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Interaction | January 2014

Banks should prioritise funding solar power projects

 Based on high asset depreciation and other factors, Indian banks still do not consider funding solar power projects as their thrust area. Anish Rajgopal, Managing Director, Chemtrols Solar, which helps developers get ECB funding, tells ELIZA WAGHMARE that the government should consider funding this segment a priority and enable banks to view the segment more favourably.

How is the current project finance scenario for solar projects in India?
Currently, most of the developers are looking external commercial borrowings (ECBs) wherein they get low-cost funding from abroad. All over the world, developers get loans at around 7 per cent interest, which is quite low as compared to around 14 per cent in India. The other route that most developers consider is long-term credit from suppliers. However in the current scenario, long term credit is not so prevalent.

Many Indian banks are looking at solar sector as a growth market and are entering the segment. We can even see the results as many of the projects are in completion stages.

Your company provides financial assistance to major solar projects. What are your expectations from the banks?
Because of our exposure of external commercial borrowings (ECBs), we've been able to get in touch with financial agencies and advise developers on financial closures. We also have some expertise in financial structuring. We do the consulting and get the developer in touch with the right institution for finance.

Currently, there are many projects that are more than 25 years long, but the term loans are not. This is the reason why there is some level of discomfort among banks with regards to funding solar projects. But there are also banks like Central Bank of India, SBI, etc, that are very open in providing funds. Slowly and gradually, more banks are now keen to fund solar projects. As part of our wish list, we expect the government to consider the funding for solar projects as a priority, so that the banks will view this sector more aggressively.

Land acquisition is a major challenge for solar projects. As a provider of solutions in this space, how do you go advise your clients about acquiring land?
For setting up a thermal power plant, coal linkages, transportation, land acquisition, etc, are major constraints, whereas in a solar power plant project, we do not face these issues. It is much easier to acquire land for a solar plant as compared to other projects. We believe that solar power projects do not need solar power radiation level. The best location for setting up a solar project is Rajasthan.

However, challenges are part and parcel of land. While acquiring a land, there are multiple owners. In fact, some part of land might not have even the necessary documents. In order to resolve this issue, we buy only land that is under a single owner, wherein the person will purchase the land for us even before the project on that land is announced. We look at creating land banks for solar projects. This process is followed by many agencies.

What approvals are required to set up a solar plant?
Power purchase agreement (PPA) is very important for setting up a solar plant along with other necessary clearances from the State Electricity Board. Regulatory and environmental clearances are required. Apart from clearances and approvals, getting the financial closure from the bank or any other financial agencies is easier.

We have some expectations from the government with regards to getting the necessary approvals, since the process is too long. We expect the government to speed up its process of sanctioning projects and also give other important approvals. Apart from getting approvals, the projects are delayed due to policy framework in various states, especially Maharashtra.

What is wrong with the existing policy, and what is the right policy and regulatory framework for utility-scale solar power projects?
In addition to adopting the lowest bidding route, leaving the price to the market, the government needs to additionally consider the quality of work. I would suggest that instead of going by low price, there is also some kind of a quality benchmark. The government has tried to address by including the generation benchmark. In addition, if the government could also put in some additional mechanism, it will work better in quality of the projects.

What solutions does your company offer to the solar domain?
Chemtrols Solar is majorly into three verticals. The first vertical is the engineering, procurement and construction (EPC) space, wherein the company provides key end-to-end turnkey solutions like obtaining land acquisitions, getting clearances from state bodies as well as operations and maintenance for 25 years.

The second vertical is off-grid solutions, which includes de-centralised solutions for telecom towers, telemetric for gas pipelines, off-shore platforms, roof tops and factories having 100-500 kV rooftops. And thirdly, we are into retail products segment, wherein we provide home lighting systems with a 1-2 kV system, which can be used in households.

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Chemtrols Solar, a Mumbai-based provider of project development and EPC services for grid-connected power plants, recently won the Intersolar Award 2013 for the best MW scale project in India for the 1 MW PV-diesel hybrid power plant installed on the roof of the spinning mill of Alpine Knits at Palladum, Tirupur.


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