RMG Acquisition II : ReNew Power Capital Markets Day - Transcription

ReNew Energy Global PLC

Capital Markets Day

Ticker: RNW

Date: October 12, 2021

Capital Markets Day

Present on the Call for ReNew

1. D. Muthukumaran - Chief Financial Officer
2. Mayank Bansal - Chief Commercial Officer
3. Nathan Judge - Head of Investor Relations
4. Sumant Sinha - Founder, Chairman and Chief Executive Officer
5. Vaishali Nigam Sinha - Chair, ReNew Foundation and Chief Sustainability and CSR Officer

Presentation

Nathan Judge - Opens the meeting

Hello everyone, and welcome to ReNew Power's First Ever Capital Markets Day. I'm Nathan Judge, Head of Investor Relations. And we are absolutely delighted that you have taken time out of your busy day to join us.

We have three speakers for you today. Our first speaker will be our Founder, Chairman and CEO, Sumant Sinha. Sumant will go through an overview of the company, an outlook on the Indian renewable energy market, our commitment to capital discipline, and the initiatives that we are taking to reduce our accounts receivables. Our CFO, Mr. Muthukumaran will go through guidance as well as update you all on the new disclosures we are providing following conversations that we have had with you. Our Chief Sustainability Officer, Vaishali Sinha will provide an update on the strong ESG standards that the company has as well as the initiatives we are looking to undertake over the long term. At the end, we will open the questions. Now on to the obligatory safe harbor statement.

Our safe harbor power statements are contained within our annual report 20-F, press release, presentation materials and available on our website. These statements are important and integral to all our remarks. 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 disclaimers we've provided in our presentation, on our website and in our Form 20-F for a more complete description. And with that I would like to present our Founder, Chairman and CEO Mr. Sumant Sinha

Sumant Sinha

Thank you, Nathan, and welcome everyone. It is a real pleasure to present our company for the first time as a publicly traded company. Let me say that the past 18 months have been an extraordinary time. Our business faced one of the greatest challenges with COVID that we have ever seen since our business began. We have been able to weather the storm extremely well, which shows the quality and predictability of our assets. Not only have we seen our operating assets continue to deliver consistently, but we have been able to add over 1 gigawatt of operating capacity during the pandemic. We were also able to successfully raise $855 million in our private

placement and list on the NASDAQ.

Turning to Slide 7. Why ReNew? We believe that there are many differentiating factors that make ReNew a leader in the global renewable energy sector. We are excited about the company's future and about RNW. To begin with, we have scale. ReNew is one of the leading renewable energy companies in India and one of the largest renewable energy companies globally. Our scale helps us further differentiate ourselves from smaller competitors in many ways such as having a fully integrated business model and greater access to cheaper capital. We have a long track record of execution as well as delivering superior growth and returns over a long period of time.

When we first started with our first 25-megawatt project about a decade ago, there were many companies that were interested in getting into the renewable sector in India. As time passed, we have been able to consistently grow faster than the industry while still remaining disciplined with our capital by investing wisely. Much of this success lies in our corporate culture of thinking ahead, making judicious investments now for meaningful differentiation in the future, and our ability to sustain competitive advantages. We have been able to deliver equity IRRs above our cost of equity consistently, and we believe there are many opportunities to achieve this threshold going forward as we pursue areas that we continue to have a comparative advantage in.

On the cost of capital, our listing on the NASDAQ is a major milestone for the company, which we believe will provide us many advantages relative to most of our domestic competitors. In addition, the combination of the improvement in our balance sheet from raising $610 million of net equity during the listing process and having access to equity public markets makes ReNew more attractive to banks and global green bond markets, which continues to reduce our cost of borrowing. This has a meaningful impact for equity holders. The reduction to our borrowing cost increases the value of RNW meaningfully, and we have seen our recent marginal cost of borrowing dropped nearly 200 basis points compared to our current average debt cost.

Finally, as we look at RNW today, we believe that there are some positive technical catalysts that will enhance the attractiveness of the stock for an increasingly larger audience of investors. As some of you may have seen, we recently released our first ever sustainability report as a public company. We're on the path to further strengthen ESG and sustainability governance. We are very proud of our ESG credentials and believe that we will be able to achieve strong ESG scores from ESG rating agencies. This should enable RNW to screen well for sustainability investors.

We also recently announced that our pipe investors who have $855 million of stock are now able to trade freely in the market, which should drive higher average daily trading volumes. The combination of strong ESG scores and EDTV (Audio Muffle) should result in the inclusion of RNW into major indices leading to meaningful buying from ETFs and index funds. We're also optimistic that leading sell side analysts will be initiating coverage on RNW helping to further drive investor awareness of our already strong story.

Turning to Page 8. We believe investors are looking for the next blue chip renewable energy company, and we believe that we will fill this gap. We are confident that we will be able to deliver on our promises and grow faster with better returns than our peers. During the past six months, as we were going through the listing process, we heard some consistent questions from all of you that we would like to address today. The main purpose of this presentation will be to show how

ReNew plans to deliver shareholder value in a sustainable manner. Specifically, we will be addressing the ability to deliver returns above our cost of capital as competition increases and our ability to hit our guidance and concerns about our counterparty risk.

