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8/4/2019 Alan Rosling - An Indian Solar Developer's Perspective
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Perceptions from
the
private
sectorAn Indian solar developer’s perspective
Alan Rosling
Kiran Energy
Bangladesh Solar Energy Development Forum20th September 2011
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Introduction
• Kiran Energy Solar Power Private Limited (“Kiran Energy”) aims to become a leading green power company inIndia with a focus to build a portfolio of grid connected and corporate captive solar photovoltaic power plants withinhigh isolation zones of India.
• Kiran Energy has secured a Series A financing round of US $ 50 Mio from a consortium of private equity investors -
Bessemer Venture Partners, Argonaut Private Equity and New Silk Route.
Kiran Energy is a professionally run organisation promoted by :
Alan Rosling: Former Executive Director of Tata Sons and Chairman of the Jardine Matheson Group inIndia, Alan has also been a Special Advisor to the British Prime Minister, John Major. Alan was educated atCambridge University and Harvard Business School.
Ardeshir Contractor: Former Managing Director at KPMG India, Ardeshir serves on several internationalcompany Boards and Government Committees. Ardeshir has a BTech from IIT Mumbai and an MS from Ohio
Kiran Energy ‐ An Overview
Professional Management Team
Proven experience in growing businesses
within well-established corporations like
Tatas and KPMG, backed by a highlyacclaimed advisory board
Strong Equity Backing
Funded by three Global Private Equity
Funds with commitment to invest in India’s
Solar potential
Land Banking
Kiran Energy is building a significant
land bank in high insolation zones in
India to prepare itself for itsdevelopment plan
Project Management
Project team with well-established
experience in solar industry backed by
reputed independent engineering firms
such as TCE
Strategic Relationships
Essential relationships with potential
stakeholders including financing
institutions, engineering firms, other
corporate for potential clients
Project Financing
Continuous endeavor to use innovative
and globally acceptable structures to
reduce debt burden such as export credit
and securitization
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Current Projects Under Construction
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Equity
Internal Rate of return/(IRR) higherthan risk adjusted WACC
Solar Projects: Critical financing criteria
Debt
Debt Service Coverage Ratio(DSCR)on conservative case higher than 1.3
RISKS
Risks Mitigation
Analysis of historic dataClimate
Technology Field Performance. EPC contractor guarantees
Financial Hedging
Evacuation Track record of grid/transmission company, contract
Implementation Fixed term EPC contract
PPA risk Credit profile/rating of off-taker, potentially insurance
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Policy: Clear policy supported by political will to promote and scale solar power until economicsconverge with grid alternatives
Tariff: Off-take regime such as Feed-in Tariff to support economics
PPA: PPA on terms acceptable to banks from a creditable counter-party
Evacuation: Clarity and predictability of evacuation of power through the grid
Clearances: Clear and timely licensing and permitting regime
Land: Where private land procurement is an issue, support on securing acceptable land
Key policy requirements from Government
Mr. Ardeshir Contractor collecting Allotment Letter from Mr. Narendra Modi, Chief Minister of Gujarat
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Commitment to strategic importance of solar in the energy mix
Support of solar economics until convergence with grid alternatives
Predictable roadmap to achieve industry scale with annual allocation
Widely debated and accepted
Independent regulator
Economic support through one or more of:
– Feed-in Tariff set annually by Regulator (Europe, Gujarat)
– Competitive bidding on discount to regulated rate (Indian National Solar Mission, South Africa)
– Regulated solar requirement with tradable certificates (Indian RPO system)
– Tax concessions and incentives (USA)
Private and Confidential
Policy
‘Bhumi Puja’ during Ground Breaking
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Tariff
Feed-in Tarif f
Clear and simpleSecures maximum participation
Reverse bidding
Market discovers proper pricingOpen competitive process
Attributes
Positive
Regulator may set rate incorrectlyPotential excess applications
Budget pressure, if not capped upfrontAllocation of scare resource
Complex processPotential for winner’s curse
Requires participants to commitresources
Negative
T
A R I F F
( R s . )
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Timeline of 20-25 years
Credit status of counterparty (or credit enhancement)
Payment terms
Committed dispatch Dispute resolution and consequences of default
Power Purchase Agreement
Support Structures for modules at our 20MW Site atGujarat Solar park Modules being fitted at our 20MWSite at Gujarat Solarpark
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Responsibility to connect
Capacity of substations
Cost of any connection to substation
Grid stability and availability Responsibility for deemed generation
Timelines
Evacuation
Electrical layout for the Solar Park as proposed byGETCO
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Clarity on required permitsand sanctions
Timelines involved
Comfort on delays for
improper motives
Clearances
Clearances
LandRelated
Land Use State Pollution Control Board Ministry of Forest and Environment Environmental Impact Study Airport Authority of India Clearance Defense Clearance Water Supply Clearance Rehabilitation & Resettlement Road and Railway Clearance
Mining Clearance Archaeological Clearance
Financial Central Sales Tax State VAT Customs and Excise Duty Exemptions Import Export Code
BusinessCompliance
Industrial Entrepreneurs' Memorandum Labour Commissioner Approval Factories Act
Evacuation Transmission scheme approval Report from electrical inspectorate Approval from electrical inspectorate
Attribute
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Land
Considerations
Availability of private land and efficiencyof market
Alternative availability of Governmentland
Title risks and consolidation
Land use changes
Issues of encroachment or “social”claims
Political or community issues
Environmental considerations
Timeline risks
Land Purchase Process in India
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Solar Parks: Our experience in the Gujarat Solar Park
Good land for solar use
Speed of land acquisition
Single Window for most clearances
Higher certainty on evacuation
Common services
Clustering of developers
Advantages Disadvantages
Government entity as landlord
Lease rather than freehold
Cost of land, including development
charges
Inflexibility on lease terms
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Learnings from earlier engagement with
projects
in
Bangladesh
Extreme shortage of large land plots due to population density
Vulnerability to floods and tropical storms
Intense political debate on most issues
Speed and certainty of decision taking and clearances
Importance of wider society and media
Grid weaknesses and financial position of DISCOMs
Important role for Multi-Laterals and donor countries
Sensitivity to investment from India given bi-lateral issues
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Summary of policy asks from Government of Bangladesh
Clear solar policy with future roadmap to scale and wide support in the country
Tariff to reflect costs, risks and insolation
Bidding process almost certainly better for all
World standard PPA with credit enhancement
Facilitation of issues over land, evacuation and permitting with timescalesestablished
Solar Park on a “turnkey” basis for successful applicants/ bidders
Developed land
Common clearances including EIA
Assured evacuation