No more interested in plain vanilla solar or wind: Hero Future Energies CEO

In a Q&A, Srivatsan Iyer talks about his firm's expansion plans in new segments and what the equity investment by KKR means for the company

Hero Future Energies, the renewable energy company under the Hero family tree, made a one-of-a-kind move to shift its headquarters to London, United Kingdom. While the company has been quiet on the project bidding front, it has been able to tap global green bonds and more recently, equity investment from KKR. Speaking with Shreya Jai post this transaction, Srivatsan Iyer, chief executive officer, HFE talks about their expansion plans in new segments, countries and why just a plain solar or wind project is not feasible anymore. Edited excerpts:

Would the equity investment by KKR and parent Hero Group in the company entail any shareholding alterations? Will IFC partake of any of its stake in HFE?

The Hero family (members) are majority shareholders and will continue to be so. The good thing is we have KKR as a prominent shareholder now and they, with their knowledge, not just their equity, are going to be very active in supporting everything that we do. IFC is still the key shareholder for us.

Two years back, HFE shifted its headquarters to London to tap the global financial markets. Is the KKR deal a result of that? Also, how has the shift helped the company’s financials and operations?

We had a green bond issuance in the global markets a year and a half back. That was the first sign of us tapping into the global markets for financing. It was very successful. I would not say the KKR deal happened because of our UK headquarters, but with corporate headquarters in the UK come various governance requirements, various accounting standards that KKR being a global firm, is very knowledgeable about and very comfortable with.

Being a UK-based company allows us to compete in that market. The UK itself announced in the last three months a whole host of things to improve renewables in the country and take it up. They have announced a green hydrogen policy, targets for renewable energy. They are also investing big time in transmission and energy storage for supporting this amount of renewable energy. The UK is likely to become one of the large markets of storage. It is great learning for us as a company to participate in that market. We have multiple projects in the pipeline and in various segments – solar, battery storage, green hydrogen.

What are the company’s targets with regards to solar, wind and now storage too?

I do not like to have gigawatt targets as it shows a perverse incentive of adding capacity, whether it makes financial sense or not. We have said earlier, and still have a goal of building 5 Gw in five countries by 2025. In that line, I want to build 1 Gw a year. And I think that's an eminently doable target for us. At the same time, I think this capacity generates good value.

Is more value generation than Gw capacity the reason HFE has slowed its participation on the renewable project bidding market or there are not enough good projects?

The reason is a mix of both. There was a market slowdown because of volatility in prices. We looked at a few bids, and decided not to participate, because we were not entirely clear on how the volatility would play out. With that being said, we just won the first utility scale storage bid in India, state of Kerala.

I think we have the capability to win but we have chosen not to participate because of the volatility module pricing and availability. We are back in the game now but you will see us bidding selectively.

What are your selection criteria?

We probably will not be terribly active in the ‘plain vanilla solar’ space. Projects such as peak power, around the clock renewable, integrated battery storage energy projects, those are the places you will see us being active. We would be both in the utility scale as well as commercial and industrial services segment. In solar module supply and battery storage, we are looking for long term partners to build a sustainable business and supply chain.

Which other markets are you looking at as demand for renewables witness a revival in European nations?

Our focus as of now will be South Asia, Southeast Asia, and the UK. Europe is ripe with opportunity. We will take a measured approach to it and we will focus more on the UK because it seems to be moving a little faster than the rest of Europe. If there's specific opportunities in Northern and Western Europe, we will probably look at it. We had a few projects in Ukraine but our staff has now moved out from there. Eastern Europe for all the reasons is not the best time to be. We will stay out of Africa as well for now. In the UK, we are very close to several opportunities and we would want to execute those first.