Shell Treasury marks multiple firsts to integrate new renewables firm in India

Shell Treasury Centre East (Pte) Ltd. (STCE) conducts, coordinates, and manages treasury operations within the Shell group of companies to meet various treasury requirements, including foreign exchange and borrowings. In August 2022, Shell Overseas Investment B.V., a wholly owned subsidiary of Shell plc (Shell), acquired Sprng Energy (Sprng) – an Indian company that supplies solar and wind power to electricity distribution companies in India.

Globally and in India, Shell maintains an optimised account and banking structure for its group companies with its primary banks. Following the acquisition of Sprng, it was imperative to quickly integrate the new company to tap into the banking competitiveness of the group.

However, as Sprng operated a cluster of special purpose vehicles (SPV) with projects across operations, construction, and early development and each segment having different cash management, trade and financing needs and challenges, Shell needed to address the following challenges pertaining to Sprng’s business:

• Multiple banking relationship and accounts that involved a mix of local banks and non-bank providers.
• Meeting heavy funding needs for Sprng’s SPV projects which were in the early stages of development.
• Complex payments and collections requirements arising from sporadic payment needs and schedules, including regulatory-related payments.
• Cumbersome manual processes which are inefficient and prone to human error
• Navigating India’s intricate regulatory landscape that bore capital and FX requirements.
• Quick implementation of loan and trade facilities as Bank Guarantees and letters of credits (LC) are critical for Sprng to secure commercial contractual obligations.

Shell worked with HSBC to transform Sprng’s banking organisation and integrate it into Shell’s overall infrastructure, all while ensuring compliance to India’s regulatory regime as well as Shell’s own corporate governance. The complex project involved:

• Capital infusion. With HSBC’s support as the custodian bank, Shell was able to bring in group funding via Foreign Venture Capital Investment (FVCI), a regulated cross-border program, using Optionally Convertible Debentures (OCD).
• Simplifying Sprng’s banking structure through:
  • Bank account harmonisation, centralised visibility, and control of cash, as well as improved forecasting capabilities by leveraging HSBC’s systems.
  • Smoother processing of payments and receipts.
  • Yield enhancement via investments.
• New ways of funding. HSBC implemented multi-entity cash concentration structures for Shell to facilitate onshore funding between Shell India and Sprng to support the SPVs at various project lifecycles.
• Liquidity and investment management. The unique structure is complimented by yield-enhancing capabilities and further supported by HSBC’s digital banking platform. ‘Cluster deposits’ were setup for all Sprng SPVs so excess liquidity in India is parked into multiple deposits with fixed tenures.
• Leveraging technology and digitisation. Sprng will be leveraging API for real-time payments and collections, as well as digitalising the complete reconciliation process for its SPVs. The solutions will promote automation in sharing and consumption of information in real-time to complete the transaction journey.

• Seamless integration of a newly acquired business with a leaner, more effective banking structure.
• Automated solutions to reduce manual effort and enhance focus on strategic priorities.
• Liquidity optimisation through best-in-class and customised cash pool setups.
• Scalable structures that deliver interest and cash optimisation across various SPV lifecycles.
• Simplified documentation to enable digital consolidated sign offs across multiple entities.

Shell / Sprng Energy is an Overall Winner of the 2024 Treasury Today Adam Smith Awards Asia in the Best-in-Class Treasury Solution in India category.