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Solar Project Financing

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  • 1. Project FinancingAF-Mercados EMI
  • 2. Financing options  Project Financing  Corporate balance sheet financingAF-Mercados EMI 2 FirstGreen
  • 3. Preliminary steps for the developer  Identifies the sites with the best resources.  Negotiates the use of the land.  Conducts an initial solar resource analysis.  Completes an EIA.  Conducts initial layout and design including initial equipment selection.  Applies for and receives planning permits and consents.  Applies for and receives grid connection offer or letters of intent.  Applies for feed-in tariff (FiT) and/or PPA.  Licences and permits, consents  Technical solutions  DPRAF-Mercados EMI 3 FirstGreen
  • 4. Due Diligence by Lender  Legal due diligence – assessing the permits and contracts (EPC and O&M).  Insurance due diligence – assessing the adequacy of the insurance policies and gaps in cover.  Technical due diligence – assessing the technology, integration and technical aspects of the permits and contracts.AF-Mercados EMI 4 FirstGreen
  • 5. Typical areas for Technical Due diligence  Sizing of the PV plant: Layout in the land area available. Appropriate buffer zone around the plant t account for shading/other activities. Overall size appropriate for the grid connection. Layout of the PV modules, mounting and/or trackers, and inverters: Assessment of level of inter-row shading. Access to plant components for maintenance and installation activities. Electrical design layout and sizing: Assessment of cable losses in the DC/AC cabling. Assessment of appropriateness of the cable placement and connectors. Appropriateness of the earthing and protection systems. Compliance to safety standards.AF-Mercados EMI 5 FirstGreen
  • 6. Typical areas for Technical Due diligence  Technology review of major components (modules/ inverters/mounting or trackers):  Suitable for environment.  Integration of components.  Track record of suppliers and models.  Quality and compliance certificates.  Compliance to safety standards.  Warranties.  Design life.  Degradation assumptions.AF-Mercados EMI 6 FirstGreen
  • 7. Typical areas for Technical Due diligence Energy yield assessments:  Appropriateness of any assumptions made.  Source of solar irradiation data.  Assessment of shade.  Degradation assumptions.  Uncertainty analysis.  Model used and modelling techniques.  Check the theoretical Performance Ratio.AF-Mercados EMI 7 FirstGreen
  • 8. Typical areas for Technical Due diligence Contract assessments (EPC, O&M, grid connection, power purchase and FiT regulations):  Looking for interface points and areas where there could be risks.  Examining construction timelines and ensuring that the critical path is clearly identified and mitigated in the contracts.  Assessing the warranty and guarantee positions within the contracts – protection for the lenders. Financial model assumptions:  Assessing that the assumptions used are complete and appropriate AF-Mercados EMI 8 FirstGreen
  • 9. RisksAF-Mercados EMI 9 FirstGreen
  • 10. Supporting Analysis Probability SEVERIT RISK Commercial - Risks (1/3) of Occurrence APPLICABILITY TO XXXX Y OF IMPACTOff-taker risk NVVN is the PPA signatory, has a low capital base and a balance sheet .Off-takers must have PPA is also linked with the with the implementable remedial framework for delays; penalties for lower) than the guaranteed generation from a non-firm sourcethe capacity to meetpayments. Also theproject developer LOW MEDIUMshould be able tomeet the contractconditions of the PPATariff riskThe risks that may SSEL has signed a PPA at the tariff of Rs. 12 per unit. The tariff is applicable for the periodarise in the case of a of 25 years from the COD. The tariff signed by SSEL is a reasonable tariff as compared withregulated PPA tariff is the other projects of similar nature. NVVNprimarily on accountof the extent of thetariff revisions by theregulatory MEDIUM LOWcommission. And therisks on account ofmerchant sale ofpower ispredominantly linkedto the variations in themarket price. AF-Mercados EMI DRAFT © 2011 Mercados Energy Markets India, the Indian subsidiary of Mercados Energy Markets International – a member 10FirstGreen company of ÅF GROUP. All Rights Reserved
  • 11. PROBABILITY SEVERIT RISK Supporting Analysis OF APPLICABILITY TO XXXX Y OF Commercial - Risks (2/3) OCCURENCE IMPACTTechnical riskConsistent technical SSEL has decided to procure the PV modules from Solar Frontier. They use the CIS thin-performance is critical film technology which has been developed since 1993. The performance ratio is about MEDIUM 85% which is highest as per the report submitted by Solar frontier. MEDIUMto successful plantoperations.Adequate SSEL has take the quotations from the leading EPC contractors for the execution of theprocurement project activity. SSEL has tied up with the AEG for the EPC of the project and thestructure modules has been sourced directly from Solar frontier to keep the cost low.An efficientprocurementmechanism is LOW MEDIUMessential to procurethe different projectitems at a competitiverates Availability Plant The failure to maintain • Plant availability risk for solar PV power project seems to be low due to the modular nature of adequate levels of the project. The plant availability is function of O&M related problems in the solar modules, plant availability has and the availability of the inverter units. SSEL has undergone with the AEG to ensure certain significant negative level of generation. AEG guarantees 92% of KWH of solar in generated electricity fed into MEDIUM LOW implications for power the Inverters at a minimum insolation of 500W/m2 at grid as recorded on state government and consequently on utility meter. revenue generation. • Another risk for plan availability is due to grid unavailability risk. Currently the grid unavailability risk in such projects has not been observed. AF-Mercados EMI DRAFT © 2011 Mercados Energy Markets India, the Indian subsidiary of Mercados Energy Markets International – a member FirstGreen 11 company of ÅF GROUP. All Rights Reserved
  • 12. RISK Supporting Analysis PROBABILITY OF APPLICABILITY TO XXXX SEVERITY OF Commercial - Risks (3/3) OCCURENCE IMPACTCompliance risk • SSEL has acquired the required statutory clearances for the project. As the project activity isSolar power projects under commissioning phase some of the clearance are underway and will be availed in due coursemust comply with a host of time.of state and nationalregulations governingthe purchase of land,utilization of labor,power evacuation, etc. LOW LOWFailure to comply withthe prescribed statutoryrequirements couldexpose projects topunitive measures bythe government up toand including shut-down.Technology Risk • As per the study PV Syst simulation study conducted by the Solar Frontier for a typical site the CISSolar power projects technology has a higher performance ratio as compared to the mono crystaline or the polymust select appropriate crystaline technology. This because of the two reasons. Due to light soaking effect in CIS (coppertechnology for the PV indium selenide ) technology the performance ratio is higher in this technology.modules. There are ofnumber of technologyoptions availableranging from the thin film HIGH MEDIUMtechnology to thecrystalline silicontechnology. Theappropriateness oftechnology has severeimpact on the projectperformance. AF-Mercados EMI DRAFT © 2011 Mercados Energy Markets India, the Indian subsidiary of Mercados Energy Markets International – a member 12FirstGreen company of ÅF GROUP. All Rights Reserved
  • 13. Thank You FirstGreen Consulting Private Limited Gurgaon: 206, Tower B, Millennium Plaza, Sec 27, Gurgaon – 122002, India Tel.: (+91) 124 424 1750 , 9899295854 Fax: (+91) 124 424 1751 Web: www.firstgreenconsulting.in Email: sanjayvashishtha@gmail.comAF-Mercados EMI 13 FirstGreen