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Solar Auction at Risk as Tata Says ‘Not Bankable’: India Credit : Bloomberg Businessweek

In a rather interesting report a few days back, Bloomberg had highlighted the fact that Tata Power, India’s largest non- state electricity developer, is shunning the country’s first major solar auction on concerns that terms set by the government will make it difficult for projects to be built profitably and that projects under the National Solar Mission would either be delayed or shunned.

Panchabuta in its essay on the topic had detailed that while  the concerns could be genuine there could be other factors that influenced Tata Power’s decision.

Further, given that Lanco Infratech Ltd, KVK Energy and Infrastructure Pvt. Ltd and Anil Ambani-controlled Reliance Power Ltd’s (RPower), Mahindra Partners Division a division of Mahindra group all participated and won the bids in the first phase of the mission it would be unfair to say that many large developers have not bid or stayed away from the Solar Mission as mentioned in that article.

A few days later,  the CEO of NTPC Vidyut Vyapar Nigam Ltd (NVVN) Shri. A.K. Goyal had resigned and according to this report by Bloomberg Businessweek, that the resignation could serve as a potential setback to the government program and the National Solar Mission itself.

Panchabuta had discussed this development in detail here.

However it was good to note that as Panchabuta had mentioned,  Shri. Anil Agarwal was appointed as the CEO within a couple of days by NTPC Vidyut Vyapar Nigam Ltd (NVVN).

In another report today, Bloomberg Businessweek says that solar auction is at risk as Tata Says ‘Not Bankable’.

Solar Auction at Risk as Tata Says ‘Not Bankable’: India Credit

India’s first auction of solar power permits may get derailed as plant builders say borrowing costs are too high to finance the projects, a key part of government efforts to reduce oil imports.Tata Power Co., India’s biggest non-state power developer, said it isn’t participating in the auction because it would have trouble raising loans. Azure Power said it has found another way to fund its project because of unattractive rupee lending terms. Developers offering to sell their electricity at the cheapest rate will be picked and will gain preferential tariffs and a designated buyer of their power, according to the government.

………..“We’re not comfortable,” Banmali Agrawala, Tata Power’s executive director of strategy and business development, said in an interview in Mumbai on Nov. 26. “We would not want to go and win a project with a power purchase agreement that’s not bankable.”

…….The solar auction aims to avoid the problems of European governments, including Spain, Germany and France, which are struggling to curb mounting subsidies to solar electricity suppliers. Spain owes about 14.6 billion euros ($19.3 billion) to power companies for the shortfall between the cost of supplying power and what the government promised to pay.


India will guarantee that solar projects get paid for the power they produce to encourage banks to lend, said Deepak Gupta, secretary of the Ministry of New and Renewable Energy. The government also asked a group of lenders headed by the State Bank of India to look for ways to cut funding costs, he said.

“The developer must be paid, that we will ensure,” he said in an interview in New Delhi on Nov. 30. “The government of India is guaranteeing this. The banker can reduce his interest rate if he knows that if there’s a problem, there’s a guarantee.”

……..“The cost of financing in India is higher than the international cost of financing,” Inderpreet Wadhwa, chief executive officer of New Delhi-based Azure Power said in an interview yesterday. “We’re not looking at Indian banks.” Azure Power has bid to build a 5-megawatt project.


“The bankers are saying they’d like to see if the ADB can help alleviate some of the risks,” such as panels failing to deliver as much power as expected, Barrow said by telephone from New Delhi last month.

The Manila-based lender may try to help extend the loans from the eight years that banks might offer to the 15 years that project developers will need, he said.

“Interest rates are what they are, we can’t impact underlying borrowing costs,” he said. “But we can make the sector attractive. If you’re having to pay back over 15 years versus eight years, that fundamentally affects the economics of a transaction.”

The funding of solar projects by Indian banks has always been suspect and other banks including ADB have expressed their concern of funding of Solar projects as Panchabuta has discussed earlier, even when the bidding process was underway. So most developers who have made these bids have gone ahead fully aware of the challenges and the risks that they would face in terms of financial closure. However, it is worthy to note that all the above mentioned concerns in the article are relevant and pertinent.

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