EN-June-2017

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IN THIS ISSUE PDF Compressor Free Version20 Innovative solutions in 24 renewable energy inancing Cover COVER India overtakes the US to become the second-most attractive country after China for renewable energy investment. Innovation partner to India’s RE mission The World Bank is supporting India’s renewable inancing through a portfolio of energy engagements amounting to $1 billion. 28 27 COLUMN Cover Bhadla Phase-IV and India set to be a innovative inancing great destination for investment Solar tarif reaches a historic low of Rs 2.44 a unit in the latest bidding process at Bhadla, Rajasthan, Developers are giving a way to innovative inancing. ready to take risks as we have 29 a suiciently developed EVENT COVERAGE ecosystem today. Time right to raise aggressive 40 innovation in inancing IN-CONVERSATION Eminent industry players come together at the ‘Renewable Energy Innovative Financing – Strategic Larger projects would Discussions’ – a seminar organized by the National enable developers to Solar Energy Federation of India (NSEFI). bargain better 45 The scale of wind projects has gone up in the recent inter-state competitive INTERVIEW bidding which is enabling the project developers to do reengineering and Emergence of new means in RE better project management. inancial space Opportunities in India’s renewable energy build up has resulted in mobilizing several strategic & inancial investors towards the sector.4 | Energy Next | June 2017

VOLUME 7 | ISSUE 08 | JUnE 2017 www.energynext.in PDF Compressor Free Version49 INNOVATIVE FINANCINGInnovative inancinginstruments need of the hourLong terms funds are not always available with commercial banks,hence, renewable energy developers require diferent solutions.58 51 EVENT INNOVATIVE FINANCINGSECI to launch ofshore We want to make investing inarm to boost demand in solar as simple as investing inISA member mutual fundsThe online platform, titled Infopedia will Sunfund helps customers to discover their solarprovide an e-library with videos and reading savings potential, understand long term implicationsmaterial on the best practices. of different financing models and get offers from India’s leading solar companies. 63 MNRE NEWS Power minister announces 1,000 MW wind energy auction scheme65 The scheme is open for all obligated entities purchasing wind IREDA CORNER power for compliance of their non-solar Renewable PurchaseIREDA Obligation (RPO).showcasesachievements June 2017 | Energy Next | 5at eventsThe new rates would beefective from April 1.

PDF CNoamtiporneassloIrnsFtrieteutVeerosfioSnolar Energy, Gurugram provide services for assessing susceptibility of Potential Induced Degradation (PID) of PV modulesThe PV Module Test Lab, NISE is a NABL (National accreditation board for testing & calibration laboratories)accredited laboratory in accordance with the standard IS/IEC 17025: 2005 for qualification testing of PV module asper IEC 61215:2005/ IS 14286:2010. Testing of PV modules for susceptibility to PID is now important for anylarge-scale PV project.IEC 62804: Photovoltaic (PV) modules – Test methods for the detection of potential-induced degradation –The IEC 62804 standard prescribes very specific test procedures for conducting the test, including: a) Module temperature: 60 °C ± 2 °C. b) Chamber relative humidity: 85 % ± 3 % RH. c) Dwell: 96 h at the above stated temperature and relative humidity (not including stabilization). d) Voltage: Module rated system voltage and polarities applied for the above given dwell duration and during ramp down of temperature to ambient conditions.MNRE Specification for the detection of potential-induced degradation: The IEC 62804 standard have been modified by keeping in mind the harsh environmental conditions of India. In India PV module failure rate is very high due to the hot and humid conditions, in order to simulate the Indian operating conditions; NISE has initiated PID TEST as per the following MNRE specification. Pre Stess Test PID Volatge stress Post PID stress test test•Precondition•Visual Inspection •Temperature: 85 °C ± •Visual Inspection•Maximum power 2 °C. •Maximum power determination at STC •Humidity: 85 % ± 3 % determination at STC•Performance at Low relative humidity. •Performance at Low irradiance •Dwell: 96 h irradiance•Wet leakage test •cycle - 3 •wet leakage test•Electroluminescence •Voltage: Module •Electroluminescence•Ground continuty Test rated system voltage Pass Criteria after completion of the test, shall be meet as per MNRE specificationa) Power degradation at STC shall be ≤ 5%.b) No dark area in the cell should be detected during EL Measurementc) PV module shall meet the pass criteria of Visual Inspection and Wet leakage current test as per IEC 61215. For More Information Please Contact Deputy Director General (SPV) National Institute of Solar Energy, Gwalpahari, Gurgaon-Faridabad Road, Gurgaon – 122003 (Haryana) Phone: 0124-2579084 Email: [email protected] , [email protected], Web: www.Nise.Res.In

FROM THE EDITOR PDF Compressor Free VersionPush to clean power continuesI ndia and China have surpassed shows the confidence that investor have crores and the balance Rs. 2360 crores the United States to become the shown in India and renewable energy would be raised in the year 2016-17. two most attractive countries sector. Various innovative renewable for RE investment, a report by energy instruments – masala bonds, Such timely investments would notUK accountancy firm Ernst & Young Green banks, securitization, partial risk only boost the sustainable infrastructure,(EY) said in an annual ranking of and credit guarantee and asset backed but also facilitate achievement of thethe top 40 renewable energy markets securities are being harnessed by the ambitious energy-for-all mission. Theworldwide. India has moved up to developers. resources raised would be used forthe second position from third in developing additional capacity in thethis year’s ‘Renewable energy country The Union Cabinet has given its sustainable energy sector that will resultattractiveness index’ released by EY. approval to Raising of Bonds of Rs. 2360 in generation of additional employmentThe credit for this has been awarded to crores for Renewable Energy. The Bonds opportunities.the combination of strong government will be raised by the Ministry of New &support and increasingly attractive Renewable Energy (MNRE) through theeconomics. IREDA during the 2017-18. These funds will be used by MNRE in the approved As such, generating finance for a wind programmes/schemes for solar park,or solar project is no more a challenge as green energy corridor, generation-basedbanks and foreign institutional investors incentives for wind projects, viability(FIIs) not only understand this sector gap funding for solar projects, roof-better, they are willing to take exposure top solar, off-grid/grid-distributed andat attractive terms. They kind of decentralized renewable power, amongcommitment shown by the government others. The Government had earlierthrough policy initiatives are only allocated Rs. 4000 crores to IREDA toboosting their confidence. raise “GOI fully serviced taxable Bonds” on behalf of the MNRE. Out of this The solar tariffs have come down to as allocation, IREDA had raised Rs. 1640low as Rs 2.44 per unit at the auction of500 megawatt of capacity at the Bhadla KS Poplisolar park in Rajasthan, mainly due to Chairman & Managing Director, IREDAlower equipment and borrowing costs. The industry has also comfortablybeen able to raise funds in internationalmarket in rupee as well as dollar that June 2017 | Energy Next | 7

LETTERS TO THE EDITOR PDF Compressor Free VersionMost informative magazine Enabling Investment Environment Energy Next is one of the most informative Editor-in-Chief K S Popli magazines in India that provides latest, Publications Director Anupam Datuar crisp and exclusive coverage of the energy sector. Energy Next puts in great efforts to Associate Editor Fozia Yasin present to its readers’ rich quality content Associate Editor Anurima Mondal in an easy way to understand the latest on Sr. Correspondent Sagarika Ranjan trends along with expert opinions from Industry leaders. I wish Energy Next Design Flying Tusker Media magazine continued success and growth in Marketing Manager Abhinav Dutta the times to come. Marketing Manager Aditya Datuar ll Rajesh Prothi, Managing Director, Subscription & Dispatch Anil Patwal Absolute Factor For the latest Renewable Energy news.Complete Coverage his is truly a keeper’s issue. it provides on all renewable log on to www.energynext.in ll Varun Kumar, Engineer, energy verticals. InterviewsYour May issue on Rewa gave New Delhi of the stalwarts carreid in Energy Next is printed by R Ramprasad and publisheda complete overview of the the magazine is something I by R Ramprasad on behalf ofproject. While the landmark Events Calendar really look forward to everyproject has been creating month. I can look forward Focal Point Media Services Pvt Ltdripples, one was keen to know I would like to compliment to a Rewa-like coverage on #407, Fith Floor,the details like the way bids team Energy Next especially for Wind energy and electricwere conducted and how the their event’s page. he details vehicles in renewable energy. Pavani Plaza, Khairatabad,developers managed to clinch are very helpful and it helps ll Rakesh Singh, Noida Hyderabad - 500 004, Telangana, India.the deal with perspective plan for these important events CIN No.: U74999AP2010PTC070645from other stakeholders. in advance. Also the updates in Future expectations Focal Point Media Services Pvt. Ltd. is a jointFrom the state minister to the the news column and actually venture of Gateway Media Pvt. Ltd, and Invisionsighning of the power purchase the whole journal helps us Your articles explore every Communications & Research Pvt. Ltd, and printed atagreement, the issue covered know about the developments aspect of the renewable energyevery aspect of the project. in the green energy sector, both sector. From manufacturers to M/s. Kala Jyothi Process Pvt. Ltd. of India and abroad. consumers and big players in 1-1-60/5, RTC Cross Roads, Musheerabad, ll Vishal Sinha, Hyderabad the industry to informative Hyderabad - 500 020, and Published at Focal Point pieces from the government, Coverage Request every voice is recorded in Media Services Pvt. Ltd. the magazine for the benefit #407, Fith Floor Pavani Plaza Khairatabad, I have been reading Energy of those interested in the Next for quite some time green sector. Hyderabad - 500 004, Telangana, India. now. I am particularly ll SK Mehta, Haryana Tel: +91 40 233 000 61, 233 006 26 hooked for the information +91 40 233 006 65 Feedback: Please send your feedback and comments to Editor-in-Chief: K S Popli [email protected] Subscribe: Tel: +91 11 2642 4071/72advisory board e-mail : [email protected] Write to: Focal Point Media Services Pvt. Ltd. #409, Mansarovar Building, 90 Nehru Place, New Delhi-110 019, INDIA Tel: +91 11-26424071/73 Fax : + 91 11-46507580Prof Rangan Banerjee Arun Gupta Dr Praveen Saxena K P Sukumaran S Chandra Sekhar Yogesh Mehra Please note: Views expressed in the articles are those IIT-Mumbai Managing Director Former Advisor Former Advisor Managing Director Managing Director of the Authors and may not be shared by the editor or Him Urja Pvt Ltd MNRE MNRE Wind World (India) Ltd members of the editorial board. Unsolicited material Bhoruka Power Corpn Ltd will not be returned.Advertise Contact Write to Copyright: No material published here should with us be reproduced in any form without prior written Aditya Datuar Focal Point Media Services Pvt. Ltd. permission from Focal Point Media. Marketing Manager 409, Manasarover Building +91 8860636021 / +91 98-71-048271 90, Nehru Place [email protected] New Delhi - 110 0198 | Energy Next | June 2017

GSTPDF Compressor Free VersionPiyush Goyal: GST regime will haveno impact on renewable powerThe GST regime will have no impact response from the industry. Piyush Goyal @PiyushGoyal . Apr 6 on renewable power rates as According to consulting irm, Bridge to these tarifs are already touching I congratulate the nation new lows, there was no need India, the new rates would hit more than 10 on the historic passing offor lower taxes to encourage clean energy gigawatt of ongoing utility scale solar power GST. The unanimity acrossin the country, Minister Piyush Goyal said. projects and pose a threat to their viability. the political spectrum“We don’t need support of lower taxes to in national interest doesencourage renewable energy. By itself, it is he irm, however, clariied that they India proudgood for the nation. It reduces pollution. It believe long-term prospects of the industrygives discoms 25-year-long afordable power would not be impacted by GST move as an Piyush Goyal @PiyushGoyal . Apr 6at prices which are even below grid (parity increase in tax rates will be quickly ofset byprice),” Goyal said. falling costs. GST has become a reality now where a few months he minister said, “Solar power prices have ago it was inconceivablegone below grid parity. Wind power prices that all States & UTs wouldare also almost at grid parity despite only one become One Nation, Onebid (auction for 1GW).” He added that the Marketsituation today is very diferent from the past as“we can stand on our feet”. Goyal said, “Twenty “A commercially viable, non-subsidyive years later, other forms of power would be dependent sector is naturally more3-4 times higher. Solar, wind and hydro would sustainable in the long run. However, we dobe afordable forms of power. I don’t think GST wonder why solar equipment is attractingrates will impact my sector’s tarif.” higher taxes than coal or other power equipment,” it remarked. Meanwhile, the GST regime got a mixed

NATIONAL NEWS PDF Compressor Free VersionParis or no Paris, India committed to preserve climate: PMPrime Minister Narendra Modi and despite America’s exit from the deal. Talking because we learn it in the Vedas. Paris or no France President Emmanuel Macron about the climate change deal, Modi said that Paris, our commitment to preserving thewill “continue working above and beyond” protecting the environment is an article of faith climate is for the sake of future generations,”the Paris Agreement on climate change for India and a part of its tradition that respects he said. “I said it then, I say it now. We nature. “It is our duty to give a git to the next must leave for our future generations a generation,” he added. Modi arrived at the climate wherein they can breathe clean air presidential Elysee Palace and hugged Macron. and have a healthy life.,” he asserted. And he pictures contrast with Macron’s white- emphasised that India had been working knuckle handshake with Trump in Brussels to protect the environment even before last week. He further said that the French the Paris deal in 2015. Donald Trump has centrist’s election had “encouraged the whole pulled US out of Paris climate change deal world”. According to Modi, protecting “mother agreed by more than 190 nations. He said Earth” was part of Indian culture. “For Indians, it unfairly beneited countries such as India environmental protection is a profession of faith and China.India’s renewables plan gets boost India surpass U.S. as most attractiveAter the Paris agreement, India is walking Institute (GEI), China’s overseas investment, renewables market on a strong renewable energy path. While including in India, into 240 coal power plantsChinese investments are gradually increasing in along the Belt and Road Initiative has slowed According to a recently publishedsolar energy, its investments in thermal power down in 2016 ater the Paris Agreement on report by Ernst & Young, India, alongplants is slowing down. As per a recently- Climate Change. with China, has surpassed the United Statesreleased report of the Global Environmental to become the most attractive countries for India was a top destination for fossil fuel renewable energy investment. infrastructure investments but now there is a noticeable spike in solar investment by Chinese In an annual ranking of the top 40 irms as per a inancial expert in India. Reports are renewable energy markets worldwide doing the rounds that China’s top solar module in terms of allure, China ranked first, manufacturer GLC-Poly energy is in talks with followed by India. India’s Essel group to set up a solar module manufacturing facility in India this year. he United States, which ranked the highest last year, slumped to thirdISA gets approval from ive African countries place, due to a shit in U.S. energy policy under President Donald Trump.International Solar Alliance – the key meeting between May 22-26. Comoros renewable energy initiative of India had also submitted its ratification Among European countries,got boost when Djibouti, Comoros, Cote instrument. Finance Minister Arun Germany, France and Britain rankedd’Ivoire, Somalia and Ghana signed Jaitley graced the signing and fourth, eighth and tenth. “he UK’sthe ISA framework agreement on the ratification ceremony that was organised reappearance in the top 10 is thesidelines of African Development Bank by the Ministry of External Affairs. result of other countries falling away -(AfDB) meeting in Gandhinagar. notably Brazil, which cancelled a wind Launched at the UN Climate Change and solar auction in December - rather The ISA Framework Agreement was Conference in Paris on 30 November than any particularly encouragingopened for signature during AfDB 2015, the ISA initiative was the resurgence,” said Ben Warren, EY’s brainchild of Prime Minister Narendra head of energy corporate inance. Modi. It is conceived as a coalition of solar resource rich countries to address their special energy needs. The foundation stone was laid by the Prime Minister of India and the President of France in National Institute of Solar Energy, Haryana on January 25, 2016.10 | Energy Next | June 2017

