We will import energy models of the UK to India: Hero Future Energies CMD

HFE aims at conservative growth; favours quashing of reverse bidding in solar energy

Hero Future Energies (HFE), the clean energy arm of Hero Group, became the first Indian green energy company to shift base to the UK, expecting to tap into global funds for future growth. The decision bore fruit last August when leading private equity fund KKR invested $450 million (along with parent company Hero Group) in HFE.

The fund infusion came just months after HFE reported a loss of $108 million in the financial year that ended in March 2022.

The company reported that its “networth has completely eroded owing to accumulated losses of $378 million, and the group’s current liabilities of $578 million exceeded its current assets of $264 million as on balance sheet date (March 31, 2022)”. 

Rahul Munjal, chairman and managing director, HFE, the first in the Hero clan to set up a non-mobility business, is confident of robust growth, but said it is best to remain “conservative and cautiously optimistic”.

Speaking with Business Standard, Munjal said the KKR+Hero Group funding round is minimally for debt repayment and largely for growth.

“This money is enough to last two years. We are in the growth phase like everyone else. We will fundraise. Additionally, thanks to several initiatives of the Centre, our cash flow has improved. Be it distribution company payment under the late payment surcharge scheme or of viability gap funding, that has unlocked a lot of cash for us,” said Munjal.

While he did not offer specific details about future projects, he said the company has “creative projects” lined up in the UK and will increase exposure to Vietnam, Bangladesh, along with India.

“The UK is the most mature energy market in the world. We see the UK as our test pilot. What we do on a small scale there, we bring to India on a larger scale. A lot of derivatives are emerging in this financially viable industry. Our research and development (R&D) is in the UK and actual execution at a large scale in India,” said Munjal.

Some of the novel projects the company is looking at in the UK are battery storage with peak power or battery storage with spot pricing.

The company has stayed away from aggressively low bidding in the Indian solar and wind power projects market.

Munjal said the company wishes to continue the same.

“We want to be a cautiously optimistic and very conservative company. We want profitability and good growth. We are looking at a 20-year horizon. For us, it is not a five-year game,” he said.

The Centre recently announced the quashing of reverse bidding in the wind energy sector. Munjal said it should be done in solar as well.

“Reverse bidding has not helped anyone but squeezed the market. As an industry, if you do not make money, you won’t have the capital for R&D, growth and other things that are good for the industry overall. Everyone is cost conscious all the time,” he said.

He further added that the competition in the sector should decide what price is right.

“But reverse bidding is a dirty element of adrenaline or excitement. The number of megawatts which are won has not seen the light of day. We need to make sure people who are winning projects should do them.”

HFE currently has a portfolio of 1.6 gigawatt of operating assets.

In 2019, HFE reorganised its business to expand its portfolio abroad and access cheaper funding.

HFE Global, registered in London in 2016, was made the controlling entity for the India business through a Singapore firm to spearhead global plans.

To date, HFE has received funding from Asian Infrastructure Investment Bank, Masdar Clean Energy (also known as Abu Dhabi Future Energy Company), International Finance Corporation and most recently KKR.