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Oh well, what was earlier a national suspicion has suddenly gone international. You might recall that banks have always been wary about investing in solar, even after the National Solar Mission was announced. Yeah, you theoretically had an IRR (equity) of 19%, but that did not do enough to convince the banks to put in their money there. And now, ADB also thinks that the Indian solar projects might find it tough to get funds.

“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 official said. “Banks are very uncomfortable financing solar in India,” Don Purka, senior investment specialist for the Manila-based bank, said in an interview today at the Clean Energy Forum in Singapore. “The power purchase agreements must be modified for banks 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.” (Source: Bloomberg)

These are not exactly new concerns. The ability of the distribution companies to pay up has been a concern even in wind, though thankfully there’s really no concept of feed in tariffs for wind. Even under such circumstances, there have been cases where the SEBs have delayed payments to the owners of wind farms (especially in Tamilnadu). And when you realize that NVVN itself might not have a balance sheet strong enough to dispel these concerns, you know that something got to be done to get the solar power projects going. And well, there really isn’t a lot of time. The MNRE is supposed to finalise the 5 MW grid connected solar PV power plants soon, and these blokes are going to need a lot of external investments to get their projects going.