Mytrah Energy looks to cut power costs over five years

Hyderabad-based renewable power company Mytrah Energy (India) Limited has set a target of four per cent reduction in power costs year-onyear for the next five years. During this time, it also aims to take the installed capacity to 5,000 megawatts (Mw) from the current 1,500 Mw.

“We will try to achieve this internal target by ensuring lower cost of funds through efficient funding channels on one side and with efficient deployment of finances on the other side, while leveraging the technology, including artificial intelligence, to help increase the generation at our sites,” said Mytrah Energy managing director Vikram Kailas.

The company this year had bid for wind energy projects at ~3.46 per unit, which it expects to go to below ~3 per unit in the next three years. In a business that offers an average 10 per cent margin, addition of five to six per cent by way of cost reduction makes a big difference, according to Kailas. Recent reports suggested an increase in finance costs owing to higher interest costs of the newly constructed projects. This puts pressure on the management to look for cheaper and more long-term funds.

The under-construction projects of the firm are expected to take the total debt to ~8,500 crore by the end of this year from the current ~6,000 crore, despite a four to five per cent reduction in the debt of the operational projects in 18year repayment cycle. In a pre-IPO (initial public offering) round this week, the company is raising $300 million (~1,900 crore) from Piramal Capital’s Structured Finance Group and the latter's Dutch partner APG in order to provide exit to all existing investors, including IDFC Alternatives, and to fund growth. Next year, it plans to raise $500 million by way of equity capital or other means to take out this mezzanine debt and use the remaining proceeds to fund the growth. The company expects revenue to reach ~3,000 crore in the current year from ~2,300 crore last year.

When asked if the likely exit of existing investors was due to uncertainty over IPO, Kailas said the firm has been waiting to reach a certain scale before going for IPO and the final choice (between IPO and other options) would depend on the level of advantage it gains. The promoters’ group of this Alternative Investment Market-listed company holds 72.6 per cent share. Use of new technology as well as Generation Management Control system developed in-house by Mytrah has already resulted in two to three per cent additional generation at its sites as compared with many other developers.