Market Overview

Azure Power Announces Results for Fiscal Second Quarter 2018

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Azure Power Global Limited (NYSE:AZRE), a leading independent solar
power producer in India, today announced its consolidated results
under United States Generally Accepted Accounting Principles ("GAAP")
for the second quarter ended September 30, 2017.

Second Quarter 2018 Period Ended September 30, 2017 Operating
Highlights:

  • Operating Megawatts were at 803 MW, as of September 30, 2017 an
    increase of 124% over September 30, 2016.
  • Operating & Committed Megawatts were at 1,381 MW, as of September 30,
    2017 an increase of 35% over September 30, 2016.
  • Revenue for the quarter was INR 1,823.8 million (US$27.9 million), an
    increase of 104% over the quarter ended September 30, 2016.
  • Adjusted EBITDA for the quarter was INR 1,499.5 million (US$23.0
    million), an increase of approximately 167% over the quarter ended
    September 30, 2016.

Key Operating Metrics

Electricity generation during the six months ended September 30, 2017
increased by 306 million kWh, or 111%, to 581 million kWh, compared to
the same period in 2016. The increase in electricity generation was
principally a result of additional capacity operating during the period.

Total revenue during the six months ended September 30, 2017 was INR
3,701.7 million (US$ 56.7 million), up 93% from INR 1,916.6 million
during the same period in 2016. The increase in revenue was primarily
driven by the commissioning of new projects.

Project cost per megawatt operating consists of costs incurred for one
megawatt of new solar power plant capacity during the reporting period.
The project cost per megawatt operating for the six months ended
September 30, 2017 decreased by INR 7.0 million (US$ 0.11 million) to
INR 51.1 million (US$ 0.78 million), as compared to the same period in
2016. The decline is due to decreasing solar module prices and the
reduction in the balance of system costs.

As of September 30, 2017, our operating and committed megawatts
increased by 360 MW to 1,381 MW compared to September 30, 2016 as a
result of winning new projects.

On October 16, 2017, the Company announced that it has won 250 MW of new
projects. This brings the Operating and Committed Megawatt capacity to
1,631 MW.

Nominal Contracted Payments

The Company's PPAs create long-term recurring customer payments. Nominal
contracted payments equal the sum of the estimated payments that the
customer is likely to make, subject to discounts or rebates, over the
remaining term of the PPAs. When calculating nominal contracted
payments, the Company includes those PPAs for projects that are
operating or committed. The following table sets forth, with respect to
our PPAs, the aggregate nominal contracted payments and total estimated
energy output as of the reporting dates. These nominal contracted
payments have not been discounted to arrive at the present value.

     
As of September 30,
2016     2017
INR INR     US$
Nominal contracted payments (in thousands) 247,388,527 296,524,749 4,540,961
Total estimated energy output (kilowatt hours in millions) 43,345 60,349
 

Nominal contracted payments increased from September 30, 2016 to
September 30, 2017 as a result of the Company entering into additional
PPAs. Over time, the Company has seen falling benchmark tariffs as
reported by Central Electricity Regulatory Commission, in line with the
reduction in solar module prices.

Portfolio Run-Rate

Portfolio run-rate equals annualized payments from customers
extrapolated based on the operating and committed capacity as of the
reporting dates. In estimating the portfolio run-rate, the Company
multiplies the PPA contract price per kilowatt hour by the estimated
annual energy output for all operating and committed solar projects as
of the reporting date. The estimated annual energy output of the
Company's solar projects is calculated using power generation simulation
software and validated by independent engineering firms. The main
assumption used in the calculation is the project location, which
enables the software to derive the estimated annual energy output from
certain meteorological data, including the temperature and solar
insolation based on the project location.

The following table sets forth, with respect to the Company's PPAs, the
aggregate portfolio run-rate and estimated annual energy output as of
the reporting dates. The portfolio run-rate has not been discounted to
arrive at the present value.

      As of September 30,
2016     2017
INR INR     US$
Portfolio run-rate (in thousands) 10,560,382 12,827,890 196,445
Estimated annual energy output (kilowatt hours in millions) 1,856 2,541
 

Portfolio run-rate increased by INR 2,267.5 million (US$ 34.7 million)
to INR 12,827 million (US$ 196.4 million) as of September 30, 2017, as
compared to September 30, 2016, due to an increase in operational and
committed capacity.

