Financing of solar power projects Presentation by Abhilakh singh general Manager ireda 28th July, 2016

Power for all Focus on attaining ‘Power for all’ has accelerated the renewable energy capacity addition in the country. About 1/4th of the overall capacity addition during 2015-16 has been from renewables and India is now set to become the largest energy market. As per India Solar Handbook of Bridge to India, India is poised to become the 4th largest solar market in 2016, leaving behind three major solar markets, U.K., Germany and France. Renewable energy sector in India is now a crucial and significant player in the power generation capacity and it is now supporting the government agenda of sustainable growth

Cumulative Deployment from RE Sources Sector FY- 2016-17 Cumulative Achievements (as on 31.05.16) Target  Achievement  Wind Power 4000.00 106.40 26932.30 Solar Power 12000.00 559.78 7568.64 Small Hydro Power 250.00 1.80 4280.25 Bio-Power 400.00 4831.33 Waste to Power 10.00 115.08 Total 16660.00 670.98 43727.60 Source : MNRE

Solar Power Installed Capacity Total Solar installed capacity in the country is 7568 MW as on 31.05.2016

Ramping up Targets - 2022 By 2022, aiming 175 GW of renewable energy capacity, 90% of which is to come from Solar and Wind Energy. Aiming to generate 100 GW solar power by 2022, predominantly comprising 40 GW Rooftop and 60 GW through large and medium scale grid connected solar power projects. With these challenging targets, the country is now operating one of the largest RE capacity expansion programmes in the world, with action-oriented plans and vision.

Roadmap to 2022 - RE-INVEST 2015 With the intent of providing a platform to the global investment community to connect with stakeholders in India, First Renewable Energy Global Investment Promotion Meet & Expo (RE - INVEST) was organized in 2015. A first of its kind Event at such a massive level, saw participation of 3,000 delegates from 41 countries with more than 200 global investors. 462 global and domestic companies/stakeholders made commitments to set up renewable energy projects aggregating to more than 287 GW, 16 companies also committed to setting up manufacturing facilities of 62 GW. 40 Banks and NBFCs committed to finance over 78.7 GW of renewable energy projects

Post RE-INVEST 2015 – Policy initiatives Suitable amendments to the Electricity Act and Tariff Policy for strong enforcement of Renewable Purchase Obligation (RPO) and for providing Renewable Generation Obligation (RGO); Setting up of exclusive solar parks; Development of power transmission network through Green Energy Corridor project; Identification of large government complexes/ buildings for rooftop projects; Provision of roof top solar and 10 percent renewable energy as mandatory under Mission Statement and Guidelines for development of smart cities; Amendments in building bye-laws for mandatory provision of roof top solar for new construction or higher FAR; Infrastructure status for solar projects;  Raising tax free solar bonds; providing long tenor loans; making roof top solar a part of housing loan by banks/ NHB; Incorporating measures in Integrated Power Development Scheme (IPDS) for encouraging distribution companies and making net-metering compulsory;   Raising funds from bilateral and international donors as also the Green Climate Fund to achieve the target.

Investments in re Estimated investment in the renewable energy power projects during the last 3 years has been around Rs. 86000 crores. Indian Banks and FIs have sanctioned large debt over the last 1 year and around Rs. 29500 crores have already been disbursed. MoUs being signed with key countries for investment flow in developing new and renewable energy technologies RE expected to gain from several announcements in the Budget. Clean Environment Cess at Rs. 400 per ton shall further enhance the funds for promoting renewables and infrastructure associated with it. RE Sector has been given “Priority Sector Lending” status by Reserve Bank of India (RBI). Banks can extend loans upto a limit of Rs.15 crore to corporate borrowers and upto Rs.10 lakh to individual borrowers for RE projects under priority sector.

