Download mou 2014-15 negotiation meeting

Challenges in Financing
Renewable Energy
B V Rao
Director (Technical)
Indian Renewable Energy Development Agency Limited ( IREDA)
16th March, 2016 | New Delhi
Power Scenario in India
Installed capacity of 288 GW, of which RE capacity is over 39 GW (as on Feb 2016)
Diesel
Gas 0.36%
8.36%
Nuclear
2.07%
Hydro
15.04%
Wind
8.98%
RE
13.95%
SHP
1.48%
Biomass
1.59%
Coal
60.23%
Waste to energy
0.05%
Solar
1.84%
175 GW RE Target by 2022
287 GW
Private Sector
PSUs
Commitment of
268 GW from
414 Companies
Commitment of
19 GW from 48
PSUs
Finance
Manufacturing
Commitment
for financing 78
GW from 40
Banks
Commitment of
62 GW from 17
Manufacturing
Companies
Growth in Renewable Investment in India
Renewable Energy Investment in India ($ Billion)
14
13
12
10.9
10
9
8
6.3
6
4.9
4
2.7
3.1
2004
2005
5.6
8.2
8.9
7.1
4.3
2
0
2006
2007
2008
2009
2010
2011
2012
2013
2014
•
Investment in India’s renewable industry increased more than 22% in 2015 to reach $10.9bn
•
Rise largely attributed to scale, where investment reached $5.6bn, up 80% from $3.1bn last year
2015
February 2016
Investment Requirement
•
•
•
•
175 GW RE plan entails investment of Approx. $ 140 billion
(Rs. 8,50,000 Crore)
Multilateral and
Bilateral
NBFCs
Commercial banks
Bonds
Debt (70%)
Equity (30%)
$ 98 Billion (Rs. 6,00,000 Crore)
$ 42 Billion (Rs.
2,50,000 Crore)
Annual investment in RE (Rs. Crore)
160000
140000
120000
Rs. Crore
120000
128000
136000
143000
149000
SHP and Biomass
Investment (Rs.
Crore)
102000
100000
80000
60000
40000
20000
Wind Investment (Rs.
Crore)
58000
18000
Solar Investment (Rs.
Crore)
0
2014-15
2015-16
(p)
2016-17
(p)
2017-18
(p)
2018-19
(p)
2019-20
(p)
2020-21
(p)
2021-22
(p)
February 2016
Sources of Low Cost Capital
Indicative
Rates
Sources
Green Bonds
7-9%
Public Deposits
International Funds
6-8%
Multilateral Agencies
Insurance / Pension
Funds
7-9%
Corporate
10-12%
Stock Exchange, Mutual
Funds
0-3%
Tax on Fossil Fuels
Instruments
Raising Equity
Climate/ Carbon Funds
GOI Initiatives to promote Renewable Energy Financing
Innovative
Financing
Mechanisms
•
•
•
•
•
•
Increased
availability
of finance
Lower rates
of interest
Faster RE
deployment
Renewables accorded Priority Sector lending status: Loans up to ₹ 15 crore for renewable power projects
included. Banks mandated to disburse 40% of adjusted net bank credit to priority segments.
Rooftop Solar through Home Loans: DFS has issued guidelines and circulars issued by various banks to
include rooftop under housing loan
Tax-Free Bonds: Government approves INR 50 billion tax-free bonds to enable low interest rate funding for RE
Green Bonds: Enabling low cost funding for clean energy , REC, PFC, IREDA, IDBI and private sector like ICICI,
Yes Bank asked to issue green bonds to raise funding for RE projects.
Increase in Clean Environment Cess from Rs.200/tonne to Rs.400/tonne to boost renewable energy.
Indian Renewable Energy Fund ( 1 Billion US$) : To raise funds to invest in Renewable Energy
Projects and associated value chain including equity (Proposed)
Proposed Dedicated Renewable Energy Fund For India
 Govt. of India (through IREDA) proposes to set up USD 1 to 1.5 bn fund for renewable energy
 Fund is to be setup in line with National Infrastructure Investment Fund (NIIF) structure
 Govt. owned entities such as PFC, REC, NTPC and IREDA have in principle agreed to
the fund as Anchor Investors
invest USD 315 million into
 Fund will be managed by a reputed international fund manager whose selection is being undertaken through an ICB
process
 Received prima facie interest from various large fund managers to act as Investment Managers (GP) for proposed
fund.
Structure of the fund
To be setup as a ‘Category I’ Alternative
Investment Fund (AIF) under SEBI
(Alternative Investment Funds)
Regulations, 2012.
Independent trustee company will be
trustee.
Anchor Investors and Other Investors
would be LPs in the fund and would have
role on Limited Partner Advisory
Committee (LPAC).
LPAC would not be decision making
body and all investment decisions would
be made by Investment Manager.
February 2016
Tax Free Bonds for Renewable Energy
Tax free bonds of INR 5,000 crores have been allocated to four institutions
S. No.
Name of the Institution
Amount allocated
(INR Crores)
1
IREDA
2000
2
NTPC
1000
3
REC
1000
4
PFC
1000
IREDA Tax Free Bonds:
• IREDA’s Tax free Bond Public Issue of Rs.1716 Crore was oversubscribed
by 3 times on the day of opening.
• The average cost of Tax free Bond of Rs.2000 Crore is 7.50% .
• IREDA’s Tax free Bonds were rated as AA+ by ICRA and India Rating
Research Pvt Ltd. On stand alone basis.
• Entire Tax free Bond proceeds will be utilized for on lending to RE & EEC
Projects.
February 2016
Key Challenges in Financing RE projects
• Policy Regime
• Long Term & consistent policies
• Visibility of tariff policy
• Regulatory interventions against the existing tariffs
• Compliances of RPOs and RECs
• Timely approvals
• Infrastructure
• Grid connectivity and evacuation facilities
• Must run status for RE projects
• Timely payments by DISCOMs
• Forecasting and re-scheduling
February 2016
Key Challenges in Financing RE projects
• Long terms low cost funds
• Pensions funds
• Sovereign fun ds
• Insurance funds
• Improve “east of doing business” and transparency
• “Single Window Clearance” systems
• Land acquisition for RE projects
• Technology aspects
• Experience of developers for RE projects
• Emerging market – lack of organized financial sector
February 2016
Thank You
Indian Renewable Energy Development Agency Limited
[email protected]
www.ireda.gov.in