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POWER INDIA

Everything you want to know about...

NATIONAL	SOLAR	MISSION	
Batch	I	of	Phase	II	
	
Introduction	
What	is	NSM?		
Salient	features	of	NSM	Batch	I	of	Phase	II	
Viability	Gap	Funding	(VGF)	support	

	
Techno‐commercials	
Key	technical	&	commercial	requirements	
Tentative	 inancials	of	the	projects	
Sensitivity	analysis	
	

Key	Strategies	

Connect with us 
October 30, 2013 
 
 

Power India  

	

	

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the	 Reports	 published	 by	 the	
POWER	INDIA	are	properties	of	
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POWER	 INDIA	 hereby	 grants	
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conditions	of	this	agreement.		

Every	 effort	 is	 made	 to	 provide	
correct	 and	 updated	 information.		

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www.powerind.in	
 

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POWER	INDIA	is	not	herein	engaged	in	rendering	professional	
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POWER	 INDIA	 makes	 no	 warranties,	expressed	or	implied,	as	
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For	 further	 enquiries,	 please	
contact:	
POWER	INDIA	
sparksnetwork@gmail.com	

Power India   

contact@powerind.in	

 

 
Power India  

The	 Jawaharlal	 Nehru	 National	 Solar	 Mission	 (JNNSM	 or	 NSM)	 is	 a	 mission	
launched	by	Government	of	India	on	the	11th	January,	2010	to	promote	development	of	solar	energy	projects	in	India.		by	the	Prime	Minister.		
	
The	 NSM	 has	 set	 the	 ambitious	 target	 of	 deploying	
20,000	 MW	 of	 grid	 connected	 solar	 power	 by	 2022	 is	
aimed	at	reducing	the	cost	of	solar	power	generation	in	
the	country	through	(i)	long	term	policy;	(ii)	large	scale	
deployment	goals;	(iii)	aggressive	R&D;	and	(iv)	domestic	production	of	critical	raw	materials,	components	and	
products,	as	a	result	to	achieve	grid	tariff	parity	by	2022.		
NSM	 will	 create	 an	 enabling	 policy	 framework	 to	 achieve	 this	 objective	 and	
make	India	a	global	leader	in	solar	energy.		
NSM	was	supposed	be	executed	in	three	phases.	
 Phase	1:		1,000	MW	(by	2013)	
 Phase	2:		cumulative	4,000	MW	(by	2017)	
 Phase	3:		cumulative	20,000	MW	(by	2022)	
	
In	the	Phase	1	of	the	Mission,	950	MW	solar	power	projects	were	selected	in	
two	batches	(batch-I	during	2010-11	and	batch-II	during	2011-12)	through	a	
process	 of	 reverse	 bidding.	 NTPC	 Vidyut	 Vyapar	Nigam	 Limited	 (NVVN)	 was	
appointed	as	the	nodal	authority	for	purchase	of	power	from	developers	and	
further	sale	to	distribution	utilities/	Discoms	after	bundling	with	power	from	
unallocated	quota	of	power	from	coal	based	stations	of	NTPC	on	equal	capacity	 basis.	 A	 total	 capacity	 of	 420	 MW	 has	 been	 commissioned	 under	 these	
batches	by	the	end	of	Phase-1.	In	addition,	a	capacity	of	50.5	MW	under	migration	 scheme,	 88.8	 MW	 under	 IREDA-GBI	 scheme	 and	 21.5	 MW	 under	 old	
Demonstration	scheme	has	been	commissioned,	taking	the	total	capacity	commissioned	to	680.80	MW.	
For	 Phase	 2	 of	 NSM,	 on	 account	 of	 unavailability	 of	 conventional	 power	 for	
bundling,	 the	 Government	 has	 ixed	 the	 solar	 tariff	 at	 Rs.	 5.45	 per	 unit	 (Rs.	
4.75	per	unit	if	accelerated	depreciation	is	availed)	and	shall	assist	the	developers	by	providing	Viability	Gap	Funding	to	make	the	solar	projects	viable	at	
this	tariff.	
Detailed	 guidelines	 for	 bidding	 under	 NSM	 Phase	 2	 Batch	 I	 is	 issued	 by	 the	
Government	of	India	on	28th	October	2013.	
	

Power India   

WHAT	IS	NSM?	

