alan rosling - an indian solar developer's perspective

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Perceptions from

the

private

sectorAn Indian solar developer’s perspective

Alan Rosling

Kiran Energy

Bangladesh Solar Energy Development Forum20th September 2011



Introduction

• Kiran Energy Solar Power Private Limited (“Kiran Energy”) aims to become a leading green power company inIndia with a focus to build a portfolio of grid connected and corporate captive solar photovoltaic power plants withinhigh isolation zones of India.

• Kiran Energy has secured a Series A financing round of US $ 50 Mio from a consortium of private equity investors -

Bessemer Venture Partners, Argonaut Private Equity and New Silk Route.

Kiran Energy is a professionally run organisation promoted by :

Alan Rosling: Former Executive Director of Tata Sons and Chairman of the Jardine Matheson Group inIndia, Alan has also been a Special Advisor to the British Prime Minister, John Major. Alan was educated atCambridge University and Harvard Business School.

Ardeshir Contractor: Former Managing Director at KPMG India, Ardeshir serves on several internationalcompany Boards and Government Committees. Ardeshir has a BTech from IIT Mumbai and an MS from Ohio

Kiran Energy ‐ An Overview

Professional Management Team

Proven experience in growing businesses

within well-established corporations like

Tatas and KPMG, backed by a highlyacclaimed advisory board

Strong Equity Backing

Funded by three Global Private Equity

Funds with commitment to invest in India’s

Solar potential

Land Banking

Kiran Energy is building a significant

land bank in high insolation zones in

India to prepare itself for itsdevelopment plan

Project Management

Project team with well-established

experience in solar industry backed by

reputed independent engineering firms

such as TCE

Strategic Relationships

Essential relationships with potential

stakeholders including financing

institutions, engineering firms, other

corporate for potential clients

Project Financing

Continuous endeavor to use innovative

and globally acceptable structures to

reduce debt burden such as export credit

and securitization



Current Projects Under Construction



Equity

Internal Rate of return/(IRR) higherthan risk adjusted WACC

Solar Projects: Critical financing criteria

Debt

Debt Service Coverage Ratio(DSCR)on conservative case higher than 1.3

RISKS

Risks Mitigation

Analysis of historic dataClimate

Technology Field Performance. EPC contractor guarantees

Financial Hedging

Evacuation Track record of grid/transmission company, contract

Implementation Fixed term EPC contract

PPA risk Credit profile/rating of off-taker, potentially insurance



Policy: Clear policy supported by political will to promote and scale solar power until economicsconverge with grid alternatives

Tariff: Off-take regime such as Feed-in Tariff to support economics

PPA: PPA on terms acceptable to banks from a creditable counter-party

Evacuation: Clarity and predictability of evacuation of power through the grid

Clearances: Clear and timely licensing and permitting regime

Land: Where private land procurement is an issue, support on securing acceptable land

Key policy requirements from Government

Mr. Ardeshir Contractor collecting Allotment Letter from Mr. Narendra Modi, Chief Minister of Gujarat



Commitment to strategic importance of solar in the energy mix

Support of solar economics until convergence with grid alternatives

Predictable roadmap to achieve industry scale with annual allocation

Widely debated and accepted

Independent regulator

Economic support through one or more of:

– Feed-in Tariff set annually by Regulator (Europe, Gujarat)

– Competitive bidding on discount to regulated rate (Indian National Solar Mission, South Africa)

– Regulated solar requirement with tradable certificates (Indian RPO system)

– Tax concessions and incentives (USA)

Private and Confidential

Policy

‘Bhumi Puja’ during Ground Breaking



Tariff

Feed-in Tarif f

Clear and simpleSecures maximum participation

Reverse bidding

Market discovers proper pricingOpen competitive process

Attributes

Positive

Regulator may set rate incorrectlyPotential excess applications

Budget pressure, if not capped upfrontAllocation of scare resource

Complex processPotential for winner’s curse

Requires participants to commitresources

Negative

T

A R I F F

( R s . )



Timeline of 20-25 years

Credit status of counterparty (or credit enhancement)

Payment terms

Committed dispatch Dispute resolution and consequences of default

Power Purchase Agreement

Support Structures for modules at our 20MW Site atGujarat Solar park Modules being fitted at our 20MWSite at Gujarat Solarpark



Responsibility to connect

Capacity of substations

Cost of any connection to substation

Grid stability and availability Responsibility for deemed generation

Timelines

Evacuation

Electrical layout for the Solar Park as proposed byGETCO



Clarity on required permitsand sanctions

Timelines involved

Comfort on delays for

improper motives

Clearances

Clearances

LandRelated

Land Use State Pollution Control Board Ministry of Forest and Environment Environmental Impact Study Airport Authority of India Clearance Defense Clearance Water Supply Clearance Rehabilitation & Resettlement Road and Railway Clearance

Mining Clearance Archaeological Clearance

Financial Central Sales Tax State VAT Customs and Excise Duty Exemptions Import Export Code

BusinessCompliance

Industrial Entrepreneurs' Memorandum Labour Commissioner Approval Factories Act

Evacuation Transmission scheme approval Report from electrical inspectorate Approval from electrical inspectorate

Attribute



Land

Considerations

Availability of private land and efficiencyof market

Alternative availability of Governmentland

Title risks and consolidation

Land use changes

Issues of encroachment or “social”claims

Political or community issues

Environmental considerations

Timeline risks

Land Purchase Process in India



Solar Parks: Our experience in the Gujarat Solar Park

Good land for solar use

Speed of land acquisition

Single Window for most clearances

Higher certainty on evacuation

Common services

Clustering of developers

Advantages Disadvantages

Government entity as landlord

Lease rather than freehold

Cost of land, including development

charges

Inflexibility on lease terms



Learnings from earlier engagement with

projects

in

Bangladesh

Extreme shortage of large land plots due to population density

Vulnerability to floods and tropical storms

Intense political debate on most issues

Speed and certainty of decision taking and clearances

Importance of wider society and media

Grid weaknesses and financial position of DISCOMs

Important role for Multi-Laterals and donor countries

Sensitivity to investment from India given bi-lateral issues



Summary of policy asks from Government of Bangladesh

Clear solar policy with future roadmap to scale and wide support in the country

Tariff to reflect costs, risks and insolation

Bidding process almost certainly better for all

World standard PPA with credit enhancement

Facilitation of issues over land, evacuation and permitting with timescalesestablished

Solar Park on a “turnkey” basis for successful applicants/ bidders

Developed land

Common clearances including EIA

Assured evacuation

alan rosling - an indian solar developer's perspective

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