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NATIONAL NEWS PDF Compressor Free VersionIndian Railways to save Rs 41,000 crore in next 10 yearsRailway minister Suresh Prabhu has India have already been electriied so far, announced that the railways will save Prabhu aims to double it in next 15 years.Rs 41,000 crore in the next 10 years onenergy cost on account of its thrust on “We have the funding and have alreadypower generated from solar energy. started awarding contracts to new agencies. It will reduce cost and increase eiciency,” “In the next 10 years, the railways he said, adding that the railways iswill save Rs 41,000 crore in energy. By committed to reach the target of generatingelectriication, we will reduce diesel 1,000 MW solar power across the countryconsumption. Solar generation will help in the coming years.the environment too,” Prabhu announcedduring an event. “Work is on to achieve the target. We will also focus on having LED lamps in While 42 per cent of railway tracks across railways,” he announced.Solar power tarifs reach Rs 2.44 per unit MoAs signed for irst wind auction schemeSolar power tariffs in India have announced power minister Piyush Goyal dropped to a new record low of Rs Through micro-blogging site. The Memorandum of Agreements2.44 per unit as per the bidding that Goyal tweeted that Solar Energy for purchase of 1000 MW windhas been recently concluded for Bhadla power under were signed betweenPhase-III Solar Park in Rajasthan Corporation of India (SECI) is PTC India and Discoms of Uttar developing the 500 MW solar park Pradesh, Bihar, Jharkhand, Delhi, “Latest solar power auction at at Bhadla with Saurya Urja Co. of Odisha and Assam.Bhadla Solar Park 3 sets new record Rajasthan Renewable Energy Corp. Ltd.with electricity tariff of Rs 2.44/unit,” As per MoAs, the Discoms of UP, “The auctions began at 2 pm yesterday Bihar, Jharkhand, Delhi, Assam, and (Thursday) and have been concluded at Odisha will buy wind power of 449.9 10 am today. The tariffs for the first 200 MW, 200 MW, 200 MW, 100 MW, 50 MW were at Rs 2.44 per unit while the MW and 50MW respectively. rest 300 MW were at Rs 2.45 per unit,” added SECI Managing Director Ashivini he Letter of Award (LoA) has Kumar. been issued to the developers by Solar Energy Corporation of India (SECI) Apparently, renewable energy firm under the irst wind auction scheme ACME has bagged 200 MW and SBG have been conducted by Solar Energy Cleantech has bagged the rest 300 MW Corporation of India (SECI) on April 5. at Bhadla phase-III. This was the first time suchArun K Tripathi takes over as DG NISE auction process was done in the country for wind power through A run K Tripathi takes over as Director General of e-reverse auction and its success can National Institute of Solar Energy (NISE). An be seen from the fact that a record engineering graduate, he obtained M Tech from IIT low tariffs of Rs. 3.46 per kWh was Kharagpur and PhD from IIT Delhi in the field of biomass achieved. energy. He has also acquired MBA in Environmental Management.Tripathi is an adviser in the Ministry of New and Renewable Energy and has over three decades of experience in planning, development, and implementation of various renewable energy programmes particularly on biogas development, biomass gasification, solar rooftops,waste to energy, village energy security, solar cities, green buildings and informationand public awareness in the country.12 | Energy Next | June 2017

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STATE NEWSPDF Compressor Free VersionHyderabad Airport Marching Towards 100% LEDGMR Hyderabad International Airport second airport to convert the entire Neutral Airport (Level 3 + Neutrality), Ltd. (GHIAL) which operates Rajiv Taxiway Edge Lights from halogen lamps GHIAL is on its green journey ofGandhi International Airport (RGIA), to energy efficient LEDs (Light Emitting transforming RGIA into a 100% LEDHyderabad, has announced that it has Diodes). Complementing the recently airport, out which 75% of the work hasbecome South India’s first and India’s achieved recognition of being Carbon been already completed. RGIA, which currently caters to more than 15 million passengers per annum (FY16-17) with close to 400 daily air traffic movements, requires consistent supply of electricity to operate round the clock. With its mission to move from conventional energy to renewable energy sources for environmental sustenance, the airport had recently commissioned a captive 5MW solar power plant for its captive use.Odisha villagers use solar lights to scare wild elephants Delhi to get power from wind energyBaghuapat village is located on yet to be electrified, the villagers and the fringes of the Satkosia Gorge the residents were struggling to deal Delhi is all set to get powerSanctuary in Odisha. As Baghuapat is with wild elephants. However, now they generated from wind as Reliance have started using solar-powered lights Infrastructure owned-BSES Rajdhani as soon as the sun sets as the lights kept Power Limited (BRPL) has signed a them away. Memorandum of Agreement with PTC India Ltd for procuring 100 MW wind “Encountering wild elephant is a power. Starting from November 18, routine affair for us. It is difficult to 2018, the power will be available for 25 drive their herds away. The best option years at a competitive tariff of Rs 3.46 was to stay away from the animals. The per unit, lights have become our only defence against the elephants,” said Tilottama, a “In line with government’s push for resident of Baghuapat village. the renewals, BRPL has taken the lead Delhi in championing the cause of The village was introduced to solar wind power. This agreement will help lights by the Foundation for Ecological BRPL fulfil its Renewable Purchase Society (FES), an Angul-based NGO, Obligations (RPO),” said BRPL Chief and TERI, a non-profit research Executive Officer Amal Sinha. organisation. The 1,000 MW wind power projectAndhra Pradesh tops in solar power would be installed in Tamil Nadu and Gujarat by four winners of bids. ThisWhen it comes to solar capacity, in the current financial year. Meanwhile, was the first time when competitive Andhra Pradesh has topped the the cost of solar panels have decreased in bidding was conducted for wind powerchart with accumulative generation past five years. in India. The bid was executed by SECIcapacity of 1,867 MW. Rajasthan, Tamil (Solar Energy Corporation of India).Nadu and Telangana are at second thirdand fourth positions with 1,812 MW and1,691MW respectively. The Union Power Ministry hasestimated that the country has solarpower potential of 748 GW. Almost 5,000MW of rooftop solar and 10,000 MW oflarge-scale solar projects would be added14 | Energy Next | June 2017

PDF Compressor FFreeiVnerasionn cial Solutions Pvt. Ltd. together we can...Debt Syndication Valuation Services Term Loan Syndication Fair Valuation of SharesWorking Capital Syndication Valuation for Equity Placement Financial Restructuring Advisory Valuation for Relisting PurposesPrivate Equity Syndication Services Portfolio Valuation for InvestorsIPO & Pre IPO Advisory Services Fairness Opinion & Valuation for M&A of Listed Companies NEXGEN Domestic InternationalCapital Market Capital Market Services ServicesDomestic Market Offerings International Market Offerings Initial Public Offer , Follow on Public Offer, Integrated services starting from planning Rights Issue, Preferential Allotment up to successful execution for the following: Buy Back Offering, Delisting, Disinvestment Qualified Institutional Placements ADRs/ GDRs/ AIM Listing Corporate Bond Issue Foreign Currency Convertible BondsNEXGEN An Introduction: NEXGEN Team’s Deals include: SEBI Registered (Category - 1) Permanent Merchant Banker Companies : Valuation of Global Corporates.......................................................................NEXGEN NEXGEN Financial Solutions Pvt. Ltd. Category - 1 Merchant Banker. SEBI Regn No. INM 000011682 709, Madhuban Building, 55, Nehru Place, New Delhi – 110019 Tel.: + 91-11-30682000 , Fax : + 91-11-30682111 Web: www.nexgenfin.com Email id: [email protected]

STATE NEWSPDF Compressor Free VersionHaryana govt exempts solar devices from VAT Andhra Pradesh to loat tenders forWith an aim to promote solar and with a limit of Rs 20,000 per KWP for battery-backed solar encourage entrepreneurs to certain categories of the buildings for projectsset up manufacturing of these items, setting up of grid-connected rooftopHaryana government has exempted solar solar power plant in Haryana. Andhra Pradesh is all set to floatdevices, equipment or parts used in the tenders for two solar parks to beinstallation of solar power projects from taken up on a pilot basis. AccordingValue Added Tax. Devices include solar to power secretary Ajay Jain, two pilotlanterns, solar home systems, stand- projects of 5 MW capacity of solaralone street lighting systems, solar water along with storage systems would beheating systems, solar water pumping taken and the power generated wouldsystems, solar inverters, solar cooker be used in irrigation.boxes and solar photovoltaic modules. The state might also operationalise A notification was issued by Power local grids where the produced powerSecretary Ankur Gupta on May 8. The is locally consumed. The batterygovernment is also giving subsidy at the storage technology is likely to getrate of 30 per cent of the benchmark cost more accessible and inexpensive with its mass adoption in coming years.Gujarat tops in discom rankings The two pilot projects willAs per the rankings released by Union improvements in curbing transmission reportedly be taken up as a part of power ministry, four power distribution losses, tarif realisation and lowering the cost the larger solar parks dedicated tocompanies of Gujarat have performed well of power supply. local requirements in the agricultureand topped the list for the ith year in a row. sector. Andhra Pradesh is factoringAlong with Gujarat, Himachal Pradesh was he rating methodology assisted by the huge impact the renewable energyamongst the best performers in cost coverage. Central Electricity Authority, Central sector capacity would bring in the Electricity Regulatory Commission, Power system. The declining prices of power Other discoms, namely, Tamil Nadu Finance Corporation, Rural Electriication from solar generation power plantsGeneration and Distribution Corporation, Corporation, distribution utilities and credit was seen at the Bhadla solar projectKanpur Electricity Supply Company, rating agencies CRISIL, Icra and CARE, was in Rajasthan where it attained theMadhyanchal Vidyut Vitaran Nigam and developed by the power ministry in 2012. tariff of Rs. 2.44 per unit.Jodhpur Vidyut Vitaran Nigam have shownmore than 15 per cent improvement on thisparameter. “here has been an increase inthe number of utilities that have iled tarifpetitions for 2017-18 on time,” the report said. While utilities that lagged behind hadfaced high technical and commercial losses,utilities that fared well had made noteworthyHaryana to construct small hydro projectsHaryana Government is working on either been completed or is near completion. foundation stones of various projects related to small hydro projects along with major he minister has also inaugurated and laid power and water supply.projects such as Renuka and Lakhwar Dams.Chief Minister Manohar Lal has conirmedthat around nine sites have been earmarkedin the Shivalik area for construction of smalldams. He also added that subsidies and otherincentives would be provided so that farmersadopt drip and sprinkler irrigation techniques. he state government has made about 3,600announcements, of which work on 1,600 has16 | Energy Next | June 2017

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INTERNATIONAL NEWS Iowa senator condemns energy chief PDF Compressor Free Version for undermining wind energyAbu Dhabi closes $ 872 million inancing forworld’s largest solar plantAbu Dhabi’s government-owned power and international commercial banks,” said Iowa’s Republican senator Chuck utility has closed a 3.2 billion dirham Al-Sayari. He also added that the loan will Grassley says that U.S. Energy($872 million) inancing package for the enable reinancing ater ive years. Secretary Rick Perry has commissionedworld’s largest solar power plant. Director a ‘hastily developed’ study of the of theGeneral Saif Saleh al-Sayari conirmed that Bank of Tokyo Mitsubishi, Sumitomo electric grid that seems to be ‘geared toAbu Dhabi Water & Electricity Authority Mitsui Banking Corporation, Mitsubishi undermine’ the wind sector.(ADWEA) raised $650 million in debt with UFJ Trust and Norinchukin Bank werethe remaining $222 million raised in equity the three leading arranger of the loan. Grassley asked a series of questions Apparently, French Banks - BNP Paribas in a letter regarding the 60-day study he Japan’s Marubeni Corp and China’s Credit Agricole, Natixis - and First Abu commissioned. Grassley also said theJinkoSolar Holding were selected to construct Dhabi Bank were also part of the deal. results were pre-determined and wouldand operate the 1,177 megawatt plant. show that intermittent energy sources he equity portion will be contributed like wind make the grid unstable. “he inancing which is completed is by ADWEA and the project developersa $650 million project inance from local Marubeni and JinkoSolar. “I’m concerned that a hastily developed study, which appears toSolar power output hits record in Britain pre-determine that variable, renewable resources such as wind have underminedSolar power output in Britain recently The previous record was 8.48 GW, set grid reliability, will not be viewed as hit a record as the country basked in a on May 10. Britain’s Met Office added credible, relevant or worthy of valuable taxpayer resources,” wrote Grassley,heat-wave. A record high of 8.7 gigawatts temperatures could reach up to 30 degrees whose state is home to a booming wind energy industry.(GW) of electricity was produced by Celsius in some parts, with the country Last month, Perry ordered thesolar panels at their peak on Friday, poised to beat previous temperature grid study and that incentives for the deployment of renewable energy hadcontributing more than 24 percent of records for May. Solar power capacity has come at the expense of conventional energy sources.Britain’s electricity supplies, said power increased from 2 GW to 12 GW in five Grassley showed an example of hisgrid operator National Grid. years. state Iowa that gets 36 percent of its electricity from wind. He further said that its largest utility MidAmerican has the ninth lowest electricity rates in the country.18 | Energy Next | June 2017

