SOLAR MONTHLY UPDATE. Vol. I. Issue IV March 2016

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1 SOLAR MONTHLY UPDATE Vol. I Issue IV March 16

2 Creating value, partners in growth Incorporated in 1997, LSI Financial Services Private Ltd (LSI) is a leading provider of innovative financial solutions in India and abroad. It has successfully raised funds for companies through structured financial products, spanning various sectors. With in-depth domain knowledge, LSI strives to add value to the client's financial supply chain ensuring an effective and efficient capital structure. It is also providing Project Advisory services including preparation of Detail Project Reports (DPR) and Techno Economic Feasibility/Viability Reports (TEFR/TEVR) on behalf of Banks, Public and Private Sector Institutions and Companies. Our services include: Debt Syndication Private Equity Advisory Issue Management Mergers and Acquisitions Financial Restructuring/ Corporate Debt Restructuring Preparation of DPR/ TEFR/TEVR Lender's Independent Engineers' (LIE) Services Due Diligence Valuation of Assets/Equity

3 EDITORIAL Securitization as a Future Financing Tool for Solar Projects India has massively scaled up targets for the solar industry to 100 GW of solar power by 22. Rapid expansion has now led the industry to tap every available means of financing in a bid to stay competitive, amid aggressive bids for solar projects, falling solar tariffs and an uneven playing field comprising both domestic and foreign players. While the Indian solar sector continues to enjoy a host of benefits from the Government in the form of subsidies and incentives, foreign investments too are pouring in as they enjoy automatic approval for up to 74% in joint ventures and 100% investments with approval. Viability gap funding is also available for public-private partnerships. In this scenario, it is imperative for players across the industry to find financing on terms that are competitive with global players. At this juncture, we believe securitization offers a convenient and comprehensive off-balance sheet financing tool to meet exactly these needs of an emerging solar market. LSI Financial Services Pvt. Ltd., with its two decades of experience in debt syndication and project financing, opines that infrastructure projects such as road and solar power are likely to benefit the most from securitization, as the future cash flows either in the form of tolls for roadways and monthly electricity charges for power sold in the case of solar, are predictable cash flows that can be securitized with minimal risk. Solar projects can either securitize cash flows from a Power Purchase Agreement (PPA) or pool together a combination of debt financed solar projects to make a pool of debt assets. Financing through the securitization route has taken firm ground in the US and some of the other countries. Indian solar companies and financiers too have already tested the waters on this mode of financing. As early as 11, the energy unit of the Welspun Group, India's leading photovoltaic developer, backed by the Apollo Global Group, was approached by ICICI bank to securitize revenue from its 15-megawatt unit in Gujarat after three months of operation. In December 15, the Indian Renewable Energy Development Agency (IREDA) has introduced this mode of financing for companies that have a track record of good performance of 3 years, relaxable to 2 years, for projects running successfully and with a DSCR averaging 1.4 for the two years. Moody's Investors Service says that the development of domestic securitization markets will help India and China achieve their common goal of building inclusive financial systems that will ultimately bring affordable credit to the underprivileged segments of their societies, as these are usually excluded from the conventional banking system. It is however, a trend that is yet to catch on in India and worldwide as well, given the complex nature of securitization that has hindered players and financiers from adapting to it easily. Moreover, with the presence of Government backed incentives and abundant early stage financing, the industry is yet to tap the full potential of this powerful instrument, which, according to us, could prove a game changer in the financing of solar industry in a few years. Raj Kajaria, Managing Director, LSI Financial Services Pvt. Ltd. SOLAR MONTHLY UPDATE March 16 3

