Project Finance and Debt Equity Solar Thermal Projects

Transcription

1 Project Finance and Debt Equity Solar Thermal Projects Presented by: Mr. Barin Sarkar Executive Director LSI Financial Services Private Limited March 14, 2012

2 AGENDA ¾National Solar Mission ¾Targets and Achievements: Phase I ¾ Status Grid Connected Plants ¾Financing of Solar Projects in India ¾Forms of Debt Funding ¾Broad terms of Loan & Financial Indicators ¾Private Equity Funding ¾ Lessons Learnt ¾ Possible Solutions/ Way Forward ¾Suggestions ¾ CSP Projects Under development, Operational & Others Nationally and Internationally

3 MISSION UNDER JNNSM THE NATIONAL SOLAR MISSION S.NO. APPLICATION SEGMENT PHASE I ( ) Utility Grid Power including Roof top 1100 MW Off grid Solar application (including lights) 200 MW Solar Thermal Collector 7 mn sqm MISSION TARGET PHASE II (2013 PHASE III ( ) 2022) 4000 MW MW 1000 MW 15 mn sqm 2000 MW 20 mn sqm

4 TARGETS AND ACHIEVEMENTS: PHASE 1 S.NO. APPLICATION SEGMENT MISSION TARGET Target ( )Status January Grid Solar Power 1000 MW 1054 MW Roof top & distribution grid connected plants 2 Off grid Solar application (including lights) capacity allocated, 170 MW capacity commissioned 100 MW 98 MW allotted 60 MW 200 MW 83.5 MW sanctioned 3 Solar Thermal Collector 7 mn sqm 4.88 million sq meters Achievement Expected by March MW 120 MW 5.7 mn sqm

5 STATUS GRID CONNECTED PLANTS: ¾84 MW capacity projects (54 MW PV & 30 MW Thermal) under Migration Scheme. ¾Solar Thermal : Selection for 470 MW allotted in ¾Selection of PV projects done in two batches. First batch of 150 MW completed in Second batch ( ) of 350 MW allotted. Average Tariff of Rs 8.7 / unit (Lowest Tariff Rs 7.5 / Unit ) PPA signed January, ¾Status Migration 48 MW commissioned, 6 MW yet to be completed of PV. Batch 1 Projects 150 MW (PV) expected by March Batch 2 Projects 350 MW expected by February Batch 1 Projects 470 MW (CSP)expected by May 2013.

6 FINANCING OF SOLAR PROJECTS IN INDIA: To achieve this target of 500 MW of solar thermal plants by 2013 and further generation of power through solar thermal route, projects have to reach financial closure. Projects are funded by Debt and Equity: 1) DEBT FUNDING Solar power is only beginning in India. Solar CSP projects can be financed through the following routes: A) BALANCE SHEET BASED FINANCING Available for large conglomerates with a healthy balance sheet that can support projects. This option can put the company balance sheets at risk. Entire burden of the project under performing falls on the developers. It may allow large industrial houses to get lower rates of finance using their existing relations with the banks.

7 Contd. B) NON RECOURSE PROJECT FINANCING It is a preferred financing structure. Debt would be provided to a special purpose vehicle set up for the project and lenders would have a lien on the cash flows. This structure does not provide recourse to the developer s balance sheet. A healthy Debt Service Coverage Ratio (DSCR) is required besides a Debt Service Reserve Account is to be established.

8 FORMS OF DEBT FUNDING: Funds to be raised for solar thermal project should have longer maturity period of over 15 years otherwise there will be an asset liability mismatch. Funds can be raised from: ¾Infrastructure Financing Companies (IFC) like, PFC, REC, IREDA, etc. ¾Banks. ¾External Commercial Borrowings (ECBs). ¾ Corporate Bonds. ¾ Insurance and Pension Funds: In future, we expect the insurance and pension funds to come forward which an access to long tenor funds are still not the major lenders to solar sector. This institutions can be attracted by further developing the corporate bond market and putting prudent credit rating mechanism in place. ¾ EXIM Funding: The US export import bank provides finance to corporates which import a substantial part of the project components from US. This is a good option in case the main technology provider is from the US and has relations with the EXIM BANK.

