Azure Power to Announce Results for Fiscal Fourth Quarter 2020

Azure Power Global Limited (NYSE: AZRE), as leading independent solar power producer in India, announced its consolidated results under United States Generally Accepted Accounting Principles (“GAAP”) for the fiscal fourth quarter ended March 31, 2020.

Fiscal Year and Fourth Quarter 2020 Period Ended March 31, 2020 Operating Highlights:

  • Operating Megawatts (“MW”) were 1,808 MWs, as of March 31, 2020, an increase of 25% over March 31, 2019. Operating and Committed Megawatts were 7,115 MWs, as of year ended March 31, 2020, an increase of 112% over the year ended March 31, 2019. 2,000 MWs of Committed Capacity is a greenshoe option that has been exercised by the Company as part of an auction that was won but this capacity has yet to receive a Letter of Award.
  • Revenue for the quarter ended March 31, 2020 was INR 3,675 million (US$ 48.7 million), an increase of 29% over the quarter ended March 31, 2019.
  • Net loss for the quarter ended March 31, 2020 was INR 394 million (US$ 5.2 million). During the quarter, our results were negatively impacted by higher charges amounting to INR 551 million (US$ 7.3 million), partially offset by higher revenue, refer the detailed explanation in the net loss section of the commentary below.
  • Non-GAAP Adjusted EBITDA for the quarter ended March 31, 2020 was INR 2,647 million (US$ 35.1 million), an increase of 24% over the quarter ended March 31, 2019, despite being negatively impacted by additional expenses of INR 169 million (US$ 2.2 million) related to management transition and accruals related to stock appreciation rights included in general and administrative expenses.
  • Non-GAAP Free Cash to Equity for Operating Assets for fiscal year 2020 was INR 3,237 million (US$ 43.0 million), an increase of INR 424 million or 15% over fiscal year 2019.

Key Operating Metrics

Electricity generation during the quarter and year ended March 31, 2020 was 868 million kWh and 2,870 million kWh, respectively, an increase of 343 million kWh or 65%, over the quarter ended March 31, 2019, and an increase of 1,136 million kWh, or 66%, over the year ended March 31, 2019. The increase in electricity generation was principally a result of additional operating capacity during the period driven by the commissioning of new projects. Our Plant Load Factor (“PLF”) for the quarter and the year ended March 31, 2020, was 22.3% and 19.5%, respectively, compared to 20.5 % and 18.6%, respectively, for the same comparable period in 2019.

During the fiscal year, we completed 367 MWs (AC) and 610 MWs (DC). During the fourth quarter, 4 MWs (AC) and 11 MWs (DC) were put into operation. Project cost per megawatt operating consists of costs incurred for one megawatt of new solar power plant capacity during the reporting period. The project cost per megawatt (DC) operating for the year ended March 31, 2020 decreased by INR 5.2 million (US$ 0.07 million), or 13%, to INR 35.5 million (US$ 0.47 million) primarily due to lower costs on account of the reduction in solar module prices for the projects commissioned during the period. The project cost per megawatt (AC or megawatt capacity per the PPA) operating for the year ended March 31, 2020 was INR 48.9 million (US$ 0.65 million), compared to INR 50.4 million, for the year ended March 31, 2019, on account of the reduction in solar module prices which was partially offset by additional safeguard duties paid by the Company. Excluding the impact of safeguard duties, the DC and the AC costs per megawatt for fiscal year 2020, would have been lower by approximately INR 2.9 million (US$ 0.04 million) and INR 4.9 million (US$ 0.07 million), respectively.

As of March 31, 2020, our operating and committed megawatts increased by 3,759 MWs to 7,115 MWs compared to March 31, 2019. 2,000 MWs of Committed Capacity is a greenshoe option that has been exercised by the Company as part of an auction that was won but this capacity has yet to receive a Letter of Award.

