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financing for renewable energy A Presentation by: Debjani Bhatia Asst. General Manager Indian Renewable Energy Development Agency Limited New Delhi (India) TLA International Energy Conference , 15 th April , 2016 Present Power Scenario of

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“financing for renewable energy”

A Presentation by: Debjani Bhatia

  • Asst. General Manager

Indian Renewable Energy Development Agency Limited

New Delhi (India)

TLA International Energy Conference , 15th April , 2016

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SLIDE 2

February 2016

Present Power Scenario of India

*Source: MNRE, GoI ; CEA Statistics Current Status, Outlook & Investment Opportunities in RE Sector • MNRE 3

Coal 60.23% Gas 8.36% Diesel 0.36% Nuclear 2.07% Hydro 15.04% Wind 8.98% SHP 1.48% Biomass 1.59% Waste to energy 0.05% Solar 1.84% RE [PERCENTAGE ]

  • India’s installed capacity is 284

GW (As on December 2015).

  • India’s RE capacity has exceeded

39 GW (as on Jan 2016) which accounts for 13.95% of the installed power capacity

  • Current share of renewable

energy (in energy produced) is ~7%

  • Wind contributes to 64.5% of the

installed Renewable Capacity Overview

25188 5129 4177 4550 127 39171

10000 20000 30000 40000 50000 Wind Solar Small Hydro Biomass Waste to Energy Total

Installed RE Capacity as on 14 Jan 2016 (MW)

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February 2016

RE in India: Status and Revised targets

Current Status, Outlook & Investment Opportunities in RE Sector • MNRE 4

164.1

5000 10000 15000 20000 25000 30000 35000 40000 45000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 (Till Jan) MW Source wise renewable capacity ( FY 07-16)

WtE Solar Power Biomass power Co Gen bagasse Small Hydro Wind Power

39171MW 9389MW

Capacities in MW Source Installed capacity by end of 11th Plan (March 2012) Current installed Capacity (Jan 2016) Target as per 12th Plan (March 2017) Revised Targets till 2022 Solar Power 941 5130 10,941 1,00,000 Wind power 17,352 25188 32,352 60,000 Biomass Power 3,225 4550 6,125 10,000 Small Hydro 3,395 4177 5,495 5,000 TOTAL 24,914 39171 54,914 1,75,000

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February 2016

Wind energy across states

Current Status, Outlook & Investment Opportunities in RE Sector • MNRE 9

India has potential of over 302 GW (at 100 meter above ground level)* 115 5 MW 2887 MW 7515 MW 4638 MW 1200 MW 3877 MW 3878 MW 35 MW

Wind 25,188 MW (Jan 2016)

*Source: NIWE

Wind Resource

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February 2016

Solar Energy across states

Current Status, Outlook & Investment Opportunities in RE Sector • MNRE 10

India has potential for 748 GW (considering deployment on 3% of wastelands) 357 MW 104 MW 419 MW 379 MW 679 MW 1024 MW 1264 MW 12 MW 73 MW 13 MW 200 MW 140 MW 10 MW 16 MW 67 MW

Solar: 5,130 MW (January 2016)

342 MW Solar Resource 12 MW 0.3 MW 12 MW 5 MW

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Fis iscal al a and d Fin inan ancia ial l Incentiv ives fo for RE P Proje jects i in I Indi dia

State RE policies

a.State level renewable and solar policies b.Significant capacities under state policies

Demand & Supply gap

  • a. Expected to increase in coming 2-3 years due to lack of present

investments in power sector

Exemptions and other incentives

  • a. 100% exemption in Excise Duty for many RE project components.
  • b. Concessional Customs Duty of 5% for selected RE project components
  • c. 10 year tax holiday

RPOs & RECs

  • a. RPOs are mandated by the Electricity Act 2003 and NTP
  • b. RPOs adopted by 26 SERCs
  • c. REC mechanism launched to fulfil the RPO obligations

Accelerated Depreciation (AD) and Generation based incentive

  • a. Key instrument for success of wind in India

Feed in Tariffs/ Preferential Tariffs

  • a. Preferred by developers because it enhances project bankability.
  • b. Introduced by almost all states for RE technologies
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SLIDE 7

Fi Fina nanc ncin ing g Req equi uire reme ment nts

Renewable Energy Scale up plan • MNRE 19

175 GW RE plan entails investment of Approx. $ 130 billion (Rs. 8,50,000 Crore)

Debt (70%) $ 92 Billion (Rs. 6,00,000 Crore) Equity (30%) $ 39 Billion (Rs. 2,50,000 Crore)