9 ¾Foreign Funding: Large project developers can tap international banks to get lower rates of finance. However, hedging can put a substantial dent in the rate differential and only someone ready to take the currency risk should resort to this option. ¾Green Energy Funds: There are many green energy funds currently in the market and these can provide equity, quasi equity and mezzanine financing.

10 For success of any project and solar thermal is no exception the following has to be in place for funding a project: ¾ PROMOTERS Promoters should be capable of completing the project. ¾ TECHNOLOGY The technology should be a proven technology. Contractual guarantees from proven technology providers with a track record for the long term performance of the plant to be obtained. ¾ PROJECT VIABILITY Financial viably should be assessed. ¾ MARKET: There should be a ready market for the products. ¾ REVENUES Long term PPA with credible consumers, i.e. direct power sale to large consumers, State Discoms, etc. ¾ ENERGY CERTIFICATE Developers can forego the preferential tariff and trade the RECs on the energy exchange. ¾ Developers must convince lenders that projects are technically and financially viable and have the capability of repaying debt without outside assistance.

11 BROAD TERMS OF LOAN AND FINANCIAL INDICATORS FOR CSP PROJECT Interest Loan % Debt Equity Ratio Repayment 12.35% 14% 70:30 12 years (excluding construction and grace period) Construction Period Moratorium Period months COD + 6 months subject to a maximum of 4 years from first disbursement Cost (with storage of 6 7 hours) Cost (without storage) Land Rs. 20 Rs. 25 crs per MW Rs. 15 Rs. 20 crs per MW 8 10 acres / per MW KEY PERFORMANCE INDICATORS: IRR >=12% DSCR 1.2 FACR 1.2

12 2) PRIVATE EQUITY (PE) FUNDING ¾ PE investment in the Indian renewable energy space surged ahead in 2011, with both deal volumes and average deal values years. ¾ PE funds and venture capitalists have become active in the Indian renewable energy space over the past one to two years. ¾ Some of PE funds and venture capitalists have also launched clean energy specific funds targeted at the sector. These include Climate Change Capital, IDFC Private Equity, FE Clean Energy, and ADB s Clean Resources Asia Growth Fund and Renewable Energy Asia Fund. ¾ A significant emerging trend is that PE funds are floating their own renewable energy start ups. For example, IDFC Private Equity was one of the first funds to set up a cleantech company, Green Infra. ¾ The International Finance Corporation, the Acumen Fund, New Silk Route, Bessemer Ventures, Argonaut Venture Partners, IDFC Private Equity and the FE Clean Energy Group are some of the entities active in the solar energy space in India. ¾ PE has become the preferred route to set up and expand operations. ¾ PE funds to be attracted by bringing more transparency in the profitability and credit rating where by private equity funds would be attracted. ¾ At the same time, Exit route for the private funds should be attracted.

13 LESSONS LEARNT ¾ Delay in Land Acquisition/conversion to commercial use. ¾ Improper assessment of site conditions in the beginning. ¾ Inexperienced developers leading to delay in finalization of technology. ¾ Inadequate co ordination among the stakeholders while creating evacuation system. ¾ Delay in getting State/Local clearances. ¾ Delay in legal documentation resulting in delay in project implementation. ¾ Lack of experience of developers leads to delay in raising equity. ¾ In the absence of authentic critical data's like DNI (Direct Normal Irradiance) leads to unrealistic projections of CUF(Capacity Utilization Factor) and hence IRRs for projects. ¾ Lack of experience EPC contractors. ¾ Non factorization of grid penetration levels/strength/availability. ¾ Weak Credit rating of State Utilities/Discoms.

14 POSSIBLE SOLUTIONS/ WAY FORWARD ¾ Select proven technology suitable for Indian condition at the time of DPR preparation. ¾ Proper due diligence to be carried out in selection of site and creation of evacuation facilities. ¾ Suitable arrangements should be planned for raising equity before financial closure. ¾ Simplification of land acquisition procedures for solar thermal projects. ¾ Setup Single window clearance system for solar projects. ¾Take adequate steps for completion of legal documents with FI s for release of funds to avoid delay in project progress. ¾ Select experienced EPC contractors with track record. ¾Realistic assessment of Radiation data and to project practically achievable CUFs. Developers should project realistic Capex and IRRs. ¾Proper assessment for grid strength must be conducted before site selection.