EVENTPDF Compressor Free VersionISA will help mobilise $1000billion by 2030: Tripathyhe Common Risk Mitigation Mechanism works the best when there are moreeconomies and this is where the partnership of the ISA becomes importantFrom let -- Isabelle Kocher, Alexandre Ziegler and Upendra Tripathy share a light moment at the ISA-TWI Leader and this is where the partnership and leadershipSession, held at he Leela Palace in New Delhi of the International Solar Alliance or ISA becomes important, explained Gosh.I n last couple of years solar energy UpendraTripathy, Interim Director General has grown in leaps and bounds of ISA; Isabelle Kocher, Chairperson of Talking about the legal practices, Akshay across the world and countries Terrawatt Initiative; Dr Arunabha Gosh, Jaitly said, “he importance of the pricing risk are deliberating around the world CEO at Council of Energy, Environment was particularly signiicant for the long-termon tapping this huge energy potential. and Water; Akshay Jaitly, Partner with investors who have to live in the regulatoryRecently, giving a boost to the renewable Trilegal; Jean Pascal Pham-Ba, Secretary environment of a country”.sector, the USA agreed to formalize the General and Spokesperson of TerrawattInternational Solar Alliance (ISA). Initiative besides others. Introducing a UNDP-based inancial model, Jaitly said that the model, with its To deliberate on how the ISA is going Speaking on the occasion, Dr Arunabha 20 diferent regulatory risks gives investorsto play a role in the renewable sector, Gosh, CEO at Council of Energy said, “he a tool not only to build their tarifs on theexperts, researchers, representatives from idea is to develop a tool that is simple and basis of traditional input costs but help themthe industry and the government came afordable for the participating countries. compare their costs against that of the othertogether at the International Solar Alliance he countries would pool the risks such as countries as well.-Terrawatt Initiative leader session on “De- currency, inconvertibility, political risks etc.risking investment in renewable energy” was which would help reduce the cost that would Jean Pascal Pham-Ba elaborated on theorganized by Terrawatt Initiative recently in otherwise be borne by a particular country operationalization of the operational partNew Delhi. or a particular project developer. “If we could of Common Risk Mitigation Mechanism do this, we could signiicantly bring down while Ziegler said that the ISA was one of Following the withdrawal of objections the cost of the tarif and help scale up the the most rising initiatives. Encouraging theby the US, several countries have renewables even further.” guests from the industry present at the event,signed the ISA. The dignitaries who Ziegler explained how important was thegraced the session included Alexander he Common Risk Mitigation Mechanism support from the private sector.Ziegler, Ambassador of France to India; works the best when there are more economies “India has made very impressive achievements,” said Ziegler adding that “We get better together.” Speaking on ISA, Tripathy said that the ISA believes everyone should have access to energy. “India is trying to tell other prospecting member countries that solar can make fundamental diference in the lives of those around. ISA will help mobilize $1,000 billion by the end of 2030, he said adding that ISA believes that the wait for energy access to all will not take a very long time and can be achieved in the irst quarter of the present century. All the panelists expressed great hopes for the ISA. With the USA’s positive response, a lot of prospective partner countries are now actually partner countries thus paving way for a brighter future for solar sector across the globe. June 2017 | Energy Next | 19

COVER PDF Compressor Free Version Innovative solutions in renewable energy inancingWelcome to the changing dynamics in the solar energy jungle. Today, theroar of the Indian lion is next only to Chinese dragon in the renewable energyinvestments. India has overtaken the US to become the second-most attractivecountry ater China for RE investment In the last 3 years since the launch global investors. of “Govt. of India’s Target 2022” of he inancing challenge is further increased “24X7,“Afordable power for All”, around 10 GW of solar capacity has already been due to the constantly lowering of tarifs. his is added to 2014 base of 2.6 GW. further highlighted in the backdrop of recent fall in solar tarif to a jaw dropping level of 2.44 per As of March 31, 2017, renewable energy unit his is actually a V. steep drop of more than sources aggregating to 12.6 GW accounted for 40% in the tarifs from more than Rs.4.50 per 17.5 percent of all power generated in India. unit ; a year ago. Financing constitutes 70 to 80% of the Traditional inancing fails at times like this CAPEX and around 80% + of OPEX. hus when the return on investment practically it remains the most critical success factor of becomes invisible. his is the time for exploring Renewable Energy projects. Indian corporates Innovative Financing with a focus on all its three are recently witnessing their leadership slip to elements viz : foreign Companies or those backed by global • Adequacy, long term Funds, due to the availability of • Cost Efectiveness & cheaper, long term adequate funds with these • Timely Availability20 | Energy Next | June 2017

MARkING PROGRESSPDF Compressor Free Version I clearly feel that innovative inancing shall $30bncontinuously play an important role in shapingup the ever growing Renewable Energy space. $20bn 2.7 $10bn he two main functions which seems tobe impacting solar tarif is the “Technology & $0bnits upgradation” coupled with the “ImprovedConidence” of global investors in to Indian solar United France China Germany Nether- Sweden India Canada Norway Japanenergy space. States lands his Improved Investors conidence istravelling on the back of the following four India currently ranks 7th for total labelled green bond issuanceimportant pillars:• Transparency (in the bidding process) Green Bonds of 2016: Indian labelled green bonds, Jan to Sept• Lowered Risk• Credit Enhancement by the Otaker DATE ISSUER AMOUNT COUPON CERTIFIED/REVIEWED THEME• CECLP Phenomenon Renewable enegy Feb 2016 Hero Future Energies INR 3bn 0 Climate Bonds Standards Low carbon buildings While transparency has been achieved as a Renewable energy, low carbonnational phenomenon; lowered risk & credit May 2016 PNB Housing Finance INR 5bn n/a n/a buildings and transportenhancement by otaker are functions of better 2.875 Climate Bonds Standards Renewable energystructuring achieved with the support of global June 2016 Axis Bank USD 500m Renewable energyexperience including World Bank at times. Renewable energy Aug 2016 ReNew Power INR 5bn 10.4 Climate Bonds Standards Renewable energy What is of critical relevance to this Aug 2016 NTPC INR 20bn 7.375 Climate Bonds Standardsdeliberation is the CECLP phenomenon which Aug 2016 Greenko USD 500m 4.875 Sustainalyticsis the acronym for “Cost Efective Capital for Sep 2016 YES Bank INR 3.3bn n/a n/aLarger Projects”. Single location large projectin fact ofer tremendous opportunity for larger On-grid Renewable Energy Capacity (In GW)India Added 18.7 GW Renewable Energy Capacity In 4 Yearscapital deployment & higher economies of scalebesides creating the possibility of structuring 4.0innovative inancing solutions for Renewable 3.8energy. DEBT Financing not only plays a criticalrole to the extent of 70% to 80% of CAPEX 3.2but also igures as the most critical OPEX 3.0outlow towards its servicing. he increasingpressure of international investors backed by 2.0 2.0 2.3sovereign national funds & global leaders of 1.7institutionalized capital clearly proves the point 1.3that the deeper pockets are deploying funds in 1.0 0.8 1.0 0.7 0.5the Clean Energy operations of India, with a 0.8 0.6 2016-201720 to 25 years outlook on India’s growth story. 2015-16Recent bids exhibiting the presence of South 0.0 2014-15 OtherAfrica’ Phelan, Sot Bank Cleantech, France’s 2013-14Solairedirect are clearly some cases in point. hiscontinuously increasing attraction shall continue Solar Windin times to come. Innovative inancing shallcontinuously play an important role in shaping NOTE:*Includes small hydro, biomass and waste to energyup the ever growing RE space. domestic & international investors. Typically the Recent issuances of EXIM Bank, YES Bank & by he four innovative inancial instruments are : global climate change & climate control funds as Renew Power are all beads in the same golden• Green Bonds also CSR funds seeking Green (Clean) Energy as threads. he lowered cost of fund help achieved• Credit Enhancement a mission destination & generating some returns lowered tarif & a resulting WIN-WIN for all the• Masala Bond alongside are clearly allowing the interest tag on stakeholders.• InvITs Green Bonds constantly become more favorable. Green bond issuance up 42% in irst quarterll Green BondShe Green Bonds typically represents fundsraised by the Clean Energy companies from June 2017 | Energy Next | 21

COVER | MARkING PROGRESS PDF Compressor Free Versionof 2017.Globally, total green bonds issuance Masala Bonds: Recent Indian Issuesstood at $21.76 billion during the irst quarterof 2017, up nearly 42 per cent from the issuance Issuer Issue date Size Tenor Coupon Listingduring the same period last year – according to (Rs. in crores)the Climate Bonds Initiative. NHAI 12/05/2017 3,000 5 yrs 7.30% LSE-AIMll CredIT enhanCemenTCredit enhancement has remained as one of the NTPC 25/04/2017 2,000 5 yrs 7.25% LSE-AIM &most unique inancial product for infrastructure SGXprojects seeking global money. he guaranteesupport of stronger national & international Shriram 20/01/2017 475 3yrs 1 month 8.25% SGXinstitution provided for a fee to any Clean TransportEnergy company (which could typically be ratedsay around BBB or A, A- ) would be able to get a ECL 30/10/2016 502 3yrs 2 month 9.05% SGX & SEMrating of around AAA. his shall enable it to seek Financeglobal money from long term Pension, Sovereign& Insurance Funds (which could otherwise not Fullerton 18/10/2016 500 3yrs 1 month 8.125% SGXbe able to invest in their lower rated bonds).hus creating a market place enviable for Clean India Bulls 07/09/2016 1,300 3 yrs 8.57% SGXEnergy companies. NTPC 10/08/2016 2,000 5 yrs 7.375% LSE-AIM &ll maSala BondS SGXMasal Bonds are rupee denominated bondswith their coupon rates to be serviced in rupee HDFC 21/07/2016 3,000 3 yrs 7.875% LSE-AIMas well & thereby bearing no liability in foreigncurrency. he currency rate is thus transferred to corporate players deploy the cost efective Six (6) InvITs have already beeninvestor rather than borrower. funds in competition to the global companies conceptualized. Four (4) are in planning in solar energy bids which continue to stage & two (2) in pipeline. Out of these Masala Bonds: Recent Indian Issues witness lowering solar tarif. four (4) , two (2) InvITs have already raisedMasala Bonds are most innovative inancial money aggregating to around Rs. 7,000 Cr.product bearing their origination to IFC’s ll InvIT (approx.) wherein Rs. 1700 Cr. scheduled toirst Rupee Bond raised internationally in InvIT is an acronym for Infrastructure be returned to the banks. he balance two (2)September 2015. hereater various Indian Investment Trust which represents a Trust InvITs are expected to raise another Rs. 4,000corporates & more like HDFC, NTPC & now registered with SEBI formed with an objective Cr. with an aggregate returning of Debt beingNHAI recently have further raised around Rs. to invest in infrastructure projects directly around Rs. 2,000 Cr.12,770 Cr. as path breakers in this direction. or through their SPVs. It has the potential ofI strongly urge Clean energy companies to emerging as one of the strongest innovative Many more Innovative Financingexplore every possibility of using this rupee inancial products, allowing the unlocking of not Instruments, Processes & Structures shallborrowing option from global investors for only Equity but also of Debt. be demanded & delivered in the comingbringing cost efective debt fund into Indian months. Time shall also report our successSolar play. his shall further help Indian InvIT have created deleveraging of the on each of the above. Balance Sheets of infrastructure companies. InvITs are also unlocking equity & a causing Let’s keep our ears on the ground & eyes a return of Debt funds borrowed from the on the targets!. bankers. his has not only created healthy situation for bank but also capacity for Sanjeev Gupta is Financial Advisor & Head — infrastructure companies to borrow a fresh Banking and Finance, NSEFI, & MD NexGen for new projects. Financial Soultions Pvt. Ltd. The views and opinions expressed in this article are the author’s own and do not necessarily represent the views of the magazine.Potential Re nancing by InvITs(INR billion) Issue size Re nancing50 46.54030 25.0 26.5 7.220 18.0 8.5 12.5 India Grid Trust 8.0 Reliance Infrastructure InvIT10 Fund 0 IRB InvIT Fund IL&FS Transportation Investment TrustSource: Ind-Ra22 | Energy Next | June 2017

From Mega wattsPDF Compressor Free Version to Giga watts Envisioning a Greener Tomorrow with Renewable EnergyENCOURAGING GREEN-POWER TODAY ENERGISING INDIA’S TOMORROW Energy for Ever Loan Sancions (Rs. Crores) (2012 - 2017) Loan Sancions Gol’s target of 5x increase 4th largest wind 12000 10,199in renewable energy capacity installations in the 10000 7,806 to 175,000 MW by 2022 world 8000 6000 One of the largest CO2 4000 3,747 3,818 4,540 2015-16 2016-17solar programs in the world 2000 2012-13 2013-14 2014-15 All IREDA funded projects with planned capacity of are helping in avoiding 0 100 GW by 2022 CO2 emissions Funded more than 2,382 renewable energy projects Indian Renewable Energy Development Agency Ltd. (A Govt. of India Enterprise) A Mini Ratna PSU under Ministry of New and Renewable Energy www.ireda.in Corporate Office: 3rd Floor, August Kranti Bhawan, Bhikaiji Cama Place, New Delhi 110 066, Tel: +91 11 26717400 - 26717412Registered Office: India Habitat Centre, East Court, Core-4A, 1st Floor, Lodhi Road, New Delhi 110003, Tel: +91 11 24682206 - 24682219

COVER PDF Compressor Free VersionInnovationpartner to India’sre missionIndia needs $100 billion of investments for 100 GW of solar energy capacityby 2022, a part of the 175 GW target. To raise this inancing, the World Bankis supporting India through a portfolio of renewable energy engagementsamounting to $1 billion, says Surbhi Goyal, Energy Specialist at the World BankIndia has embarked on an aspiring journey One of the most important pillars in achieving US$100 million in inancing under the ‘Shared to attain its Nationally Determined these targets is the Government of India’s goal to Infrastructure for Solar Parks Project’. he Contributions (NDC) targets by 2022. install 175 gigawatts (GW) of renewable energy project, being implemented under theMinistry he most important of these targets is to capacity by 2022. Of this, 100 GW is to come of New and Renewable Energy’s Solar Parkreduce the emissions intensity of the country’s from solar energy. his translates into about Scheme, is currently helping establish the Rewagross domestic product by 33-35 percent from US$100 billion of investments in the solar energy Ultra Mega Solar Park and the Mandsaur Solar2005 levels, as well as to increase theinstalled sector itself. To raise this inancing, the World Park, which will have a cumulative capacitycapacity of non-fossil fuel electric generation to Bank is supporting India through a portfolio of 1,000 MW. Funds will be invested in the40 percent by 2030. of renewable energy engagements amounting parks’ common (or shared) facilities such as to US$1 billion. About20 percent of the World the transmission evacuation system, etc. Other Bank’sportfoliois being supported through potential solar parks are to follow. concessional funding from Clean Technology Funds, under which funds are available for 40 he World Bank Group has also deepened years at a marginal interest rate. its engagement in the Rewa Ultra Mega Solar Park through the role played by the International In 2015, the Government of India ramped Finance Corporation (IFC) asthe park’s up itstarget for solar energy ive-fold - from transaction advisor. he IFC has helped the solar 20 GW to 100 GW. Of this, 40 GW is to be park developer (Rewa Solar Ultra Mega Limited added under the solar park scheme. To help (RUMSL) todevelop an innovative business India establish large scale solar parks, the model that ofers a “plug-and play” facility to World Bank is providingIndian Renewable investors. his hasinstilled conidence in private Energy Development Agency (IREDA) with developers and helpedreducecosts, which was24 | Energy Next | June 2017