Nominal Contracted Payments

Our Power Purchase Agreements (“PPAs”) create long-term recurring customer payments. Nominal contracted payments equal the sum of the estimated payments that the customer is likely to make, subject to discounts or rebates, over the remaining term of the PPAs. When calculating nominal contracted payments, we include those PPAs for projects that are operating or committed.

The following table sets forth, with respect to our PPAs, the aggregate nominal contracted payments and total estimated energy output as of the reporting dates. These nominal contracted payments have not been discounted to arrive at the present value.

Nominal contracted payments as of March 31, 2020 increased compared to as of March 31, 2019 as we entered into additional PPAs received a LOA and elected to exercise a greenshoe option for additional capacity.

Our nominal contracted payments are not impacted for the delays in construction due to COVID-19, as revenues from our PPA’s start after the date of commissioning of the project.

Portfolio Revenue Run-Rate

Portfolio revenue run-rate equals annualized payments from customers extrapolated based on the operating and committed capacity as of the reporting dates. In estimating the portfolio revenue run-rate, we multiply the PPA contract price per kilowatt hour by the estimated annual energy output for all operating and committed solar projects as of the reporting date. The estimated annual energy output of our solar projects is calculated using power generation simulation software and validated by independent engineering firms. The main assumption used in the calculation is the project location, which enables the software to derive the estimated annual energy output from certain meteorological data, including the temperature and solar insolation based on the project location.

The following table sets forth, with respect to the our PPAs, the aggregate portfolio revenue run-rate and estimated annual energy output as of the reporting dates. The portfolio revenue run-rate has not been discounted to arrive at the present value.

The portfolio revenue run-rate increased by INR 27,651 million (US$ 366.8 million) to INR 53,591 million (US$ 710.9 million) as of March 31, 2020, as compared to March 31, 2019, due to an increase in operational, committed, and greenshoe capacity.

Fiscal Fourth Quarter 2020 year ended March 31, 2020 Consolidated Financial Results:

Operating Revenues

Operating revenues for the quarter ended March 31, 2020 were INR 3,675 million (US$ 48.7 million), an increase of 29% from INR 2,847 million in the same period in 2019. This increase was driven by the revenue generated from projects which were commissioned during the period after March 31, 2019 until March 31, 2020. Our revenues for the quarter ended March 31, 2020 were negatively impacted by INR 43 million (US$ 0.6 million) due to power curtailment in Andhra Pradesh (“AP”). Our management believes that AP power curtailment is in contempt of a court ruling and we have filed an action for recovery.

Cost of Operations (Exclusive of Depreciation and Amortization)

Cost of operations for the quarter ended March 31, 2020 increased by 29% to INR 329 million (US$ 4.3 million) from INR 256 million in the same period in 2019. This increase in the cost of operations was primarily due to an increase in operational expenses from projects commissioned during the period from April 1, 2019 through March 31, 2020. The cost of operations during the three month period ended March 31, 2020 per megawatt was approximately INR 0.18 million (~US$ 2,000) during the quarter, in line with the same period in 2019, reflecting productivity improvement offset by higher lease costs from plants that were commissioned in solar parks during the year.

General and Administrative Expenses

General and administrative expenses for the quarter ended March 31, 2020 increased by INR 250 million (US$ 3.3 million) to INR 699 million (US$ 9.3 million) compared to the same period in 2019. The higher general and administrative expenses primarily comprised of accrual of leases (ASC Topic 842) of INR 114 million (US$ 1.5 million) as well as additional expenses of INR 169 million (US$ 2.2 million) comprised of INR 65 million (US$ 0.9 million) of higher payroll charges related to management transition and accruals of INR 103 million (US$ 1.4 million) related to stock appreciation rights due to the increase in the share price during the quarter. This was partially offset by savings in legal and professional charges.

Depreciation and Amortization Expenses

Depreciation and amortization expenses during the quarter ended March 31, 2020 increased by INR 340 million (US$ 4.5 million), or 67%, to INR 850 million (US$ 11.3 million) compared to the same period in 2019. The increase relates to the additional depreciation on capital expenditures for the 25% increase in operating MWs.

