Gujarat-based power company Torrent Power has disclosed its plans to achieve a 5 GW renewable energy portfolio over the next three to five years through inorganic acquisitions and greenfield projects.

The company currently has a renewable energy project pipeline of 700 MW.

During the recent quarterly earnings conference call, the company’s Chief Financial Officer, Saurabh Mashruwala, discussed the financial performance and strategic vision, highlighting its focus on expanding in distribution, renewable energy, and transmission sectors.

Torrent Power has identified distribution, renewables, and transmission as key areas for growth.

The company also disclosed that it had been allocated 6,000 hectares of land in Gujarat, where it plans to set up ~3 GW of renewable projects encompassing both solar and wind energy.

The project development is expected to commence upon securing power purchase agreements (PPAs) or winning bids, ensuring the optimal utilization of resources.

The company expects the projected internal rate of return for newly constructed assets to be around 12%, although it may vary based on site-specific factors.

The total capital expenditure is estimated to be approximately ₹50 billion (~$608.7 million) for renewables currently under construction. Of this amount, ₹8 billion (~$97.4 million) to ₹10 billion (~$121.7 million) have already been spent, with most of the remaining capex to be incurred over the next two years.

Mashruwala highlighted Torrent Power’s robust financial performance in the renewables segment, with the company reporting an EBITDA of ~₹8.5 billion (~$103,4 million) for FY 2023, a significant increase from the previous year’s ₹6.5 billion (~$79.1 million). This notable growth underscores the success of Torrent Power’s strategic focus on renewable energy.

Inorganic Acquisitions and Greenfield Projects

While specific details regarding acquisitions were not disclosed during the conference call, Mashruwala confirmed that Torrent Power is evaluating potential inorganic acquisitions, including discussions regarding assets from Renew Power. The deliberations are ongoing, and no concrete decisions have been reached yet.

The company’s approach to inorganic growth aligns with its goal of expanding its renewable energy portfolio swiftly and effectively.

He also stated that Torrent is one of the four bidders for acquiring SKS Power, along with Jindal Steel Power, Vantage Point, and Sharda Energy.

Distribution Focus and Regulatory Processes

While Torrent Power emphasizes its renewable energy ventures, the company remains committed to its core distribution business and recognizes the importance of focusing on it as a vital part of its operations.

Mashruwala mentioned that Torrent Power has participated in the bidding process for transmission projects at various locations in Maharashtra, but the regulatory processes involved will likely extend the timeline by three to six months.

Future Opportunities

Torrent Power’s management expressed interest in exploring new areas and business segments. The company is actively pursuing corporate PPA market opportunities and has already executed 20 MW of PPAs. It is also considering the group captive arrangement for selling renewable power, which involves setting up subsidiaries within Torrent Power.

Additionally, Torrent Power is exploring new segments, including battery storage and pump hydro storage.

Torrent Power recently raised ₹6 billion (~$72.7 million) through the issuance of non-convertible debentures (NCD) on a private placement basis. The company issued and allotted 60,000 Series 11 (series 11A- 11F) Secured, Rated, Listed, Taxable, Non-Cumulative, Redeemable, and Non-Convertible Debentures of ₹100,000 each (~$1,212).

Torrent Power’s profit increased by 371% YoY to ₹21.71 billion (~$262.36 million) in FY23, mainly due to reduced transmission and distribution losses and higher generation throughout the quarters.