars | Commissioned Capacity (MW) | Committed Capacity (MW) | | :--- | :--- | :--- | | Utility-scale wind energy | 3,602 | 179 | | Utility-scale solar energy | 3,296 | 900 | | Corporate wind energy | 178 | 264 | | Corporate solar energy | 392 | 74 | | Utility-scale firm power | - | 1,704 | | Hydro power | 99 | - | | Total | 7,567 | 3,121 | Offtaker Profile by Total Capacity (as of March 31, 2022) | Offtaker Type | % of Total Capacity | | :--- | :--- | | Central Agency (SECI/PTC/NTPC) | 45.52% | | State Utilities | 45.04% | | Third Party (Corporate) | 9.44% | | Total | 100% | Our Projects and Operations The company manages a 10.69 GW portfolio with a diversified offtaker base, long-term PPAs, and extensive in-house project management capabilities Power Generation and Financials by Segment (FY2020-FY2022) | As of and for the year ended March 31, | 2020 | | 2021 | | 2022 | | |---|---|---|---|---|---|---| | | Wind | Solar | Wind | Solar | Wind | Solar | | Commissioned capacity (GW) | 3.24 | 2.18 | 3.59 | 2.01 | 3.78 | 3.69 | | Plant load factor (%) | 26.4% | 22.3% | 23.6% | 22.8% | 26.4% | 23.3% | | Electricity generated (KWh millions) | 7,226 | 3,679 | 6,854 | 4,320 | 8,469 | 5,677 | | Revenue from customers (INR millions) | 31,800 | 16,598 | 29,411 | 18,737 | 33,861 | 24,060 | - The company's PPAs for utility-scale projects have an average term of over 24 years, providing long-term revenue visibility[273][274] - The company has secured over 36,800 acres of land through ownership or leasehold rights as of March 31, 2022, for its projects[214] - Key wind turbine suppliers include Siemens Gamesa (44.5% of contracted capacity) and Suzlon (20.8%), while key solar panel suppliers include Longi Solar (21.2%) and JA Solar (14.9%)[294][296] - The company has a growing workforce, with the number of full-time employees increasing from 864 in FY2020 to 1,675 in FY2022[328] Government Regulations Operations are governed by India's Electricity Act, 2003, with a shift to competitive bidding and support from various national renewable energy policies - The Electricity Act, 2003 is the central legislation governing the power sector, promoting renewables through mechanisms like Renewable Purchase Obligations (RPOs)[350][353] - Tariff determination has largely moved from a Feed-in Tariff (FiT) system to a competitive bidding process as per guidelines issued by the Ministry of Power[355][360] - The government has granted a waiver of inter-state transmission system (ISTS) charges for solar and wind projects commissioned before June 30, 2023, for a period of 25 years[358][377] - The National Solar Mission has a target of 100 GW of solar power by 2022, comprising 40 GW of rooftop and 60 GW of large-scale grid-connected projects[374] - The government has introduced policies to promote hybrid projects (National Wind-Solar Hybrid Policy) and green hydrogen (Green Hydrogen Policy, Feb 2022) to encourage efficient use of infrastructure[380][414] Operating and Financial Review and Prospects Operating Results Total income grew 27% in FY2022, though a net loss was reported due to significant one-time listing expenses, while Adjusted EBITDA increased Consolidated Financial Performance (FY2020-FY2022) | Particulars (Rs. in millions) | FY 2020 | FY 2021 | FY 2022 | | :--- | :--- | :--- | :--- | | Total Income | 53,303 | 54,491 | 69,195 | | Total Expenses | 53,873 | 59,574 | 81,428 | | Loss for the year | (2,781) | (8,032) | (16,128) | Revenue by Segment (FY2020-FY2022) | Segment (Rs. in millions) | FY 2020 | FY 2021 | FY 2022 | | :--- | :--- | :--- | :--- | | Wind Power | 31,800 | 29,411 | 33,861 | | Solar Power | 16,598 | 18,737 | 24,060 | | Others | - | - | 1,428 | - The increase in total income for FY2022 was primarily due to an increase in operational capacity and a higher plant load factor for wind projects, which rose to 26.4% from 23.6% in the prior year[474] - The net loss of Rs. 16,128 million in FY2022 included Rs. 11,202 million of charges related to the Nasdaq listing and issuance of share warrants[485] Non-IFRS Financial Measures (FY2020-FY2022) | Particulars (Rs. in millions) | FY 2020 | FY 2021 | FY 2022 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | 43,978 | 41,870 | 55,144 | | Total CFe (Cash Flow to Equity) | 6,541 | 6,691 | 12,888 | Liquidity and Capital Resources Liquidity is sourced from operations, debt, and equity, with significant cash used for investing activities and expansion in FY2022 Summarized Statement of Consolidated Cash Flows (FY2020-FY2022) | Particulars (Rs. in millions) | FY 2020 | FY 2021 | FY 2022 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | 35,088 | 32,081 | 42,390 | | Net cash used in investing activities | (53,724) | (17,412) | (124,747) | | Net cash from/(used in) financing activities | 21,610 | (7,079) | 90,038 | | Cash and cash equivalents at end of year | 13,089 | 20,679 | 28,379 | - Capital expenditures for the purchase of property, plant, and equipment were Rs. 89,830 million in FY2022, a substantial increase from Rs. 24,482 million in FY2021, reflecting significant expansion[529] - As of March 31, 2022, the company had capital commitments of Rs. 16,740 million for the commissioning of new wind and solar projects[531] Long-Term Interest-Bearing Loans and Borrowings as of March 31, 2022 | Particulars | Amount Outstanding (Rs. in millions) | Nominal Interest Rate | Maturity | | :--- | :--- | :--- | :--- | | Non-convertible debentures | 84,262 | 6.03% - 12.68% | Aug 2022 - Sep 2034 | | Term loans from banks | 63,819 | 2.81% - 9.60% | Mar 2023 - Jun 2042 | | Term loans from financial institutions | 109,769 | 3.20% - 10.90% | Sep 2023 - Jan 2044 | | Senior secured notes | 170,712 | 4.50% - 7.18% | Sep 2022 - Apr 2027 | Directors, Senior Management and Employees Directors and Senior Management The company is led by a ten-member board, including the founder CEO, investor nominees, and independent directors, with a recent change in CFO - The Board of Directors as of March 31, 2022, consisted of 10 members, including the CEO, investor nominee directors, and independent directors[543] - Mr. Sumant Sinha is the founder and has served as Chairman and CEO since 2011[544] - D. Muthukumaran resigned as CFO effective March 31, 2022, and Kedar Upadhye was appointed as the new Group CFO on May 9, 2022[559][560] Compensation Executive compensation totaled approximately $3.96 million in FY2022, supplemented by equity incentive plans and director retainer fees - Aggregate compensation for executive directors and officers for FY2022 was US$3,955,104, excluding share option grants[568] - CEO Sumant Sinha's aggregate remuneration for FY2022 was US$1,254,196[569] - Non-executive independent directors receive an annual cash retainer of US$100,000, plus committee fees, and an annual equity retainer of US$150,000 in RSUs[564][565] - As of March 31, 2022, executive directors and officers held outstanding options to purchase an aggregate of 33,355,995 Class A Ordinary Shares[570] - The company established an Employee 2021 Incentive Award Plan with an aggregate of 23,527,705 Class A Ordinary Shares available for issuance[575][577] Board Practices As a foreign private issuer, the company follows U.K. governance practices, with major shareholders holding board appointment rights - The company is a foreign private issuer and follows home country practices, exempting it from certain Nasdaq corporate governance rules, including requirements for compensation and nomination committee independence[603][973] - The Board consists of up to 11 directors, with specific appointment rights granted to the Founder Investors, GSW, Platinum Cactus, and CPP Investments as per the Shareholders Agreement[605][606] - The Board has established five committees: Audit, Remuneration, Nomination and Board Governance, Finance and Operations, and ESG[613] - The Audit Committee is composed of three independent directors, with Mr. Manoj Singh identified as the audit committee financial expert[614][963] - The Remuneration and Nomination committees are not composed solely of independent directors, which is permitted under the foreign private issuer exemptions[615][616] Major Shareholders and Related Party Transactions Major Shareholders Major shareholders include CPP Investments and GS Wyvern, with a multi-class share structure defining voting rights Beneficial Ownership of Major Shareholders (as of March 31, 2022) | Beneficial Owner | Class A Shares (%) | Class C Shares (%) | Class D Shares (%) | | :--- | :--- | :--- | :--- | | CPP Investments | 26.2% | 10.56% | 100% | | Platinum Cactus | 20.6% | - | - | | JERA | 10.1% | - | - | | TT International Asset Management Ltd | 6.4% | - | - | | GS Wyvern Holdings Limited | 4.1% | 89.44% | - | - The company has a multi-class share structure with Class A (one vote), Class B (variable vote linked to ReNew India holdings), Class C (non-voting), and Class D (variable vote linked to ReNew India holdings) shares[628][762][763] Related Party Transactions Key related party agreements include a Shareholders Agreement on board rights and a Registration Rights Agreement with put options for founders - The Business Combination was completed on August 23, 2021, resulting in ReNew India becoming a subsidiary of ReNew Global[634] - The