Financing Requirements Renewable Energy Scale up plan • MNRE 19 175 GW RE plan entails investment of Approx. Rs 12,00,000 crores Debt (70%) (Rs. 8,40,000 Crore) Equity (30%) (Rs. 3,60,000 Crore) Multilateral and Bilateral NBFCs Commercial banks 18000 58000 102000 120000 128000 136000 143000 149000 160000 140000 100000 80000 60000 40000 20000 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 (p) (p) (p) (p) (p) (p) (p) Rs. Crore Annual investment in RE (Rs. Crore) SHP and Biomass Wind Solar

Indian Renewable Energy Fund (IREF) Government proposing to create an Indian Renewable Energy Fund with the fund size of US$ 1 to 1.5 billion for enhancing financing to the renewable energy infrastructure in the country. IREF, proposed to be set up as an Indian trust, would raise funds to invest in Renewable Energy Projects and associated value chain.   In-principle commitment for USD 315 million has already been made by Anchor Investors.

IREDA – A dedicated FI for Renewables Mini-Ratna “Public Sector FI dedicated for financing renewable energy (RE) projects in India.   Maintaining its leadership position in Renewable Energy space for last 29 years and developing several innovative financial schemes/solutions for meeting the market requirement from time to time. Enabled the commercialization of Renewable Energy sector in India, resulting in active participation from domestic commercial banks, international funding agencies As a result of the above, today, several commercial banks and financial institutions are actively financing renewable energy projects.

IREDA Financing Highlights Cumulative Loan Sanctions : Rs. 41505.89 crores (As on 30th June, 2016) Cumulative Loan Disbursements : Rs. 23035.08 crores (As on 30th June, 2016) Supported green capacity addition of more than 6000 MW IREDA Financing Norms Parameters Norms Maximum Loan Quantum Upto 70% of the project cost Upto 75% of project cost in Wind and Solar projects* Interest Rate 9.90 % - 11.90 % Repayment Period Upto 15 years Moratorium Upto 1 year *Subject to meeting minimum conditions

IREDA Operations( Rs. in Crores) Loan Sanctions Loan Disbursements

IREDA : Solar Sector Performance Parameters Cumulative Sanctions as of June, 2016 Rs. 7295 Crs. Installed Capacity of IREDA Funded Projects : 460.90 MW

Financial Services Fund Based Term Loan Take-out financing from Banks/FIs Bridge Loan for SDF, Solar VGF, GBI etc. Securitization of Project Receivables Short term loan to RE Developers/ Suppliers Refinance to Banks/ FIs under NCEF Scheme Line of Credit to NBFCs for lending to RE Projects Non-Fund Based Performance Guarantee to RE Suppliers/ Promoters Underwriting/ Syndication Program Administrator for Wind & Solar GBI

IREDA’s Initiatives in RE Financing Rooftop Solar Financing Scheme (through Aggregators ) Off grid Solar Financing – Telecom Towers, Solar Pumps. Scheme for CST Direct Discounting of GBI for grid interactive Wind and Solar power projects Direct Discounting of Capital Subsidy payable to channel partners / SNAs for SWHS To take up the Lead FI Role

IREDA’s Initiatives in RE Financing Credit Enhancement Guarantees Supplier Credit Guarantees Comfort Letter against EMDs Enhancement in quantum of loan – upto 75% Enhancement of Loan Tenure- Repayment period from 12-15 years

Financing issues Financial Closure not achieved on time   Lack of bankable solar projects particularly under tariff based reverse bidding Uncertainty of payment by Utilities for long period i.e., 25 years. Health of DISCOMs for timely payment of power purchased Non-availability of suitable land for setting up of projects Delays in obtaining clearances, usual time taken for NA use permission is 6 months Variations in costs using similar components & technology Contract clauses not adequate w.r.t. LDs, Penalties, Performance Guarantees, Insurance

SUGGESTIONS Single window Clearances need to be activated urgently. PLF/CUF projections to be realistic considering de-rating and heat & dust losses. EPC Contracts should be structured to give back to back guarantees/warranties to mitigate project risks. Strengthening of grid and payment security for PPAs by utilities Strengthening of Project performance. Exchange of information database on project performance among Banks/ FIs .

Way Forward Renewable energy is seen as the next big industry, with the potential to transform the trillion dollar energy industry across the world. Investing in renewable energy would enable India to develop globally competitive industries and technologies that can provide new opportunities for growth and leadership by corporate India.   In addition to increasing share of renewable energy in India’s energy supply mix, India could become a manufacturing hub for renewables.

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