Second Quarter Period ended September 30, 2017 Consolidated Financial
Results:

Operating Revenue

Operating revenue in the quarter ended September 30, 2017 was INR
1,823.8 million (US$ 27.9 million), an increase of 104% from INR 894.9
million over the same period in 2016. The increase in revenue was driven
by the commissioning of new projects.

Cost of Operations

Cost of operations in the quarter ended September 30, 2017 increased by
92% to INR 144.7 million (US$ 2.2 million) from INR 75.4 million in the
same period in 2016. The increase was primarily due to plant maintenance
cost for newly commissioned projects which was partially offset by the
implementation of improved O&M methods which improved plant
productivity. This includes INR 17.6 million (US$ 0.3 million) of
non-cash expense, which pertains to the amortisation of lease expense.

General and Administrative Expenses

General and administrative expenses for the quarter ended September 30,
2017 decreased by INR 78.8 million (US$ 1.2 million), or 30%, to INR
179.6 million (US$ 2.8 million) compared to the same period in 2016.
General and administrative expenses was lower due to lower legal and
professional expenses in the current period as compared to same period
last fiscal on account of the Company's Initial Public Offering last
year in the same period and due to platform of economies of scale.

Depreciation and Amortization Expenses

Depreciation and amortization expenses during the quarter ended
September 30, 2017 increased by INR 216.5 million (US$ 3.3 million), or
88%, to INR 463.0 million (US$ 7.1 million) compared to the same period
in 2016. The principal reason for the increase was capitalization of new
projects during the period from June 30, 2017 to September 30, 2017.

Interest Expense, Net

Net interest expense during the quarter ended September 30, 2017
increased by INR 1,781.6 million (US$ 27.3 million), or 305%, to INR
2,364.9 million (US$ 36.2 million) compared to the same period in 2016.
It includes one-time non-cash write offs of unamortised deferred
financing cost of INR 615.5 million (US$ 9.4 million) on account of the
solar green bond and in addition, one-time prepayment fees of INR 658.4
million (US$ 10.1 million) for debt refinancing related to the solar
green bond. Interest expense increased on account of borrowings for new
projects during the quarter ended September 30, 2017.

Loss on Foreign Currency Exchange

The Indian rupee appreciated against the U.S. dollar by INR 0.9 to US$
1.00 (1.4%) during the period from June 30, 2016 to September 30, 2016,
while the Indian rupee depreciated against the U.S. dollar by INR 0.68
to US$ 1.00 (1.1%) during the period from June 30, 2017 to September 30,
2017. This depreciation during the period from June 30, 2017 to
September 30, 2017 resulted in a foreign exchange loss of INR 43.0
million (US$ 0.7 million), compared to a gain of INR 76.1 million during
the same period in 2016.

Income Tax Expense / Benefit

The income tax benefit increased during the quarter ended September 30,
2017 by INR 77.1 million (US$ 1.2 million) to INR 130.9 million (US$ 2.0
million), compared to the same period in 2016. The increase in the
income tax benefit was primarily on account of the commissioning of new
projects. During the current quarter, we recorded a deferred income tax
benefit amounting to INR 130.9 million (US$ 2.0 million) and there was
no cash outflow relating to income taxes during the period.

Net Loss

Net loss for the quarter ended September 30, 2017 was INR 1,240.5
million (US$ 19.0 million), as compared to a net loss of INR 138.9
million for the quarter ended September 30, 2016, an increase in loss of
INR 1,101.7 million (US$ 16.9 million) as compared to the same period in
2016. This was primarily due to one-time expenses related to the
issuance of solar green bond, and was partially offset due to an
increase in revenue during the quarter ended September 30, 2017.

Cash Flow and Working Capital

Cash generated from operating activities for the six months ended
September 30, 2017 of INR 227.8 million (US$ 3.5 million), INR 37.7
million (US$ 0.6 million) higher than prior comparable period, primarily
due to increase in revenue during the current period.

Cash used in investing activities, for the six months ended September
30, 2017 was INR 5,272.6 million (US$ 80.7 million), compared to INR
5,494.6 million for the prior comparable period. The cash used in
investing activities was lower due to higher realization of permitted
investments and release of restricted cash from bond offering.