4 Inside this Issue: Solar News Round Up Solar State Focus - Karnataka Company Limelight - Azure Power Solar Tender Tracker - March - April 16 SOLAR NEWS ROUND UP KARNATAKA TENDERS UNIQUE 10MW SOLAR PV PROJECT DISTRIBUTING CONTRACTS ACROSS TALUKS, RESERVES 100 MW FOR DOMESTIC MANUFACTURERS Hero Future Energies and ReNew Power emerged the primary winners in a mega tender for 1,0MW of solar power capacity floated by the Karnataka Government, winning 180MW each of projects. Other winners in Karnataka included the Aditya Birla Group (40MW), Essel Green Energy (65MW), Marikal Solar Park (60MW) and SunEdison ( MW). Karnataka is the first state to distribute solar contracts across its length and breadth. The location of the proposed solar plants has been dispersed across 60 of the 177 taluks in the state. However, a dozen taluks, accounting for a total of 240MW, received no bids at all and will have to be retendered. For the remaining 60 taluks, each taluk received between 3MW and MW of the remaining capacity. As a result, the winning tariff at different locations varies. The auction also reserved 100MW for Karnatakabased solar module manufacturers, also an unusual conditionality, that no other state or central policy has ever imposed previously. VIKRAM SOLAR MODULE SHIPMENT TO JAPAN TO MAKE IT INDIA'S FIRST EXPORTER TO EAST ASIAN COUNTRY Vertically integrated PV module manufacturer Vikram Solar announced that it expects a shipment of 5 MW of modules, to arrive in Japan this week, making it the first Indian maker to export to the East Asian country. According to the company, the company's modules meet the requirements of the Japanese market for quality. Vikram Solar already exports to markets including Germany, the US and UK, as well as having a pipeline of around 325MW in India to be constructed within a year, according to the company. INDIA PLANS TO ADD 12GW SOLAR POWER, 4.1GW WIND ENERGY CAPACITY IN MNRE plans to add 12GW of solar power capacity between April 16 and March 17. This is a massive target when compared to the target set for FY15 16 of just 1.4GW. The Ministry estimated that a total of 9,244MW solar power capacity may be added under the central Government policies, while 1,615MW capacity may be added under the state solar power policies. For FY15 16, the solar power capacity addition target has been set at 1,400MW, st with 1,489MW having already been added by 31 January 16. The Ministry expected to add 4.3GW capacity in FY15 16 so that any shortfall may be made good with further installations in FY16-17, and thus help meet the increased target. During the remaining period of the FY15-16, as much as 3,790MW of solar power generation capacity is expected to be added by March-end, taking total capacity to 9,038MW from existing 5,248MW, according to a status report by MNRE. Tendering for solar project totaling a capacity of 15,177MW has already been completed and a total capacity addition of 12,161MW is expected during the FY KERALA LAUNCHES ITS FIRST LARGE SCALE SOLAR TENDER FOR 0 MW The Kerala State Electricity Board (KSEB) has issued a request for selection (RfS) for 0MW of grid-connected solar PV in what is the South Indian state's first utility-scale solar tender for consumer use. Kerala installed 12MW of solar at the Kochi International Airport last year, yet the state has a total installed capacity of just 13MW. The KSEB RfS document stated that the Kerala projects will be between 10-0MW capacity and will be allocated via a competitive bidding process. Power purchase agreements (PPAs) will be signed for 25 years for tariffs below the benchmark of INR7.04/kWh. The final date for online submission of bids will be 28 April this year. The projects will be used to help the state reach its Renewable Purchase Obligation (RPO) targets. SOLAR MONTHLY UPDATE March 16 4

