Mr. Sanjeev Gupta, MD- Nexgen Financial Solutions…Shares His Opinion on the REWA 750 MW Solar Project Bid
The REWA’s 750 MW Solar Tender bids have surprised many & shocked almost all of us. The five (5) most important aspects as per NEXGEN which have created the resultant surprise in the lowering solar tariff are :
1. Cost of Fund :
The funding cost remains a critical component of any solar project financing. International funds (including Alternate Funds & Long Term Insurance, Pension & related Funds) have invariably been overtly attracted to the Indian solar landscape with return period of around 25 years & so.
2. Declining Solar Panel Pricing :
REWA’s 750 MW Solar Tender bids allows 18 months commissioning period. This catalyzes an apt opportunity for any investor to take a view on the aggressively declining solar panel prices. With US market closing for Chinese manufacturers; the advantage could shift to country like India where the panel price & lower projected tariff continue to further decline.
Further other critical aspects triggering increasing competitive tariff remains :
3. Lowered Risk due to addressal of Land Acquisition & Power Evacuation issues.
4. Offtaker Credit Enhancement created due to availability of Assured Payment Mechanism (further assured by the World Bank).
5. Single location large project aggregating to 750 MW is a very big “attraction” for large international institutional investors looking for long term high quality returns. Coupled with the above factors, lowering tariffs are natural.