Shareholders Agreement grants specific director appointment and board observer rights to key investors, including the Founder Investors, GSW, CPP Investments, and Platinum Cactus[642][643][646] - The Registration Rights, Coordination and Put Option Agreement provides shareholders with registration rights and includes lock-up provisions restricting share transfers for 180 days for most significant shareholders and one year for Founder Investors[667][683] - Founder Investors have put options allowing them to require the company to purchase their ReNew India shares, including a de-minimis option of up to $12 million per year[677][678][680] - A Voting Agreement gives ReNew Global proxy voting rights over the ReNew India shares held by GSW, CPP Investments, and the Founder Investors, ensuring alignment with the company's voting decisions[685] Financial Information Consolidated Statements and Other Financial Information The company is involved in material legal proceedings regarding tariff disputes, power line undergrounding, and claims for 'change in law' events - The company is involved in a major dispute with Andhra Pradesh distribution companies (AP DISCOMs) over tariff revisions and power curtailment, with a favorable High Court ruling under appeal[701][710][717] - As of March 31, 2022, total receivables from AP DISCOMs amounted to Rs. 17,411 million out of total receivables of Rs. 45,825 million[701][710] - A Supreme Court order regarding the undergrounding of power lines to protect the Great Indian Bustard could affect over 4,100 MW of operational and under-development projects[732][1502] - The company has filed multiple petitions seeking compensation under 'change in law' provisions in its PPAs due to the imposition of safeguard duties on imported solar cells and modules[741][742][743] - The company is pursuing recovery of outstanding dues and late payment surcharges from distribution companies in Maharashtra and Telangana, with total receivables from Telangana DISCOMs at Rs. 10,029 million as of March 31, 2022[736][738] Additional Information Memorandum and Articles of Association The company is governed by English law with a multi-class share structure defining distinct voting rights for different shareholder groups - The company's share capital as of March 31, 2022, consisted of 282,469,171 Class A, 1 Class B, 118,363,766 Class C, and 1 Class D Ordinary Shares[761] - Voting rights are structured with Class A shares having one vote, while Class B and Class D shares have variable votes linked to their holdings in ReNew India, and Class C shares are non-voting[768][769][770][771] - The U.K. Companies Act governs share allotments and preemption rights, with shareholders having authorized directors to allot shares up to certain limits until August 20, 2026[765][767] - The company believes the U.K. City Code on Takeovers and Mergers does not currently apply because a majority of its directors reside outside the UK, Channel Islands, and Isle of Man[803][807] Material Contracts The company and its subsidiaries have several material debt instruments outstanding with covenants that restrict financial activities - The $525M 6.67% Senior Secured Notes due 2024 were issued by certain subsidiaries and are guaranteed by the parent[829] - The $450M 5.875% Senior Secured Notes due 2027 require a redemption of 40% of the outstanding notes between July 2022 and March 2023[841] - The $585M 4.50% Senior Secured Notes due 2028 were issued in April 2021 to repay outstanding debt and fund capital expenditure for eligible green projects[855][856] - In January 2022, ReNew Power Private Limited issued $400M in 4.56% Senior Notes due 2032 to repay existing indebtedness[868] - The indentures for these notes contain customary covenants restricting activities such as incurring additional debt, making restricted payments, selling assets, and creating liens[832][844][858][872] Taxation Securities are subject to U.S., U.K., and Indian tax laws, with potential adverse U.S. tax consequences under PFIC rules - U.S. Taxation: U.S. Holders face potential adverse tax consequences under Passive Foreign Investment Company (PFIC) rules, though the company does not believe it is a PFIC[892][893] - U.K. Taxation: Non-U.K. holders are generally not subject to U.K. tax on dividends or capital gains, but a 0.5% stamp duty or SDRT is typically payable by the purchaser on share transfers[915][919][923][924] - India Taxation: Gains on the sale of ReNew Global shares by non-resident shareholders may be taxable in India because the company derives substantial value from Indian assets[934][935] - Dividends distributed