 
Power India  

Approach	
 To	incentivize	setting	up	of	a	large	
number	 of	 Solar	 Power	 Projects	
and	minimizing	the	impact	of	tariff	 on	 the	 distribution	 companies,		
Viability	 Gap	 Funding	 (VGF)	
Scheme	has	been	selected.		
 Implementation	 will	 be	 by	 the	
Solar	Energy	Corporation	of	India	
(SECI).		
	

NSM	Documents	

 Final	Guidelines	for	Batch-I,	
Phase-II	of	JNNSM		

 RfS	Document	for	750	MW	
Grid	Connected	Solar	PV	
Projects	under	Phase-II	
Batch-I	of	JNNSM		

Total	Capacity	
 Total	capacity:	750	MW		
 Minimum	capacity:	10	MW	and	in	
multiples	there	of	
 Maximum	 Project	 capacity:	 50	
MW	
 The	 total	 capacity	 to	 be	 allocated	
to	a	Company	including	its	Parent,	
Af iliate	or	Ultimate	Parent-or	any	
Group	 Company	 shall	 be	 limited	
to	100	MW.	
 Maximum	 of	 ive	 projects	 at	 different	 locations	 with	 aggregate	
capacity	not	exceeding	100	MW.	
 A	 waiting	 list	 of	 up	 to	 100	 MW	
may	 be	 maintained	 up	 to	 date	 of	
Financial	Closure.	
	
Financial	Quali ication	Criteria	
 Minimum	Net	Worth	requirement	
at	 the	 rate	 of	 Rs.	 2	 crore	 per	 MW	
of	 the	 project	 capacity	 up	 to	 20	
MW	 and	 Rs.	 3	 crore	 per	 MW	 for	
the	capacity	above	20	MW.		
	
Connectivity	with	the	Grid	
 Inter-connection	 with	 the	 transmission	 network	 of	 STU/CTU	 or	
any	 other	 transmission	 utility	 at	
voltage	level	of	33	KV	or	above.	
 The	 responsibility	 of	 getting	 connectivity,	 development	 &	 maintenance		of	transmission	system	and		
metering	 will	 lie	 with	 the	 Project	
Developer.		
	
Clearances	&	Approvals	
 All	 the	 clearances	 &	 approvals	
required	 for	 the	 project	 shall	 be	
obtained	 by	 the	 Project	 Developer.	

Domestic	Content	Requirement	
 A	capacity	of	375	MW	to	be	bided	
with	 Domestic	 Content	 Requirement	(DCR).		
 The	 solar	 cells	 and	 modules	 used	
in	the	solar	PV	power	plants	must	
both	be	made	in	India.		
	
	
Tariff	
 Separate	 tariffs	 for	 the	 projects	
availing/not	 availing	 accelerated	
depreciation	bene its	are	 ixed.	
 The	 tariffs	 are	 irm	 for	 the	 25	
years	of	project	period.	
 With	 Accelerated	 Depreciation	
Bene it:	Rs.	5.45	per	Unit	
 Without	 Accelerated	 Depreciation	
Bene it:	Rs.	4.75	per	Unit.		
	
Viability	Gap	Funding	
 The	 developer	 will	 be	 provided	 a	
viability	 gap	 fund	 based	 on	 his	
bid.		
 The	upper	limit	for	VGF	is	30%	of	
the	project	cost	or	Rs.2.5	Cr./MW,	
whichever	is	lower.	
 The	developer	has	to	put	his	own	
equity	of	at	least	Rs.1.5	Cr./MW.	
 The	 remaining	 amount	 can	 be	
raised	as	loan	from	any	source	by	
the	developer.	
 The	 VGF	 will	 be	 released	 in	 six	
tranches	as	follows:	
50%	:	Upon	commissioning		
10%	:	End	of	1st	Year		
10%:	End	of	2nd	Year		
10%	:	End	of	3rd	Year		
10%	:	End	of	4th	Year		
10%	:		End	of	5th	Year		
 If	the	project	fails	to	generate	any	
power	continuously	for	any	1	year	
within	25	years	or	its	major	assets	
(components)	are	sold	or	the	project	is	dismantled	during	this	tenure,	 VGF	 to	 be	 refunded	 back	 on	
pro-rata	 basis	 or	 else	 a	 claim	 on	
assets	 equal	 to	 the	 value	 of	 VGF	
released,	on	pro-rata	basis.		
	