  • Multilateral and

Bilateral

  • NBFCs
  • Commercial

banks 18000 58000 102000 120000 128000 136000 143000 149000 160000 140000 120000 100000 80000 60000 40000 20000 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 (p) (p) (p) (p) (p) (p) (p)

  • Rs. Crore

Annual investment in RE (Rs. Crore)

SHP and Biomass Investment (Rs. Crore) Wind Investment (Rs. Crore) Solar Investment (Rs. Crore)

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SLIDE 8

February 2016

Renewable Investment globally vis-à-vis India

60 88 128 175 205 206 273 318 295 268 318 100 200 300 400 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Clean energy investment globally ($ Billion)

Investment in Europe decline and stay constant in US, Asia & South America witness highest growth

110.5 56 43.6 23.4 10.9 10.6 7.5 4.5 50 100 150

India 5th largest by RE investment in 2015 ($ Billion)

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February 2016 1

Proposed Dedicated Renewable Energy Fund For India

  • Govt. of India (through IREDA) proposes to set up USD 1 to 1.5 bn fund for renewable energy
  • Fund is to be setup in line with National Infrastructure Investment Fund (NIIF) structure
  • Govt. owned entities such as PFC, REC, NTPC and IREDA have in principle agreed to invest

USD 315 million into the fund as Anchor Investors

  • Fund will be managed by a reputed international fund manager whose selection is being

undertaken through an ICB process

  • Received prima facie interest from various large fund managers to act as Investment

Managers (GP) for proposed fund.

Structure of the fund

To be setup as a ‘Category I’ Alternative Investment Fund (AIF) under SEBI (Alternative Investment Funds) Regulations, 2012. Independent trustee company will be trustee. Anchor Investors and Other Investors would be LPs in the fund and would have role on Limited Partner Advisory Committee (LPAC). LPAC would not be decision making body and all investment decisions would be made by Investment Manager.

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February 2016

  • S. No.

Name of the Institution Amount allocated

(INR Crores)

1 IREDA 2000 2 NTPC 1000 3 REC 1000 4 PFC 1000

Tax Free Bonds for Renewable Energy

Tax free bonds of INR 5,000 crores have been allocated to four institutions

  • IREDA’s Tax free Bond Public Issue of Rs.1716 Crore was
  • versubscribed by 3 times on the day of opening.
  • The average cost of Tax free Bond of Rs.2000 Crore is 7.50% .
  • IREDA’s Tax free Bonds were rated as AA+ by ICRA and India

Rating Research Pvt Ltd. On stand alone basis.

  • Entire Tax free Bond proceeds will be utilized for on lending to

RE & EEC Projects.

IREDA Tax Free Bonds:

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February 2016

RE-INVEST 2015 and one year later

MNRE Target Commitments made during & after RE-Invest 175 GW 287 GW $140 Billion $ 57 billion to support

  • approx. 78GW
  • 462 investors submitted “Green Energy Commitment” to develop 287 GW
  • 39 Banks and Financial Institutions have given commitments to finance projects

aggregating to 78 GW

  • New RE projects aggregating more than 3 GW commissioned & about 29 GW under various

stages of implementation against GEC commitments made by developers.

  • Projects worth $ 8.28 Billion sanctioned and $ 2.82 Billion disbursed by banks / FIs who have

made GEC commitments for financing.

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Ren enew ewab able le Ene nerg rgy y Rev evol

  • lut

utio ion n in in Ind ndia ia & & Est stab abli lish shme ment nt of

  • f

IREDA

 To provide Renewable Energy Technologies beyond the stage of Research,

Development & Demonstration to Commercialization.

 To optimize utilization of India’s vast potential for energy generation from

Renewables

 To integrate renewable energy into the National Energy planning for a balanced

energy mix

 To create exclusive institutional framework for financing RE projects  To operate innovative financing schemes  To alleviate the severe power crunch faced by the country.

It was this effect, the Government set up Indian Renewable Energy Development Agency in 1987

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SLIDE 13

Abou

  • ut

t IREDA

Dedicated FI for Renewable Financing

Inception

Incorporated under the Companies Act on 11th March, 1987 to promote, develop and extend financial assistance for Renewable Energy and Energy Efficiency/ Conservation Projects.