Interest Expense, Net

Net interest expense during the quarter ended March 31, 2020 increased by INR 546 million (US$ 7.2 million), or 38%, to INR 1,994 million (US$ 26.4 million) compared to the same period in 2019. The increase in net interest expense was primarily due to an increase in interest expense of INR 401 million (US$ 5.3 million) on borrowings related to projects commissioned in the current financial period, and lower interest income of INR 50 million (US$ 0.7 million) on account of lower free cash available during the quarter ended March 31, 2020, as well as an INR 95 million (US$ 1.3 million) charge related to refinancing of a loan.

Other Income

Other Income, primarily income from current investments, increased by INR 52 million (US$ 0.7 million) during the quarter ended March 31, 2020 to INR 73 million (US$ 1.0 million) as compared to the same period in 2019.

Loss on Foreign Currency Exchange

The Indian Rupee (“INR”) depreciated against the U.S. dollar by INR 4.01 for every US$ 1.00 (or 5.6%) during the quarter from December 31, 2019 to March 31, 2020. During the quarter ended March 31, 2020, the Company incurred an expense on foreign exchange of INR 188 million (US$ 2.5 million) compared to gain of INR 17 million, during the quarter ended March 31, 2019. The Company had higher foreign exchange expenses primarily due to a loss of INR 158 million (US$ 2.1 million) on reinstatement of outstanding foreign currency loans due to the depreciation of the INR against the Dollar, as compared to quarter ended March 31, 2019.

Income Tax Expense (Benefit)

Income tax benefit decreased during the quarter ended March 31, 2020 by INR 100 million (US$ 1.3 million) to income tax expenses of INR 82 million (US$ 1.1 million), compared to an income tax benefit of INR 18 million in the same period in 2019. The decrease in the income tax benefit was primarily on account of the reversal of deferred tax assets as the company now expects to pay lower taxes after eliminating intercompany margins earned by our Engineering, Procurement and Construction (“EPC”) business.

Net Loss

The net loss for the quarter ended March 31, 2020 increased by INR 635 million (US$ 8.4 million) to INR 394 million (US$ 5.2 million) compared to a net profit of INR 241 million for the same period in 2019.

The loss for the quarter included charges amounting to INR 551 million (US$ 7.3 million) comprising of the following items: INR 43 million (US$ 0.6 million) due to power curtailment in Andhra Pradesh, INR 65 million (US$ 0.9 million) of higher payroll charges related to management transition, accruals of INR 103 million (US$ 1.4 million) related to stock appreciation rights due to the increase in the share price during the quarter, an INR 95 million (US$ 1.3 million) charge related to refinancing of a loan, loss of INR 158 million (US$ 2.1 million) on a reinstatement of outstanding foreign currency loans due to the depreciation of the INR against the Dollar, and a INR 96 million (US$ 1.3 million) reversal of deferred tax assets due to lower taxes on intercompany margins earned by our EPC business, offset by higher revenue from operations.

Cash Flow and Working Capital

Cash from operating activities for the quarter ended March 31, 2020 was INR 1,838 million (US$ 24.4 million) compared to INR 1,332 million for the comparable quarter. Cash generation from operating activities for the year ended March 31, 2020 was INR 3,678 million (US$ 49.2 million) compared to an inflow of INR 2,138 million for the comparable period. The improvement from the comparable period in 2019 was due to an increase in operating revenue during the year ended March 31, 2020, partially offset by higher general and administrative and interest expenses.

During the quarter ended March 31, 2020, the working capital inflow was INR 487 million (US$ 6.5 million), compared to an inflow of INR 549 million, for the prior comparable period in 2019. During the year ended March 31, 2020, the working capital outflow was INR 39 million (US$ 0.3 million), compared to an outflow of INR 1,520 million for the year ended March 31, 2019.