	

Power India   

SALIENT	FEATURES	
OF	NSM	PH	II	BATCH	I	

 
Power India  

Fees,	Charges	&	Bank	Guarantees	
 Non-refundable	 processing	 fee	 of	
Rs.	 1	 Lakh	 for	 each	 Project	 upto	
20	 MW	 capacity	 and	 of	 Rs.2	 Lakh	
for	 each	 project	 above	 20	 MW	
capacity.		
 Earnest	 Money	 Deposit	 (EMD)	 of	
Rs.	 10	 Lakh/MW	 in	 the	 form	 of	
Bank	Guarantee.	
 Performance	 Bank	 Guarantee	 of	
Rs.	 20	 Lakh/MW	 at	 the	 time	 of	
signing	of	PPA.	
 In	 addition	 to	 the	 Performance	
Bank	 Guarantee	 of	 Rs.	 20	 Lakh/
MW	to	be	provided	
 At	 the	 time	 of	 signing	 of	 PPA,	 the	
Bank	Guarantee	towards	EMD	will	
also	 be	 converted	 into	 Performance	Bank	Guarantee.	
	
Electricity	Generation	
 The	 developers	 have	 to	 declare	
the	 CUF	 upon	 commissioning	
which	shall	in	no	case	be	less	than	
17%	over	a	year.		
 CUF	 shall	 be	 maintained	 within	 15%	 and	 +10%	 of	 the	 declared	
value	till	the	end	of	10	years	from	
COD	subject	to	the	CUF	remaining	
over	minimum	of	15%	and	within	
-	20%	and	+10%	thereafter	till	the	
end	 of	 the	 PPA	 duration	 of	 25	
years.		
 The	lower	limit	be	relaxable	to	the	
extent	 of	 grid	 non-availability	 for	
evacuation.		
 Penalty	in	case	of	shortfall	in	CUF	
from	 the	minimum	 level;	 equal	 to	
the	
compensation	
payable	
(including	 RECs)	 by	 the	 Discoms	
towards	non-meeting	of	RPOs.	
 Excess	 generation	 from	 the	 maximum	 level	 of	 CUF	 shall	 be	 purchased	by	SECI	at	Rs.	3	per	Unit.	

Selection	 Process	 &	 Implementation	Agreement	
 Request	 for	 Selection	 (RfS)	 shall	
be	issued	inviting	bids	quoting	the	
VGF	 requirement	 for	 setting	 up	
the	 Solar	 PV	 Power	 projects	 at	
locations	of	choice.	
 Bid	submission	&	evaluation	to	be	
done	separately	for	the	categories	
of	with	and	without	DCR.	
 Selection	of	projects	for	allotment	
will	 start	 from	 L1	 (in	 terms	 of	
lowest	 VGF	 requirement)	 and	 go	
up	to	the	level	where	the	speci ied	
maximum	MW	capacity	to	be	allocated	 under	 the	 chosen	 Category	
is	reached.	
 Letter	 of	 Intent	 (LoI)	 shall	 be	 issued	 to	 successful	 bidders	 and	
sign	 Power	 Purchase	 Agreements	
(PPAs)	 valid	 for	 a	 period	 of	 25	
years.		
 The	 solar	 power	 purchased	 by	
SECI	 shall	 be	 sold	 to	 State	 Utilities/	 Discoms/	 other	 Bulk	 Consumers	 under	 Power	 Sale	 Agreements	 (PSA)	 at	 a	 ixed	 tariff	 of	
Rs.5.50/kWh	 (Rs.4.75/kWh	 in	
case	of	projects	availing	bene it	of	
accelerated	 depreciation)	 for	 25	
years	 (including	 Trading	 Margin	
of	SECI	@	5	paisa/kWh).		
	
Payment	Security	Mechanism	
 SECI	shall	set	up	a	payment	security	mechanism	in	order	to	ensure	
timely	payment	to	the	developers.	
 The	money	received	from	encashment	 of	 BGs,	 interest	 earned	 on	
this	fund,	incentives	for	early	payment,	 the	 extra	 money	 coming	
from	10%	lower	tariff	to	developers	 claiming	 AD	 and	 the	 grants	
from	 Government/	 NCEF	 will	 be	
used	to	build	a	fund	for	providing	
Payment	Security	Mechanism.		
 This	 fund	 will	 have	 a	 corpus	 to	
cover	3	months	payment.		

