solar power project financing

7/21/2019 Solar Power Project Financing

http://slidepdf.com/reader/full/solar-power-project-financing 1/19

Solar Power Project Financing

Aligning Banker-Borrower- Investor Perspective

International Conclave on Climate ChangeOctober 12-14 ,2011

Hyderabad1



Agenda

Clean Energy Biz Architecture

Clean Energy Biz Potential

Clean Energy Financing Dilemma

Clean Energy Financing Risk –

Reward Matrix Financing De-Risking Strategy

Clean Energy Financing Options

Way Forward

2



Global Warning to Global Warming

Financial Crisis

Food CrisisFuel Crisis

Economic Prosperity

Food SecurityEnergy Security

3



Clean Tech biz Enablers

• Clean Tech is Main Tech

• Clean Tech Biz- A Growth Path

• BASICS- Low Carbon High Growth Economies

4



Cleantech Biz Tri- Angle

•Science case

•Socio economic case•Asia Energy and GHG Growth

•De-carbonizing Asian Growth

•Political Barriers

•Regulatory barriers

•Early Stage Barriers

•

Commercial barriers

•Drivers for Private capital

•Political and

•Regulatory interventions

•Risk Mitigation Interventions

•Early stage project development

interventions

•Carbon Market interventions

5



Cleantech Business Architecture

Clean Energy C l e an

E n

er g y

I nf r a s t r u c t ur e

Energy Efficiency

C

l e an

T e ch n ol o gi e s

Clean Technology

Clean Energy Infra/

Urban TransportEnergy Efficiency

Clean Energy

Fuel Switch

HydroWind Solar

Bio mass

Sustainable materials

W2e

Co-generation

Bio Gas

Heat

recovery

Electric

Vehicles

CFL

Street

Lighting

Low CarbonBiz

Global additional investment and financial flows of $350 bnneeded by 2020, just to return to current emission level in

Technology Transfer/Capex 6



Cleantech Biz Premise Cleantech Industry $ 350 bn by 2020 61% of total emissions contributed by energy production

sector

65 % of power generation based on coal and lignite

Only 8 % in total installed power capacity is renewable India can generate 714 GW from Renewable till 2032

India can generate >- 50 % of its energy needs till 2032through RE Power

50 % RE Power scenario will help us to reduce more than2 bn tons of CO2( 2bn CER) every year till the life of theprojects which has around $ 20 bn USD revenue potentialthrough sale of CER

7



Cleantech Biz Investment Dilemma

Cleantech

Financer/Investor

•Patents selling than Product selling•Long Time to market cycle ( 15- 20 yrs)

•Scourge of finance capital

•Resistance to change for new clean tech

•Absence of Large scale Technology roll out plan

•Shortening Time to Market Cycle

•Aligning of Tech Developer and Financer goals

•More business driven innovation

•Low cost capital and its efficient use

•More realistic regulations

•Joint Manufacturing initiative

•Cross Licensing technology agreement

•Tariff/Duty Exemption•Uncertain business outlook

•Risk management of emerging clean

technologies

Cleantech

Developer

8



RISK –REWARD MATRIX

(R & D)HIGHMEDIUM( r &D)LOW ( r & d)

Low Tech

Policy in place

Market Demand

Medium Tech

Policy in place

Market Demand

Break Through Tech

Policy in place

Market Demand

FINANCING RISK

R

E

W

A

R

D

9



Banker –Borrower Risk Profiling

Borrower

Banker/Investor

•Project Performance

•Policy uncertainty/Continuum

•Political Risk

•Technology Risk

•Sponsor Risk

•Construction Risk

•Project Implementation Risk

• Domain competence

•Financial Strength

•Project approval risk

•Offtaker Risk

•Return on Investment

•Project Execution Risk

• Interest rate volatility

•Policy continuum

•Off taker creditworthiness

•Financing Cost

•Project Approval Risk

•Land Acquisition and approval

•R & R issues

10



De-Risking Strategy

Borrower

Banker

•Limited Recourse

•Balance Sheet Financing• Escrow Mechanism

•Environmental Rating

•Corporate Guarantee for SPV

•Personal Guarantee

•Technology Performance Guarantee

•Performance Guarantee from Tech supplier

•Generation guarantee

•Insurance cover

•Low Cost capital

•Long term Capital

•Optimum Moratorium

•Long Technology Life cycle

•Long term O & M arrangement

•Project cost overrun and Time over run

management

11



Clean Energy Biz- Finance Model

Clean EnergyFinance

Low Carbon PENetworking

RegulatoryNetworking

FIsand

Multilateralagenciesnetworking

•RBI•MOEF/GOI•BEEE•

TERI•MNRE•CERC

•PFC•KFW• ADB•IIFCL

•ICICI•IDBI•STANCHART•CREDIT SUSSIE

• And many more

•IFC•ILFS•BVP•Olympus Capital• I-Venture

• And many more•;;;;;

Co-invest Co-Finance

12



Emerging Financing Trends

Innovative Financial engineeringDifficult Risk mitigation

mechanism

Limited Exit options forLenders

ECB,

ECA and Green Credit LinesMultilateral Agency funding

Long Term Patient capital/ Soft Loan

Debt through INR Loans

Financing through subordinated debt , PE Funds andInsurance companies

Conventional financethrough Debt and Equity

EmergingExisting

Buy Out Clauses in concession agreement

13



Case StudyAstonfield Renewable India Limited

14



Solar Project Finance Key parameters

Return on Investment

15 -20 %

Payback : 5- 7 years

MDSCR 1.2 min

ADSCR 1.3 mn

Debt/ATNW : 1 Min

Debt/NCA: 4,5 min

Project life cycle – 25 years

Traiff – Rs 15- 17 per KWH

Or 25 cents to 40 cents perKWH for first 12 years andthan Rs 5 per kwh from 13th

year

Solar Project

Finance

Project Finance Mix

Debt : equity : 70 :30

Loan Tenure : 2 + 10 year

Pricing : L + 500 bps

Capex per MW

Solar PV- $ 3.5 mn

Solar CSP - $ 2.75 mn

OPEX $ 1.4 cents- $ 2 centsper KWH



Solar Project Financing Lenders

STANCHARTIREDA

HSBCILFS

CREDIT SUSSIEPFC

KFWIIFCL

WORLD BANKIDFC

USAIDEXIM

ADBICICI Bank

IFCIDBIJBICSBI

InternationalDomestic

16



Mainstreaming Clean energy Financing

Integrated

Clean Energy

Finance

PrivateEquity

Banks

Insurancecompany

PowerTradingExchange

Multilateralagencies

Regulator

17



18

Inclusive

Growth

Order of the Day- A Triple Bottom-line Approach

Economical Profit

Environmental ProfitSocial Profit

18



Thank You

19

solar power project financing

Documents