INNOVATIVE FINANCINGPDF Compressor Free Versionrelected in the landmark low tarifs that were sources of international debt and institutional is promoting investments in nascent renewablebid for the facility. RUMSL is a joint venture equity investment into the sector while reducing energy technologies which have not yet beenbetween Solar Energy Corporation of India price disparity between competitively bid tarif demonstrated in the country.Limited (SECI) and Madhya Pradesh Urja Vikas auctions held by central sector utilities and stateNigam Limited (MPUVNL), the state nodal utilities. Energy storage solutions are picking up paceagency of Madhya Pradesh. in the rest of the world and are proving to be the In the solar rootop segment, where also bridge for economies to transition to a low carbon Since the availability of clear land is one of India has set a target to establish 40 GW of path with minimal impact to the existing powerthe major factors in attracting international installed capacity by 2022, the uptake has been infrastructure. To maximize the use of existingplayers to a country and a project, the World modest - a little more than 1,000 MW has been power facilities, another innovative solutionBank is also helping make such investments installed so far. As the major bottleneck in this is installing loating solar plants, say on themore robust. In the Rewa solar park, for segment is limited capacity, the World Bank has reservoirs of dams. Accordingly, the World Bankinstance, the World Bank’s presence during the come forward with a US$625 million facility is partnering with SECI to bring such technologiesplanning phaseenabled RUMSLin adhering to with the State Bank of India to improve the to the forefront while absorbing the irst-moverenvironmental and social norms at international ‘ease of doing rootop business’ and to build risks in terms of technology and sustainability.standards.Since the due diligence on the the capacity of various stakeholders, be they he objective is to set up demonstration projectssafeguards was very deep, developers were able inancial institutions, developers, regulators or while setting up the ecosystem in terms of theto mitigate the risks around land and attract state agencies. he program aims to improve regulatory and policy framework,thereby openinginternational investors, bringing down tarifs. the investment climate for solar photovoltaic upthe market for future investments. he World segment and galvanize the Indian market by Bank is also exploring ways to undertake takeout Considering the enormous need for supporting developers, aggregators and end- inancing with central sector utilities to help themanpower that will emanate from the Rewa users wishing to setup solar PV projects on Government of India in meeting its renewableSolar Project, the World Bank has, at the request commercial, industrial and institutional rootops. energy targets.of the Madhya Pradesh government, undertakena capacity assessment of educational institutions In spite of India’s recent progress in installing Overall, to support India’s eforts to transitionin and around Rewa district to identify where solar capacity, the scale required to reach 100 to a low carbon path, the World Bank is helpingrelevant technical training courses can be GW solar by 2022, with a requirement to add the country bring renewable energy into theintroduced. Given the Government of India’s 18 GW of solar capacity per annum for next mainstream by working in areas where thescaled up targets for solar energy and its thrust ive years, is still enormous. It will therefore public sector has a comparative advantage. heon the Skill Development Mission,the Madhya be important toleverage limited resources in aim is to attract more private sector investmentsPradesh pilot can be scaled up at the national the best possible manner. In a country like in the sector to help achieve the country’slevel, creating a sustainable ecosystem around India, where large tracts of land are diicult aspirational targets in renewable energy.solar parks which can meet the industry’s need to identify, it will be important to venturefor trained workers as well as directly beneit into new technologies such as combining Adhering to its twin goal of reducingthe people by providing them with employment solar installations with wind energy solutions. poverty and boosting shared prosperity, theopportunities. In the longer run, this is also Such hybrid plants, which may or may not be World Bank is extending its wings by notexpected to ensure the sustainability of such combined with energy storage solutions, will only combining its funding with concessionalinvestments. For these activities, which go ensure eicient use of common facilities such inancing from other sources, especially thebeyond usual inancing, the World Bank has as evacuation system and land, amongst others. CTF, but also by investing in the promotiondipped into multiple sources of grant funds, It will also help in containing the variability of innovativetechnologieswhich are new butsuch as the Korean Green Growth Trust Fund, of generation from such sources if done in proven.the Asia Sustainable and Alternative Energy standalone manner. As such, the World BankProgram, and Austria’s South Asia Clean Energy The views and opinions expressed in this articleTrust Fund. are the author’s own and do not necessarily represent the views of the magazine. Given the weak distribution sector,the Government of India has recognizedthe importance of the introducing creditenhancement mechanisms. he latest inthis is the inclusion of SECI in the tripartiteagreement with the Reserve Bank of Indiaand state distribution companies. To furtherthe Government’s agenda, the World Bankis exploring the possibilities of setting up apayment security mechanism to mitigate the of-taker risk for renewable energy tenders plannedinselect states. he objective is to attract new June 2017 | Energy Next | 25

SOLAR | GAUGING GROWTh PDF Compressor Free Version‘Need for overhauling offinancial, regulatory architecture’Facilitative changes have occurred in policies and many more have to come.Innovation, and its speed, will be critical. A small advisory group could be formed sothat we move forward both robustly as well as systematically, says Deepak Gupta,Ex-Secretary, MNRE & Director-General, National Solar Energy Federation of IndiaT he solar energy sector is on the already very high, it is critical to develop and the States, informed Gupta. threshold of a revolution which will domestic banking and capital markets in Single location large projects ofer great culminate into a paradigm shit in India and increase both international debt the power structure of the country. and equity lows while mitigating currency opportunities for large capital deployment.his change requires a complete overhaul in risks. Fortunately, new inancial instruments Economies of scale, besides creatingthe inancial and regulatory architecture of are being developed and maturing. possibilities of innovative inancing, arethis sector and it is time to start building that, important said Gupta adding, “As I see the lastsaid Deepak Gupta, National Solar Energy “here are four types of innovative inancing tenders, the size has not mattered whether itFederation of India (NSEFI), speaking at a tools - Green Bonds, Credit Enhancement, is 50 MW or 300 MW, the policy people haverecent event in Delhi – Renewable Energy: Masala Bonds and Invits. Exim Bank and Yes to consider this matter very seriously.’ LowerInnovative Financing ‘Strategic Discussions. Bank have lowered cost of funds through green size projects will allow more companies to bonds. Guarantee support of strong national bag projects and diversify sources of funding. Terming the issue as a critical one today or international institutions allows global We must also not forget the desirability ofand as we go forward, Gupta said that people money from long-term pensions, sovereign and having 1-2 MW size at the tail end distributionassociated with this sector are asking three insurance funds,” he said, pointing to growing centres. Somehow this component of thequestions – how will all the money for 100 interest of such funds in the Indian solar sector. National Solar Mission is not discussed at all.-200 GW come; how will the cost of funds bereduced and how does the current low tarif Detailing on these instruments, Sharing some advice based on hisbecome sustainable – and these questions need Gupta explained Masala bonds are rupee experiences, Gupta said, “Let us, however, notto be both asked and satisfactorily answered. denominated bonds where currency risk is forget that the solar rootop sector is equally transferred to investors. Ater IFC, various important where 40 per cent is the target. Solar Explaining the developments in the sector, irms like HDFC, NTPC and NHAI have rootops have both similar as well as diferentGupta also elucidated on perhaps the most raised huge funds in this way. Invits are inancial and regulatory issues. Many facilitativeimportant factor for further development infrastructure investment trusts which invest changes have occurred in policies but many– increasing inancial low to the industry. in infrastructure bonds. Six such Invits have more have to come. Innovation, and its speed,Given the cumulative exposure of Indian been conceptualised and two have already will be critical. A small advisory group could bebanking system to the power sector being raised money of around 7000 crores. formed so that we move forward both robustly as well as systematically.” We simply must In the regulatory and policy area, it is critical ind ways to incentivise discoms to allow the to eliminate risk. For this the PPAs require to industrial and commercial sectors to go in a big be standardised, and enforced, not postponed, way for solar roof tops. Operational procedures amended or cancelled. heir bankability for net metering must be standardised across must improve through provision of deemed the board. Generation at consumption point generation, termination compensation, security and avoidance of transmission problems is very mechanisms, assignment in favour of lenders, important. We also have to develop inancial etc. And if required, the central government instruments speciically for this area. It is also must come out with support mechanism time to reconsider the need for subsidy and for state discoms. his is the agenda which certainly diferentiated subsidy for diferent Federation will take forward with the Centre states. he market is now mature enough to proceed on its own.Single location large projects ofergreat opportunities for large capital The views and opinions expressed in this articledeployment are the author’s own and do not necessarily represent the views of the magazine.26 | Energy Next | June 2017

COVER PDF Compressor Free VersionIndia set to be a great destinationfor investmentTalking of the sector’s pace – developers are acquiring land, doing the inancialclosure, constructing evacuation lines, and also commissioning projects within12 to 13 months. Deinitely, risks are involved but developers are ready to takethe risk, probably because today, we have a suiciently developed ecosystem, saysAshvini Kumar, Managing Director, SECIT he National Solar Mission was Nowadays, as the solar tarifs are falling with are involved but developers are ready to take launched on the January 11, 2010 every bid, banks are lending money at easier the risk, probably because today, we have a by the Hon’ble Prime Minister. It rates. Being on the other side of the table, SECI suiciently developed ecosystem. was the ministry which brought is trying to create the market and the policyout the irst grid-connected demonstration framework. he banks have comfort that funds ll FlexIBle rePaymenTproject. During those times, inancing was a are available for lending to projects. he issue oPTIon Should Begreat challenge. Timeline of the projects were of inancing is being addressed through masala InTroduCedvery stringent, i.e. 12 months, 13 months, bonds, green bonds and other features. Bidders from more than 10 countries have14 months. here were provisions of delays, participated in the latest tenders; this is a clearpenalty, liquidity damages. he ministry took ll rISkS Involved In relection that other countries are lookinga very proactive role at that time by talking to InveSTInG In renewaBleS towards India as a great destination forbankers and organising training programmes In my opinion, the problem of inancing is investment.for them. World bank and other inancial the of-taker risk. I have personally witnessedinstitutions also pitched in by getting experts National Solar Mission facing this issue since RE sector has come a long way. Besides solar,and conducting workshops. At that time, we Day 1. By designating NTPC Vidyut Vyapar we have done bidding for wind power andnever thought that solar photovoltaics could be Nigam as scheme implementer for Phase I achieved lower tarifs. I would say that RE sectora source of megawatts or gigawatt generation. tenders and by creating SECI, this risk has been is evolving and getting more mature. I think theToday, the world has changed and it is a happy mitigated to a large extent. repayment tenure should be increased.situation. Adani solar park, which was set up at Hydro produces more revenue in rainy Kamuthi Tamil Nadu last year is currently season. Similarly, wind power gives more the world’s largest solar park of 648 MW. he revenue in monsoon. Hence, lexible repayment total time in construction was also a record option should be introduced. (Adani solar park was built up in just eight months). his is the kind of speed in which As a part of all SECI bids, government gives India is moving. Developers are acquiring you some fund from the consolidated funds of land, doing the inancial closing, constructing India to create payment security mechanism. the evacuation lines, and also commissioning We are also working with the World Bank for projects within 12-13 months. Deinitely, risks unfunded payment security mechanism. Excerpts from Mr Ashvini Kumar’s speech at the Innovative Financing Strategic Discussion event at India Habitat Centrell BankS are lendInG moneyaT eaSIer raTeS:In my opinion, subsidy constrains the market.As an implementer, I have seen that if I havethe VGF, I need to have so many compliances.It is better if subsidy goes of. hankfully, thathas happened in ground mounted project andnobody is asking for VGF now. June 2017 | Energy Next | 27

COLUMN PDF Compressor Free Version Bhadla Phase-IV and innovative inancing A bankable project should be one that a bank is willing to inanceHistory was created with the he question is – Is the Bhadla Phase-IV wider variety of investors, it is agreed that new record low tarifs achieved in Solar Park, low tarif of Rs. 2.44 per unit is solutions must: (a) address credit/sovereign the auction for Bhadla Phase-IV aresult of innovative inancing? risk (b) improve deal implementation and time Solar Park, Rajasthan on May to completion and (c) mitigate inancial risk9 with tarif of Rs. 2.44 per unit. his tarif Traditionally, project inancing is based through increased variety of product oferings.is ixed for 25 years with no escalation and on the prediction of future cash lows. In the Financing energy infrastructure is not a one-the bidders have sought no VGF from the power/ RE sector, cash lows are determined by size-its-all exercise; what works for one projectGovernment. he winners are M/s ACME the amount of energy an independent power may not work for another. Consequently, itSolar Holdings Pvt. Ltd. (200 MW) at a tarif of producer (IPP) generates and then sells to a is imperative to develop a diverse menu ofRs. 2.44 per unit and M/s SBG Cleantech One state-owned utility or third party. To project options to access capital. With new investment,Ltd. (300 MW), quoting a tarif of Rs. 2.45 per the cash lows, developers and deal sponsors infrastructure can be leveraged to spur newunit. he developers will be paying solar park create a power purchase agreement (PPA) economic and social development wellcharges of Rs. 45.2 lakh per megawatt towards to facilitate the sale of the energy into grid into the future. Innovative inancing refersland, connectivity (from pooling substation or another power source. hese agreements to a range of non-traditional mechanismsto state network) and other infrastructural outline the terms and conditions of the to raise additional funds for developmentfacilities. he projects are likely to be sale of energy, including the price, capacity, aid through “innovative” projects such ascompleted in about 12-13 months. performance, and contingencies for losses, micro-contributions, taxes, public-private damages, and emergencies. Project inance is partnerships and market-based inancial Almost all, working in the Solar domain, structured to include early-stage equity from transactions. Innovative inancing instrumentsfeels how it is possible. a developer backed by a private equity irm or do not replace, but rather complement, corporate investor, that is then supplemented traditional resource lows such as aid, foreign his fall in solar tarifs is understood by mid-term debt and long-term debt direct investment and remittances. Innovativeto be the result of combination of various provided by commercial banks. inancing is unique because it can attractfactors, most important being the decision private companies that want to expand intoof the Government of India to cover solar Each investor, bank, government, or new markets; investors and fund managerspower by SECI under the ambit of Tripartite developer has a diferent idea of what a who want to create both inancial and socialAgreement for payment security against project’s risk/return proile should be. A returns; and governments that want to achievedefaults by State distribution companies. bankable project should be one that a bank more and better development impact in aOther factors contributing are about 7-8% is willing to inance. But bank inancing is resource-constrained environment.higher yield in Rajasthan due to better solar only one component of the capital investmentradiation conditions, drop in module prices structure, and most private investors seek Most of these mechanisms combine publicin International market, and strengthening of much higher returns on their investment. what and private sector resources and expertise;Indian rupee against US dollar. Shri Piyush looks like a strong project, with stable revenue, successful innovative inancing createsGoyal, Minister for Power, Coal, Mines and a suite of credit guarantees, and political risk incen¬tives for private companies to invest inNew & Renewable Energy speaking at the insurance, may still only generate single-digit projects that beneit people at the base of thelaunch of “Scaling Solar MiniGrids” by France or mid-teen returns. Most of the investors pyramid or support the environment. Bhadlaand India on the sidelines of 52nd Annual normally look for at least 25 percent internal Phase-IV is not a one day story. It is built stepMeeting of the African Development Bank rate of return (IRR) if the investment is part of by step, with learnings of past and showing a(AfDB) in Ahmedabad mentioned that Indian their private equity allocation. Unfortunately, way forward.renewable energy sector ofers lessons such as on average, energy infrastructure projects havelower and innovative inancing models, risk yielded 16 percent to 18 percent IRR, based on The views and opinions expressed in this articlereduction, setting up large scale solar projects 20-year cash low projections. are the author’s own and do not necessarilythrough energy parks. represent the views of the magazine. To bridge the funding gap and to appeal to a28 | Energy Next | June 2017