Power India   

SALIENT	FEATURES	
OF	NSM	PH	II	BATCH	I	

 
Power India  

SN	

Event	

Date	

1	

RfS	Document	

Zero	Date	

2	

Issuance	of	RfS	Document	

7	days	from	Zero	Date	

3	

Submission	&	opening	of	Bids	

60	days	from	Zero	Date	

4	

Evaluation	of	Techno-Commercial	
Bids	&	Short	listing	of	Bidders	

60	days	from	Submission	of	Bids	(SN	3)	

5	

Opening	of	Financial	Bids	

7	days	from	Short	listing	of		Bidders	(SN	4)	

6	

Issuance	of	LoIs	

15	days	from	opening	of	Financials	Bids	
(SN	5)	

7	

PPA	Signing	

30	days	from	Issuance	of	LoIs	(SN	6)	

8	

Financing	Arrangments	

210	days	from	PPA	signing	(SN	7)	

9	

Commissioning	of	Projects	

13	months	from	PPA	signing	SN	7)	

Power India   

IMPLEMENTATION	
SCHEDULE	

 
Power India  

Site	Selection	

VGF	Disbursement	

 As	 there	 is	 no	 concept	 of	 Solar	
Park	 under	 NSM	 Phase	 II	 Batch	 I	
and	 also	 no	 support	 will	 be	 given	
by	 the	 Government	 for	 the	 land	
acquisition,	 the	 Project	 Developer	
has	 to	 identify	 and	 select	 the	 site	
suitable	for	the	Project.	
 Parameters	such	as	land	availability	and	costs,	solar	resource	availability,	 proximity	 to	 the	 grid,	 water	 etc	 have	 to	 be	 considered	
while	evaluating	the	sites.	
	
Land	Acquisition	
 As	 acquisition	 of	 land	 is	 the	 biggest	 hurdle	 for	 the	 development	
of	projects	in	India,	the	same	is	of	
utmost	 importance	 for	 the	 Developer.	
 Suitable	 land	 should	 be	 identi ied	
and	 inalized	 (in	 terms	 of	 inprinciple	agreement	or	agreement	
to	sale	etc)	before	the	submission	
of	bids.	
	
Clearances	&	Approvals	

 As	 the	 VGF	 to	 be	 disbursed	 over	
the	period	of	6	years	from	project	
start	 date;	 the	 same	 should	 take	
into	account	in	the	 inancials	models	of	the	Project.	
 Further,	various	political	and	economical	 risks	 associated	 with	 the	
disbursement	of	VGF	shall	also	be	
considered	 while	 arriving	 at	 the	
biding	amount.		
 Delay	 in	 disbursement	 of	 VGF	 by	
the	 Government	 will	 hamper	 the	
inancials	of	the	Projects.		
	

 Obtaining	 all	 the	 necessary	 clearances	&	approvals	are	the	responsibility	of	the	developer.	
 Hence,	 the	 timelines	 and	 risks	
associated	 with	 this	 are	 required	
to	be	considered.	
	
DCR	 Requirement	 for	 375	 MW	
Projects	
 Developer	has	to	take	into	consideration	 the	 domestic	 modules	
while	bidding	under	the	DCR	Category;		
 Availability	 of	 modules,	 quality,	
CUF	 estimation,	 degradation	 &	
warranty	 aspects	 etch	 are	 required	to	be	considered.	
	
Grid	Connectivity	
 In	 the	 absence	 of	 the	 Solar	 Park	
concept,	 the	 cost	 of	 developing	
and	 maintaining	 the	 evacuation	
systems	 as	 well	 as	 generation	
losses	on	account	of	down	time	of	
the	grid	have	to	be	taken	into	consideration.	

Off-take	Risks	
 Absence	 of	 irm	 mechanism	 to	
ensure	 a	 match	 between	 states	
willing	 to	 buy	 power	 at	 the	 predetermined	 prices	 and	 developers’	 preference	 of	 location	 for	 the	
projects		
 Lack	 of	 clarity	 on	 how	 the	 SECI	
will	 ensure	 the	 off-take	 of	 the	
power	to	states	across	the	country	
that	 might	 be	 willing	 to	 buy	 the	
power.		
	
Payment	Security	Mechanism	
 Lack	of	clarity	in	terms	of	how	the	
payment	security	will	be	provided	
by	SECI	to	the	developers.	
 The	current	mechanism	of	collecting	corpus	of	fund	suf icient	for	3	
months	 payment	 is	 not	 adequate	
considering	 the	 lower	 tariff	 and	
high	 amount	 of	 upfront	 equity	
funding	from	the	developer.	
 Further,	 without	 the	 proper	 payment	 security	 mechanism,	 the	
banks/FIs	 will	 also	 be	 hesitant	 to	
provide	 funds	 at	 D:E	 ratio	 of	
70:30.	