The Company’s days receivable increased to 126 days as of March 31, 2020, as compared to 122 days as of March 31, 2019.

Cash used in investing activities for the year ended March 31, 2020 was INR 18,256 million (US$ 242.7 million), compared to INR 26,053 million for the comparable period in 2019, primarily on account of lower value of purchases of property plant and equipment for new solar projects amounting to INR 18,321 million (US$ 243.6 million), for the year ended March 31, 2020, compared to INR 26,029 million for the year ended March 31, 2019.

During the quarter ended March 31, 2020, cash generated from investing activities was INR 3,684 million (US$ 48.9 million) as compared to outflow of INR 12,922 million in the comparable period in 2019, primarily on account of sales of mutual funds and lower capital expenditures. During the quarter ended March 31, 2020, the Company incurred INR 1,524 million (US$ 20.2 million) on account of capital expenditures compared to INR 11,469 million, in the comparable period in 2019.

Cash generated from financing activities for the year ended March 31, 2020 was INR 16,146 million (US$ 214.3 million) compared to cash from financing activities of INR 26,887 million in the prior comparable period in 2019, primarily due to the public issuance of equity shares of INR 13,706 million in the previous year as compared to INR 5,317 million (US$ 70.5 million) from a private placement of equity shares in the current fiscal year. Cash generated from financing activities was INR 235 million (US$ 3.1 million) for the quarter ended March 31, 2020 compared to an inflow of INR 1,773 million for the comparable period in 2019, primarily due to higher loans and debentures drawdown in comparable quarter of the prior year.

Liquidity Position

As of March 31, 2020, the Company had INR 9,792 million (US$ 129.9 million) of cash, cash equivalents and current investments. The Company had undrawn project debt commitments of INR 19,360 million (US$ 256.8 million) as of March 31, 2020.

Adjusted EBITDA

Adjusted EBITDA is a Non-GAAP metric, please refer to the reconciliation of this non-GAAP metric in this document.

Adjusted EBITDA was INR 2,647 million (US$ 35.1 million) for the quarter ended March 31, 2020, compared to INR 2,142 million for the quarter ended March 31, 2019. The increase was primarily due to the increase in revenue during the quarter ended March 31, 2020, partially offset by higher expenses related to operations and general and administrative expenses.

The Adjusted EBITDA for the quarter ended March 31, 2020, was negatively impacted by additional expenses of INR 169 million (US$ 2.2 million) from management transition related charges and accruals related to stock appreciation rights due to the increase in the share price during the quarter included in general and administrative expenses.

Cash Flow to Equity (CFe) for Operating Assets

CFe is a Non-GAAP metric, please refer to the reconciliation of this non-GAAP metric in this document.

Cash Flow to Equity for Operating Assets was INR 3,237 million (US$ 43.0 million) for fiscal year 2020, an increase of 15% compared to INR 2,813 million (US$ 37.3 million) in fiscal year 2019. The increase in Cash Flow to Equity for Operating Assets was primarily driven by higher revenues from the completion of new projects during the current year.

COVID-19 Update

The World Health Organization (“WHO”) declared the Corona Virus Disease (COVID-19) as a global pandemic. Our plants have remained fully operational as electricity generation is designated as an essential service in India. We have been receiving payments towards electricity supplied from most of our customers in normal course and there has only been minor curtailment of our plants. The Government of India has taken additional measures to ensure payment security for Renewable Energy projects during recent months.

Our liquidity position remains sufficient to continue normal operations through at least the end of fiscal year ending March 31, 2021. As of May 31, 2020, our unrestricted cash and cash equivalents were approximately INR 7,900 million (US$ 105 million). To further bolster liquidity, we are exploring working capital lines and revolving credit lines with domestic and international financial institutions.

Financing for our 1,290 MWs of under construction projects remain on schedule. The Assam 1 (90 MW) and Rajasthan 6 (SECI 600 MW) projects have debt funding in place.