COVER | EvENT PDF Compressor Free VersionTime right to raise aggressiveinnovation in financingA positive development we see today is that corporate is looking at renewables asa promising segment that may be instrumental in expanding their businessesRenewables, world over, is making Sanjeev Gupta said that the seminar is an The discussions revolved mostly news and with the drastic decline opportunity to raise aggressive financing around the key elements of debt – cost in the solar tarif, solar has and that too innovative financing. effectiveness; acoustics and timely taken the center stage. Eminent arability. In the initial discussions, theindustry players came together at the The tariff of 2.44 today is a 40 per cent speakers shared their achievements on‘Renewable Energy Innovative Financing – downscaling of the tariff in just one year. how the companies built themselves andStrategic Discussions’ – a seminar organized Earlier, industry people were worried raised innovative financing.by the National Solar Energy Federation of about the grid parity but today that is noIndia (NSEFI), recently at the India Habitat more a problem. “I think that solar energy ll SuCCeSS manTraCentre in New Delhi. The seminar offered has clearly reversed its role today, having The solar sector is a 12,288 MW industrya platform for the developers to share the tariff of 2.44 specifically and clearly today which actually is almost doublethe issues they face while financing of proving a point that it is almost more than of the size and is expected to cross 20their projects. Banking institutions like 20 per cent lower than the average rate of GW in the coming year. This success isYes Bank, Exim, Tata Capital and IREDA power generation for the coal fuel plants of a combined effort of all players of thetalked about their loan schemes and NTPC which still exists at 3.20,” he said. industry and even future developmentsother financial instruments available with depend on the team work.them. Industry players like Adani and Gupta, while introducing the agenda ofAmplus shared their success stories and the seminar said that the most important Speaking on these lines, NSEFI Chairmanexperiences, making the event a solution part of financing remains debt. He said, Pranav Mehta said, “We started with thefor all in the sector. “The most important aspect of financing motto ‘making solar energy afordable’. I am remains (in my opinion) the debt which happy that we are already standing at Rs. Welcoming all at the event, NexGen is not only 70 to 80 per cent of the total 2.44. I was the irst one to congratulate theFinancial Solutions Managing Director financing element but more than 80 per minister, secretary on the WhatsApp.” cent of the opex also.” June 2017 | Energy Next | 29

COVER PDF Compressor Free Version Mehta said that along with Government, a promising segment that may be instrumental where currency risk is transferred toeven the industry deserves a kudos because this in expansion of their own businesses. “We have investors, after IFC, various firms likeis the PPP mode. “Industry has contributed more than 60 customers like Walmart, Metro, HDFC, NTPC and NHAI have raised hugetremendously by taking risk and playing the Dominos, Intel, Honda, ABB, Fortis, Dominos funds in this way, he added.game to lower this tarif. In nuclear sector, and others. hey want to adopt renewable energygovernment is spending money here, the private and buy it for long term. his gives us more Mehta talked about a recent step byplayers are spending money. Solar private sector conidence that this is a growing sector and we the government has further boosted thehas played an important role, not only in the must leave no stone unturned to promote it,” said investors’ as well as all potential investors.growth but also lowering the cost,” he added. Sanjeev Aggarwal, Founder, Amplus. He said, “The government is coming up with the quality order. The government has Technology is the same i.e. 18-20 per cent ll FInanCInG The Green circulated the draft and we at NSEFI havecell eiciency but it is the inancial increment All the players in the sector have given our suggestions. The governmentwhich has contributed signiicantly in unanimously attributed the new levels of or any purchaser has the right to demandlowering the cost, he said. achievement in the sector to the inlux of quality. No legal course of action should inancing, especially from the private players. be taken, we would persuade them to take Another key industry igure, Adani Chief legal action only in some exceptional caseExecutive Oicer (Renewable Energy) Jayant The lenders and the investors present like Tamil Nadu backing down, PPA notParimal shared his achievements at the solar at the seminar discussed the financial honored, that too when negotiations failplant in Kamuthi, Tamil Nadu. aspects and shared their success solutions. otherwise we always believe in talking over They opined that a lot of innovation is a matter. We have brought credibility by he solar plant in Kamuthi, Tamil Nadu going on in the financial segment. bringing international recognition.”which apparently is the world’s largest solar parkof 648 MW capacity– was completed in less than Giving a brief explanation to the four Speaking at the event K S Popli, CMDtwelve months’ time. Right from acquiring the innovative financing instruments – Green IREDA said, “Till 2012, bankers were notland for the project from the private parties to Bonds, Credit Enhancements, Masala very confident of the technology as solarsetting up and connecting it. As per its current Bonds and Invits, Gupta said, “Given the was a new field and projects were veryportfolio, 898 MW are operational and 1322 cumulative exposure of Indian banking small. However, in 2014, new governmentMW are under implementation, said Parimal, system to the power sector is already very came to power and enhanced the targetadding that present in all states, Adani is actively high. It is critical to develop domestic and financing came to fore-front. There is aparticipating with the government. banking and capital markets in India and difference between large infrastructure and increase both international debt and equity solar projects, because they get completed “Our success is driven by four key strengths flows while mitigating currency risks.” in one year and revenue starts flowing in.”- rapid execution and cost efective O&M,inancing for large scale infrastructure projects, Elucidating on the recent issuance of Explaining that in solar the fuel is assured,scale led procurement and power evacuation green bonds of Exim Bank and Yes Bank, only the money part is let which makes thecapabilities,” he added. which have lowered cost of funds, he said things viable, he added that it is much easier that guarantee support of lower national to take risks on solar projects. Funding cost Hailing the achievements of the sector as a or international institutions allows was 6 to 8 crore earlier, has come downwhole, Gupta said that the industry expects a global money from long-term pensions, to 3-4 crore. Solar parks are a great help.paradigm shit of the power structure in the sovereign and insurance funds. Development of green bond market marketscountry. For this he suggested that there is a has taken in a big way. Lot of companies areneed for complete overhaul of the inancial and Similarly, in the case of masala bondsregulatory architecture in this sector. “Single location, large projects ofer greatopportunities for large capital deployment.Economies of scale, besides creating possibilitiesof innovative inancing, is again very critical.As I see the last tenders, the size has notmattered. Whether it is 50 MW or 300 MW, thepolicy people have to consider this sector veryseriously,” said Gupta. Expressing confidence in the potentialof the sector’s growth, Parimal said, “Wehave a portfolio of around 2 GW, andtherefore assuming that India will reach20 GW in this year, we are contributingapproximately 10 per cent.” A positive development that we see today isthat the corporates are looking at renewables as30 | Energy Next | June 2017

EVENTPDF Compressor Free Versionswitching to the bond market for getting Apart from solar, it was also used for and will go hay-way if it is not properlythe funds. he solar tarif which is already environmentally sustainable projects such structured.”standing at 2.44 is expected to be lower in the as waste management, land use, forestry,coming years. bio-diversity conservation and clean Calling the journey remarkable, Director transportation, said Joshi. (Corporate Finance and Infrastructure Given to the falling solar tarifs with every Banking) Vikas Bansal said that creditbid, banks are lending money at easier rates, Yes Bank was the irst bank to launch guarantee schemes, green bonds, equitysaid Ashvini Kumar, Managing Director, India’s irst green infrastructure bond for participation, Yield Cos, NTPC SECI of-takeSECI. Sharing the role of SECI, he said, inancing 5000 MW of RE projects. It is arrangement, REWA 750 MW solar power“Being on the other side of table, SECI is committed to mobilize USD 5 billion for tender are some of key drivers of renewabletrying to create the market and the policy climate action on the side-lines of COP 21 at energy in India.framework. he banks have the comfort that Paris. It raised INR 2135 crores through longthe funds are available and they will lend it at term infrastructure bonds and is a knowledge Senior Energy Specialist and Worldthe terms they want to have for the project. partner to International Solar Alliance Bank’s Task TeamSurbhiGoyal, Head-Credit-he issue of inancing is being addressed launched jointly by India and France during Cleantech of Tata Capital Ashwini Kumar,through masala bonds, green bonds and COP 21 engagements. Deputy General manager of Exim Bankother features.” Manish Joshi also share their presentations While all were explaining how inancing is and talked about new methods of inancing. In 2015, Exim Bank had launched Reg S becoming easier, Emandi Sankara Rao, Chiefgreen bond of $500 million; this transaction General Manager, IIFCL explained what are While banks and financial institutionsmarks the irst USD-denominated green the important requisites for being able to get like Yes Bank, Exim, Tata Capital andbond ofering out of India as well as the irst the inancial support approved. IREDA talked about the loan schemesbenchmark-sized green bond out of Asia in and instruments available with them,2015-2016 and the third ever green bond Talking on this, he explained, “Long renowned organizations such as Adaniissuance out of Asia. It was successful and terms funds are not always available with and Amplus shared their success storiesattracted subscription of around 3.2 times the commercial banks, hence, you require and experiences. The panelists talkedissue size led by demand across 140 accounts, diferent inancing and funding solutions. It about the need to create awareness amonginformed Manish Joshi, Deputy General is very well possible to approach domestic the developers on how to have a strategicManager, Exim Bank. as well as international banks and FI’s approach for financing related issues. for investment but your project should They spoke on the availability of funds He added that Exim has used the net be attractive enough with proper project from national and international banksproceeds from the sale of the notes to appraisal. Whether you are a developer, or financial institutions. The seminarfund eligible green projects in countries banker, or equity player, the cost of the concluded with a questionnaire session andincluding India, Bangladesh and Sri Lanka. inance is critical in this competitive market thanking note by the presenters. June 2017 | Energy Next | 31

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PDF Compressor Free Version“ Innovative Business models with attractive returns on your Investment ”

EVENT PDF Compressor Free Version(L to r) Jayant Parimal, Pranav Mehta, Ashvini Kumar, Deepak Gupta, KS Popli & Sanjeev AggarwalSanjeev Gupta, Financial Advisor & Head - Banking and Finance, NSEFI and MD, Nexgen; Jayant Parimal, CEO Energy law expert Raj Singh Niranjan with Ashvani Kumar(Renewable Energy), Adani Enterprises; Pranav Mehta, Chairman, NSEFI; Ashvini Kumar, Managing Director, SECI;Deepak Gupta, Director General, NSEFI; KS Popli, Chairman, IREDA Jayant Parimal, CEO Renewable Energy, Adani Enterprises Ashvini Kumar, Managing Director, SECI Ltd, and Deepak Gupta, Director General, NSEFIIREDA Chairman KS PopliManish Joshi, Deputy General Manager, EXIM Ashvini Kumar and Deepak Gupta Sanjeev Aggarwal, Founder & CEO, Amplus Solar34 | Energy Next | June 2017

PhOTOGRAPhSPDF Compressor Free Version Pranav Mehta, Chairman, NSEFI addresses guests at the conferenceSurbhi Goyal, Senior Energy Specialist & Anupam Surbhi Goyal, Senior Energy Specialist, World Bank sitting amongst the guestsDaftuar, Director, Energy NextSpeakers and distinguished guests pose for photograph at ‘’Innovative Financing – Strategic discussions seminar Guests engaged in a coversation during the tea breakheld at India Habitat Centre.Ashwini Kumar, Head (Credit), Tata Cleantech CapitalJayant Parimal, CEO (Renewable Energy), Adani Crowd dispersing ater the eventEnterprises Limited June 2017 | Energy Next | 35

COVER PDF Compressor Free Versionre innovative financinginstruments at a glanceWith a green bank format, clean technology can raise low cost deposits, overseaspension funds, co-inancing from wealth funds & capital markets, reports ENRenewable power is set to play a with the ultimate objective of making solar of housing loan by banks/NHB, incorporating critical role in country’s energy energy compete with fossil-based energy measures in Integrated Power Development security as the world’s largest options. Scheme (IPDS) for encouraging distribution renewable capacity expansion companies and making Net-meteringprogramme is being taken up by India. Also, In order to achieve the renewable energy compulsory and raising funds from bilateralgovernment’s target of reducing India’s carbon target of 175 GW by the year 2022, various and international donors as also the Greenfootprint has prompted a policy and regulatory policy measures have been initiated and special Climate Fund to achieve the target are somesupport for green energy projects. steps taken in addition to providing inancial other steps taken by the government. support to various schemes being implemented he government has raised the solar power by the Ministry of New and Renewable Energy According to Manish Aggarwal, Partnergeneration capacity addition target by ive times (MNRE). and Head, Energy & Natural Resources,to 1,00,000 MW by 2022, which will entail an KPMG in India, “Over the last two years Indiainvestment of around Rs 6 lakh crore. hese include, inter alia, suitable has demonstrated a signiicant increase in its amendments to the Electricity Act and Tarif renewable capacity addition backed by strong he government is playing an active role Policy for strong enforcement of Renewable policy push and government’s commitmentin promoting the adoption of renewable Purchase Obligation (RPO) and for providing to provide sustainable, clean and afordableenergy resources by ofering various Renewable Generation Obligation (RGO) and power to consumers. Auctions have led toincentives. hese included generation- setting up of exclusive solar parks, development very competitive tarifs which necessitates anbased incentives (GBIs), capital and of power transmission network through Green innovative inancing and structures that caninterest subsidies, viability gap funding, Energy Corridor project, identiication of large support such tarifs.”concessional inance, iscal incentives etc. government complexes/ buildings for rootop projects. “his is still evolving. As the risk framework he National Solar Mission (NSM) aims becomes more balanced like REWA bids, utilityto promote the development and use of solar Raising tax-free solar bonds, providing risk comes down we will see more innovativeenergy for power generation and other uses, long-term loans, making rootop solar as a part36 | Energy Next | June 2017