Power India   

KEY	TECHNICAL	&	
COMMERCIAL	CONCIDERATIONS	

 
Power India  

TENTATIVE	FINANCIALS	

Assumptions	
 CAPEX:	Rs.	6.6	Crs/MW	
 VGF	 Percentage:	 25%	 of	 the	 Project	

Financials	
Considering	 a	 standard	 project	 size	
of	 10	 MW	 (11	 MWp),	 the	 inancials	
of	 the	 Project	 will	 look	 like	 below	
based	 on	 the	 assumptions	 depicted	
herewith.	
	
 Project	IRR:	14.7%	
 Equity	IRR:	15.0%	

Cost	

 PLF:	19%	
 Interest	Rate:	13%	
 D/E	Ratio	:	70/30	
 Tariff	:	Rs.	5.45	per	Unit	(W/o	Depreciation	Bene its)	

 OPEX:	Rs.	 6	Lacs/MW	with	5%	annual	

	

escalation	

 Project	NPV:	Rs.	8	Crs	
 Equity	NPV:	Rs.	5	Crs	
	

 Project	Payback:	6.6	Years	
 Equity	Payback:	11.4	Years	

TENTATIVE	FINANCIALS	
Sensitivity	 of	 the	 change	 in	 key	 variables	 such	 as	 CAPEX,	 VGF	 Percentage,		
Interest	Rate,	PLF	and	OPEX	using	the	radar	chart	analysis	is	presented	below.		

0.7%
Interest Rate (‐
0.5%)

0.5%

VGF Percentage
(+1%)

CUF (+0.2%)

0.6%
CAPEX/MW  (‐₹ 
10 Lacs)

Power India   

Grid Lossess (‐
1%)

OPEX/MW (‐₹ 1 
Lacs)
0.8%
0.7%
0.6%
0.2%
0.4%
0.2%
0.4%
0.0%

 
Power India  

KEY	STRATEGIES	

Power India   

 As	the	individual	project	size	is	10	MW	and	in	multiples	thereof,	developers	
shall	 try	 to	 reduce	 the	 beta	 of	 the	 bid	 amount	 by	 lower	 VGF	 in	 lowest	 bids	
and	higher	for	the	highest	bids.		
 Hoping	 the	 VGF	 disbursement	 as	 per	 the	 de ined	 schedule	 the	 Developer	
shall	 avail	 cheaper	 short	 term	 inancing	 such	 as	 buyer’s	 credit	 or	 bridge	
loans.		
 As	the	maximum	CUF	limit	is	adequately	high,	developers	may	try	to	maximize	 the	 DC	 iled	 thereby	 getting	 higher	 generation	 with	 relatively	 lower	 increase	in	CAPEX.	

 
 

Power India  

POWER	INDIA	
Power,	in	the	present	edge,	is	the	life	blood	for	each	&	every	economy	around	
the	globe.	It	is	an	essential	requirement	for	all	facets	of	our	life	and	has	been	
recognized	as	a	basic	human	need.	Socio-economic	development	of	any	country	
depends	upon	development	of	this	critical	infrastructure.	
Indian	 Power	 sector	 has	 been	 in	 the	 fore	 front	 of	 Indian	 growth	 story.	 With	
huge	 captive	coal	 reserves,	 signi icant	 potential	 for	generation	of	power	 from	
renewable	 energy	 sources,	 and	 a	 highly	 investor	 friendly	 Government	 policy	
for	setting-up	green- ield	Power	projects,	Indian	Power	sector	is	abreast	with	
untapped	opportunities.	The	growth	of	the	economy	and	its	global	competitiveness	 hinges	 on	 the	 availability	 of	 reliable	 and	 quality	 power	 at	 competitive	
rates.	
POWER	INDIA	is	putting	an	effort	to	bolster	the	sturdy	growth	of	Indian	Power	
Sector	 by	 providing	 comprehensive	 supports	 in	 terms	 of	 latest	 happenings,	
analysis,	publications,	links	and	other	resources	related	to	the	Indian	and	Global	Power	Sector	to	the	Power	Professionals.	

