Our world is going through profound changes in response to the uncertain times we are living in. Humbled by a global pandemic, we are all learning to adapt to new challenges as they emerge. Yet, this year also demonstrated the resilience of the Sembcorp business and team, and brought sharper clarity to our strategic direction.
FY 2020-21 posed many challenges for the power sector. The mid-year collapse of demand, the challenges of keeping plants operational amid a countrywide lockdown, and the liquidity crunch among customers, all tested its mettle. But the sector stayed true to its responsibility as an ‘essential service’, and rose to the challenge of ensuring that the nation got the uninterrupted power it needed. While meeting its commitments, the power sector suffered many fatalities, and we must acknowledge the sacrifices and contributions of the power sector’s frontline warriors. The brunt was borne by our customers, India’s public-facing distribution companies, whose staff for the large part continued their duties despite the pandemic.
At Sembcorp, we implemented SOPs to ensure the safety of our people and disruption-free operations across all plants. Maintenance was carried out as scheduled, including a capital overhaul at Nellore and major repairs and upgrades across several of our wind sites. Along with operational efficiencies, we prioritised the health, safety and well-being of our employees, subcontractors, and all related personnel diligently. We implemented Behaviour-Based Safety (BBS) programmes at our plants to further strengthen our safety culture. We also continued to focus on ensuring the highest standards of environmental management in our operational areas on reducing carbon emissions for a sustainable future.
I am happy to inform you that in FY 2020-21, we delivered another year of resilient performance despite the challenging macro environment. We registered a record high PAT of INR 8,437 Mn, while EBITDA stood at INR 40,832 Mn, up 15% from FY 2019-20. Return on equity for FY 2020-21 was 11%, up from 4% for FY 2019-20. The PAT comprises INR 2,123 Mn of underlying, and INR 6,314 Mn of one-time profits, largely due to the recognition of pending change in law claims in our thermal business.
Liquidity remained a concern due to poor collections by the discoms, but we were able to manage working capital requirements despite increase in working capital by INR 9,861 Mn over the previous year, due to strong policy support from the Government of India in the form of its innovative Atmanirbhar Scheme that injected receivables-linked funds for liquidity to discoms that committed to improve benchmarks.
FY 2020-21 also brought focus and a new strategic direction for the company. Our parent, Sembcorp Group, has separated out its marine unit, Sembcorp Marine Ltd, and is now a focused energy and urban solutions company. Sembcorp has committed to focus on sustainability, a “brown to green” transition to a lower carbon future, and on achieving 10GW operational renewables capacity by 2025. Accordingly, Sembcorp Energy India Ltd.’s strategic priorities are to:
We expect to pursue these priorities against the backdrop of significant regulatory changes expected in the Indian power sector in the next two years. During this period, demand for power is expected to outstrip supply, and renewable energy is projected to grow to over 10% of total power consumed. High import tariffs of 40% on solar equipment have been announced from April 2022 to encourage domestic manufacturing, and free interstate transmission which subsidises renewables, is scheduled to expire in June 2023. Considering all these factors, tariffs for renewable energy will inevitably rise. This will present challenges for securing offtake by discoms who are already struggling to stay viable. However, it would also accelerate innovation in technology to reduce costs, and adoption of round-the-clock solutions that help mitigate the costs of renewables intermittency.
The Government’s continuing strong priority for renewables may also provide an impetus to the pending distribution sector policy reforms, including introduction of retail competition, higher renewable purchase obligations, and stricter financial norms.
I would also express my sincere gratitude to our customers and partners for their continued trust and cooperation and thank our Board of Directors and our promoters for their constant support and guidance.
The next few years hold great promise for the growth of Sembcorp India into a strong anchor presence in renewables and a centre for capabilities for Sembcorp Group as it becomes a leading Asian renewables and sustainable solutions player, delivering reliable and efficient energy solutions to millions of people.