No Impact: Suzlon CEO On Reverse Auctions Of Wind Capacity As Stock Drops
The Suzlon Energy stock has declined over 8% this week, since media reports on reverse auctions.
The government's reported weighing in on the reverse auction method of wind capacity power will have no impact on Suzlon Energy Ltd. order pipeline for the next 5-6 years, Chief Executive Officer JP Chalasani said.
"Twelve gigawatts are under execution, plus there's 15 gigawatts under discussions for finalisation of orders; 27 gigawatts are pure wind and have nothing to do with the reverse auction," he told NDTV Profit on Thursday.
"The execution on the ground will decide how much capacity we will add. We all need to concentrate on execution and get that capacity up on the grid," he said.
The Ministry of New and Renewable Energy was revisiting its stance on reverse auctions, considering bringing it back as a result of undersubscription and higher tariff discovery in recent wind bids.
The Suzlon Energy stock has declined over 8% this week, since media reports on the reverse auctions.
Edited Excerpts From The Interview:
A space in focus, a stock in focus—wind energy. Suzlon is the stock that I'm talking about. It has rebounded after falling close to well over double digits in the recent days due to the update on reverse bidding, which came in. We are now joined by the CEO of the company Mr. JP Chalsani. How material is this change in policy?
JP Chalasani: I think best is let's decide that at the end of reportinv some facts to the table. I think, all of us including your viewers can decide whether it has an impact or it has no impact. As we speak today, nine gigawatts of bids, which were awarded to various IPPs, in turn have been awarded to the OEMs which are under different stages of execution. And in addition to that, about three gigawatts have been awarded through the commercial industrial segment.
So, therefore, 12 gigawatts of bids have been awarded to the OEMs. They are at various stages to get commissioned in the next couple of years. In addition to these 12 gigawatts, which have already been awarded to the OEMs—not even to the IPPs—about 10 gigawatts of bids have been finalised by the government. And these 10 gigawatts of bids have been awarded to various IPPs, who are in turn in the process of finalising the OEMs for that. These 10 gigawatts, plus additional five gigawatts—15 gigawatts—of C&I is in the market today for discussions to finalise the OEMs. So first, 12 gigawatts are under execution plus there's 15 gigawatts under discussions for finalisation of orders. Twenty-seven gigawatts are pure wind, I am talking about. They have nothing to do with the reverse auction you are talking about. On top of it, there is about 15 gigawatts of bid schedule announced by government of India, which is supposed to be completed in the next few months. In that, only two gigawatts is pure wind and 13 gigawatts is predominantly FDRE (fixed dispatched renewable energy) and the hybrid and RTC (renewable thermal collaborative). Why I'm stressing the FDRE is, in case of FDRE, 1,000 megawatt is the capacity of the PPA. Actual wind capacity alone would be 1.2-1.4 times. In this 13 gigawatts, 10 gigawatts is FDRE. We expect the 13 gigahertz to have at least 13 gigawatts of wind component, which is at the various stages of bidding. Where reverse auction was there earlier, is there today, will be there in the future. There is no impact of this. In addition to that, about four gigawatts of C&I segment will flow in. So we're talking about 40 gigawatts of pipeline which has nothing to do with this reverse auction. And as a country, we have been doing in the range of 1.5-2.2 in the last five years, per year. And we expect to reach about 3.5 gigawatts this year. Even if we achieve eight gigawatts per year, we are looking at a pipeline of eight for next five years. That is the order pipeline that is available. So as a country, what is important is not the reverse auction. It has just no impact, I repeat no impact, on the order pipeline for the next 5-6 years. The execution on the ground will decide how much capacity we will add. We all need to concentrate on execution and get that capacity up on the grid.
The point being, for the next five years, because of the orders already bid for and in the pipeline, there is no impact on that existing five-year executable order book that you may currently have or will get.
But for the orders beyond that, if there is a negative in the reverse bidding process, it comes into play then. Is that what you're saying?
JP Chalasani: No, because this reverse auction is only applicable to the small component of pure wind bids. Reverse auction has always been there. And given the pure wind bids, let’s say we appreciate the fact that reverse auction has been not taken in the bidding guidelines. It was only told that reverse auction is not mandatory. Reverse auction has been there in the FDRE bids, as well as in the hybrid bids and RTC bids. And it will continue. Most of the bidding, henceforth will happen through this route because as the renewable capacity increases you will need to get in combination solar, wind and storage because we are reaching a stage where the renewable capacity will be like a fossil fuel capacity where you can dispatch whenever you want. Those are those FDRE bids.
Therefore, moving ahead, the pure wind bids are not going to move the needle. What is going to move the needle is the bids of FDRE, hybrid, or RTC, which has no impact on reverse auction. So I don't see at present, or even in the future this having a significant impact or going to move the needle. I'm not saying for the sake of saying, but because we believe it firmly.
Mr. Chalasani, therefore, I'm assuming the market believes that if not the order wins or the order execution, but operational margins would come under pressure as well. You have negated that. I'm just wanting it for record.
You believe the next 2-3 years the earlier guidance on execution and margin stays pat.
JP Chalasani: Absolutely, without any doubts.