Power India   

SERVICES		
OFFERED	

 

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National Solar Mission - Phase II Batch I

  • 1.   POWER INDIA Everything you want to know about... NATIONAL SOLAR MISSION Batch I of Phase II Introduction What is NSM? Salient features of NSM Batch I of Phase II Viability Gap Funding (VGF) support Techno‐commercials Key technical & commercial requirements Tentative inancials of the projects Sensitivity analysis Key Strategies Connect with us  October 30, 2013   
  • 2.   Power India   This document along with all the Reports published by the POWER INDIA are properties of POWER INDIA. DISCLAIMER POWER INDIA hereby grants the user a personal, nonexclusive, nonrefundable, nontransferable license to use the report for research purposes only pursuant to the terms and conditions of this agreement. Every effort is made to provide correct and updated information. POWER INDIA www.powerind.in   Connect with us  However, POWER INDIA takes no responsibility for content of any of the material posted , and will not be liable for, any reliance you place on information. POWER INDIA is not herein engaged in rendering professional advice and services to user of this report. POWER INDIA makes no warranties, expressed or implied, as to the ownership, accuracy, or adequacy of the content of this report. POWER INDIA shall not be liable for any indirect, incidental, consequential, or punitive damages or for lost revenues or pro its, whether or not advised of the possibility of such damages or losses and regardless of the theory of liability. POWER INDIA retains exclusive and sole ownership of each report disseminated under this agreement. The user cannot engage in any unauthorized use, reproduction, distribution, publication or electronic transmission of this report or the information/ forecasts therein without the express written permission of POWER INDIA. No part of this report may be used or reproduced in any manner or in any form or by any means without mentioning its original source. For further enquiries, please contact: POWER INDIA sparksnetwork@gmail.com Power India    contact@powerind.in    
  • 3. Power India   The Jawaharlal Nehru National Solar Mission (JNNSM or NSM) is a mission launched by Government of India on the 11th January, 2010 to promote development of solar energy projects in India. by the Prime Minister. The NSM has set the ambitious target of deploying 20,000 MW of grid connected solar power by 2022 is aimed at reducing the cost of solar power generation in the country through (i) long term policy; (ii) large scale deployment goals; (iii) aggressive R&D; and (iv) domestic production of critical raw materials, components and products, as a result to achieve grid tariff parity by 2022. NSM will create an enabling policy framework to achieve this objective and make India a global leader in solar energy. NSM was supposed be executed in three phases.  Phase 1: 1,000 MW (by 2013)  Phase 2: cumulative 4,000 MW (by 2017)  Phase 3: cumulative 20,000 MW (by 2022) In the Phase 1 of the Mission, 950 MW solar power projects were selected in two batches (batch-I during 2010-11 and batch-II during 2011-12) through a process of reverse bidding. NTPC Vidyut Vyapar Nigam Limited (NVVN) was appointed as the nodal authority for purchase of power from developers and further sale to distribution utilities/ Discoms after bundling with power from unallocated quota of power from coal based stations of NTPC on equal capacity basis. A total capacity of 420 MW has been commissioned under these batches by the end of Phase-1. In addition, a capacity of 50.5 MW under migration scheme, 88.8 MW under IREDA-GBI scheme and 21.5 MW under old Demonstration scheme has been commissioned, taking the total capacity commissioned to 680.80 MW. For Phase 2 of NSM, on account of unavailability of conventional power for bundling, the Government has ixed the solar tariff at Rs. 5.45 per unit (Rs. 4.75 per unit if accelerated depreciation is availed) and shall assist the developers by providing Viability Gap Funding to make the solar projects viable at this tariff. Detailed guidelines for bidding under NSM Phase 2 Batch I is issued by the Government of India on 28th October 2013. Power India    WHAT IS NSM?  