Cash generated from financing activities was INR 15,351.0 (US$ 235.1
million) for the six months ended September 30, 2017, compared to INR
8,329.9 million for the prior comparable period. During the six months
ended September 30, 2017, the Company raised INR 40,164.0 million (US$
615.1 million) of project debt, including green bonds and
non-convertible debentures.

Liquidity Position

As of September 30, 2017, the Company had INR 16,530.6 million (US$
253.1 million) of cash, cash equivalents and current investments. The
Company had undrawn project debt commitments of INR 5,359.2 million (US$
82.1 million) as of September 30, 2017.

Adjusted EBITDA

Adjusted EBITDA was INR 1,499.5 million (US$23.0 million) for the second
quarter period ended September 30, 2017, compared to INR 561.1 million
in the second quarter period ended September 30, 2016. This was
primarily due to the increase in revenue during the period.

Derivatives and Hedging

The Company elected to follow hedge accounting ASC 815 for the
derivative contracts related to the green bond issuance and early
adopted the FASB amendment ASU 2017-12 during the quarter and recorded a
derivative asset of INR 246.0 million (US$ 3.8 million) as of September
30, 2017.

Guidance for Fiscal Year 2018

The following statements are based on current expectations. These
statements are forward-looking and actual results may differ materially.
The Company continues to expect revenues for fiscal year 2018 ending
March 31, 2018 of US$ 118 – 125 million and that 1,000 – 1,200 MW will
be operational by March 31, 2018.

Webcast and Conference Call Information

The Company will hold its quarterly conference call to discuss earnings
results on Friday, November 10, 2017 at 8:30 a.m. US Eastern Time. The
conference call can be accessed live by dialling 1-866-317-6003 (in the
U.S.) and 1-412-317-6061 (outside the U.S.) and entering the passcode
3456525. Investors may access a live webcast of this conference call by
visiting http://investors.azurepower.com/events-and-presentations.
For those unable to listen to the live broadcast, a replay will be
available approximately two hours after the conclusion of the call. The
replay will remain available until Friday, November 17, 2017 and can be
accessed by dialling 1-877-344-7529 (in the U.S.) and 1-412-317-0088
(outside the U.S.) and entering the replay passcode 10113489. An
archived podcast will be available at http://investors.azurepower.com/events-and-presentations
following the call.

Exchange Rate

This press release contains translations of certain Indian rupee amounts
into U.S. dollars at specified rates solely for the convenience of the
reader. Unless otherwise stated, the translation of Indian rupees into
U.S. dollars has been made at INR 65.3 to US$ 1.00, which is the noon
buying rate in New York City for cable transfer in non-U.S. currencies
as certified for customs purposes by the Federal Reserve Bank of New
York on September 30, 2017. The Company makes no representation that the
Indian rupee or U.S. dollar amounts referred to in this press release
could have been converted into U.S. dollars or Indian rupees, as the
case may be, at any particular rate or at all.

About Azure Power Global Limited

Azure Power is a leading independent solar power producer in India.
Azure Power developed India's first private utility scale solar project
in 2009 and has been at the forefront in the sector as a developer,
constructor and operator of utility scale, micro-grid and rooftop solar
projects since its inception in 2008. With its inhouse engineering,
procurement and construction expertise and advanced in-house operations
and maintenance capability, Azure Power manages the entire development
and operation process, providing low-cost solar power solutions to
customers throughout India.

Forward Looking Statements

This press release contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended and the Private Securities Litigation Reform Act of 1995,
including statements regarding the Company's future financial and
operating guidance, operational and financial results such as estimates
of nominal contracted payments remaining and portfolio run rate, and the
assumptions related to the calculation of the foregoing metrics. The
risks and uncertainties that could cause the Company's results to differ
materially from those expressed or implied by such forward-looking
statements include: the availability of additional financing on
acceptable terms; changes in the commercial and retail prices of
traditional utility generated electricity; changes in tariffs at which
long term PPAs are entered into; changes in policies and regulations
including net metering and interconnection limits or caps; the
availability of rebates, tax credits and other incentives; the
availability of solar panels and other raw materials; its limited
operating history, particularly as a new public company; its ability to
attract and retain its relationships w

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