Azure Power Hopeful of No Price Markdowns As PSA's Finally Start on Its 4 GW Mfg Linked Win

At an analyst call post its Q1 results for 2022-23, Azure Power CEO Ranjit Gupta expressed the hope that there will be no price markdowns on the winning bid rates, for its 4 GW tender manufacturing linked tender wins. Azure had won a total project capacity of 4 GW, even as Adani Green Energy won 8 GW, with a manufacturing commitment of 1 GW and 2 GW respectively for both the winners.

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This marks a change from the apprehensions of a markdown that the firm had expressed in previous presentations to analysts, especially when not a single PSA (Power Sales Agreement) was signed for over a year by SECI. What seems to have changed the sentiment is the signing of the recent 800 MW PSA with GRIDCO by SECI, where a third will accrue to Azure Power as its proportionate share. The PSA's have been signed at Rs 2.61, the same as the winning bid price.

Gupta also expressed the hope that with another 1150 MW of PSA about to be finalised, and talks at an advanced stage for a further 1000 MW (divided between two discoms at 500 MW each), progress would finally bear fruit on the long pending PPA's (Power Purchase Agreement)  on these massive tenders.

As reaching 3000 MW  to 4,000 MW would  possibly allow the bid winners to finally start work on the projects, and manufacturing lines too. Azure Power had tied up with Waaree Energies for the manufacturing part of its tender.

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To a question on the rise in costs and its possible impact, Chief Operating Officer Murali Subramanian tried to put things in perspective.

He asserted that you can't just do a like-for-like DC costs because what constitutes a DC has also changed. Where earlier it was based on a  polycrystalline module with six cells, today we are looking at monopod modules, bifacial modules, using trackers. Thus, he added, the yield per megawatt has gone up and with its, overall performance.

Thus the cost per watt metric makes sense if the technology is standard. Which is not the case anymore. He also mentioned the drop in interest rates to drive home his point that cost increases have to be seen versus other changes in the operating environment.

Azure Power would also be expanding its portfolio with both wind and solar going ahead, as it has demonstrated with the winning  bids it made in recent Hybrid tenders.

CEO Gupta also stressed that he saw high risks of disruptions from Hydrogen and falling storage costs, and the firm would be tracking progress there closely to make course corrections for the future too.

With the rising use of trackers in India again, worries were expressed about the impact of rising steel prices on those costs, as steel remains the largest cost component of tracker costs.