INNOVATIVE FINANCINGPDF Compressor Free Versioninancing coming to the market. We are already level other level is domestic level. India can marketplace that will connect business ownersseeing emergence of green bonds, masala do a lot on its own SBI can do it. Punjab with debt providers (high net individuals,bonds, and soon we will have InvITs for this National Bank can do it. Similarly in other family investment oices and corporateasset class as well,” he added. countries their banks can bring in a number of treasuries) through peer to peer lending,” instruments so. Kumar said. Kameswara Rao, Leader (Energy Utilities& Mining) PwC India said, “Clean technology “One thing is that ISA is trying at global level he instrument will be supported by a robustis capital hungry, more so with wide range and other thing than can activate is domestic credit risk assessment model, which will beof deployment in India, from renewables to level. For example in India during REINVEST in conjunction with the project’s cash lowlighting. With a green bank format it can raise 2015 we got 77,000 million dollars commitment projections. It would be the irst peer to peerlow cost deposits, overseas pension funds, from domestic banks. Not from multilateral lending facility in India, Kumar added.co-inancing from wealth funds and capital banks,” Tripathy said. • P50 Risk solutions :An insurance productmarkets.” to reduce the inancial risk associated with One thing is inancial instruments, second weather variability in wind projects. his riskll InnovaTIve FInanCInG thing is equity and the third thing is loan, he limits the availability and the cost of capitalmeChanISmS said adding that there is a need to look at the for projects. he product would increase theTarun Kapoor the former Joint Secretary with inancial market as a whole. amount and reduce the cost of long-termMNRE is of view that the cost of inancing is debt to the wind energy sector by ofering avery important for renewable energy sector. “here are three components loans, equity minimum revenue guarantee to wind farms and insurance,” Tripathy added. and may be useful in attracting new sources of “Renewable Energy projects are capital capital.intensive. If we bring down the cost of inancing Somesh Kumar, Partner and Leader, Powerthe tarif drops drastically. It is important that & Utilities, Ernest and Young, India, said, “To ll The rooFToP Solarthe project cost is brought down which can be keep pace with the changing scenarios, various PrIvaTe SeCTor FInanCInGdone by either raising money internationally new and innovative inancing mechanisms are FaCIlITyor nationally through instruments like Masala being proposed. Some of these instruments An aggregator model bundles a large numberBonds or long-term loans,” he said. are Loans4SMEs, P50 Risk solutions, rootop of small projects together into one structured solar private sector inancing facility, integrated investment. his makes the aggregated deal Internationally, he explained, the money is hedging, equity and debt fund, green banking, size large enough and of suicient creditavailable with 40-year tenure and because of partial credit guarantee and partial risk rating to attract more attention from investors,which the burden in the initial year reduces. guarantee.” particularly institutional investors. InstitutionalIn India too now funds are available with investors can provide capital at lower cost20-years tenure therefore companies must ll InSTrumenTS For by combining commercial and concessionalborrow long term. InnovaTIve FInanCInG capital to further reduce the cost of power from • Loans4SMEs: Renewable energy SMEs rootop solar. he instrument will provide long- According to International Solar Alliance oten fail to meet banks’ lending requirements term (12-14 years compared to maximum nine(ISA) interim Director General Upendra (collateral requirements and three years years of currently available loans) debt capital toTripathy innovative inancing is a new area proitability) thereby resulting in a shortage of developers that aren’t able to access debt capitalin the renewable energy because renewable capital for these groups.energy requires a lot of investment and a lot ofrisk is also involved which depends on country “Peer to peer lending provides a solutionto country. “Now to minimize these risks you in this case. Loans4SME will provide aneed some sort of new mechanisms. It can becredit enhancement mechanism. For exampleyou are going to the market for a bond. If I saylook your loan is secured by 25 per cent fromme for a premium your bond coupon rate willbe less. Your interest rate will come down,”Tripathy said. “hese are the facilitation mechanisms andISA have tied in a small way with IREDA earlierand idea of 30 billion dollar of assurancesevery month and put in insurance in place isa big idea and is possible because when theWorld Bank recently came to India he himselfproposed this and now France is taking activesteps in this,” he said. Tripathy said that ISA is trying at global June 2017 | Energy Next | 37

COVER PDF Compressor Free Version Rs 2,000 crore earlier this month and Rs 2,000 crore in August, 2016. he LSE listing will provide global investors access to Indian companies while providing liquidity to them, a power ministry oicial said. he ISM is a new Multilateral Trading Facility (MTF) aimed at qualiied investors for a whole host of debt capital markets products issued by International issuers. ll ParTIal CredIT GuaranTee Partial credit guarantees reduce the cost of debt by enhancing the credit rating of a project. he guarantor agency (usually a multilateral agency or a private inancial institution) leverages its higher credit rating to reduce the risk associated with the project by guaranteeing a speciic proportion of the borrowing.due to various constraints. According to Chairman IREDA Mr K S ll ParTIal rISk GuaranTee Popli, “Banks have reduced the lending rates Partial risk guarantees attract foreign fundsll InTeGraTed hedGInG, for projects, which we need to match. Today, by mitigating political risks such as breachequITy and deBT Fund we can raise Green Masala Bonds at lower of contract by the state, expropriation andA fund to facilitate large-scale international costs compared to domestic borrowings. currency inconvertibility, thereby reducinginstitutional investments in renewable energy herefore, it is advantageous to tap the cost of inancing. A partial risk guaranteeprojects by managing currency risk and international market and also this will help typically covers the entire debt amount asaligning the cost of capital with risk proile up in raising money in future.” well as interest paymentsduring and post construction. He further said that today to tie up ll mezzanIne CaPITalGreen BankInG the inance for wind and solar projects Mezzanine inance is a hybrid instrument thatGreen Banks are publicly-funded institutions is no more a challenge as banks and bridges the gap between debt and equity. Itthat partner with private investors. hey take foreign institutional investors (FIIs) now provides capital in the form of subordinatedon diferent roles based on context and the understands this sector better and are debt or preferred equity, thereby makingspeciic inancial gaps that need to be illed. willing to take exposure in renewable energy more inances available where debt marketsA Green Bank in India would be able to ofer sector at attractive terms. Companies have are thin or unable to meet industry needs.low-rate, long-term inancing that is suitable for also been able to raise funds in international Indian renewable energy irms such asclean energy project by directly investing or co- market in rupee as well as dollar that shows Mytrah Energy and Azure Power have raisedinvesting in projects. hey could also incubate the conidence that investor have shown in inancing through mezzanine capital fromsmaller projects such as rootop solar and sell at India and renewable energy sector. “Indian domestic and international investors. R.scale to make them more attractive to investors. companies are also able to source equity Somasundaram, Head - Strategic Initiatives,Indian Renewable Energy Development from ofshore investors at attractive terms,” Mytrah Energy said that “company has usedAgency (IREDA) Popli explained. innovative inancing instruments like bank loans, Mezzanine Capital to raise money for IREDA will raise around USD 150 million in State-run power giant National hermal its projects.”the current iscal through green rupee Masala Power Corporation (NTPC) recently listedBonds for giving loans to the renewable energy its Masala Bonds at London Stock Exchange ll aSSeT BaCked SeCurITIeSprojects, including solar. (LSE). Under the USD 4 billion medium term Renewable energy projects have a life of 20-25 note (MTN) programme, NTPC had raised years. Hence, the tenor of funds raised on back of these assets should be longer. Asset-backed securities are long-term bonds backed by the cash lows associated with project assets. hese instruments have been successful in economies with large, liquid corporate bond markets which can attract large number of investors.38 | Energy Next | June 2017

COVER | FINANCING PDF Compressor Free Version‘Integrated energy vision mustfor companies to be successful’Energy market is going through a complete transition and its imperativefor all the players to igure out how this market is going to develop,Sanjeev Aggarwal, founder and CEO, Amplus Solar explainsqPlease tell us a bit about issue faced by us as a country. With ever conidence that this is a growing sector and we your company, amplus increasing population, we may ind it more must leave no stone unturned to promote it. Amplus Solar is India’s leading and more challenging to block vast tracts ofdistributed energy company that ofers low land with solar panels. hen, comes the responsibility of thecost solar energy by installing solar panels government and I must congratulate SECIfor its customers on a opex basis. We work he second challenge is transmission line which is doing a lot of work for streamliningwith leading corporates across the country that can evacuate intermittent power from the process. We also work with MNRE andand have more than 115 MW of operational renewable sources on a real time basis. And SECI and put in our part by participating inand under construction plants spread across the third challenge is the credit worthiness various government tenders.200 locations. of certain state utilities, which is a topic that is being discussed for several decades now. what changes would you likewhat challenges did you face as a the government to make in thesolar rooftop provider? Distributed solar probably makes more policies?I think that the developers and investors sense as we are able to generate power without he market is changing extremely fast and it isfocus more on the utility space than rootop using any additional land and additional important for SECI and MNRE to expedite thesolar. In countries like US, Germany, and transmission. he generated power reaches the process at various levels.China, you will ind that most of the solar customer directly.energy is in distributed form and is coming One of challenges we face is the netfrom the solar rootop which is not the case Please share your experiences metering. Apart from the procedural delays,in India. he government’s focus is still while interacting with financing I fail to understand why there is an artiicialmore on large scale plants though there are companies for your projects cap of 1 MW on net metering in most of theintentions to push the rootop sector as well. Ater facing rejections from various banks states. However, there is no such capping in and inancial institutions considering the Uttar Pradesh and we have been able to setwhy do you think rooftop solar early stages of rootop sector and limited up a 4MW plant at Yamaha rootop, which ismakes more sense than the understanding in the banking sector, Amplus net-metered.utility scale projects for a was able to get project inancing fromcountry like India? Reliance Capital. We were able to implement We operate in 20 states but unfortunatelyI have worked for 20 years in power sector our irst 1 MW of rootop and developed could not install any plant in Gujarat forand having developed large scale fossil fuel further pipeline. a private party. Although, Gujarat is veryplants. I think land acquisition is the biggest developed and advanced state in terms Next challenge was continued supply of of policy norms, there is no net-metering equity. We discussed with many investors and allowed for third party PPAs in Gujarat inally decided to work along with I squared which is very unfortunate. capital which is now our main investor and have committed investment of $150 million for Can you shed some light on Amplus’s growth. the current scenario of Indian renewable energy market? Tell us about your customer base. Energy market is going through a complete We have more than 60 customers like transition and its imperative for all the Walmart, Metro, Dominos, Intel, Honda, players to igure out how this market is going ABB, Fortis, Dominos, etc. he beneit or to develop. here is a clear integration which the comfort we get is today that corporate is happening on the renewable, storage, and sector is looking at this segment as a need for electric vehicles. People have to look at all furthering their own businesses. these things in entirety and not in isolation. Only the companies with an integrated hey want to adopt renewable energy energy vision will be successful in future. and buy it for long term. his gives us more June 2017 | Energy Next | 39

COVER PDF Compressor Free VersionLarger projects would enabledevelopers to bargain betterhe role of intermediary is all the more important because renewablecompanies are interested to see that there is a reliable body that can do riskmitigation on their behalf, says Rajiv Mishra, Director, Marketing & ProjectDevelopment, Power Trading Corporation India Ltd.q PTC India has announced about the initiative? power to non-windy states and UTs. PTC is execution of agreements the trading partner responsible for purchase with seven state utilities PTC India Limited, the leading provider of and sale of wind power under the scheme. hefor sale of wind energy for a power trading solutions in India has executed government successfully completed the irsttotal 1049.9mw. Please highlight Memorandum of Agreements (MoAs) with ever auction of wind power and associatedthese state utilities and who is seven state utilities for sale of wind energy for infrastructure for 1,000 MW in last week ofthe largest beneficiary of the a total quantum of 1049.9 MW. Agreements February with a provision to increase it uptoscheme? Please tell us more were exchanged between PTC and discoms in 1050 MW. Bidders were selected and Letter of the presence of Minister of State (IC) for Power, Awards were given to successful bidders. PTC Coal, New & Renewable Energy and Mines India Ltd successfully tied up entire power at Conference of Power, New & Renewable with discoms. Energy & Mines Ministers of States & UTs. Distribution Utilities of Uttar Pradesh, Bihar, Tell us more about the scheme Jharkhand, Assam, Odisha, Delhi and Noida and the investments made in this have signed MoA with PTC. Uttar Pradesh is industry. how do you plan to make the largest beneiciary of the scheme and has it beneficial for customers? signed MoA for 440 MW. he Government of India has set a target of achieving 175 GW power capacity from Ministry of New and Renewable Energy renewable energy resources by 2022 and out of (MNRE) had formulated the scheme for this 60 GW to come from wind power. We are setting up of 1000 MW ISTS connected wind proud to be associated as a trading partner for power in India. In the scheme wind projects are to be set up in windy states for supply of40 | Energy Next | June 2017

INNOVATIVE FINANCINGPDF Compressor Free Versionrenewable resources based power generation,which is the energy for the future. he schemeis very beneicial for power industry as a wholeand wind industry in particular. It will attractmore investments in the industry and lowertarif through competitive bidding will beneitthe consumers at the end. his model will bevery helpful for scaling up the wind generationin the overall renewable energy basket in thefuture. he scheme is for better utilization ofwind resources available abundantly in windystates and supply green power to non-windystates hence helping both kind of states and thenation as a whole in achieving the target.Can you shed some light on kWh. his is the irst such bid and we expect between the two kind of states as far as windvarious innovative financing that there will be more activities and more energy is concerned. States like U.P., Bihar,options available in renewable innovative inancing to come. Jharkhand etc. not able to generate wind powerenergy sector in India? what but they have placed order for more than 800financing options are most mnre had sanctioned a scheme MW wind power under this Scheme of MNRE.popular with developers? to set up 1,000-mw inter-stateAs the scale of wind projects have gone up transmission system connected also, how do you access thein the recent inter-state competitive bidding, wind power project, how you growth of wind sector as athe project developers would like to do re- see this changing the energy prominent renewable verticalengineering and better project management, landscape of the country. after solar?better negotiations with OEMs. he larger he Government of India has set a target India has a cumulative renewable energyproject size would also enable the developers of achieving 175 GW power capacity from installed capacity of more than 57,000 MWto bargain for better cost of capital, both renewable energy resources by 2022 and out as on 31st March, 2017. Out of the totalfrom domestic as well as from international of this 60 GW to come from wind power. installed RE capacity, more than 32,000 MWlenders. Interestingly, the developers are mix Although the total potential of wind energy is contributed by wind energy that accountsof international as well as domestic players. is estimated to be over 302 GW, the country for more than 56% of total renewable energyAlthough it was not expected that all the is able to harness only a part of it. Most of generation capacity. India, through the last twoselected bidders would quote the lowest this potential exists in 8 windy States namely decades, has witnessed substantial growth inbid but say incidentally all the ive bidders Andhra Pradesh, Gujarat, Karnataka, Madhya wind energy capacity addition.have quoted the same tarif of Rs 3.46/- per Pradesh, Maharashtra, Rajasthan, Tamil Nadu and Telangana. Hence, a need was felt to he legal clarity and certainty of regulatory formulate a scheme to harness the available principles with formulation and enunciation of wind resource at these wind rich states to Electricity Act, 2003 together with conducive supply wind power for larger beneit of the non- policy framework ensured continued interests windy states. 1000 MW ISTS connected Wind by a number of players in wind sector; which Power Projects will be set up in windy states has ultimately resulted into signiicant growth and Power will be sold to non-windy states/UTs in harnessing wind energy across various States. for fulillment of their RPO requirements. Although the total potential of wind energy is much more, the country is able to harness only So as of now where wind power was a part of it. generated and consumed locally is being able to transmit to other states where there is no wind he wind power potential in the country potential. his will give thrust for harnessing is assessed by the National Institute of Wind the full potential of wind power where it is Energy (NIWE) at 100 meter above ground available otherwise the wind sector was on the level, which is estimated to be over 302 GW. verge of getting saturated in want of buyers Most of this potential exists in 8 windy states in the same state. his will act as a balance namely Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, June 2017 | Energy Next | 41

