108 YINSON HOLDINGS BERHAD STRATEGY & OUTLOOK BUSINESS REVIEW - RENEWABLES We continue to progress construction of the 285 MWp Nokh Project, also located in Rajasthan, India. Recent progress has been slow, relating to finalisation of the provision of agreed land and regulatory adoption of the tariff for power sales. However, these delays, caused in part by Covid-19 restrictions, are accepted by the PPA counterparty NTPC Limited, as the expected final commissioning date still falls within the terms of the project agreements. Disruption to both commodity pricing, especially polysilicon, and logistics have also impacted PV module pricing negatively. However, we are working to mitigate these issues and are on track to deliver the project in accordance with stakeholder expectations. EXTERNAL ENVIRONMENT • The energy transition towards increased renewable sources and sustainability has been further strengthened by commitments made by nations at COP26 held in Glasgow in October 2021. The majority of nations increased their commitment levels and the conference has generated new momentum in many markets. • Renewable energy sources remain the energy source of choice for new power generation due its low cost. Challenges remain in markets with high renewable energy power penetration as intermittent power needs to be balanced with other sources or mechanisms. • The pandemic has encouraged increased national spending on infrastructure (especially energy) as a mechanism to revitalise lagging economies while delivering on COP26 commitments. However, it has had negative impacts on global commodity prices, logistics and supply chains, affecting some key components of renewal energy projects. • Energy price and access concerns driven by the ongoing Ukraine crisis are anticipated to further supercharge the energy transition, especially in Europe. RISKS • Increased logistics and commodity pricing, arising as an impact of the pandemic, could affect the delivery of renewable energy projects. • A general increase in competition in the segment could make it harder for renewable energy companies to secure projects. • Renewable energy companies may face intermittency challenges related to high penetration of renewable energy generation sources in a single market. OPPORTUNITIES • Increased global and national renewable energy targets driving strong growth provides a wider range of opportunities for renewable energy companies. • Renewable energy is underpinned by strong governmental policies, providing surety and incentives for the renewable energy supply chain. • Renewables are an attractive secondary market investment, which can support effective capital recycling, opening up potential new pockets of capital for renewable energy players. EXTERNAL VARIABLES, RISKS & OPPORTUNITIES STRATEGIC RESPONSE TO OUR RISKS & OPPORTUNITIES Creating value through growth & capital recycling Yinson Renewables was set up to be Yinson’s first step towards participating in the energy transition and contributing to the sustainability of the Group. The objective was to develop a standalone business stream delivering stable long-term cash flows, but just as importantly to deliver significant growth and value to our shareholders. With the exponential growth in renewable energy globally, it was key for us to select the right markets and position ourselves in the value chain to create a competitive advantage. We are focused on participating across the full value chain as an independent power producer – originating, developing, building and operating projects and then selling power over the long-term. In order to maximise value, this means being involved in greenfield developments, i.e. getting in early, finding project sites, evaluating and optimising them, and then taking the best projects forward to gain building and environmental consents prior to taking a final investment decision. Following this, we would manage construction prior to starting commercial operations. When an asset is operational, additional value can then be created by recycling capital in the secondary markets by bringing in investment partners at a project, country or platform level. By entering the value chain early, we can use our experience and expertise to manage the early phase risks, offering the investors a de-risked investment opportunity with stable returns.
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