1. Anvesha Paresh Thakker, KPMG USAID PACE-D TA PROGRAM September 2015
Opportunities for PSUs -
Solar Parks
Consultation Workshop: Accelerating Solar Energy Deployment in
Public Sector Undertakings (PSUs)
Anvesha Paresh Thakker, KPMG
USAID
PACE-D TA PROGRAM
September 2015

2. Central Government Scheme for Solar Parks
Solar Park Implementation Models
PSU investment in Solar Park
Why PSU?
Which PSUs?
Opportunities for PSUs in Solar Parks
Business model for Solar Park Development involving PSUs
Key Considerations

3. Introducing Solar Park Scheme

4. What is a Solar Park
The solar park is a concentrated zone of development of solar power projects and provides developers an area that is well characterized, with proper infrastructure and access to amenities and where the risk of the projects can be minimized.

5. Objective of Solar Parks
“To provide an impetus to solar energy generation by acting as an integrated infrastructure facility; encouraging project developers and investors, prompting additional projects of similar nature, triggering economies of scale for cost-reductions, technical improvement and achieving large scale reductions in GHG emissions”

6. Tx company & System Operators
Lower cost & Better infra
Cost effective evacuation from a larger pool
Common site appraisal for multiple projects
Easier to mobilize resources/Multiple projects
SOLAR PARK
IPPs
Tx company & System Operators
Lenders/PEs
EPC Contractors
Value proposition offered by Solar Parks
Value Proposition for Stakeholders
Access to developed land and infrastructure
Removal of regulatory hurdles
Economies of scale in capital and operations cost
Better network planning
Access to low cost finance (owing to lower risk perception)
Better skill availability and utilization

7. Government of India Solar Parks Scheme
Target 2022: 25 Solar Parks pan India with a total installed capacity of 20 GW
Minimum capacity of 500 MW
SECI is responsible for administrating scheme and disbursement of incentives on behalf of the Central Government.
State nodal agency is responsible for procurement and provision of land for the Solar Park. State government responsible for infrastructure development beyond solar park boundary
Implementation Agency responsible for development of common infrastructure at the solar park, obtain clearances, conduct necessary social & environmental assessments
MNRE will enable a grant of INR 25 lacs for DPR, surveys, etc.; and a grant of INR 20 lacs/MW or 30% of the projects cost including grid connectivity cost (whichever is lower) to the solar park developer

8. Current Solar park Implementation Models

9. Government of India Solar Parks Scheme - Model Options
Implementation Agency
SECI as nodal agency
State Government owned
Private sector owned 1 2 3 4
State designates SECI as nodal agency to undertake development & management of solar park on mutually agreed terms
50-50 Joint venture between State nodal agency & SECI for development & management of solar park
State designated nodal agency (State PSU or SPV) to undertake development & management of solar park
Private entrepreneurs promote solar park without equity participation of SECI, but may have equity participation of State government or its agencies

10. Solar Parks: Current Model Adoption
MNRE Approved Solar Parks
State
Model 1
Model 2
Model 3
Model 4
Implementing Authorities
State Nodal Agency/PSU
JV between State Nodal Agency and SECI
100% SECI
JV between State Nodal Agency & Private Players
Andhra Pradesh - 1 √
JV of SECI, NREDCAP & APGENCO
Andhra Pradesh - 2
Gujarat  √
SECI
Karnataka - 1
JV between SECI and KREDL
Karnataka - 2
Madhya Pradesh - 1
JV between SECI and MPUVNL
Madhya Pradesh - 2
To be decided
Meghalaya
Rajasthan Phase - 2
JV between RRECL and IL&FS Energy Development Company Limited
Rajasthan Phase – 3
Rajasthan Jaisalmer Solar Park
Telangana -1
  √
Telangana State Industrial Infrastructure Corporation Ltd & Telangana New and Renewable Energy Development Corporation Ltd
Uttar Pradesh - 1
JV of SECI & UPNEDA
Apart from MNRE scheme, the other solar parks that have been successful operated are developed by GPCL in Gujarat and RRECL in Rajasthan.