  • 4. Power India   Approach  To incentivize setting up of a large number of Solar Power Projects and minimizing the impact of tariff on the distribution companies, Viability Gap Funding (VGF) Scheme has been selected.  Implementation will be by the Solar Energy Corporation of India (SECI). NSM Documents  Final Guidelines for Batch-I, Phase-II of JNNSM  RfS Document for 750 MW Grid Connected Solar PV Projects under Phase-II Batch-I of JNNSM Total Capacity  Total capacity: 750 MW  Minimum capacity: 10 MW and in multiples there of  Maximum Project capacity: 50 MW  The total capacity to be allocated to a Company including its Parent, Af iliate or Ultimate Parent-or any Group Company shall be limited to 100 MW.  Maximum of ive projects at different locations with aggregate capacity not exceeding 100 MW.  A waiting list of up to 100 MW may be maintained up to date of Financial Closure. Financial Quali ication Criteria  Minimum Net Worth requirement at the rate of Rs. 2 crore per MW of the project capacity up to 20 MW and Rs. 3 crore per MW for the capacity above 20 MW. Connectivity with the Grid  Inter-connection with the transmission network of STU/CTU or any other transmission utility at voltage level of 33 KV or above.  The responsibility of getting connectivity, development & maintenance of transmission system and metering will lie with the Project Developer. Clearances & Approvals  All the clearances & approvals required for the project shall be obtained by the Project Developer. Domestic Content Requirement  A capacity of 375 MW to be bided with Domestic Content Requirement (DCR).  The solar cells and modules used in the solar PV power plants must both be made in India. Tariff  Separate tariffs for the projects availing/not availing accelerated depreciation bene its are ixed.  The tariffs are irm for the 25 years of project period.  With Accelerated Depreciation Bene it: Rs. 5.45 per Unit  Without Accelerated Depreciation Bene it: Rs. 4.75 per Unit. Viability Gap Funding  The developer will be provided a viability gap fund based on his bid.  The upper limit for VGF is 30% of the project cost or Rs.2.5 Cr./MW, whichever is lower.  The developer has to put his own equity of at least Rs.1.5 Cr./MW.  The remaining amount can be raised as loan from any source by the developer.  The VGF will be released in six tranches as follows: 50% : Upon commissioning 10% : End of 1st Year 10%: End of 2nd Year 10% : End of 3rd Year 10% : End of 4th Year 10% : End of 5th Year  If the project fails to generate any power continuously for any 1 year within 25 years or its major assets (components) are sold or the project is dismantled during this tenure, VGF to be refunded back on pro-rata basis or else a claim on assets equal to the value of VGF released, on pro-rata basis. Power India    SALIENT FEATURES OF NSM PH II BATCH I  
  • 5. Power India   Fees, Charges & Bank Guarantees  Non-refundable processing fee of Rs. 1 Lakh for each Project upto 20 MW capacity and of Rs.2 Lakh for each project above 20 MW capacity.  Earnest Money Deposit (EMD) of Rs. 10 Lakh/MW in the form of Bank Guarantee.  Performance Bank Guarantee of Rs. 20 Lakh/MW at the time of signing of PPA.  In addition to the Performance Bank Guarantee of Rs. 20 Lakh/ MW to be provided  At the time of signing of PPA, the Bank Guarantee towards EMD will also be converted into Performance Bank Guarantee. Electricity Generation  The developers have to declare the CUF upon commissioning which shall in no case be less than 17% over a year.  CUF shall be maintained within 15% and +10% of the declared value till the end of 10 years from COD subject to the CUF remaining over minimum of 15% and within - 20% and +10% thereafter till the end of the PPA duration of 25 years.  The lower limit be relaxable to the extent of grid non-availability for evacuation.  Penalty in case of shortfall in CUF from the minimum level; equal to the compensation payable (including RECs) by the Discoms towards non-meeting of RPOs.  Excess generation from the maximum level of CUF shall be purchased by SECI at Rs. 3 per Unit. Selection Process & Implementation Agreement  Request for Selection (RfS) shall be issued inviting bids quoting the VGF requirement for setting up the Solar PV Power projects at locations of choice.  Bid submission & evaluation to be done separately for the categories of with and without DCR.  Selection of projects for allotment will start from L1 (in terms of lowest VGF requirement) and go up to the level where the speci ied maximum MW capacity to be allocated under the chosen Category is reached.  Letter of Intent (LoI) shall be issued to successful bidders and sign Power Purchase Agreements (PPAs) valid for a period of 25 years.  The solar power purchased by SECI shall be sold to State Utilities/ Discoms/ other Bulk Consumers under Power Sale Agreements (PSA) at a ixed tariff of Rs.5.50/kWh (Rs.4.75/kWh in case of projects availing bene it of accelerated depreciation) for 25 years (including Trading Margin of SECI @ 5 paisa/kWh). Payment Security Mechanism  SECI shall set up a payment security mechanism in order to ensure timely payment to the developers.  The money received from encashment of BGs, interest earned on this fund, incentives for early payment, the extra money coming from 10% lower tariff to developers claiming AD and the grants from Government/ NCEF will be used to build a fund for providing Payment Security Mechanism.  This fund will have a corpus to cover 3 months payment. Power India    SALIENT FEATURES OF NSM PH II BATCH I  