5 SOLAR STATE FOCUS KARNATAKA KARNATAKA - COMMISSIONED SOLAR CAPACITY BY SCHEME KARNATAKA SOLAR POLICY 14-2O21 ANNEXURE Total Commissioned Solar Capacity (MW) till 31 January, 16 by Scheme , MNRE Projects State Policy RPO Source: GW Solar Plan, January 16, MNRE REC Scheme Karnataka Rest of India Pvt. initiative (Rooftop) CPSUs Karnataka Commissioned Solar Capacity by Scheme Karnataka has good solar potential. It gets an average insolation of more than 5 kwh/m2/day, having about clear sunny days. Among the states and union territories, Karnataka is ranked 11th and accounted for 2 percent of the India's total commissioned solar capacity of 5, MW as of March 7th 16. The State has recently tendered for solar PV projects totaling 10 MW distributed for the first time across the taluks or sub districts of the state. Another unique feature of the tender was that it earmarked 100 MW exclusively for Karnataka-based solar module manufacturers, encouraging solar manufacturing in the state. Please refer annexure for list of successful bidders across the 60 taluks for which LOAs have been issued. What has shot Karnataka into the solar spotlight is that the State has another 564 MW in the solar pipeline and a further 1800 MW under allocation process (including 600 MW by NTPC), aiming to rise up to second rank by the end of the financial year. Karnataka has also planned to set up three of the 33 solar parks scheduled by SECI as a joint venture with the state bodies as below: Table 1 : Karnataka Proposed Solar Parks as joint venture between SECI, and KREDL Name of the Park Location Proposed Capacity (MW) Karnataka Solar Park Source: MNRE Shirasangi & Hulikatti, Savadatthi Taluk, District: Belagavi Moregere, Hagaribommanahalli village District: Bellary Nagalamadika, Pavagada Taluk District: Tumkur Identified Land Area 4000 acre (approx.) 00 acre (approx.) 00 acre (approx.) Karnataka Solar Cumulative Alloted Capacity of 1,124 MW-Status Break-up as of January 16 Karnataka Status of Grid Connected Solar Power Projects Alloted and Commisioned till January 16 Balance Alloted Capacity to be Commissioned, 930 MW Commissioned Capacity, 124 MW Cancelled Capacity, 70 MW Alloted Commissioned FY12-13 FY13-14 FY14-15 FY15-16 (till Jan 16) Source: MNRE Source: KREDL SOLAR MONTHLY UPDATE March 16 5

6 Karnataka was the first state to form separate entities for power generation and distribution (in 1970), and the ESCOMs (BESCOM, MESCOM, HESCOM, GESCOM) are taking customer services to the next level. Other plans include an Energy Centre of Excellence and Incubation Centre in Bangalore, and a Technology Innovation Centre at BESCOM. Renewable energy contributed up to 31 per cent of the total installed capacity with the potential estimated at GW as of 15. FY15-16 has already seen a huge amount of tendering and planning activity for solar in Karnataka. For example, Indian state-owned utility National Thermal Power Corporation (NTPC) has invited bids for 250MW and 750MW of capacity in solar parks. Indian Conglomerate Adani Group announced plans to build 1GW of solar alongside coal and seaport investments. Steel major ArcelorMittal is also planning MW of PV after backing out from plans to build a six million tonnes per annum steel mill. Karnataka has tendered 10 MW of solar PV projects recently across 60 taluks. Another 240 MW across 12 taluks for which tender was floated in February, there was no interest generated, probably on account of it s remote location or land availability issues, and it has been retendered with a closing date of April 21st. Karnataka Distribution of Solar PV Projects by District as of January 16 Karnataka Solar Policy Target of achieving 2,000 MW of solar generation capacity by 21 Encouraging development of 300 MW of feed in tariff based solar projects (1-3 MW) by farmers Encouraging the development of utility scale solar projects through competitive bidding Promotion of grid connected rooftop solar projects with net metering Encouraging off-grid solar street lights and rooftop solar systems Encouraging the use of solar powered agricultural pump sets Promotion of integrated solar parks and hybrid renewable energy projects Creation of land banks for development of solar projects under lease of land Supporting the deployment of grid connected canal top solar projects Imposing solar purchase obligation on HT consumers subject to consent of KERC Facilitation of deemed conversion of land for solar projects Time bound permissions for purchase of agricultural lands for setting up of solar power projects Exemption to solar PV projects from obtaining clearances from pollution control board Promotional Measures Source: KREDL Charges Wheeling charges Banking charges Cross subsidy surcharge Payment for unutilized banked energy Availability of banking Source: Deloitte Subsidy Exempted for first 10 years from date of commissioning Exempted for first 10 years from date of commissioning Exempted for first 10 years from date of commissioning 85% of generic tariff determined by KERC Annual Basis The Karnataka Government is also working with farmers to get their land on lease for solar and wind power generation, and make them stakeholders in the energy future. As of January 16, over 12,000 acres have been contributed voluntarily by Karnataka's farmers. SOLAR MONTHLY UPDATE March 16 6

