ReNew Power: Vision and Growth Strategy

ReNew Power's Vision and Growth

• In December 2020, Sumant Sinha, CEO of ReNew Power, planned a meeting to strategize the company's future direction, considering renewable energy opportunities in India and globally.
• Sinha expressed satisfaction with ReNew Power's growth, which had become India's largest RE developer within nine years.
• Starting with 25.2 MW of wind energy capacity in 2011-12, ReNew Power expanded to 5,000 MW by 2019.
• The company had been considering an IPO in 2018, but it was postponed due to market conditions.

Background of ReNew Power

• ReNew Power was founded in January 2011 by Sumant Sinha, a first-generation entrepreneur with an investment banking background, along with his wife, Vaishali.
• By 2019, ReNew Power emerged as one of India's largest renewable energy independent power producers (IPPs) regarding total energy generation capacity.
• Sinha's prior experience as COO at Suzlon Energy, a top wind turbine manufacturer, sparked his interest in renewable energy.
• Wind energy-based generation was ReNew Power's initial focus, achieving grid-parity while solar energy was not yet competitive.
• ReNew Power grew significantly after beginning with a 25.2 MW wind project in Gujarat.
• ReNew Power developed, built, owned, and operated utility-scale wind and solar energy, hydro, and distributed solar energy projects.

Entrepreneurial Journey of Sumant

• Sumant Sinha, after graduating from IIT Delhi and IIM Calcutta, started his career with Tata Administrative Services.
• He pursued a post-graduate degree in International Affairs from Columbia University, specializing in international banking and finance.
• After spending 10 years as an investment banker in New York and London, he returned to India to become CFO of the Aditya Birla Group in 2002.
• Sinha led major M&A deals, including Novelis' acquisition, and helped transform the group into a global multinational.
• In 2007, he initiated a retail business setup which was his first entrepreneurial endeavor.

Seizing the Renewable Energy Opportunity

• In 2008, Sumant Sinha joined Suzlon Energy during a challenging business environment and began to focus on renewable energy.
• The Kyoto Protocol's focus on reducing greenhouse gases increased the appeal of renewable energy (RE) as a sustainable alternative.
• Despite the potential, India's RE sector was in its early stages with limited knowledgeable players and business models, requiring substantial capital.
• The Indian RE sector mainly comprised turbine manufacturers catering to high-net-worth clients seeking tax benefits rather than electricity generation.
• Sinha, with Vaishali, decided to form a core team and raise funds to capitalize on the RE sector's prospects.

Assembling the Team

• ReNew Power focused on hiring experienced professionals with sector knowledge due to the lack of established RE firms.
• Kailash Vaswani, a finance professional previously with Sumant at Aditya Birla Group, was among the first hires and led fundraising efforts.
• Balram Mehta, later COO, joined, and the team expanded to include experts in finance and wind energy like Shanker Bhatia, Nikunj Kathuria, Ajith Pillai, and Iftekhar Ansari.

Initial Funding Difficulties

• Sumant faced funding challenges despite his investment banking experience, as investors were wary of the emerging renewable energy sector.
• Renewable energy projects were capital-intensive and faced ground-level challenges with regulatory uncertainty.
• Private equity firms considered ReNew Power too premature for investment due to a lack of revenue, project track record, and implementation capabilities.
• Venture capitalists viewed ReNew as too large for their typical investment size of $10 million.
• Sumant’s perseverance led to a final deal with Goldman Sachs (GS).

Goldman Sachs' Initial Investment

• Goldman Sachs (GS) expressed interest in India's infrastructure space, leading to a meeting where Sumant and Kailash presented ReNew's plans.
• GS was keen on a larger investment size requiring ReNew to create a more ambitious five-year plan targeting 600 MW capacity and $200 million funding.
• This resulted in ReNew winning the trust of GS, a premier investor.
• GS completed due diligence in three months, and ReNew received the funds in September 2011.
• GS's concurrent investment in a US RE business facilitated replicating its investment model in India, finalized after evaluating ReNew with RE-sector expertise.
• GS invested in Sumant's vision, closely monitored ReNew's financial management, wind assessment, timely project execution, and problem-solving.
• GS grew confident in ReNew, providing an additional $90 million in capital as opportunities increased.

Early Hurdles

• ReNew required equity investment to construct and run RE capacity as it aimed to be a major developer
• Securing an equity commitment was needed to develop project execution and procurement capabilities to stay afloat
• Leading OEMs were unsure about their intention to be long term player before GS gave its funding
• ReNew had to foster a harmonious relationship of mutual respect with the leading global renewable energy players including Suzlon, Enercon and Gamesa

Business Growth

• Maharashtra was a state where ReNew started due to its favorable policy
• Received turn key projects from EPC in which the OEM would in effect manage everything
• ReNew developed the plants after obtaining the appropriate production and materials in the first year of operations
• It invested in a team that developed and executed projects in Maharashtra
• The OEM wanted in house developement because of the complicated approvals process as well as signing power purchase agreements (PPA)

Other Key Points

• After founding ReNew Power in 2011, Sumant Sinha scheduled a team meeting in December 2020 to discuss the company's future strategy.
• In 2012, ReNew commissioned its first 25.2 MW wind plant in Jasdan, Gujarat, inaugurated by Narendra Modi, then the chief minister of Gujarat.
• The company plans for IPO (initial public offering).
• ReNew consciouslty sought to engage numerous OEMs for wind turbines turning against the trend of IPPs being linked to one OEM
• It had abundant data on the wind potential of the entire country, mapped into zones and well informed
• ReNew Established a modern facility called ReNew Power Diagnostic Centre (RPDC)
• RENEWERS DAY, an annual event held over two days consisting of 1,000 employees to celebrate and inform company direction
• From 2015-2019 had phenomenal growth in assets as it had emerging opportunities and built capacity

Financials

• ReNew achieved high growth through continuous equity and debt injections.
• Initially funded by Goldman Sachs, ReNew secured PE investments from ADB, GEF, ADIA, CPPIB, and JERA at increasing valuations.
• Maintained a target debt-to-total-capital ratio of 75–80%
• ReNew used various borrowing channels, including India Infrastructure Finance Company Limited (IIFCL) guarantees, mutual funds, and overseas borrowings.

Overcoming financial challenges

• India's RE sector faced challenges in 2020 due to discoms' financial difficulties, leading to liquidity issues for IPPs like ReNew, with financial difficulties and needed to be tactfully handled
• Land acquisition laws caused commissioning delays
• Policy reversals and power curtailment by state governments added to investor uncertainty needing discussions to resolve issues with government and investors

Renew Power's diversification into Solar Energy

• ReNew shifted focus to solar energy due to anticipated cost decreases and government support through the National Solar Mission.
• In December 2014 India has scaled up its capacity from 20 GW to 100 GW, with 60GW from utility scale plants as well as roof top ones
• Falling solar PV costs prompted ReNew's entry into solar energy, with bids dropping from INR 16-17/kWh to INR 7-7.50/kWh.
• In 2013 an in house team was created within Renew in order to help understand and grow in the evolving solar sector
• Established a large wind portfolio and a solar business ramped up in a short span

Competitive advantage through Technology and Innovation

• ReNew leveraged technology, including robotics and drone-based thermal imaging, to maximize asset yield.
• They have also adapted to machine Learning and AI
• ReD (ReNew Digital) initiative to achieve digital transformation
• Climate Connect acquisition.