L&T Infra

Lenders Perspective on Solar Power Projects

Workshop on Solar Energy & Smart Grid Development 13th-15th September 2011 Jodhpur, Rajasthan, India

L&T Infrastructure Finance Company Ltd. G. Krishnamurthy Head - Project Finance

Infra Project Finance

Structured Products

Financial Advisory Services

1

L&T Infra

He, whose form is circular and is colored in yellow and red hues, is intensely brilliant and energetic. He is a giver of heat, the cause of all work, of life and death. He is the destroyer of all and is the Omniscient one sustaining the universe and sustaining all action aadityahridaya stotram 14

Infra Project Finance

Structured Products

Financial Advisory Services

2

L&T Infra

Development of Solar sector in India

Why Solar for India? Abundant & available across the country for 250-300 days a year Modular and scalable Government Support Required to provide boost to the development and reducing the cost of generation by indigenization Central as well as State Governments have launched progressive policy for the development of Solar in Indi Commendable policy initiatives and implementation of allotment process
Rajasthan Andhra Pradesh Gujarat Karnataka Maharashtra Others Total JNNSM 571 65 20 10 16 22 704 State Policies 365 123 125 18 631 Total 571 65 385 133 141 40 1335

Infra Project Finance

Structured Products

Financial Advisory Services

3

L&T Infra

Our experience in Solar sector

Amongst the leading financial institutions to actively seek and finance Solar Power projects in India Sanctioned 96 MW of solar projects using Solar PV Crystalline as well as Thin film Technology under various Feed-in-tariff schemes Long tenor Financing Customized and Efficient financing structure as per requirements of the project End to end financing solutions including Underwriting, syndication, senior debt, EPC financing, structured finance L&T ECC provides EPC services for solar PV as well as solar thermal power plants
Policy/ Scheme Gujarat Policy JNNSM Policy Total Sanctioned Solar PV Projects 85 MW 11 MW 96 MW

Policy/ Scheme Sanctioned Solar PV Projects Gujarat 5 Rajasthan 1 Maharashtra, UP 2 Total 8 Technology wise Breakup
13 MW Thin film- Asi Technology 20 MW 64 MW Thin film - CdTe Technology Crystalline Technology

Infra Project Finance

Structured Products

Financial Advisory Services

4

L&T Infra

Challenges in Financing Solar Power Projects

Considering Indias growing power deficit and dependence on international coal, we believe that Solar Power has great potential with decreasing capital costs and active interest/support by the government. Key Challenges : 1. 2. 3. 4. 5. Sustainable Policy Framework PPA Issues Financing Issues Solar resource assessment Project Specific Challenges

Infra Project Finance

Structured Products

Financial Advisory Services

5

L&T Infra

Sustainable Policy Framework

Infra Project Finance

Structured Products

Financial Advisory Services

6

L&T Infra

PPA issues
- Financial health of state Discoms - Grid Availability - Bankable framework - Step- in rights for Lenders - Termination Clause - Re-inventing the various state govts wheel by
Termination Clause Step in Rights for Lenders Payment security Mechanism Grid Availability Assurance Gujarat 3 X revenue of first year Yes 1 month revolving LC NVVN None /only Merchant Power Yes 1 month revolving LC + Rs. 486 Cr of budgetary support None

None

Need to prepare PPA in line with Model Concession Agreements (MCA) for DBFOT road projects by NHAI that has been successfully functioning for a decade

Infra Project Finance

Structured Products

Financial Advisory Services

7

L&T Infra

Financing Issues
Capacity Building for Lenders

Transparent sharing of data and success/failures with lending community

Exposure limit for Renewable energy projects to be separate from Power sector limits

Greater involvement of Multilaterals for mitigating political risk

Access to wider range of sources of funds Domestic: Retail, Pension funds External Refinancing thru ECBs

Infra Project Finance

Structured Products

Financial Advisory Services

8

L&T Infra

Solar Resource Assessment

Resource assessment for historical and forecast periods
Bankable solar data sets Data uncertainty characteristics of different sources of Satellite Data

How to get bankable meteo data? -DLR Resource Assessment by Robert Pitz-Paal
Infra Project Finance Structured Products Financial Advisory Services
9

L&T Infra

Solar Resource Assessment

Ground vs. Satellite Data
-There is a need to build a wider network of Met-stations at potential solar sites by Govt to ensure reliable data availability for the future projects - Developers should invest in more reliable data assessment Ground Data Advantages + high accuracy + high time resolution Ground Data Disadvantages -high costs for installation and O&M soiling of the sensors -sometimes sensor failure -no possibility to gain data of the past

Satellite Data Advantages + wider spatial resolution + long-term data (more than 20

years)
+ + + + lower failures no soiling / dust ground site not required lower costs

Satellite Data Disadvantages -Lower time resolution - low accuracy in particular at high time

Infra Project Finance

Structured Products

Financial Advisory Services

10

L&T Infra

Challenges in Financing Solar Power Projects

Project Specific Factors
Long term Game Plan Pure play Developers EPC Agreements/Contracts Performance Guarantee Structures Technical and financial capabilities of EPC contractor and PV mfg

Infra Project Finance

Structured Products

Financial Advisory Services

11

L&T Infra

Challenges in Financing Solar Power Projects

Sustainable Policy Framework
Reverse Bidding Methodology
Development of Solar Land Bank Enforceability of RPPO for success of REC Step- in Rights for Lenders Clarity on completion timelines Fillip to domestic solar mfg industry Dynamic policy review to tackle emerging issue s Termination Clause Grid Availability Assurance

PPA Issues
Financial Health of State Discoms

Financing Issues

Project Specific

Capacity Building for Lenders Transparent sharing of data and success/failures with lending community Exposure limits for RE projects to be separate from Power sector limits Greater involvement of Multilaterals for mitigating Political risk Access to wider ranges of funds

Long term Game Plan

Solar Resource Assessment

EPC Agreements/Contracts

Performance Guarantee Structures Technical and financial capabilities of EPC contractor and PV mfgr

Re-inventing the wheel by various State Govts

Infra Project Finance

Structured Products

Financial Advisory Services

12

L&T Infra

Thank You

Infra Project Finance

Structured Products

Financial Advisory Services

13