7 Comparison in Solar Policy Highlights, Promotional Measures of South Indian States Promotional Measures Availability of Banking Banking Charges Concessional Wheeling and Transmission charges Concessional cross subsidy surcharge Net metering for rooftop solar Tariff for excess injection by rooftop solar Karnataka Annual basis (up to March 18) Yes, for all categories, up to 1MW capacity Rs.9.56/kWhr Tamil Nadu Monthly basis 30% of applicable charges 50% of applicable CSS Yes, for domestic and commercial consumers Carried forward to next month & lapses at end of next settlement year AP Telengana Kerala Annual basis with restricted drawal 2% of injected energy Exempted for first 5 years of operation Yes, for all consumers No Payment for excess injection Annual basis with restricted drawal 2% of injected energy for Captive Use Exempted for first 5 years of operation Yes, for all three phase consumers Payment at APPC Annual basis 5% of energy Yes, for all categories, up to 1MW capacity Payment at APPC Electricity Duty No Exemption Exempted for captive use, sale to DISCOM Exempted Exempted Exempted Pollution Board Clearance No clearance/ NOC required for PV Facilitation provided by TEDA No clearance/ NOC required for PV Clearance within a week - Source: Deloitte and respective State Solar Policy Reports Annexure Table 2 : List of LOAs issued to the successful bidders quoting prices upto to Rs.5.50 per kwh for implementation of 10MW capacity Solar Grid Connected Power Projects in 60 taluks. (Tender Notification No. KREDL/07/RPO/GC/RFP/15-16/ dated ) No. Name of the Bidder Taluk District Capacity (in MW) Quoted tariff (in Rs./kWh) 1 Madhugiri Tumkur Aditya Birla Nuvo Ltd Mulbagal Kolar AMPL Cleantech Pvt Ltd Holalkere Chitradurga Growthstreet Consultants Pvt Ltd Harapanahalli Davanagere OPG Power Generation Pvt Ltd Hosadurga Chitradurga GRT Jewellers Pvt Ltd Kannakapura Ramanagara Renew Solar Power Pvt Ltd Honnali Davanagere OPG Power Generation Pvt Ltd Harapanahalli Davanagere Asian Fab Tech Ltd Gowribidanuru Chikkaballapura Asian Fab Tech Ltd Nagamangala Mandya Chikkanayakanahalli Tumkur Renew Solar Power Pvt Ltd Turuvekere Tumkur Rishabh Buildwell Pvt Ltd Harapanahalli Davanagere Rays Power Expert Pvt Ltd Chikkabalapura Chikkabalapura Koratagere Tumkur Sunedison Solar Power India Pvt Ltd Bangarpet+KGF Kolar Chamrajanagara Chamrajanagara Kollegala+Hannur Chamrajnagar Gundlupet Chamrajnagar 4.86 Renew Solar Power Pvt Ltd Yadgiri Yadgiri Renew Solar Power Pvt Ltd Bhalki Bidar Renew Solar Power Pvt Ltd Chincholli Kalburgi Renew Solar Power Pvt Ltd Alland Kalburgi Parampujya Solar Energy Pvt Ltd Shorapur Yadgir SOLAR MONTHLY UPDATE March 16 7

