We will set up 3 GW renewable energy projects within 2 yrs: Rahul Munjal, Chairman, Hero Future Energies & Mohamed Jameel Al Ramahi, CEO, Masdar
New Delhi : Hero Future Energies has just announced Abu Dhabi Future Energy Company or Masdar will invest $150 million in the company that will help fund the expansion of its renewable energy portfolio, including in selected international geographies. In an exclusive interview with ETEnergyworld, Rahul Munjal, Chairman and Managing Director, Hero Future Energies and Masdar CEO Mohamed Jameel Al Ramahi put that investment in perspective and share the broad vision behind the partnership. Edited excerpts..
What is the larger focus of Masdar’s investment strategy and how does it view the Indian energy market?
Al Ramahi : We see a lot of opportunities in India for growth in the renewable energy sector. When it comes to clean energy, India cannot be ignored. This focus is also driven by the unique bilateral relationship between the UAE and the current government in India. The Indian market has always been of interest to us. We have looked at several opportunities to invest in India over the past few years and have finally found the right partner, company and team. This is why we are excited to partner with Hero Future Energies (HFE).
What would be the focus of the two partners going forward in terms of developing projects?
Al Ramahi: We would like to continue growing in India and explore within our common jurisdictions how we can focus on Asia and the opportunities that exist in this region. We are happy to support Hero Future Energies. We found in HFE the right business partner and we realised that we have many common objectives. We are comfortable investing in them. We are looking at India to be a primary growth market for HFE. The country still has significant untapped potential when it comes to renewable energy projects.
How does HFE plan to leverage the partnership with Masdar to develop its portfolio?
Munjal : This is an industry where scale matters and large companies are getting larger. In ten years from now, we are looking at a capacity of 10 Gw or more. And that focus on clean energy comes on the background of the need to address climate change. Today, governments around the world and citizens have started the fight for the cause of cutting climate change. When it comes to this transaction, the partnership with both IFC and Masdar helps us on the Government-to-Government side and the technology while we come with valuable operational knowledge.
What is HFE’s overall plan for capacity addition and the broad growth strategy?
Munjal: Our main focus is capacity expansion along with improving returns. We are looking at a growth that gives high returns. Our partners have learned a lot of things from our past and so have we. The ultimate aim is to become the most profitable renewable energy company. Our immediate target is to set up around 3 Gw capacity projects within the next two years. In terms of geographical expansion, we want to enter 1-2 countries every year. While our main focus will still be India, we are aiming to be present in at least 6 countries over five years or so. And these new geographies will be chosen with the aim of balancing out the risks present in the India market. For example, we need to diversify into other countries to address the risk of interest rates in India. In terms of technology, we are currently more bullish on solar and the entire industry is more bullish on solar. That is driven by the experience witnessed in the wind energy sector in the recent past. If that situation changes we can look at increasing focus on wind. Otherwise, we will continue to be more bullish on solar.
How do you view the role of storage technology as an enabler for renewables in India?
Munjal : We are a technology friendly company and are focussing on segments like battery storage. The country has huge plans for renewable energy capacity expansion and when all of that GW scale capacity comes into the grid, it will need to be stabilized. That challenge is the elephant in the room and addressing it is the next big frontier for India. India has a 450 Gw target for RE capacity expansion in the long run and around 10 per cent of that will be done through storage. India must work on the premise that renewable energy can provide round-the-clock power. The system should be able to resort to gas or storage as an option when wind or sun is not available. We should not look for cookie cutter solutions as there are unique regional nuances for green energy IPPs in India. Both RE and storage have to go hand-in-hand, whether it is Li-ion or some other technology.
What is Hero Future Energy’s larger thinking on the capex requirement for the huge capacity addition being planned?
Munjal : The real question is not about how much capacity is being set up. Seven years back, 1 Gw used to look like a pipedream. Today, 1 Gw seems small. We wish to set up 1 Gw of projects every year. There is enough capital available for sustainability but that growth has to be achieved profitably.
There have been reports pointing out a shift in the company’s base to UK. What is the plan there?
Munjal : The renewable energy business requires low cost capital and, after the US, London is the deepest market for green bonds. So, we want to be close to the markets. We realize that our profitability will come from low cost capital. Also, geographically, India seems to be a corner of the world. By going to London, we are taking the bull by the horns. With IFC and Masdar by our side we will be getting a lot of credibility.
How would the two partners, Hero Future Energies and Masdar, utilize the opportunity thrown up by the ongoing energy transition where new technologies like floating solar are fast changing the face of the industry?
Al Ramahi : The economic case for the decarbonisation of the power sector, whether in India or the Middle East & North Africa, is today undeniable. Accordingly, the appetite of lenders and investors to support the growth of the renewable energy and clean-tech sectors is growing. That is opening up new geographies, as well as new technologies, like floating solar and wind, and indeed other technologies, such as battery storage, green building solutions, and electric vehicles. As a global renewable energy leader, Masdar is active in many of these emerging sectors, besides being a developer and investor in utility-scale renewable energy projects. For example, in 2017, we inaugurated the world’s first commercial-scale floating wind farm, Hywind Scotland, while a year later, we launched the world’s first smart battery connected to an offshore wind farm, also in Scotland. At the same time, we are expanding our geographical footprint – to Saudi Arabia and Morocco, Eastern Europe, Central Asia, and now, of course, India and hopefully other countries in Asia. Thanks to the leadership of the Indian government and business conglomerates like Hero Future Energies, India is today without question one of the global centres of the renewable energy industry. At Masdar, we are eager to participate in the clean energy transformation underway in this country. By sharing our knowledge and the expertise we have gained over the last 13 years, we can also support the diversification and growth of Hero Future Energies, whether in its home market or new markets. We believe Hero is the ideal partner for us.
Source : economictimes