15 SUGGESTIONS: Since there is no solar thermal plant in India. The government should set up a demonstration plant so that: ¾ Acceptance of technology will be established. ¾ Performance would be established to the lender. ¾ Since the technology is new in India, assessment of credit risk is must. ¾ Plain Vanilla funding may not be sufficient. Each infrastructure project has been differently structured. ¾ Foreign lenders are more comfortable lending to projects near completion. Refinancing of rupee loans through ECB is restricted at 25 % of total debt and this cap needs to be removed to let firms raise funds through ECB. ¾ Power firms will certainly benefit if they are able to borrow from international leaders as their overall cost is around 8 9% as against 13 14% domestically.

16 CSP Projects Under Development S. COMPANY LOCATION SIZE TECHNOLOGY N NAME O 1 Lanco Infratech Jaisalmer 100M Parabolic Ltd district of W Trough Rajasthan 2 KVK Energy Jaisalmer 100M Parabolic Trough Ventures Pvt Ltd district of W Rajasthan Project 3 Megha Andhra 50 Parabolic MW Trough Engineering & Pradesh Infrastructres Ltd 4 Godawari Rajasthan 50 Parabolic Power & Ispat MW Trough Ltd 5 Corporate Ispat Rajasthan 50 Parabolic Alloys Ltd MW Trough EPC COMPLETIO FIXED CONTARCTOR N DATE TARIFF PER KW (Rs.) LANCO Solar 13 Mar & INITEC Energía N/A 13 Mar 11.2 MEIL Green 13 Mar Power Limited Lauren Jyoti 20 Mar Shriram EPC Ltd 13 Mar 12.24

17 OPERATIONAL PLANTS COMPANY NAME 1 ACME Bikaner 2 MNRE R&D Project LOCATION SIZE TECHNOLOGY EPC CONTARCTOR DEVELOPER Rajasthan 10MW Power Tower Gwal 1 MW Parabolic Trough Abener Pahari, Haryana ACME OTHER PROJECTS UNDER DEVELOPMENT COMPANY NAME LOCATION SIZE TECHNOLOGY DEVELOPER PARTNER 1 Rajasthan Solar One Rajasthan 10 MW Parabolic Trough Entegra Techint, Archimede Solar Energy, Ronda Reflex and Duplomatic Oleodinamica 2 Bap Solar Power Plant Rajasthan 10 MW Parabolic Dish Sterling N/A 3 NTPC Pilot Project Rajasthan 15MW Parabolic Trough NTPC 4 Andhra Pradesh Project Andhra Pradesh 5 Thermal Power Project, Kutch Kutch, Gujarat Dalmia Cements 50MW Parabolic Trough Sunborne Energy Khosla Ventures & General Catalyst Partners 25MW Parabolic Trough Cargo Solar Power with Thermal Gujarat Private Storage Limited PARTNE esolar

18 GEMASOLAR 24 HOURS OF UNINTERRUPTED SUPPLY: Gemasolar is the first high temperature solar receiver with molten salt, which provides 15 hours of thermal storage and an annual capacity factor of about 75%. BACKGROUND Technology: Power tower Country: Spain Land Area: 195 hectares 2 Solar Resource: 2,172 kwh/m /yr Size: 19.9 MW Company: Sener Start Production: Apr 11 Torresol Energy Developer(s): SENER (60%) AND MASDAR (40%) Owner(s) (%): UTE C.T. Solar Tres EPC Contractor: Gemasolar 2006, S.A. Operator(s): THERMAL STORAGE Storage Type: 2 tank direct Storage Capacity: 15 hour(s) Thermal Storage One cold salts tank (290ºC) from where salts are pumped to the Description: tower receiver and heated up to 565ºC, to be stored in one hot salts tank (565ºC). Annual equivalent hours = 6,500.

19 THANK YOU