Regarding our returns, we believe that investors have unduly focused on the plain vanilla renewable energy bid market, which admittedly is seeing increased competition from foreign strategic and financial investors. In a way, this validates how exciting the India renewable growth story is. What we plan to show today is that there are many opportunities to achieve returns above our minimum thresholds and why we have a comparative advantage in doing that.

We have a 50% market share of projects that require intelligent energy solutions. These are higher returns and lower levels of competition. We also are one of the best positioned to be the consolidator of choice in India, and these acquisitions have the potential to have higher returns than plain vanilla projects, given the number of synergies that we are also able to capture as an incumbent of scale. We also are very excited about the corporate PPM market, which provides significant upside to the guidance that we have provided to investors.

Regarding our ability to deliver on our guidance, we are a large company with predictable cash flows from assets that generate revenues when the sun shines and the wind blows. We want to point out that 95% of our expected FY '22 EBITDA is coming from already operating or nearly completed capacity. We also have greater certainty than our Indian peers about our growth. We remain comfortable with achieving our weather adjusted FY '22 EBITDA guidance of $810 million and having 8.2 gigawatts of operating capacity by the end of this fiscal year. Nearly 90% of our committed pipeline has PPAs and we expect to sign PPAs shortly on the remaining portion.

Looking further out, we continue to target 18 gigawatts of installed capacity by the end of financial year '25, which would be an additional 8 gigawatts above our current portfolio. Already we have won about 500 megawatts recently and have identified another 15 GW - 20 GW of investment opportunities that should be auctioned or sold over the next year or so. Of course, all investments must achieve our threshold returns and be comfortably above our cost of capital. We're also providing a significant amount of new disclosure to assist investors in modeling. We would encourage everyone to review our appendix, which addresses many of the modeling questions we have received.

Turning to our counterparties. We believe that there will be significant improvement in our days sales outstanding over the next 24 months. There are several things driving this, which we will go into detail in our presentation later. But broadly, a combination of improving our customer mix to central government agencies combined with the implementation of initiatives to improve collections should put us on a much stronger position by financial year '25.

Let me also say that we have fanatically committed to capital discipline as outlined on Page 9. We commit to our shareholders that we will be diligence towards of your money and only invest when the expected returns of projects are above our cost of capital. Today, we have an equity IRR threshold requirement of 16% to 20%.

On Page 10, you can see that ReNew is a leading renewable energy company both in India and globally with 6.4 gigawatts operating with the largest by almost 2 gigawatts relative to our next

Indian renewable energy peer. This scale provides many advantages from access to broader and cheaper capital, profitability enhancement and quality control through vertical integration and being able to invest in best practices that make ReNew more competitive and profitable. We are also able to negotiate better terms with our suppliers, which is increasingly important in an inflationary market. We're also one of the largest renewable energy developers globally, which would bring greater investor awareness and visibility to ReNew.

Looking at our portfolio on Page 11, we have a diversified set of assets spread across the country, which provides diversification and operating expertise in many states. By being local, we can capture synergies from acquisitions, which most of our foreign competitors cannot avail off. About two-thirds of our portfolio is operating and much of the assets that are in development already have PPAs. Our portfolio is also very with balance between solar and wind.

Our run rate EBITDA guidance is provided on Page 12. We are changing the way we provide guidance to be more in line with our global peers, namely weather adjusted run rate EBITDA. We believe that this provides a better metric for determining long-term performance of our assets and facilitates easy evaluation comparison for investors. For those looking at our past guidance, we remain comfortable with achieving our targeted EBITDA for the next couple of years. Muthu, our CFO will go into greater detail at our guidance later in this presentation, but here are some highlights.

We expect to deliver EBITDA of over $1.1 billion annually from our 10.2 GW portfolio. This is nearly double the EBITDA that we reported last year. As mentioned before, 90% of the uplift in EBITDA is expected from assets that have been recently commissioned. All are committed with a PPA. The remaining $100 million or so are from projects that have a letter of award that we expect to get a PPA for in the near-term. Our success has been driven by our culture, which is differentiated from our Indian renewable energy peers.

As can be seen on Page 13, for the last 10 years, most of our growth has been concentrated in plain vanilla renewable energy projects and M&A. However, we kept looking forward and made investments in areas that we believe would put ReNew in a strong position for the future. For example, we have been investing in the corporate PPA market for years and believe that this is one of the most exciting growth opportunities with superior returns for the next several years. We have also been developing proprietary technologies, which allow us to be a leader in the intelligent energy solutions market now.

Today, we are making small investments for future opportunities such as green hydrogen, ancillary services and expansion into other emerging markets that should allow us to continue to be a leading global renewable energy company in the future as well. We will continue to remain disciplined with share shareholders capital and will only make large investments in future opportunities when we believe we have a comparative advantage and can secure superior returns for an extended period.

Page 14 has an update on recent developments. Electricity demand in India has recovered and in the past month itself, peak demand was 15% higher than in the same month pre- COVID. This has been the catalyst for distribution companies to resume signing contracts for new power. We recently signed a PPA for our round-the-clock1300-megawatt project, which