  • 7. Power India   Site Selection VGF Disbursement  As there is no concept of Solar Park under NSM Phase II Batch I and also no support will be given by the Government for the land acquisition, the Project Developer has to identify and select the site suitable for the Project.  Parameters such as land availability and costs, solar resource availability, proximity to the grid, water etc have to be considered while evaluating the sites. Land Acquisition  As acquisition of land is the biggest hurdle for the development of projects in India, the same is of utmost importance for the Developer.  Suitable land should be identi ied and inalized (in terms of inprinciple agreement or agreement to sale etc) before the submission of bids. Clearances & Approvals  As the VGF to be disbursed over the period of 6 years from project start date; the same should take into account in the inancials models of the Project.  Further, various political and economical risks associated with the disbursement of VGF shall also be considered while arriving at the biding amount.  Delay in disbursement of VGF by the Government will hamper the inancials of the Projects.  Obtaining all the necessary clearances & approvals are the responsibility of the developer.  Hence, the timelines and risks associated with this are required to be considered. DCR Requirement for 375 MW Projects  Developer has to take into consideration the domestic modules while bidding under the DCR Category;  Availability of modules, quality, CUF estimation, degradation & warranty aspects etch are required to be considered. Grid Connectivity  In the absence of the Solar Park concept, the cost of developing and maintaining the evacuation systems as well as generation losses on account of down time of the grid have to be taken into consideration. Off-take Risks  Absence of irm mechanism to ensure a match between states willing to buy power at the predetermined prices and developers’ preference of location for the projects  Lack of clarity on how the SECI will ensure the off-take of the power to states across the country that might be willing to buy the power. Payment Security Mechanism  Lack of clarity in terms of how the payment security will be provided by SECI to the developers.  The current mechanism of collecting corpus of fund suf icient for 3 months payment is not adequate considering the lower tariff and high amount of upfront equity funding from the developer.  Further, without the proper payment security mechanism, the banks/FIs will also be hesitant to provide funds at D:E ratio of 70:30. Power India    KEY TECHNICAL & COMMERCIAL CONCIDERATIONS  
  • 8. Power India   TENTATIVE FINANCIALS Assumptions  CAPEX: Rs. 6.6 Crs/MW  VGF Percentage: 25% of the Project Financials Considering a standard project size of 10 MW (11 MWp), the inancials of the Project will look like below based on the assumptions depicted herewith.  Project IRR: 14.7%  Equity IRR: 15.0% Cost  PLF: 19%  Interest Rate: 13%  D/E Ratio : 70/30  Tariff : Rs. 5.45 per Unit (W/o Depreciation Bene its)  OPEX: Rs. 6 Lacs/MW with 5% annual escalation  Project NPV: Rs. 8 Crs  Equity NPV: Rs. 5 Crs  Project Payback: 6.6 Years  Equity Payback: 11.4 Years TENTATIVE FINANCIALS Sensitivity of the change in key variables such as CAPEX, VGF Percentage, Interest Rate, PLF and OPEX using the radar chart analysis is presented below. 0.7% Interest Rate (‐ 0.5%) 0.5% VGF Percentage (+1%) CUF (+0.2%) 0.6% CAPEX/MW  (‐₹  10 Lacs) Power India    Grid Lossess (‐ 1%) OPEX/MW (‐₹ 1  Lacs) 0.8% 0.7% 0.6% 0.2% 0.4% 0.2% 0.4% 0.0%  
  • 9. Power India   KEY STRATEGIES Power India     As the individual project size is 10 MW and in multiples thereof, developers shall try to reduce the beta of the bid amount by lower VGF in lowest bids and higher for the highest bids.  Hoping the VGF disbursement as per the de ined schedule the Developer shall avail cheaper short term inancing such as buyer’s credit or bridge loans.  As the maximum CUF limit is adequately high, developers may try to maximize the DC iled thereby getting higher generation with relatively lower increase in CAPEX.  
  • 10.   Power India   POWER INDIA Power, in the present edge, is the life blood for each & every economy around the globe. It is an essential requirement for all facets of our life and has been recognized as a basic human need. Socio-economic development of any country depends upon development of this critical infrastructure. Indian Power sector has been in the fore front of Indian growth story. With huge captive coal reserves, signi icant potential for generation of power from renewable energy sources, and a highly investor friendly Government policy for setting-up green- ield Power projects, Indian Power sector is abreast with untapped opportunities. The growth of the economy and its global competitiveness hinges on the availability of reliable and quality power at competitive rates. POWER INDIA is putting an effort to bolster the sturdy growth of Indian Power Sector by providing comprehensive supports in terms of latest happenings, analysis, publications, links and other resources related to the Indian and Global Power Sector to the Power Professionals. Power India    SERVICES OFFERED