COVER | INNOvATIvE FINANCING PDF Compressor Free VersionTamil Nadu and Telangana. could be a product in the exchange for sale. are not having suicient paying capacities he Government of India has set a target to pay all the renewable bills in time. States how has PTC been able to set an are mostly defaulting in making paymentsof achieving 175 GW power capacity from example of a successful Public- to renewable energy developers. One of therenewable energy resources by 2022 and out of Private Partnership? western states was one of the best paymastersthis 60 GW to come from wind power. PTC India Ltd. (PTC), was established in but they also haven’t paid to the developer 1999 by Govt. of India as a Public-Private for say more than ten months. he rolePlease tell us the role that PTC, Initiativewith primary focus on of intermediary is all the more importantas a leading provider of power • promoting power trading to optimally utilize because renewable companies are interestedtrading solutions in India, is set existing resources to see that there is an intermediary who canto play in the country’s ambitious • attract investments in the power sector on the do risk mitigation on their behalf. Otherrenewable energy mission? strength of multi-buyer model than that once the market is getting saturatedPTC has gained valuable experience by • creating a Power Market in India and it is very important to ensure that the bestproviding support services to Solar Energy neighboring countries generator gets a priority to sell the power inCorporation of India (SECI) in managing the the market irst. And that can be done if thereoperational and commercial aspects of trading Promoted by public sector majors in the is a renewable market. Rather than irst comeof 750 MW power from Solar Power projects. industry (NTPC, POWERGRID, PFC and irst serve basis there should be competition NHPC), PTCis an integrated energy player among renewable generators which can SECI and PTC signed MoU for sale and in power trading, investments, Advisory happen if there are renewable traders in thepurchase of power from 3000 MW solar projects services and renewable energy.We have pan market who can prioritise the generatorsfor onward sale on long term basis (25 years India presence having relationship with all the who are more eicient who can bring morefrom COD of the Projects) to the State Utilities. utilities in the country. We are the largest power economy. We have to make the market very trading company in India with trading volume dynamic. PTC is nodal trading partner for MNRE of about 50 BU.wind scheme for setting up of 1000 MW Take for instance Tamil Nadu where the statewind projects in India and having mandate PTC is trading power not only in India is not willing to take any more renewable. Butfor purchase and sale of wind energy from rather with neighbouring countries like Nepal, if the state is allowed to sell renewable out ofdevelopers to discoms. Bhutan and Bangladesh also. PTC is uniquely the state then it is a win-win situation. Market placed at the centre to contribute more to cross- creation is that. You understand the need of Also, PTC’s subsidiary PTC India Financial border power trade. the market and come out with a product whichServices Limited (PFS) has a signiicant presence is required in this particular market. If anyin Renewable Sector with 40% portfolio how does PTC aim to provide state has more renewable sources then allowconsisting of renewable energy projects. the best value to both the buyers them to sell it in the market and give them and sellers and ensure optimum the opportunity that whatever you sell will be PTC’s subsidiary PTC Energy Ltd. (PEL) utilization of resources at the treated as renewable only. he state governmentis focused on developing and owning wind same time? has to be proactive.and solar Projects.PEL has commissioned he biggest challenge in renewable are thewind power projects with combined receivables. Once a power developer sells what are your expectations/capacity of 288.8 MW. it to the states, the state electricity boards speculations regarding the renewable energy future five We have done it for conventional and we are years from now?sure we will do it for renewable as well with inter-state sale of power and ater some point of time it We expect the share of renewables in overall power generation to steadily rise in the coming years as more and more solar and wind projects start producing power. Ater price for solar power went below 3 rupees a unit and the price for wind power is also very competitively placed, it will encourage consumers to switch to cleaner sources of energy. As per NREL, USA report 22% of total energy would be from renewable by the year 2022. he total generation from renewable energy would be 370 BUs which can be 54% of the total energy need at any particular time of the day.42 | Energy Next | June 2017

RATINGS PDF Compressor Free VersionCredit rating ofrenewable powerprojectsRenewable power sector, particularly wind and solar, is witnessing a signiicantgrowth supported by government policies and regulatory incentivesC redit Rating is an opinion on the and future prospects. While renewable power of power otakers being state power distribution creditworthiness or the relative projects have a number of similar features as utilities, renewable power producers get exposed ability and willingness of the issuer any other power projects, there are certain to the counterparty payment risks. of a debt instrument to meet debt unique operational risks, which are consideredservicing obligation as and when they arise. in credit risk assessment. ll Framework For aSSeSSInGCredit Rating plays a crucial role in providing renewaBle Power ProjeCTSlenders with vital information that helps them Renewable power sector, particularly In order to diferentiate credit risk among thein determining whether issuer of debt will be wind and solar, is witnessing a signiicant projects in this sector, CARE mainly assessesable to meet its obligations in a timely manner. growth supported by government policies and following rating factors:he analysis of the same is based on past trends regulatory incentives. Solar and wind power projects tend to beneit from long-term power ll ProjeCT ImPlemenTaTIon purchase agreements, which substantially Project implementation risks assume mitigates price and volume revenue risk. hus, signiicance in ‘yet to be operational’ projects. solar and wind power projects primarily depend While technical complexity in renewable upon availability of wind/solar resources for power projects is limited; land availability, power generation. hese projects beneit from approvals and creation of power evacuation predictability of revenue; at the same time infrastructure pose challenge. Availability of they are exposed to climatic risks. Also, solar funds, both debt and equity, is also crucial. technologies are evolving and have a limited Also, experience, track record and contractual track record in India, which poses the risk of any arrangements with the EPC contractor are technological surprises. Further, a large number June 2017 | Energy Next | 43

COVER PDF Compressor Free Versioncritical factors. It is important to assess the the state utilities or central nodal agencies infusion of funds to enable the companies toavailability/creation of transmission lines, in the form of PPAs which reduce demand tide over temporary liquidity requirements.which could pose a challenge for timely risks. Lack of such agreement can be a credit ll manaGemenT qualITy andcompletion. Timely progress on execution is concern for power otake. Per unit contracted exPerIenCeimportant not only for timely completion but price of power is important factor whichalso to meet the timelines stipulated in the impacts the proitability and cash lows of CARE evaluates the management fromagreement with the power otakers. the project. A lower power tarif can result in diferent perspectives like inancial inadequacy of cash lows at the same time a capabilities, experience in the industry, Post the completion of construction, very high tarif can result in reservation of the track record in implementing and operatingrenewable power projects face the risk otaker for purchase of contracted power. renewable power projects and availability ofof stabilization of power generation and technical manpower.payment receipts from the otaker. On he counter-party risk remains a keyaccount of these additional risks, compared factor as majority of the projects sell power CARE’s assessment considers the aboveto the operational projects, under execution to a single otaker. Even if adequate power mentioned factors based on their materiality,projects tend to have a relatively lower rating. is generated and supplied, delay in payments potential efect on performance and general by the otaker can impact the SPV’s cash characteristics. Also, peer comparisons arell ProjeCT oPeraTIonS lows. Credit risk proile of the otaker and carried out as an integral part of analysis.Power generation in renewable power projects payment track record are the important Mitigation of credit risk due to any creditis dependent upon climatic conditions, factors to analyise. Further, strength of the enhancement provided is carefully evaluatedtechnology used, quality of equipments, plant PPA in terms of penalty for delays, letter of before assigning inal rating.& grid availability and O&M activities. In the credit, termination payments are crucial. Also,conceptualization stage, resource assessment diversiication in terms of multiple otakers is CARE undertakes credit rating exercisestudies are carried out, which provide considered favorably in the credit assessment. based upon information provided by theimportant benchmarks for expected generation company, in-house databases and datalevels. Wind projects witness variation in wind ll FInanCIal ProFIle from other sources that CARE considerspatterns and also seasonality factors. Solar One of the key credit factors for rating of reliable. Rating determination is a matter ofpower plants witness degradation over the renewable power projects is predictability of experienced and holistic judgment, basedperiod, thus an adequate annual degradation the cash low stream supporting a project’s debt on relevant quantitative factors afecting theis taken into account. For the under execution servicing obligations. Apart from generation credit quality of the issuer. Hence, CAREprojects, P-75 or more conservatively P-90 level level and time taken in payment receipts; immensely beneits out of subject matterare considered. For the operational projects, proitability levels, interest cost, determine expertise developed from rating of a largeactual performance vis-à-vis projected levels cash lows of the project. On the other hand, number of renewable power producers.are analyised. Assessment of the quality and interest rate, loan tenure and structuring would Moreover, regular interactions with issuers,experience of the resource consultant and impact the debt servicing obligations. he technical experts and lenders and investorsmethodological approach is done. As the analysis focuses on the adequacy and stability of of renewable power projects help CAREconcessions entered into are for long term, the cash lows for debt servicing. CARE favorably update the understanding on various risksprojects are required to sustain the operating considers presence of DSRA, unutilized and risk mitigants.performance over a long period of time. working capital limits, sponsor’s ability and willingness to support the project by timely The author Gautam Bafna is Senior Manager It is also important to evaluate the Credit Analysis & Research Ltd (CARE Ratings)technology used, reputation of equipmentsupplier, warranties provided and inancial The views and opinions expressed in this articleproile of the equipment suppliers. Entities are the author’s own and do not necessarilysourcing equipment from reputed suppliers represent the views of the magazine.with performance warranties backed byadequate security mechanism consideredfavourably. Further, availability of transmissioninfrastructure for uninterrupted sale of poweris important. he experience and quality of theO&M contractor and the strength of the O&Magreement are other important factors to assess.ll oFFTake & CounTerParTyrISkSMajority of the renewable power producersenter into long-term otake arrangement with44 | Energy Next | June 2017

BANkS PDF Compressor Free VersionEmergence ofnew means inRE inancialspaceWe believe in Indian’s RE sector’s potential and have kept renewable energyas one of our key knowledge and sunrise sectors, says Pawan Agrawal,Senior President & Deputy Head (Corporate Finance), Yes Bankqwhat according to you Energy Country Attractiveness Index. However, high consumption centers. To this efect a Green are the future drivers of having said that, the sector will continue to need Energy Corridor (GEC) is being set up by Power renewable energy in India? dedicated conidence building measures/eforts Grid Corporation of India Limited (PGCIL).Past couple of years have been unparalleled in to help the country in achieving its intended goalIndia’s renewable energy growth timeline. he of 40 percent of installed capacity from non- Although renewable inancing in India issector has witnessed considerable traction in fossil fuel based energy sources by 2030. seeing evolution and sizeable scaling up ofterms of both cohesive and collective eforts/ innovative inancial measures/structures i.e.support from requisite government policy Ensuring that renewable energy’s Green Bonds, institutional guarantees, etc,interventions & relevant stakeholder’s interests. contractual & regulatory obligations are met concept of “INVIT’s” is also being evaluatedhis has lead to India cementing itself to 2nd by state Discoms will be key to unlocking by some, a lot more of such structures needrank in the recently published Renewable sustainable capacity rampup in the sector. to be delved upon and brought to book i.e. GOI has duly taken note of this aspect while Warehousing facilities, Takeout and reinancing designing/implementing UDAY scheme, schemes, yield co’setc to help developers unlock which provides for an efective approach to their invested capital and investing in rampant improve the inancial health structure as well green-ield capacity buildup. as the operational eiciencies of state discoms which shall be evaluated against results Can you shed some light on achieved with its rightful implementation by various innovative financing the States in the future. options available in renewable energy sector in India? Smart grids will hold the key to the future. Opportunities in India’s renewable energy build GOI has also undertaken measures to refurbish up has resulted in mobilizing several strategic & interstate transmission network for transporting inancial investors towards the sector. Majority of renewable power from renewable rich states to June 2017 | Energy Next | 45