Mission

Be a pioneering, participant friendly and competitive institution for financing and promoting self-sustaining investment in energy generation from renewable sources, energy efficiency and environment technologies for sustainable development. MOTTO Energy For Ever

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Abou

  • ut

t IREDA

  • Dedicated FI for RE Financing with over 28 years of

experience.

  • Track record of financing more than 2200 projects.
  • Profit earning & dividend paying.
  • Largest share in RE Project Financing in India
  • Catalyzed Market Development
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Op Oper erat atio iona nal l Are reas as

Sectors financed

 Wind Energy  Hydro Power  Solar Energy  Biomass including Bagasse & Industrial Cogeneration  Biomass Power Generation  Waste to Energy  Energy Efficiency & Energy Conservation  Bio-fuel / Alternate Fuel  Hybrid Projects with RE Technologies  New & Emerging Renewable Energy Technologies

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Op Oper erat atio iona nal l Sc Sche heme mes

Types of Schemes:

Project Financing

Equipment Financing

Loans for Manufacturing

Financial Intermediaries

Financing of commissioned projects including takeover of Loans

Additional / Bridge Loan against SDF Loan

Loan against Securitization New fund and non-fund based financing schemes

Line of Credit to Non-Banking Financial Companies (NBFCs)

Short term loan assistance to RE Developers/Suppliers/Contractors.

Bridge loan against Capital Subsidies/VGF/GBI

Underwriting of Debt/Loan Syndication.

Guarantee Assistance Scheme to RE Suppliers/Promoters.

16

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SLIDE 17

IREDA F Fin inan anci cing ng Hi High ghli ligh ghts ts

Parameters Norms Maximum Loan Quantum Upto 70% of the project cost Upto 75% of project cost in Wind and Solar projects* Interest Rate 10.40- 11.40% (Wind & Solar) Repayment Period Upto 15 years Moratorium Upto 1 year

*Subject to meeting minimum conditions

IREDA Financing Norms

  • 28 years of financing Renewable Energy Projects
  • Financing of more than

2200 projects

  • Supported green capacity addition of more than 6500 MW
  • Loan Disbursements

: Rs. 21,197 Cr

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TYPICAL DUE DILIGENCE OF A PROJECT PROPOSAL

 Credit Worthiness of the Promoters (Entity Appraisal)  Technical Appraisal  Techno-economic appraisal (Cost Estimates, Power Sale arrangement, etc. )  Assessment of Means of financing  Financial Analysis of the project (IRR, DSCR, Sensitivity Analysis, etc.)  Assessment of various types of risks  Environmental & Social Appraisal  Stipulation of Security and Sanction Terms

Ty Typic ical al Due ue D Dil ilig igen ence ce of

  • f a

a Pr Proj

  • jec

ect t Pr Prop

  • pos
  • sal

al

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SLIDE 19

 Mortgage & Hypothecation of Project Assets  Guarantees (Personal & Corporate)  Trust and Retention Account (Tripartite Agreement for Operating Bank

Account)

 Pledge of Shares of the Borrowing Company  Other Securities like PDC, Collaterals etc.

Securities for Loan

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Reso sourc rce Base se

 Authorized Share Capital : 6000 (USD 936.48 mn)  Paid-up Capital

: 785 (USD 122.50 mn)

 Net-worth

: 2188 (USD 341.50 mn)

International Borrowings : 4760.30 Crores (USD 743 mn) Domestic Borrowings: 2672.76 Crores(USD 418 mn)

Amount : Rs Crore

Banks 465.11 17% Bonds 2207.65 83% KFW 1200.06 25% ADB 108.41 3% NIB 146.35 3% AFD 636.04 13% EIB 132.64 3% JICA 2148.50 45% IDA 274.71 6% IBRD 113.89 2% KFW ADB NIB AFD EIB JICA IDA IBRD

As on March, 2015

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Recent Meas asures to bo boost R RE D Deve velo lopm pment

 Renewables accorded Priority Sector Lending status by Reserve Bank of India, RBI: Loans upto Rs. 15 Cr.  RBI stipulates loan for Roof-top SPV to be considered as part of Home Loans  Enforcement of RPO / REC – Recent orders by Appellate Tribunals & Hon’ble Supreme Court of India  21 States announced policy for Solar Roof-top.  Increase in Coal Cess from Rs. 100 /MT to Rs. 200 /MT .

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Indian Renewable Energy Development Agency Limited

www.ireda.gov.in

Thank You