SunEdison Setback May Delay PM Modi’s Mega Solar Drive

US solar giants SunEdison who bid for ultra-mega solar plant in Andhra Pradesh are on the verge of bankruptcy.

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Business
3 min read
Workers walk between rows of solar photovoltaics, inside a solar power plant at Raisan village near Gandhinagar. (Photo: Reuters)

The likely collapse of SunEdison Inc’s solar project in India, the first of the 32 planned “ultra mega” complexes, could delay Prime Minister Narendra Modi’s goal to increase renewable energy five-fold, by several years and probably cost consumers more.

As the US solar giant fights to stave off bankruptcy, the 500-megawatt project in Andhra Pradesh it won last November lies idle with ground yet to be broken. The other projects are still to be bid on.

It’s doubtful any rival will pick up the project at the aggressive power pricing promised by SunEdison, which beat out 29 other bidders with a record-low tariff of Rs 4.63 per kilowatt-hour.

Officials to Tighten Auction Rules, but Project Delay Possible

Indian officials will tighten auction rules to ensure that only serious, bankable bidders show up, industry sources said. India plans to auction more of the “ultra mega” projects, those which generate at least 500 MW, in the current fiscal year through to March 2017.

There is always a trade-off. There can be a relaxed condition so that more people can participate and there is another where you can make sure fly-by-night operators can’t come in. It’s an ongoing process and we are open to suggestions.
Upendra Tripathy, Secretary, Ministry of New and Renewable Energy

Tightening auction rules could slow the pace at which projects are awarded and built, pushing back Modi’s goal of expanding solar capacity to 100 gigawatts by 2020 to the middle of the decade, say officials and industry players.

Tripathy, however, said India will for now stick to its goal, set by Modi soon after taking office in 2014, and that it has planned for SunEdison-like bumps in the road with a strong project pipeline.

Modi is banking on India’s 300 days a year of sunshine to help fight climate change rather than committing to emission cuts like China. But he has also pushed firms to provide cheap power, which risks leaving too little 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 bid for the Andhra project.

Rebid for Plant a Possibility

If no buyer is found for the Andhra project, the project could be put up for a rebid. (Photo: iStockphoto)
If no buyer is found for the Andhra project, the project could be put up for a rebid. (Photo: iStockphoto)

A person close to Adani said the low tariff agreed to, for the Andhra plant will make any deal with SunEdison difficult for Indian firms, which have a relatively high cost of capital. If no buyer is found, the project could be rebid, industry sources said.

SunEdison did not respond 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. That might be a warning signal for the industry.
Santosh Kamath, Head of Renewables, KPMG

SunEdison’s troubles not withstanding, India has attracted deep-pocketed investors to its $100 billion solar energy program, the biggest in the world.

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

India wants the share of non-fossil fuel in total installed power capacity to jump to 40 percent by 2030 from 30 percent currently.

Government Persuading Banks to Loan Solar Projects

The government might make it necessary for bidders to get funding assurances from banks. (Photo: iStockphoto/altered by <b>The Quint</b>)
The government might make it necessary for bidders to get funding assurances from banks. (Photo: iStockphoto/altered by The Quint)

Challenges to the solar projects include the weak finances of state distribution companies forced to sell subsidised power, difficulties hooking up solar projects to grids, and access to affordable capital. Land acquisition is also an issue that Modi’s government has been unable to fix. A 500 MW solar project needs on average 2,000 acres (800 hectares).

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

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

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