Our plants under construction stopped activity during the Government of India “lock down” directive but have resumed construction since end of April 2020. We currently expect some delays in completion of projects under construction but our counterparties for these plants have recognized our force majeure claim and we do not expect to incur any penalty from delays related to COVID-19 for our plants under construction. We do not foresee any increase in our project costs related to COVID-19 as of date and would note that metal and module prices have recently declined due to softness in global demand.

Other Company matters

During the fourth fiscal quarter, Caisse de depot et placement du Quebec (CDPQ) has increased its investment in the equity shares of our Company and now holds 50.91% of outstanding shares of our Company as of March 31, 2020. After CDPQ became a majority shareholder, credit ratings agency Moody’s upgraded the rating of the senior notes and bonds issued by subsidiaries Azure Power Energy Limited and Azure Power Solar Energy Limited by one notch to Ba2 and Ba1, respectively.

During the current quarter, we had received a favourable order from the Appellate Tribunal for Electricity (“APTEL”) in respect of our ongoing litigation in relation to the 50 MW Karnataka project, where APTEL had set aside the order of Karnataka Regulatory Commission (“KERC”), wherein the KERC had reduced the extension of time, reduced the PPA tariff and imposed liquidated damages.

Guidance for Fiscal Year 2021

The following statements are based on our current expectations. These statements are forward-looking and actual results may differ materially. For fiscal year ending March 31, 2021, we continue to expect to have between 2,650 – 2,950 MWs operational and revenues of between INR 15,800 – 16,600 million (or US$ 210– 220 million at the March 31, 2020 exchange rate of INR 75.39 to US$ 1.00) for fiscal year ending March 31, 2021.

With respect to our revenue guidance, we would like to highlight that approximately 90% of the expected revenue is from projects already commissioned and operating and have not been materially impacted due to COVID-19. Our remaining revenue is subject to when plants under construction are completed and completion timelines are currently more difficult to forecast due to disruptions related to COVID-19. The timing of commissioning of our under-construction projects does not impact our revenues we expect during the 25-year PPA because revenues begin at the date of commissioning.

For the first fiscal quarter of 2021, we expect revenues of between INR 3,800 – INR 4,000 million (or US$ 50.5 – US$ 53.0 million at the March 31, 2020 exchange rate of INR 75.39 to US$ 1.00) and a PLF of between 22.0% and 23.0%. Due to seasonality, we expect a PLF of between 18.0 – 19.0% for the second fiscal quarter of 2021.

Webcast and Conference Call Information

[The Company will hold its quarterly conference call to discuss earnings results on Monday, June 15, 2020 at 8:30 a.m. U.S. Eastern Time. The conference call can be accessed live by dialing +1- 323-386-8721 (in the U.S.) and +91-22-6280-1444 (outside the U.S.) and reference the Azure Power Fourth Quarter Earnings Call.

Investors may access a live webcast of this conference call by visiting http://investors.azurepower.com/events-and-presentations. For those unable to listen to the live broadcast, a replay will be available approximately two hours after the conclusion of the call. The replay will remain available until Monday, June 15, 2020 and can be accessed by dialing +1-833-289-8317 (in the U.S.) and +91-22-7194-5757 (outside the U.S.) and entering the replay passcode 29352. An archived podcast will be available at http://investors.azurepower.com/events-and-presentations approximately 12 hours following the conclusion of the call.

Exchange Rates

This press release contains translations of certain Indian rupee amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise stated, the translation of Indian rupees into U.S. dollars has been made at INR 75.39 to US$1.00, which is the noon buying rate in New York City for cable transfer in non-U.S. currencies as certified for customs purposes by the Federal Reserve Bank of New York on March 31, 2020. The Company makes no representation that the Indian rupee or U.S. dollar amounts referred to in this press release could have been converted into U.S. dollars or Indian rupees, as the case may be, at any particular rate or at all.

Source: Azure Power 

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