At the Reliance Industries’ annual shareholders meeting on June 24, 2021, Mukesh Ambani announced a Rs 75,000 crore investment in a massive push into new energy business—Rs 60,000 crore towards setting up four giga factories, and Rs 15,000 crore in value chain, partnerships and future technologies.
RIL made fortunes from petrochemicals and oil refining, but has now rightly identified that bigger opportunities lie in renewable energy. The group is accelerating its push here, with two big deals on Sunday.
On the one hand, it is acquiring REC Solar Holdings, a solar panel manufacturer, from China National Bluestar Group, and on the other, its picking up a 40 per cent stake in Shapoorji Pallonji Group’s Sterling & Wilson Solar.
The two acquisitions could clearly fasttrack Ambani’s ambitions in the renewable energy space. The REC Solar buy will help Reliance New Energy Solar expand into global markets including US and Europe. The investment in Sterling & Wilson will make it a stakeholder in a company that has already installed 11 GW of solar power projects and has a presence across 24 countries.
REC has two facilities in Norway for making solar grade polysilicon, and another factory in Singapore to make PV cells and modules. In addition to this, REC has plans for a 2 GW cells and modules unit in France, 1 GW module plant in the US and expanding its facilities in Singapore.
RIL will be able to use REC’s technology to make metallic silicon and PV panels at its gigafactory in Gujarat. RIL aims to start with a 4 GW per year capacity at this Gigafactory in Jamnagar, eventually expanding to 10 GW per annum.
“It is in line with our strategy of investing in new and advanced technologies and operating capabilities aimed at achieving Reliance’s goal of enabling 100 GW clean and green energy before the end of this decade,” said Mukesh Ambani, the chairman of RIL.
Sterling & Wilson with its engineering talent, deep domain knowledge, global presence and experience of executing some of the most complex projects globally, will become an important part of RIL’s value chain, added Ambani.
In August this year, Reliance New Energy Solar, along with other investors, had announced an investment in US-based energy storage company Ambri Inc. RIL also recently signed a memorandum of understanding with Denmark’s Stiesdal Fuel Technologies for developing hydrogen electrolyser.
“RIL is well-positioned to capitalise on a sufficiently large opportunity in domestic solar business underpinned by anticipated growth in renewable power generation and recent policy initiatives for solar business including production-linked incentive scheme and customs duty protection,” said Tarun Lakhotia, analyst, Kotak Institutional Equities. The analyst said that the broking firm’s preliminary analysis suggests RIL will require to invest $3 billion to set up 10 GW of integrated capacity and it can potentially generate Rs 4,600 crore EBITDA (earnings before interest, taxes, depreciation and amortisation) in a steady-state environment.
Other analysts too have been bullish on RIL’s investments into the new energy business, including for setting up the giga factories, which will offer an entire spectrum of renewable energy solutions.
“These investments could help capture not only India’s large total addressable market of 300 GW of renewable solar capacity and 20 GW of electrolysers, but also contribute to the upcoming global demand in these areas. We estimate the new energy business could contribute EBITDA as large as its petrochemicals vertical,” analysts at Morgan Stalney said in a report earlier this month.
On Monday, RIL’s shares were trading 0.7 per cent higher at Rs 2,688.25 on the BSE. Sterling & Wilson was up over 7.7 per cent at Rs 468.45.