COVER PDF Compressor Free Versionthe players have created an impressive portfolio able to take much advantage of the same due investment banking, debt capital market etc.by making use of conventional domestic to high hedging costs. RE inancing due to its practices for proactively facilitating investmentinancing and are now aggressively looking at annuity nature should naturally attract long and inancing solutions for our Renewablealternative means of inances for churning their term foreign investors (viz. pension funds & Energy clientele and pride ourselves inoperating portfolio to ramp up new capacity/ college endowments), the currency risk severely epitomizing inancial innovativeness/uniquenessensuring sustainable yields etc. limits their participation. he market for long in India’s renewable energy growth story. term USD/INR hedge is still very illiquid & While Indian Banking system continues to expensive. While for developed markets these yes Bank is the first bankspearhead renewable project’s underwriting/ costs are in the range of 150 – 300 bps, USD/INR to launch India’s first greeninancing requirements, the sector’s inancial hedge costs upwards of 650 bps and has limited infrastructure bond. what hasspace has witnessed emergence of new means availability for tenors exceeding 5 years. An idea been its journey so far?and structures thereby enhancing funds in this regard has been for creation of a pooled At YES Bank, we strongly believe in Indian’savailability in the past couple of years. Green fund backed by the Government/Multilateral renewable energy sector’s potential and haveBonds have become the most prevalent Institutions for partially covering some of the kept renewable energy as one of our keyinstruments (labelled green bond issuances of long term currency hedging costs. he fund knowledge and sunrise sectors, in line with our~INR 3.2 Bn as on 5th April, 2017) to mobilize can provide partial downside protection based ethos of sustainable development. YES Banklong tenured inancing from global & domestic on transparent auctions and while this may has been at the forefront of renewable energyinvestors in the sector. So, much so that India seem counterintuitive, it will help build a deeper growth story in India by constantly engagingwhich had raised its irst ever green bond in Feb, market for such products. with all the stakeholders, including the2015(YES Bank issuance of INR 10 Bn) has now government, regulators, developers, domesticbecome 7th globally in the country wide list of what are the innovative financing and global investors, multilaterals and think-global green bonds issuances till date. solutions provided by yes Bank to tanks etc for institutionalizing both innovative developers? policy-level as well as inancing mechanism. Structures such as Credit Enhancement/ YES Bank was also the irst Indian Bank in theCredit Guarantees have been also evolving Indian solar sector to underwrite innovatively We at YES Bank were one of the very irstcatapulting into ever rising lows of institutional structured bond issuance by Hindustan lenders to have advised and hand held renewableinance into the sector. Leading Indian IPP’s have power group, under IIFCL’s partial guarantee developers, when the industry was in its nascentavailed counter guarantee/ third party guarantee schemes, counter guaranteed by ADB. Just stage ever. From the humble beginning ofproducts from unilateral/multilateral institutions to outline some of the key takeaways for YES renewable energy exposure in the inancial yearleading to upgrade in bond ratings, consequently Bank investment in these Bonds – Banks ending 2014, YBL today boasts of one of themeeting the stringent investment criteria for investments in Bonds falls under its investment largest renewable energy exposure in the privatepension funds, insurance companies etc globally. book thereby excluding it from PSL obligation banking space. resulting in lower costs. Further, since these Project level participation structures bonds are highly rated, AA+, due to IIFCL/ YES Bank also pioneered India’s irst Greenlike equity inancing from contractors and ADB credit enhancement structure, there Infrastructure Bond in early 2015 and hasequipment suppliers have also been a rising is much lower capital requirement thereby till date completed a hat-trick of green bondtrend in the sector. increasing bank’s appetite to take such issuances totalling INR 16.45 Bn (~USD 250 exposures. Also, being listed instruments, these MM), experimenting/optimizing every possibleaccording to various studies, the bonds have potential to generate interest from option/route available including green-shoe,high cost of debt (high interest long term investors such as pension, insurance masala, private placement etc.rates) is the most pressing and provident funds etc.problem currently facing the YES Bank has also committed to mobilizefinancing of renewable energy. As it is well known, YES Bank was India’s USD 5 Bn for climate action, a pledge we tookhow is innovative financing going irst ever Green Bond issuer in February 2015, on the sidelines of COP21 deliberations in Paristo improve this situation? when it raised INR 10 Bn in local currency in addition to being the irst private sector bankContinued availability of low cost, long term through green infrastructure bonds. Following in India to give Green Energy Commitmentcapital for inancing renewable projects will the success of its irst issue, the Bank has further (GEC’s) to the tune of 5 GW during RE-INVESTremains one of the key challenges. Domestic raised another INR 3.15 Bn in August 2015 2015. Besides being partner to the Indiandebt interest rates are one of the issues but as we with private placement to IFC Washington and Government on important initiatives like RE-have seen these rates are showing a declining another INR 3.30 Bn in September 2016 placed INVEST, and the International Solar Alliancetrend as the industry draws comfort with with FMO, Netherlands depicting international (ISA), we have been extensively engaging withmaturing technology and renowned established investor’s strong conviction in the bank’s green important stakeholders like RBI also in ensuringplayers in the industry. methodology. policy and regulatory alignments with green growth aspirations. One of the key issues that I would like to We continue to leverage from our stronghighlight in particular is that while in other parts and experienced corporate inance, sustainable The views and opinions expressed in this articleof the world, longer term low cost inancing are the author’s own and do not necessarilyoptions are available, we in India have not been represent the views of the magazine.46 | Energy Next | June 2017

INNOVATIVE FINANCING PDF Compressor Free VersionRE sector has seen severalboom and bust cyclesInterest rates have fallen by about 20 per cent over the last two years, and are nolonger a problem faced by companies, feels Raj Prabhu, CEO and Co-founder,Mercom Capital Groupq Can you shed some light increase in bond issues as a way of raising funds. percent over the last two years. However, interest on various innovative Renew Power issued non-convertible debentures; rates when compared to other countries, is still financing options NTPC has listed masala bonds on foreign very high. Developers are getting cheap buyer’savailable in renewable energy exchanges. With low bids and low margins, credit from manufacturers to fund the projectsector in India? borrowing in the current environment in India is initially and a line of credit followed by domesticOther than various forms of project funding like complicated. Other instruments include - buyer’s borrowing, debt funds at low rates and ater therecourse and non-recourse, we are seeing an credit from module manufacturers, line of credit, projects are operational for a few years, reinance debt funds, reinance with foreign lenders or with foreign lenders or infrastructure funds. infrastructure funds. Can you talk a bit about the according to various studies, the financing options that are most high cost of debt (high interest popular with developers? rates) is the most pressing Short-term and long-term loans from problem currently facing the development banks, Syndicated loans from financing of renewable energy. domestic lenders and inancing instruments. how is innovative financing going to improve this situation? reports suggest that ‘General High interest used to be a problem not so much Indian financial market conditions anymore. Interest rates have fallen by about 20 are the main cause of high interest June 2017 | Energy Next | 47

COVER PDF Compressor Free Versionrates for renewable energy.’ what Innovative inancing solutions like solar lease financing models be replicated inare these conditions and how far (zero upfront cost) can remove the hurdle India?do you agree to this? of higher initial costs. Long-term loansI am not sure about that. Interest rate in any (zero down) are another option for home here is not a single good model. It allcountry relects the growth and inlation owners who want to own the solar system. depends individual countries and whereand also the central bank’s monetary policy. he challenge is many home owners may each economy is. he China’s interest rate isIn a nut shell, if you can’t control inlation not qualify for such inancing but it is a good around 4 percent, US, UK and Germany’sin a fast growing economy, high interest option for businesses initially. rates are below 1percent. Also, interest ratesrates are the result. his applies to the are not a big factor when they are low. hatwhole Indian economy and has nothing what are your expectations/ said if the country has a robust inancialto do with renewable energy. Of course, a speculations regarding the sector system innovation will happen as need arises.small developer will pay more interest rates 5 years from now? For example, in the US, solar leases becamecompared to Adani because of size balance hings change quickly in this sector and we popular for a while using tax equity fundssheet etc. As I mentioned earlier interest rates have seen several boom and bust cycles over because US incentivizes investments in solarhave dropped approximately 20 percent over the last 5 years. In next few years India will and wind through a 30 percent investmentthe last two years. need to address transmission bottleneck tax credit (companies/banks who have challenges. he price of day time power prices tax obligations can invest in this and get aregulatory or policy lessons will fall signiicantly due to solar installations credit). As solar technology matured zerothat India has been using as and DISCOMs will lose revenues. Unless down loans have become popular as banksguidelines from the developed power demand picks up signiicantly we may are comfortable lending as they look at solareconomies do not, in many have a situation where there is surplus power as another home appliance. We saw the risecases, comply to the Indian and no takers. India’s economy needs to grow of Yieldcos (similar model as real estateenvironment. So what could at a robust rate and electricity consumption investment trusts) for a while as the cost ofbe an alternate way to explore along with it, if not, it will be challenging. capital was lower than tax equity funds. henpotential policy solutions to bring came securitization (pooling hundreds oflower cost, long-term debt into Taking a cue from global solar assets into a portfolio and selling it to thethe Indian renewable energy financing trend in the sustainable inancial markets) deals which gave access tomarket? sector by leaders like China, even cheaper loans. Some of these innovationsGovernment can provide access to cheaper uS and Germany and uk, how, in inancial instruments are applicable toloans but you would be essentially favouring according to you can similar individual markets based on need, interestone sector over the other. he simplest rates and policies.solution is to create a robust open marketthat is attractive to foreign investors whocan deploy capital at lower costs. For thisto happen, bureaucracy needs to be at aminimum, policies need to be stable and long-term and there shouldn’t be any uncertaintyaround policies. Even with all this, foreigninvestors still need to make a return and withthe current auction and low tarif environmentthat will be tough. Solar component priceshave fallen very quickly over the last one year(about 30%) more than making up for higherborrowing costs. Reducing regulatory burden,cutting solar park fees will also help.one of the most discouragingfactors for people opting forrenewable energy is its very highinitial costs of the re systems.what solutions does innovativefinancing have for this?Consumers directly interact with renewableenergy mostly through roof top solar.48 | Energy Next | June 2017

INNOVATIVE FINANCING PDF Compressor Free Version may supply ample electricity but you may have blackouts which can impact cash lows. Earlier,‘Innovative solar capacity of 5MW, 10 MW, 25 MW solarfinancing was used which did not imbalance the grid.instruments need However, today we have renewable of 250 MW,of the hour’ 500 MW, 1000 MW in the grid which can make the diference. Storage is a big issue. Hydro and thermal can take the load without storage but we need to think about new methods of renewable energy with the storage. hen, this grid will be stable and we will not have blackouts.As banks are burdened with stressed loans and why do we need financialoverexposed to the infrastructure sector, foreign and institutions along with the banks?domestic institutional investors have the potential to also, tell us about the financialbridge this inancing gap, says ES Rao, Chief General instruments that are availableManager, India Infrastructure Finance Company Ltd. with these institutions. Banks are giving the inance but that isqwhen was IIFCl started? solar power, 60MW of wind, 10 GW of waste- not suicient. You need to have diferent what was its objective? to-energy and 5GW of small hydropower. instruments, that is exactly where inancial IIFCL is a wholly-owned Government how much investment do we institutions come into picture. Some of theof India company set up in 2006 to provide long need for Indian renewable sector? instrumentsprovided by theseinstitutions are:term inance to viable infrastructure project. As of now, installed renewable capacity stands at • Credit enhancementWe have one oice in Delhi and a subsidiary in 57.26 GW comprising wind, small hydro plants, • Infrastructure debt fundUK which takes care of forex. IIFCL MF (IDF) waste to energy and solar at 32.37 GW, 4.37 GW, • Infrastructure investment truststakes care of innovative structured inance and 8.3 GW and 12.28 GW respectively. Additional • Securitization and asset backed securitieswe have an advisory company which acts as an investment required is $189 billion including • Green bondsadvisory for the government and the corporates. $57 billion in equity and 132 billion in debt. Credit enhancement, infrastructure debt funds As banks are burdened with stressed loans and and green bonds are already in operation.what do you think about the overexposed to the infrastructure sector, foreign However, one needs to look into infrastructureprogress of Indian renewable and domestic institutional investors have the investment trusts and securitization.sector? potential to bridge this inancing gap.Solar is going to be a boom. India has a total Please tell us about IIFC’s role ininstalled power generation of 326848MW do you think approaching banks financing?comprising 57260 of renewable, which is almost for investment is an easy option We channelize insurance company’s funds,17 percent. India has ambitious renewable for renewable energy developers? pension funds and commercial banks funds.energy targets of 175 GW 2022 with 100 MW Long terms funds are not always available with We take any project which is BBB in nature and commercial banks, hence, you require diferent give the credit enhancement with the balance solutions. It is very well possible to approach sheet of IIFCL and increase it to AA and AA+ domestic as well as international banks for so that the bonds can be issued by the company. investment but your product should be We have done two projects, one is Hindustan attractive enough. Whether you are a developer, Power and Renew Power. We have got raised banker, or equity player, the cost of the inance bonds worth 600 crores. hese companies are will go haywire if it is messed up. doing really well today. what are the risks faced by the what is the advantage of credit developers and how should they enhancement? overcome them? he advantages of credit enhancement are: Technically, you have fossil fuel and solar energy • Better rating for infrastructure project (AA on the same grid. It is not easy to predict what or higher) kind of grid stability will remain ater 2020. You • Bridges gap between stand-alone rating and min. investment rating for long term investors like insurance and pension funds • Efective in mobilization of long term debt June 2017 | Energy Next | 49

COVER PDF Compressor Free Version• Freeing up of bank’s capital as well as It is very well possible to approach domestic as well as international banksexposure. for investment but your product should• Longer term funds for the project with cash be attractive enoughlow suiting a project’s requirements.• Development of bond markets• Reduced rate of interestalso, tell us about IdFand developers. Recently, it was done for the road what is the scope ofalternate Investment Fund. sector where IRB was able to raise 5000 crores securitisation in renewableWe have $100 million IDF which is there for successfully. If you have more solar assets, Invits sector?every infra project including solar. his was will be fruitful as you can channelize the funds Securitisation has not come in theintroduced just three years ago and is doing and can get a lot of money from the public as infrastructure sector but it can come in the nearreally well today. It is an alternative medium to well as institutions. future. Currently, it is available for credit cardlong term investment instrument with options and automobile sector. Instead of individualof tenor ranging 5 to 20 years. Investors to IDF Invits are mutual fund like intermediaries loan, bonds, the pool will be there andincludes FIIs, Pension funds, insurance cos, enabling investments into the infrastructure promissory notes or bonds will be issued so thatsovereign wealth funds and other investors. sector by pooling diferent investors like HNI, you get more money. Banks can be deleveraged.IDF (MF) can provide a ‘Structured Financial FTs FPTs and retail and channelize funds into One of the inancial institutions is trying toProducts’ for SPVs and infrastructure infrastructure projects. Mandatory listing of introduce securitisation in infrastructure sectorcompanies. It has the potential to reduce cost invits ofers investment opportunity to a larger but it will take some time.of inancing to the project and promoters based pool of investors and inancial institutions.on the rating and class of investment used. We hey are helpful in reducing exposure of Indian Could you elaborate theare also in the process of setting up Alternate banking system and free up the banks capital challenges and benefits of GreenInvestment Fund (AIF) for green initiatives Existing developers and banks will be able Bonds? to deleverage their debt from the completed Green bonds worth $82 billion are availableare Invits a good option for projects which will enable them to focus on internationally. In India, banks like Yes Bankpeople associated with renewable new projects in the sector and will improve the and World Bank have launched green bonds.energy? investor sentiment. Green Bonds is a debt instrument by an entityInfrastructure investment trusts is good for raising funds ‘earmarked’ for use towards inancing ‘green’ projects assets business activities with environmental beneits. It attracts new class investor base - insurance funds, pension funds, sovereign wealth funds apart from the traditional investors. It helps in enhancing an issuer’s reputation illustrates green credentials of the issuer and demonstrates commitment towards the development and sustainability of the environment. he caution is that green bonds come with currency risk. However, if you raise green masala bonds, you will not have the risk of forex. One should be very careful about inancing instruments and mitigation of risks. Could you shed some light on innovative financing for renewable? also, how can we mitigate the risk? RE is a growing infra sector in the country. Innovative inancing instruments are need of the hour for the viability and sustainability of the RE sector. Care should be taken to ensure the operational parameters risk mitigating with special risk insurance instrument.50 | Energy Next | June 2017