Financing Challenges For Large Ground Mounted Solar Projects

15 September, 2015

YES BANK- Growth Story & Strengths

YES BANK- Renewable Energy Partner

Solar Project Financing: Criteria

Solar Project: Project Issues and Solutions

Solar Project Financing: Factors Affecting Fund Flow

Experience from Solar Projects

Overview of Policies and Programmes - Utility Scale Projects

Flow of Presentation

YES BANK Growth Story & Strengths

Remarkable Growth Story

20005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

0

20000

40000

60000

80000

100000

120000

140000

160000

4162111031698222901

36382

5900773626

99104109016

136170Total Assets (Crores)

20005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

55 94200

304478

727

977

1301

1618

2005PAT (Crores)

Pan-India Penetration (June 30,2015)

(Branch /ATM Network – 662/1,277)

Complete Suite of Financial Products

Market CapitalizationINR 296 BN

Knowledge Banking

INR

INR

YES BANK- Strategic Partner Through Project Life Cycle

Dedicated Corporate

Finance Team

Project Advisory Services

Long term Project Financing

Trade Finance, Working Capital &

CMS Services

LS & IB Desk

Dedicated professional infrastructural financing team - over 150 members

Project advisory services including - Pre-bid & Post Bid

Long term Project Financing

In-house Syndication team, with established relations with domestic/foreign lenders

Investment Banking team facilitates raising equity, structured equity-contribution

Renewable Energy Expertise

RE-INVEST Knowledge Partner

First private sector bank to provide Green Energy Commitment (GEC) – to finance 5,000 MW of projects in renewable energy sector in next 5 years.

Projects financed across states and across policies

First Green Bond issued by a commercial Indian Bank

INR 1,000 Crores ; 10 Years Bullet Repayment

Solar Project Financing: Criteria

Power Sale Arrangement, Policy Framework (Centre/State) and Strength of Discom

Sponsor & Borrower Assessment

Approvals and Agreements

Solar Module & BOP Quality

Financial Assessment of Project ( Project Cost, Energy Yield Assessment , DE ratio, other financial covenant )

Power Evacuation Facilities

EPC & O&M Contractor Strength

CriteriaImportant

for Developers to build

Better Financing Credibility

Sponsor Support till Project Stabilization

Solar Finance – Project Issues & Solutions

Issue Description Solution

Solar Yield Assessment

Issues related to availability and reliability of on ground data for long period

Financing based on P99 Level; Models incorporating variability

Design/ Operational Risk

Unsatisfactory Performance Appointment of LIE

SEB Issues Payment Delays • DSRA • Payment Security Mechanism•Working Capital

Technology Risk

• Changes in Technology• Location specific issues

• PV – Established Choice• Pre-approved list of suppliers• LIE Review

Land Issues Delay in Land Acquisition Pre-Disbursement Condition

Evacuation Issues

Shut-down due to evacuation constraints

• Green Corridor• Deemed Generation

Generation Less than projected generation • Liquidated Damages• Bank Guarantees

Inverter Replacement

Capital Expenditure •Maintenance Reserves• Base Case Projections

Solar Project Financing: Factors Affecting Fund Flow

Asset Liability Mismatch

Power Sector Limit Approaching Upper Limit(INR 5.77 Trillion~ 61% of Infrastructure Exposure July 24, 2015)

Lack of Insurance Products

Underdeveloped Bond Market

Absence of Robust Credit Enhancement Schemes

Solar Projects: Pitfalls from Experience

Delay in Setting Up of Evacuation Facilities

Delay in Payments from Discoms

Delay in Land Acquisition & Right of Way Related Issues

Supplier Performance

Solar Assessment Credibility

*Visual Size of box is proportional to probability of happening of the related event.

Policies and Programmes - Utility Scale Projects

•Targeted capacity addition of 15000 MW by FY19 under three tranches of 3000 MW, 5000 MW and 7000 MW.

•Bidding for 3000 MW to be completed by December 31, 2015. RFS for 1,000 MW released for projects to be set in solar parks in Andhra Pradesh.

•Selection of projects based on tariff based bidding process and PPAs will be signed with NTPC.

JNNSM Phase II Batch II

•Targeted capacity addition of 2000 MW in Solar Parks on VGF model (up to 30% of project cost or Rs. 1.0 Cr/MW for OCR and Rs. 1.31 Cr./MW for DCR whichever is lower).

•PPA will be signed with SECI at a pre determined tariff of Rs. 5.43/Kwh with an escalating clause (resultant levelized tariff of Rs. 5.79/kwh)

JNNSM Phase II Batch III

•Targeted capacity addition of 20 GW by FY19.

•States to bear complete responsibility for development and O&M of the solar park.

•Proposed capacity of 3000 MW under JNNSM Phase II Batch II Tranche I is completely being set in Solar Parks.

Solar Park/Ultra Mega Solar Power Projects

Policies and Programmes - Utility Scale Projects

•Many states have released renewable policies with specific targets for power generation through solar.

•Few state policy targets include Karnataka 2000 MW by FY21 (existing 104 MW), MP 2654 MW by FY17 (existing 637 MW), Andhra Pradesh 5000 MW by FY19 (existing 228 MW), Telangana 5000 MW by FY19 (existing 83 MW), Punjab 4280 MW by FY22 (existing 239 MW), Maharashtra 7500 MW by FY19 (existing 354 MW).

Individual State Solar Policies

•Green energy corridor project to develop a transmission network dedicated to renewable power characterized by fluctuating generation and un predictability.

•Estimated fund requirement of INR 43 BN.

•Interstate capacity to be developed by PGCIL

•Intra-state capacity to be developed by State Transmission Utilities

Dedicated Transmission Corridors

•SoftBank to invest USD 20 billion in next 10 years to set up solar power parks in India along with Bharti Enterprises and Foxconn.

•USAID to provide USD 2.7 MN for increasing clean energy access to India

•KFW sanctioned Rs 515 Cr at concessional rate of interest towards green energy corridor in Andhra Pradesh.

Low cost financing with multinational agencies

Policies and Programmes - Utility Scale Projects

•Exemption from excise duty for solar tempered glass, backsheet and EVA sheet, machinery, equipments etc. required for setting up of solar energy production projects.

•A 10-year tax holiday for solar power projects.

•GBI schemes for small solar projects connected to a grid below 33KV.

•Reduced wheeling charges as compared to those for conventional energy.

•Special incentives for exports from India in renewable energy technology under renewable sector-specific SEZ.

•A subsidy of 15% of the project cost for off-grid PV and solar thermal projects.

•Loans at concessional rates for off-grid applications

Other Incentives and Benefits

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