8 No. Name of the Bidder Taluk District Capacity (in MW) Quoted tariff (in Rs./kWh) 25 Karvy Consultants Ltd Shorapur Yadgir 26 Shahpur Yadgir 27 Chittapura Kalburgi 28 Renew Solar Power Pvt Ltd Devadurga Raichur 29 Renew Solar Power Pvt Ltd Siraguppa Bellary Renew Solar Power Pvt Ltd Essel Green Energy Pvt Ltd Marikal Solar Parks Pvt Ltd Mytrah Energy Ltd Essel Green Energy Pvt Ltd Marikal Solar Parks Pvt Ltd Marikal Solar Parks Pvt Ltd Essel Green Energy Pvt Ltd OPG Power Generation Pvt Ltd Essel Green Energy Pvt Ltd Humnabad Gangavati Indi Basavanabagevadi Sindagi Bijapura+Nagatana Naragund Chikkodi Sindagi Shiggaon Muddebihal Bidar Koppalaa Vijayapura Vijayapura Vijayapura Vijayapura Gadag Belgaum Vijayapura Haveri Vijayapura Aditya Birla Nuvo Ltd Aditya Birla Nuvo Ltd Ramadurg Shirahatti Belagavi Gadag 43 OPG Power Generation Pvt Ltd Ron Gadag Total Capacity alloted Source: KREDL Highest Tariff Quoted : Rs.5.50/kwH Lowest Tariff Quoted : Rs.4.69/kwH SOLAR MONTHLY UPDATE March 16 8

9 COMPANY LIMELIGHT AZURE POWER About the Company Solar Projects and Focus Director's Quote About the Company Azure Power is India's leading independent solar power producer and offers clean and affordable solar energy to its customers with zero upfront cost and operational expenses. The company was founded by Inderpreet Wadhwa in 08 and is headquartered in New Delhi. It developed India's?rst private utility scale solar project in 09 in Awan, Punjab. The company designs, finances, executes, operates, and maintains solar power plants. By providing solar energy as a service, Azure Power manages the entire project process for its customers, reduces costs of generating electricity, and provides long term predictable pricing. Azure Power has one of the largest portfolios of operating solar projects with a strong pipeline of clean energy generation projects for grid connected; rooftop and off-grid initiatives pan India. The company offers the following services: Design, engineering and construction of grid integrated solar installations Off grid solar installations for villages, hamlets and remote areas Turnkey solar installations for commercial and residential complexes on roof tops, as back up and alternate source. Operation & maintenance of solar installations Solar Fact File Azure Power has the highest market share in the state of Punjab with a total capacity of 215 MW under various stages. Azure Power implemented the?rst private megawatt scale rooftop smart city initiative in 13 (a 2.5 MW capacity plant) in Gandhinagar, Gujarat. The company has a portfolio of 804 MW in 14 States in India under various stages. Azure Power commissioned the largest solar plant (100 MW) under India's National Solar Mission (NSM) policy in Jodhpur, Rajasthan and is now the single largest operator of projects SOLAR MONTHLY UPDATE March 16 under the NSM with a cumulative operational capacity of 147 MW under this policy. The 100 MW plant is spread across over 717 acres of land in Jodhpur. Equipment for 60 MW has been manufactured in India, as a part of the Indian Government's Make in India initiative in the solar power sector. Azure Power's 5 MW plant in Jaisalmer, Rajasthan, was constructed to provide electricity to Indo Pak border post. The Gandhinagar, Gujarat 2.5 MW commercial plant covers 192 rooftops. Portfolio of 500+ rooftops across 10 states, which includes country's largest commercial real estate developer, a leading global chain of premium hotels and company that operates country's largest metro rail network. Azure Power is backed by World Bank arm International Finance Corp., venture capital fund Helion Venture Partners, PROPARCO, Foundation Capital and German development? nance institution DEG. Azure Power is an Independent Power Producer and a leader in the Indian Solar Industry. The company sells Solar Power on long term?xed price contracts, at prices which in many cases are at or below prevailing alternatives. Azure Power has been able to achieve a 73% reduction in total solar system cost from a tariff of Rs per kilowatt in 09 to Rs per kilowatt in 16. The company is one of the first to demonstrate a private solar park with initial capacity of 5MW extendable to 50MW. Directors / Key Personnel Inderpreet S. Wadhwa- Director and Chief Executive Officer H.S.Wadhwa Director and Chief Operating Officer Robert Kelly Director Diane Farrell- Director William B. Elmore-Director Sanjeev Aggarwal-Director Barney Rush-Director 9

