100 MW CSP Project, Rajasthan, India
Nearest town: Pokaran (18 km)Nearest highway : NH 114(Jodhpur-Jaisalmer) Nearest airport : Jodhpur (170 km)Nearest rail station: Pokaran
Nearest town: Pokaran (18 km)Nearest highway : NH 114(Jodhpur-Jaisalmer) Nearest airport : Jodhpur (170 km)Nearest rail station: Pokaran
CSP Location in India
Rationale for CSP Investments
Policy SupportPolicy Support• Preferential Tariffs
• Long term PPAs with creditworthy entity
• Preferential Tariffs
• Long term PPAs with creditworthy entity
Market LeadershipMarket Leadership• First Mover advantage
• Long term development plans drive down costs
• First Mover advantage
• Long term development plans drive down costs
Technology ImprovementsTechnology
Improvements• Technology still evolving – improved PLFs to drive down cost of generation
• Storage potential as a likely upside
• Technology still evolving – improved PLFs to drive down cost of generation
• Storage potential as a likely upside
Base load generationBase load generation • With storage solutions, CSP has potential to serve as base loan generation • With storage solutions, CSP has potential to serve as base loan generation
Regulatory Support Coupled with Long Term Strategies Drive Investments
Financing Structure
Complex financing structure for CSP Projects – Essential for Project Viability and Promoting Clean Energy
• Typical Thermal Power Project Financing includes• Debt financing of around 70% from local banks and financial institutions• Remaining financing through Equity
• A solar CSP financing structure includes• Senior debt tranches of around 70% from
• ECA – from countries where equipment is being supplied• DFIs – Development Financial Institutions across globe including multilaterals,
Climate Change funds, Governments• A small portion through local banks
• Subordinate debt tranche of 5-10% from Development Financial Institutions / Infrastructure Debt Funds
• Remaining 20-25% equity from Sponsor
CSP Project Stakeholders
EPC Contractor
EPC Contract
ProjectCo
Project SponsorProject Sponsor
Lenders PPA
Loan Agreement
100% Equity
NVVN
State Government
Land Lease Agreement
State TransCo
Grid Connectivity
MNRE
Regulatory Support
EPC Contractor
O&M Contract
• Solar Resource • DNI estimation uncertainties• Availability of large land parcels with optimum DNI
• Technology and EPC Experience• No precedence of proven technology in the country• Lack of experienced EPC partners with local experience
• Limited in-house operations experience• Lack of experienced manpower in the country
• Long term water availability
Key Risks and Challenges in Financing CSP
Challenges get compounded for a new CLFR technology
Risk Allocation Among Project Stakeholders
EPC Contractor
ProjectCo
Project SponsorProject Sponsor
Lenders
• Technology• Robust performance guarantees with BG
• Operations• O&M agmt. with availability commitment
• Solar Resource• Ground measurement, P90 estimate
• Water• Long term supply agmt. from govt
Optimum Risk Allocation Required for Attractive Financing
Solar resourceSolar
resource TechnologyTechnology O&MO&M OfftakeOfftake Supply & InstallationSupply & Installation
Inter‐connection
Inter‐connection WaterWater FXFX
Project EPC Contractor
O&M Contractor
Central government
EPC contractor
State government
State government
Project
Technology provider
State government
EPC sub-contractors
Consumers
Central government
Provides resource data to all bidders
Risk Allocation – the intention
Hedging arrangements
Solar resourceSolar
resource TechnologyTechnology O&MO&M OfftakeOfftake Supply & InstallationSupply & Installation
Inter‐connection
Inter‐connection WaterWater FXFX
Project EPC Contractor
O&M Contractor
Central government
EPC contractor
State government
State government
Sponsor
Technology provider
State government
EPC sub-contractors
Consumers
Central government
Ground data at all project sites is ~10-15% lower than provided by govt.
Risk Allocation – the reality
Reluctance to increase retail tariffs
Local supply chain takes time to establish.
Poor finances of state discoms
Project
To avoid delays, project builds its own 35km transmission line.
Design changes to suit local conditions
Severe delays on water connection
Hedging costs increase given INR depreciation
• Availability of DFI capital crucial for CSP development• Attractive rates make project viable
• Provision of sub debt by DFIs to encourage new technology development• Helps in sharing new technology risks and improving developer returns
• Extended Moratorium for new technology projects• Organization for Economic Co-operation and Development (OECD) Guidelines
generally restrict moratorium period to 6 months• New technology needs time for fine tuning and optimization post COD, hence a
moratorium of 24 months should be considered for CSP technology based projects
• Provision of interest and currency hedging facilities by DFIs• Countries such as India has limited longer team hedging options• Bilateral ties between DFIs and Government to carve out local currency limits
Key Financing Enablers for Future CSP Development
Role of Public Finance Crucial for CSP Development
Thank you!
Sachin PatelFounder Partner, Saathwic Capital Advisors LLPEmail: [email protected]: +91 74982 57591
Aniruddha PatilSenior Investment Specialist, Asian Development BankEmail: [email protected]: +6326831836