Company Overview:
NTPC Green Energy Ltd (NGEL), a wholly owned subsidiary of NTPC Ltd is the largest renewable energy public sector enterprise (excluding hydro energy) in term of operating capacity as of Sep’24 and power generation as of Mar’24. The company’s renewable energy portfolio includes both solar and wind power assets with presence across multiple locations in more than 6 states which helps in mitigating risk of location specific generation variability. As of Sep’24, NTPC Green’s operational capacity stood at 3,220 MW of solar projects and 100 MW of wind projects across 6 states with average Power Purchasing Agreement (PPA) period of 25 years. Further, it has 13,576 MW of contracted & awarded projects and capacity under pipeline of 9,175 MW as of Sep’24.
Key Highlights:
1. Strong parentage: The company is a wholly owned subsidiary of NTPC Ltd, a ‘Maharatna’ central public service enterprise, which contributes ~17% to India’s total installed capacity and ~24% to the total power generated in India as of Sep’24. NGEL benefits from the support, vision, resources and experience of the NTPC group which is currently looking to expand its non-fossil-based capacity to 45-50% of its portfolio which will include 60 GW renewable energy capacity by CY32. The company believes it can use the brand recall and long-term experience of dealing with state DISCOMs of NTPC Ltd to grow its portfolio and business in India.
2. Robust product portfolio with diversification across geographies and offtakers: NGEL has a large portfolio of utility-scale solar and wind energy projects coupled with projects for PSUs and Indian corporates. As of Sep’24, the company had 17 off-takers across 41 solar and 1 wind projects. The total portfolio as of Sep’24, consists of 26,071 MW including 3,320 MW of operating projects; 13,576 MW of contracted & awarded projects and 9,175 MW of capacity under pipeline. NGEL’s portfolio is spread out across Rajasthan, Gujarat, Tamil Nadu, Andhra Pradesh, Madhya Pradesh and Uttar Pradesh which helps in mitigating risk of location specific generation variability.
3. Experience in renewable energy project execution: The company along with the NTPC Group have a strong track record of developing, constructing and operating renewable power projects, driven by experienced in-house management and procurement teams. NGEL’s in-house team works with thirdparty aggregators, developers and EPC contractors to manage the land acquisition process. As of Sep’24, the company owns ~8,900 acres of freehold land and ~45,700 acres of leasehold land. Further, the company aims to leverage NTPC Group’s economies of scale to negotiate and reduce the cost of components, equipment and materials for its solar and wind projects from domestic and foreign original equipment manufacturers and suppliers.
4. Access to low cost of capital: The company’s focus on maintaining high capacity utilization, operational efficiencies, low operating costs along with the strong parentage and diversified portfolio helps it to maintain healthy coverage ratios. Further, leveraging NTPC group’s high credit rating and strong balance sheet provides access to low cost of capital.
Valuation: At the upper price band of Rs 108, NGEL is valued at FY24 EV/EBITDA of 53.4x on post issue capital. The company will increase its operational capacity to 6/11/19 GW by FY25E/FY26E/FY27E respectively from 3.3 GW as of Sep’24. Basis our back of the envelope calculation, at upper price band, the issue is priced at FY25E/FY26E/FY27E EV/EBITDA multiple of 35.3x/18.3x/10.1x and EV/MW of Rs 16.8 cr/9.0 cr/5.1 cr respectively. The company has exponential growth potential in medium term with its Revenue/EBITDA/PAT expected to grow at a CAGR of 79.0%/117.2%/123.8% to Rs 11,250 cr/9,563 cr/1,980 cr respectively over FY24-27E period. We recommend investors to subscribe to the issue at cut-off price for long term.
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