11. PSUs investments in solar

12. Why CPSUs: Presenting a strong investor base for Solar
Maharatna
Listed Av turnover of Rs 25,000 cr, during the last 3 years.
Av net worth of Rs 15,000 cr, during the last 3 years.
Av PAT of Rs 5,000 cr, during the last 3 years.
Significant global presence
Navratna
A score of 60 (out of 100), based on six parameters Parameters: (i) net profit to net worth (ROE)
(ii) manpower cost to total cost of production/services,
(iii)PBDIT to capital employed,
(iv) PBIT to turnover,
(v) EPS and
(vi) inter-sectoral performance
Miniratna I and II
Continuous profits in last three years
Positive net worth
Why CPSUs: Presenting a strong investor base for Solar
~250 PSUs
Of which 97 are likely to be profitable with positive net worth
Have defined financial autonomy
Includes companies which have means: cash rich companies, with land banks
And RE motivations: having RPO obligations, CSR targets, board directive for RE investments, etc
7 in Number
Coal India Ltd
IOCL
NTPC
SAIL
GAIL
ONGC
BHEL
17 in Number
Spanning Oil & Gas, Steel, Minerals and metals, Financial services, Engineering, power companies, etc
73 in Number
Includes AAI, Indian Railways, Steel, Minerals and metals, coal , ports, shipyards, etc
Source: Department of Public Enterprises, as on October 2014

13. CPSUs: Having the means
Strong cash reserves with Maharatnas as well as other PSUs
Significant land banks available with PSUs such as Indian Railways
Availability for solar parks can be explored

14. CPSUs: Motivations for solar foray
Sustainability / CSR
objectives
RPO obligations
Reduction of power cost
Business diversification
Accelerated Depreciation benefits
IOCL Sustainability Report
SAIL Annual report
Indian Railways, As reported in LiveMint in Feb 2015
BPCL Annual Report

15. Opportunities for PSUs in Solar Parks1 2 3
Possible Opportunities for PSUs
Investment in solar Parks
Development of solar projects in the solar park
Offtake of power from Solar Park
Reduction of power purchase cost
Sustainability/ CSR objectives
RPO Obligations
Accelerated Depreciation
Diversification
PSU Objectives
YES
YES
YES
YES
YES
YES
YES
Benefits for the development model
Access to cash/ land/ engineering capabilities, etc
Large anchor project developers
Reduction of offtake risks
Objectives can be maximized through a combination of roles

16. Models for PSUs participation Implementing Agency (IA)
Solar Projects
Power Sale Options
Power Purchase Agreement
Development of Solar Park D1 D2 D3
NSM
OA/Third Party Sale
Implementing Agency (IA)
Lease Rental & O&M Charges with Annual escalation
State Utility
PSU for Captive use
Revenue from sell of power
Implementation Agency
The objective is to create appropriate models utilizing PSU capabilities backed by resources and motivation to participate
Options for PSU involvement:
Consortium of PSUs with complementary capabilities
PSUs + Private Sector (EPC Player or Infra developer)
PSUs + SNAs +Private Sector
Land / Cash Rich PSU, Power sector players, Engg. Company, etc
Cash Rich PSU: Provide funds for investment into solar parks
State Nodal Agency: Identify and provide land against equity
Private Company: Brings expertise in managing infrastructure projects
Land Rich PSU: Provide land banks for solar parks
Private Company: Brings EPC/ infra development expertise for park development

17. Key Considerations
PSUs objectives for solar entry and capabilities/ resources
Applicability of MNRE capital subsidy only for prescribed implementation agencies
Applicability of Center VGF announced under Batch V of Phase II JNNSM for PSUs upto Rs1000 cr

18. Thank You!

19. Business model adopted for Charankha Solar Park - Gujarat

20. Business model adopted for Bhadla Solar Park Phase- 1 - Rajasthan

21. Key drivers for participation of PSUs in the solar space
Government of India has announced scheme for implementation of UMPP/Solar Parks to deploy solar power in a faster way with a target of 20 GW with an option to involve PSUs
To promote investments from PSUs, GoI has announced INR 1000 Cr central support in form of VGF
Various ministries including Railways, Civil Aviation, Defense and Shipping have been shown interest to participate in solar revolutions
India came out with world’s first mandatory initiative for CSR activities in April 2014 where companies are required to invest up to 2% of their profits into CSR activities.
Draft Amendment to Electricity Act 2003
RGOs: Generators mandated to generate/procure 10% of thermal capacity through renewable energy based power.
RPOs: Higher penalty for non-compliance of RPO
One of the most expensive aspects of setting up solar projects is the land. Since Indian PSUs have significantly large land banks available, it is probably easier and quicker for them to undertake solar projects
PSUs investing in the new and renewable sectors are entitled to accelerated depreciation tax benefits
Indian PSUs are said to be sitting on cash surplus of ~ INR 200,000 crores.
Investment can be done in developing large scale solar power infrastructure like solar parks to inspire more private sector companies and instill confidence in them.