Challenges in Financing Renewable Energy B V Rao Director (Technical) Indian Renewable Energy Development Agency Limited ( IREDA) 16th March, 2016 | New Delhi

Power Scenario in India Installed capacity of 288 GW, of which RE capacity is over 39 GW (as on Feb 2016)

175 GW RE Target by 2022 287 GW Private Sector Commitment of 268 GW from 414 Companies PSUs Commitment of 19 GW from 48 PSUs Manufacturing Commitment of 62 GW from 17 Manufacturing Companies Finance Commitment for financing 78 GW from 40 Banks

Growth in Renewable Investment in India – Investment in India’s renewable industry increased more than 22% in 2015 to reach $10.9bn Rise largely attributed to scale, where investment reached $5.6bn, up 80% from $3.1bn last year

Investment Requirement – 175 GW RE plan entails investment of Approx. $ 140 billion (Rs. 8,50,000 Crore) Debt (70%) $ 98 Billion (Rs. 6,00,000 Crore) Equity (30%) $ 42 Billion (Rs. 2,50,000 Crore) Multilateral and Bilateral NBFCs Commercial banks Bonds

Sources of Low Cost Capital Instruments Indicative Rates Sources Green Bonds 7-9% Public Deposits International Funds 6-8% Multilateral Agencies Insurance / Pension Funds Corporate Raising Equity 10-12% Stock Exchange, Mutual Funds Climate/ Carbon Funds 0-3% Tax on Fossil Fuels

GOI Initiatives to promote Renewable Energy Financing Innovative Financing Mechanisms Faster RE deployment Increased availability of finance Lower rates of interest Renewables accorded Priority Sector lending status: Loans up to ₹ 15 crore for renewable power projects included. Banks mandated to disburse 40% of adjusted net bank credit to priority segments. Rooftop Solar through Home Loans: DFS has issued guidelines and circulars issued by various banks to include rooftop under housing loan Tax-Free Bonds: Government approves INR 50 billion tax-free bonds to enable low interest rate funding for RE Green Bonds: Enabling low cost funding for clean energy , REC, PFC, IREDA, IDBI and private sector like ICICI, Yes Bank asked to issue green bonds to raise funding for RE projects. Increase in Clean Environment Cess from Rs.200/tonne to Rs.400/tonne to boost renewable energy. Indian Renewable Energy Fund ( 1 Billion US$) : To raise funds to invest in Renewable Energy Projects and associated value chain including equity (Proposed)

Proposed Dedicated Renewable Energy Fund For India – Govt. of India (through IREDA) proposes to set up USD 1 to 1.5 bn fund for renewable energy Fund is to be setup in line with National Infrastructure Investment Fund (NIIF) structure Govt. owned entities such as PFC, REC, NTPC and IREDA have in principle agreed to invest USD 315 million into the fund as Anchor Investors Fund will be managed by a reputed international fund manager whose selection is being undertaken through an ICB process Received prima facie interest from various large fund managers to act as Investment Managers (GP) for proposed fund. Structure of the fund To be setup as a ‘Category I’ Alternative Investment Fund (AIF) under SEBI (Alternative Investment Funds) Regulations, 2012. Independent trustee company will be trustee. Anchor Investors and Other Investors would be LPs in the fund and would have role on Limited Partner Advisory Committee (LPAC). LPAC would not be decision making body and all investment decisions would be made by Investment Manager.

Tax Free Bonds for Renewable Energy – Tax free bonds of INR 5,000 crores have been allocated to four institutions S. No. Name of the Institution Amount allocated (INR Crores) 1 IREDA 2000 2 NTPC 1000 3 REC 4 PFC IREDA’s Tax free Bond Public Issue of Rs.1716 Crore was oversubscribed by 3 times on the day of opening. The average cost of Tax free Bond of Rs.2000 Crore is 7.50% . IREDA’s Tax free Bonds were rated as AA+ by ICRA and India Rating Research Pvt Ltd. On stand alone basis. Entire Tax free Bond proceeds will be utilized for on lending to RE & EEC Projects. IREDA Tax Free Bonds:

Key Challenges in Financing RE projects Policy Regime Long Term & consistent policies Visibility of tariff policy Regulatory interventions against the existing tariffs Compliances of RPOs and RECs Timely approvals Infrastructure Grid connectivity and evacuation facilities Must run status for RE projects Timely payments by DISCOMs Forecasting and re-scheduling

Key Challenges in Financing RE projects Long terms low cost funds Pensions funds Sovereign fun ds Insurance funds Improve “east of doing business” and transparency “Single Window Clearance” systems Land acquisition for RE projects Technology aspects Experience of developers for RE projects Emerging market – lack of organized financial sector

Indian Renewable Energy Development Agency Limited bvrao@ireda.gov.in Thank You Indian Renewable Energy Development Agency Limited bvrao@ireda.gov.in www.ireda.gov.in