SunEdison setback may delay Modi'south 'ultra mega' solar drive in India

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Source:   —  April 07, 2016, at 4:24 AM

As the U. S. solar giant fights to stave off bankruptcy, the five hundred megawatt project in Andhra Pradesh state it won latest Nov lies idle with ground yet to be broken.

The likely collapse of SunEdison Inc's () solar project in India, the first of thirty-two planned "ultra mega" complexes, could delay Prime Minister Narendra Modi'south goal to expand renewable energy fivefold by several years and probably cost consumers more.

As the U. S. solar giant fights to stave off bankruptcy, the five hundred megawatt project in Andhra Pradesh state it won latest Nov lies idle with ground yet to be broken. The other projects are still to be bid on.

It'south doubtful any rival will choose up the project at the aggressive power pricing promised by SunEdison, which beat out twenty-nine other bidders with a record-low tariff of 4.63 rupees (seven U. S. cents) per kilowatt-hour.

That'll force Indian executive to tighten auction rules to ensure that only serious, bankable bidders indicate up, industry sources said. India plans to auction more of the "ultra mega" projects - those which generate at least five hundred MW - in the current monetary year through to March 2017.

"There is always a tradeoff," Upendra Tripathy, secretary at the Ministry of New and Renewable Energy, told Reuters of the renewable energy auctions.

"There can be a relaxed condition so that more people can partake and there is another where you can create sure fly-by-night operators can't arrive in. It'south an ongoing process and we're open to suggestions."

Tightening auction rules could unhurried the pace at which projects are awarded and built, pushing back Modi'south goal of expanding solar capacity to one hundred gigawatts by two thousand twenty to the center of the decade, declare executive and industry players.

Tripathy, however, said India will for presently adhere to its goal, set by Modi soon after taking office in two thousand-fourteenth, and that it's planned for SunEdison-like bumps in the road with a powerful project pipeline.

Modi is banking on India's three hundred days a year of sunshine to assistance fight climate modify rather than committing to emission cuts love China. But he's also pushed firms to allow cheap power, which risks leaving too tiny profit on the table.

Heavily indebted SunEdison, which according to one of its publicly listed units could soon file for bankruptcy protection, drew criticism from analysts for its low winning tender for the Andhra project.

The company is presently exploring a sale of its Indian assets of around one GW or seeking partners for them, sources said, and has drawn preliminary interest from billionaire Gautam Adani'south fast-expanding Adani Group. Apart from the Andhra project, SunEdison has several other tiny plants below construction across India.

POSSIBLE RE-BID

A person near to Adani said the low tariff agreed for the Andhra plant will create any deal with SunEdison challenging for Indian firms, which have a relatively high cost of capital. If number buyer is found, the project could be re-bid, the industry sources said.

SunEdison didn't reply to multiple requests for comment.

"The tariffs are a tad aggressive and that may not be healthy for developers themselves and also for others in the ecosystem ... manufacturers and financiers," said Santosh Kamath, head of renewables at consultancy KPMG India. "That might be a warning signal for the industry."

SunEdison'south troubles notwithstanding, India has attracted deep-pocketed investors to its $one hundred billion solar energy program - the biggest in the world.

Japan'south Softbank Corp (), Taiwan'south Foxconn () and India'south Bharti Enterprises have separately pledged to invest a total of about $20 billion in India'south renewable sector. Global solar giants love First Solar Inc (), Trina Solar Ltd () and Finland'south state-controlled utility Fortum Oyj () are also expanding their presence.

India wants the share of non-fossil fuel in total installed power capacity to leap to forty % by two thousand thirty from thirty percent currently.

Challenges comprise the feeble finances of state distribution companies forced to sell subsidized power, difficulties hooking up solar projects to grids, and access to affordable capital. Land acquisition is also an issue that Modi'south government has been unable to fix - a five hundred MW solar project needs on average 2.000 acres (eight hundred hectares).

"Given the energy deficit, necessity for energy security and sustained economic growth, the potential clearly exists for 100 GW of solar (energy) in India," said Sujoy Ghosh, country head of First Solar. "The question would be on the timelines in which the goal is achieved."

The Indian government is trying to persuade state banks to prolong loans to solar projects, but most lenders are saddled with horrible loans and unlikely to risk getting exposed to renewable projects with low rates of return.

To avert projects getting stuck for a lack of backing, India should create it mandatory for solar bidders to obtain funding assurances from banks at the beginning of an auction to ensure only serious players get part, analysts said. Tripathy, the government secretary, said he could consider the suggestion.

"We'll have to get care that projects don't become unviable," KPMG'south Kamath said. "If some projects become unviable then banks will stop lending to new projects and then they obtain stranded, love we've seen in the power and road sectors in the past."

($1 = 66.4938 Indian rupees)

(Reporting by Krishna N. Das; Editing by Douglas Busvine and Raju Gopalakrishnan)

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