16th Renewable Energy Summit Unlocking Decentralized Renewable Energy Potential 16th Renewable Energy Summit October 2016

We are morphing into a future where DRE sources are becoming a part of the mix. Capital and Sops skewed towards larger generation Tax free bonds Long term loans Subsidized fuel linkages Guarantees Coal power Hydro-power Nuclear power Large industry Generation Grid For capital to flow into DRE, the terms need to be similar (or more lucrative) to that of other electrification segments 20 years Power Purchase Agreements Assured Feed-in Tariff Directive to banks to lend Distribution Grid Rural customers City/ town customers Commercial customers Industry customers Solar farms Wind farms

Future necessitates a smart infrastructure and innovative financing Imperatives 175 GW Renewable (incl. 40 GW rooftop) targets as part of India’s INDC 20 million households injecting energy into the grid is going to make the grid different and complex Electric Mobility Mission, which targets 6-7 million electric vehicles on the roads by 2022 100 Smart Cities initiative Consequently Grid changing Role and implications of storage (non-utility scale vs. utility solutions); Hybrid Inverters Large scale footprint of bi-directional distribution system Advanced Metering Infrastructure Building blocks National Smart Grid Mission (lessons from the initial pilots): Universal access; < 10% AT&C losses FOR led ‘model’ Smart Grid Regulation: early states – Assam, Karnataka smart grid ‘cells’ time of use tariff regime demand response and mandatory rooftop generation for large customers National Standard for Smart Meters: 100 million smart meter rollout over the next 5-7 years

Financing Outlook for DRE DRE is like other infrastructure Needs long term and low-cost capital to attract ESCOs and more equity participants Debt is needed but not adequately available at the terms that align best to the needs of the segment Capital is there that can potentially be interested in DRE Capital competing with other opportunities Mainstream has shown interest in debt refinancing: provides a key to crowd-in capital For DRE to become an option: the market needs to reach a critical mass of installations This presents a conundrum – critical mass will only be built, if there is investment capital and ESCO interest, while the interest will only pour in, once there is a certain critical mass on ground Market creation mind-set required to break the conundrum Blending needed to lower cost of capital (just like in other infrastructure) Significant interest amongst some key global catalysts to shape integrated blended facilities Financing and operation cannot be de-linked Adapting debt products: Outlook of sub-scale Project Finance

Document data-flows on operational parameters (create evidence) Domestic financing capacity needed in form of market maker vehicles: infrastructure project finance outlook to enable match-up with project cash flows Co-developer philosophy for “risk managed fund deployment” Co – develop business / projects with (small/ early stage) borrowers Identify assets and investments with challenge in access to finance due to over-pricing of operational risk Leverage operational insight and prior data collected: bringing a project finance outlook Document data-flows on operational parameters (create evidence) Evidence leading to lowering of risk perception and causing newer investors to come in over time

Public-Private Linkages should focus on: Addressing Risk and enabling a strong domestic debt market Pooling of capital into specialist DRE financing intermediaries Credit Enhancement Pools /First Loss Default Guarantees Pre-requisites Unit level economics Performance and Standards Project development approach a key differentiator (role of M&V) Currency Hedges and Partial Insurance support Refinancing of Operational Projects

cKinetics New Delhi • Palo Alto www.cKinetics.com