Solar Power Project Financing

Transcription

1 Solar Power Project Financing Aligning Banker-Borrower- Investor Perspective International Conclave on Climate Change October 12-14,2011 Hyderabad 1

2 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

3 Global Warning to Global Warming Financial Crisis Economic Prosperity Fuel Crisis Food Crisis Energy Security Food Security 3

4 Clean Tech biz Enablers Clean Tech is Main Tech Clean Tech Biz- A Growth Path BASICS- Low Carbon High Growth Economies 4

5 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

6 Cleantech Business Architecture Clean Energy Wind Solar Hydro Clean Technology W2e Co-generation Bio Gas Clean Technologies Clean Energy Low Carbon Biz Clean Energy Infrastructure Energy Efficiency Fuel Switch Bio mass Sustainable materials Clean Energy Infra/ Urban Transport Electric Vehicles CFL Street Lighting Heat recovery Energy Efficiency Global additional investment and financial flows of $350 bn needed by 2020, just to return to current emission level in Technology Transfer/Capex 6

7 Cleantech Biz Premise Cleantech Industry $ 350 bn by % 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 2032 through RE Power 50 % RE Power scenario will help us to reduce more than 2 bn tons of CO2( 2bn CER) every year till the life of the projects which has around $ 20 bn USD revenue potential through sale of CER 7

8 Cleantech Biz Investment Dilemma Cleantech Developer Patents selling than Product selling ( yrs Long Time to market cycle ( Scourge of finance capital Resistance to change for new clean tech Absence of Large scale Technology roll out plan Cleantech Financer/Investor 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 8

9 RISK REWARD MATRIX R E W A R D Medium Tech Policy in place Market Demand Break Through Tech Policy in place Market Demand Low Tech Policy in place Market Demand LOW ( r & d) MEDIUM( r &D) (R & D)HIGH FINANCING RISK 9

10 Banker Borrower Risk Profiling Banker/Investor Borrower 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

11 De-Risking Strategy Banker Limited Recourse Balance Sheet Financing Escrow Mechanism Environmental Rating Corporate Guarantee for SPV Personal Guarantee Technology Performance Guarantee Borrower 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

12 Clean Energy Biz- Finance Model Regulatory Networking RBI MOEF/GOI BEEE TERI MNRE CERC IFC ILFS BVP Olympus Capital I-Venture And many more ;;;;; Low Carbon PE Networking Clean Energy Finance FIs and Multilateral agencies networking PFC KFW ADB IIFCL ICICI IDBI STANCHART CREDIT SUSSIE Co-invest And many more Co-Finance 12

13 Emerging Financing Trends Existing Conventional finance through Debt and Equity Emerging Financing through subordinated debt, PE Funds and Insurance companies Debt through INR Loans Limited Exit options for Lenders Difficult Risk mitigation mechanism ECB, ECA and Green Credit Lines Multilateral Agency funding Long Term Patient capital/ Soft Loan Buy Out Clauses in concession agreement Innovative Financial engineering 13

14 Case Study Astonfield Renewable India Limited 14

15 Solar Project Finance Key parameters Capex per MW Solar PV- $ 3.5 mn Solar CSP - $ 2.75 mn OPEX $ 1.4 cents- $ 2 cents per KWH Project Finance Mix Debt : equity : 70 :30 Loan Tenure : year Pricing : L bps Solar Project Finance Project life cycle 25 years Traiff Rs per KWH Or 25 cents to 40 cents per KWH for first 12 years and than Rs 5 per kwh from 13 th year Return on Investment % Payback : 5-7 years MDSCR 1.2 min ADSCR 1.3 mn Debt/ATNW : 1 Min Debt/NCA: 4,5 min

16 Solar Project Financing Lenders Domestic SBI IDBI ICICI Bank EXIM IDFC IIFCL PFC ILFS IREDA International JBIC IFC ADB USAID WORLD BANK KFW CREDIT SUSSIE HSBC STANCHART 16

17 Mainstreaming Clean energy Financing Banks Private Equity Insurance company Integrated Clean Energy Finance Power Trading Exchange Multilateral agencies Regulator 17

18 Order of the Day- A Triple Bottom-line Approach Economical Profit Social Profit Inclusive Growth Environmental Profit 18 18

19 Thank You 19