10 Key Financials According to a filing for an initial public offering (IPO) on the New York Stock Exchange to raise $100 million (approximately Rs.650 crore), for FY 14-15, Azure Power reported a revenue of Rs crore and a loss of Rs crore. The firm has raised over $525 million in equity and debt financing and approximately $102 million of the amount raised remains available for deployment, according to the filing. The firm is targeting to increase its operating capacity to 5 st MW by 31 December 16, it stated in its filing. The company has stated that its longer term goals st are to achieve 1 GW committed generation by 31 st December 17 and 5 GW by 31 December in the regulatory filing. (Source: Live Mint article dated December 17, 15 titled 'Solar energy firm Azure Power files for NYSE listing'). Director's Quote In 09, when I said that India would have two to three gigawatts [of solar energy] by 15, people said 'That's not possible.' Today we have 5GW running, said Inderpreet Wadhwa, founder and chief executive of Azure Power. Mr Wadhwa left a technology career in California after he came home to India on what was supposed to be a short personal trip eight years ago and saw the huge opportunities presented by the shortage of electricity. He started with small solar plants for electricity-hungry districts and rooftop systems for companies to replace costly diesel generators. Today, Azure Power, which is part-owned by the World Bank s International Finance Corporation, Foundation Capital and Helion Ventures - is one of dozens of domestic and international corporations putting money into building or supplying equipment to large-scale solar PV power stations across India. (Sourced from article in Financial Times dated January 4, 16, titled Investors look to India as the next Solar Power). *Note: All information sourced for the Company Limelight is taken from the company website various newspapers and media articles, which are in the public domain. SOLAR MONTHLY UPDATE March 16 10

11 SOLAR TENDERS FOR THE MONTHS OF MARCH-APRIL 16 Organiser State Capacity JNNSM Neyveli Lignite Corporation Limited Andhra Pradesh Tamil Nadu 500 MW in Ananthapuramu Solar Park in AP, Phase-II, Batch-III, Tranche-IV Setting Up of 4 Blocks of Grid Interactive Solar PV Power Project of Each 65 MW AC Capacity Technical Bid Date Neyveli Lignite Corporation Limited Rajasthan 65 MW Ac Grid Interactive Solar Pv Power Project with Associated 33kv Power System Complete for Grid Interconnection SECI Odisha 10 MW, Paradip Port NTPC Karnataka Allotment Of 240 MWs Grid Connected Solar Power Projects In 12 Taluks Of Karnataka State Karnataka Steel giant ArcelorMittal plans to build a MW solar plant UPNEDA UP MW EPC Retender NTPC Karnataka Development of 250MW (5 blocks of 50MW each) solar PV projects at Pavagada solar park in Karnataka NTPC Karnataka Development of 750 MW (6 Blocks of 125 MW Each) Solar Photo Voltaic Projects SECI Chhattisgarh 100 MW Grid Connected Solar PV under JNNSM Phase II Batch III Kerala State Electricity Board (KSEB) Kerala Procurement of 0 MW power from grid connected solar PV power plants within the state of Kerala SECI UP Grid connected solar PV projects of 315 MW (Rebidding MW Open - 50 MW DCR) in Solar Park and 160 MW Non-Solar Park Rewa (RUMPL) MP 750 MW UMPP Solar Park Source: LSI Financial Services Tender Monitor 16 SOLAR MONTHLY UPDATE March 16 11

12 New Delhi 11, 12th Floor, Chiranjiv Tower 43, Nehru Place, New Delhi P F E delhicorp@lsimails.com Mumbai Regus Business Centre, 3rd Floor, Corinthian Building Opp. Axis Bank, Link Road, Khar West, Mumbai P E mumbaicorp@lsimails.com Kolkata Sagar Trade Cube, 5th Floor 104, S P Mukherjee Road, Kolkata P F E kolkatacorp@lsimails.com