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Asian Development Bank (ADB) feels Solar Power Projects under JNNSM could face funding problem

With the government collecting revised bids for the first phase of the JNNSM where the planned capacity of SolarPV is about 170MW and Solar Thermal about 470 MW the attention and discussion has now moved to  financial closure. NTPC Vidyut Vyapar Nigam Ltd. (NVVN) a company engaged in the business of trading of power has been designated as the nodal agency by the Ministry of Power (MoP) for entering into a  Power Purchase Agreement (PPA) with the Solar Power developers.

However this power that is purchased by NVVN has to be  bundled and resold by NVVN  to the state power distribution utilities.

There has been concern regarding the financial health of the power distribution utilities which has now been expressed by the banks.

Further, with the capacity being fixed at 5MW, there is not much opportunity present to the developers to leverage on scale.

The aggressive bidding that might arise, in the next stage where developers with the highest discount to the published CERC tariff  get priority for qualifying, is also a concern to bankers.

Solar power projects likely to face funding problems

Developers of solar-power projects in India may be unable to obtain loans to complete the plants because the government’s proposed stations are too small and tariffs may be too low, an Asian Development Bank (ADB) official said. “Banks are very uncomfortable financing solar in India,” Don Purka , senior investment specialist for the Manila-based bank, said in an interview at the Clean Energy Forum in Singapore. “The power purchase agreements must be modified for bank to lend.”

……Lenders are worried about the capacity of those distribution companies to pay, Jotdeep Singh, Rabobank’s head of Asia renewable energy and infrastructure finance, said. Because many Indian power distribution companies are in poor financial health, solar-power developers and financiers have raised concerns about the possibility of payment defaults.

…..Initially, the government may have to guarantee payments for the full lifetime of the projects in order to get banks to lend, Singh said

…..There are no benefits in building 5 megawatt-sized solar photovoltaic projects, the standard size of plants to be awarded by December under the first round, said Manila-based Purka, who advised the government on the bidding process. “You need to consider 30-50 megawatts and scale up. It’s going to be very challenging for India to meet their targets.” India received bids to develop 5,126 megawatts of solar projects under the first round of the National Solar Mission, said AK Maggu, additional general manager of NTPC Vidyut Vyapar Nigam .

……Developers may bid “aggressively,” as low as `12 ($0.27) a kilowatt-hour compared with the government’s offer of about `18, to win the bid, Purka said. According to the Solar Mission programme guidelines, project developers offering the lowest tariffs would be chosen if the applications received exceeded the capacity to be awarded.


  1. Mallikarjuna rao B

    If ADB advised NVVN during the bidding that 30 MW to 40 MW is the optimal starting scale of the solar plants under the Mission, then did NVVN have a strong reason to go for 5 MW instead of 30 to 40 MW? Either way, as the Government cannot afford subsides the Plant developers have to procure bank loans and therefore NVVN should re-invite bids for larger plants. It could be that ADB`s interest in funding a 580 MW facility in Gujarat is an outcome of such funding issues.

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