from the Indian subsidiary (ReNew India) to the parent (ReNew Global) are subject to Indian withholding tax, which is 20% but may be reduced to 10% under the India-UK tax treaty[936] Material Modifications to the Rights of Security Holders and Use of Proceeds Use of Proceeds The F-1 offering generated approximately US$964 million, used primarily for shareholder payments, subsidiary acquisitions, and investments Use of Proceeds from F-1 Offering | Use of Proceeds | Amount (US$ in millions) | | :--- | :--- | | Payment to RPPL shareholders for stake purchase | 265 | | Acquisition of / investment in subsidiaries | 311 | | ReNew Jal Urja acquisition | 135 | | Investment in fixed deposits | 112 | | Offer expenses | 93 | | Set aside for share buybacks | 30 | | Payment to RPPL employees for stake purchase | 10 | | Loan to subsidiary | 4 | | Operating expenses | 3 | | Free cash | 1 | | Total | 964 | Controls and Procedures Disclosure Controls and Internal Control Management concluded disclosure controls were effective as of March 31, 2022, with an internal control report deferred as per new public company rules - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[959] - The report does not include a management assessment or auditor attestation on internal control over financial reporting, as the company is in a transition period for newly public companies[960][961] - There were no material changes in internal control over financial reporting during the year ended March 31, 2022[962] Financial Statements Report of Independent Registered Public Accounting Firm The auditor issued an unqualified opinion, identifying the impairment assessment of goodwill as a critical audit matter due to its subjectivity - The independent auditor, S.R. Batliboi & Co. LLP, issued an unqualified opinion on the consolidated financial statements[998] - The audit identified the impairment assessment of goodwill as a Critical Audit Matter due to the significant estimation and judgment required to determine the recoverable amount of cash-generating units (CGUs)[1002][1005] - Key assumptions in the goodwill impairment test included Plant Load Factor (PLF), future operating and maintenance expenses, and discount rates, which are forward-looking and subject to market conditions[1005] Consolidated Financial Statements The financial statements show significant asset growth funded by borrowings, with a wider net loss in FY2022 due to listing expenses Consolidated Statement of Financial Position (Abridged) | (Rs. in millions) | As at March 31, 2021 | As at March 31, 2022 | | :--- | :--- | :--- | | Total Assets | 492,054 | 641,343 | | Property, plant and equipment | 342,036 | 437,593 | | Cash and bank balances | 47,185 | 79,120 | | Total Liabilities | 427,309 | 514,970 | | Interest-bearing loans and borrowings | 345,779 | 388,214 | | Total Equity | 64,745 | 126,373 | Consolidated Statement of Profit or Loss (Abridged) | (Rs. in millions) | For the year ended March 31, 2021 | For the year ended March 31, 2022 | | :--- | :--- | :--- | | Total Income | 54,491 | 69,195 | | Total Expenses | 59,574 | 81,428 | | Listing and related expenses | — | 10,512 | | Loss for the year | (8,032) | (16,128) | Consolidated Statement of Cash Flows (Abridged) | (Rs. in millions) | For the year ended March 31, 2021 | For the year ended March 31, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | 32,081 | 42,390 | | Net cash used in investing activities | (17,412) | (124,747) | | Net cash (used in)/from financing activities | (7,079) | 90,038 | Notes to the Consolidated Financial Statements Notes detail the accounting for the business combination, goodwill impairment testing, legal contingencies, and derivative instrument usage - The business combination on August 23, 2021, was treated as a capital transaction, resulting in recognizing Rs. 10,512 million in listing and related expenses[1023][1029][1525] - Goodwill as of March 31, 2022, was INR 11,596 million, primarily allocated to the Ostro Energy Group CGU, and annual impairment testing resulted in no impairment loss[1235][1236][1238] - The company has significant legal disputes with AP DISCOMs, with total outstanding receivables of INR 17,411 million as of March 31, 2022, which management believes are recoverable[1489][1495] - The company uses derivative instruments like cross-currency swaps and forward contracts to hedge foreign exchange and interest rate risks on its borrowings[1505] - On February 2, 2022, the Board approved a share repurchase program of up to USD 250 million; by March 31, 2022, 1,655,300 Class A shares had been purchased for INR 997 million[1269][1270]