My­trah En­ergy looks to cut power costs over five years

Business Standard - - COMPANIES - B DASARATH REDDY

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.

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