India Solar Compass 2019 Q3

INDIA SOLAR COMPASS 2019 Q3

Dire straits Sentiment gets worse as policy uncertainty and ﬁnancing woes mount

© BRIDGE TO INDIA, 2018 Page 1 C 8/5, DLF Phase I © 2019 BRIDGE TO INDIA Energy Private Limited Gurgaon 122001 India Authors www.bridgetoindia.com Sai Siddhartha Nandamuri, BRIDGE TO INDIA Subscribe to our reports Shobhit Srivastava, BRIDGE TO INDIA [email protected] Vinay Rustagi, BRIDGE TO INDIA

For all other enquiries, please contact TERMS OF USE

[email protected] This report is owned exclusively by BRIDGE TO INDIA and is protected by Indian copyright, international copyright and intellectual property laws. Track the Indian RE market with our reports and blog BRIDGE TO INDIA hereby grants the user a personal, non-exclusive, non- www.bridgetoindia.com/reports transferable license to use the report pursuant to the terms and conditions of 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 BRIDGE TO INDIA.

The information contained in this report is of a general nature and is not intended to address the requirements of any particular individual or entity. BRIDGE TO INDIA aims to provide accurate and up-to-date information, but is not legally liable for accuracy or completeness of such information.

© BRIDGE TO INDIA, 2019 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Contents

Executive summary 1

1. Commissioned and pipeline capacity 4

2. Capacity addition 6 2.1 Performance of states 6 2.2 Progress on key projects 7 2.3 Estimate for next two quarters 8

3. Leading players 9 3.1 Project developers 9 3.2 Module suppliers 9 3.3 Inverter suppliers 10 3.4 EPC contractors 11 3.5 Domestic manuf acturers 11

4. Tender progress 13 4.1 New tender issuance 13 4.2 Auction results 20 4.3 Tenders pending allocation 22 4.4 Tenders cancellations 24

5. Pricing 26 5.1 Modules 26 5.2 Inverters 26 5.3 EPC cost 27

6. Funding 28 6.1 Equity funding 28 6.2 Debt funding 29 6.3 Mergers and acquisitions 31

7. Policy and regulations 33 7.1 Central government 33 7.2 State government 34 7.3 Others 35

8. Market trends and developments 36 8.1 States reneging on PPAs, payment delays rising 36 8.2 Balance of system (BOS) costs drop signiﬁcantly 37 8.3 Chinese solar market stays depressed 37 8.4 International auctions witness record low bids 38

Figure 1.1: Total installed and pipeline capacity as on 30 September 4 2019, MW Figure 1.2: State-wise utility scale solar commissioned and 5 pipeline capacity, MW Figure 1.3: Top 20 developers by commissioned capacity, MW 5 Figure 2.1: Utility scale solar capacity addition by type of tenders, MW 6 Figure 2.2: State-wise utility scale solar capacity addition in Q3 2019, MW 6 Figu re 2.3: Capacity addition in Q3 2019 for key tenders, MW 7 Figure 2.4: Capacity addition estimate for Q4 2019 and Q1 2020, MW 8 Figure 3.1: Leading developers by capacity commissioned in Q3 2019, MW 9 Figure 3.2: Market share of module suppliers by projects commissioned 10 in Q3 2019 Figure 3.3: Market share of inverter suppliers by projects commissioned 10 in Q3 2019 Figure 3.4: Market share of EPC contractors in Q1 2019 11 Figure 3.5: Market share of domestic module manufacturers in Q3 2019 11 Figure 4.1: Utility scale solar tenders issued in Q3 2019, MW 13 Figure 4.2: Capacity tendered in Q3 2019 14 Figure 4.3: Utility scale tender issuance and auctions, MW 14 Figure 4.4: Project development capacity allocation, MW 20 Figure 4.5: Auction results, INR/ kWh 21 Figure 5.1: BTI India Module Price Index, US cents/ W 26 Figure 5.2: BTI India Solar Inverter Price Index, INR/ W 26 Figure 5.3: BTI India Solar EPC Cost Index, INR/ Wp 27 Figure 5.4: BTI India Rooftop Solar EPC Cost Index, INR/ Wp 27 Figure 6.1: PE fund ﬂow in the Indian solar sector, USD million 28 Figure 6.2: Renewable stock trading pattern vs indices 29 Figure 6.3: State Bank of India MCLR 30 Figure 8.1: DISCOM dues to power producers, INR billion 36 Figure 8.2: BOS costs for utility scale solar projects, INR/ Wp 37 Figure 8.3: International multicrystalline cell prices, USD/ Wp 38

Table 4.1: Key details of tenders issued in Q3 2019 15 Table 4.2: Rooftop solar tenders issued in Q3 2019 20 Table 4.3: Tenders pending allocation 22 Table 6.1: PE transactions in the sector 28 Table 6.2: Offshore debt funding deals 30 Table 6.3: M&A transactions in Indian solar sector 31

India’s total solar capacity India added 2,205 MW of solar power generation capacity in Q3 2019 taking grew to 36,359 MW by total installed capacity to 36,359 MW by 30 September 2019. New capacity September 2019 addition was split 79:21 between utility scale solar (1,734 MW) and rooftop solar (471 MW). Total installed capacity for utility scale projects, rooftop solar and off-grid solar has reached 29,668 MW, 5,431 MW and 935 MW respectively.

Figure: Total installed and pipeline capacity at the end of September 2019, MW

State government NTPC offtake Public sector tenders 7,273 4,662 development SECI 130 offtake Central 5,083 government Public sector tenders development 11,333 1,091

Miscellaneous 497 Pipeline SECI offtake 22,451 Central 12,956 government Commissioned tenders 36,359 15,178 State government tenders 14,636

Rooftop solar 5,431 Others NTPC offtake Off-grid 4,071 2,092 solar 936

Source: BRIDGE TO INDIA research, MNRE Notes: ‘Others’ include projects executed under open access, REC and other miscellaneous categories. All project capacity numbers in this report are stated in AC MW, unless noted explicitly otherwise. For solar-wind hybrid projects, entire capacity is considered as solar capacity in this report.

The trend of slow capacity addition continued in Q3 2019. Actual utility scale capacity addition was 43% below our estimate of 3,034 MW. Delay in land acquisition, transmission system availability and debt ﬁnancing continue to be major bottlenecks.

© BRIDGE TO INDIA, 2019 Page 1 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure: Utility scale solar capacity addition, MW

4,000 3,833

3,000 2,919 2,435 2,082 1,856 1,885 2,000 1,104 1,734 1,178 990 1,000 720

0 9 0 e e 7 7 8 8 8 8 9 9 9 t t 1 2 1 1 1 1 1 1 1 1 1 a a 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 m m

i i 4 1 t t 3 4 1 2 3 4 1 2 3 s s Q Q Q Q Q Q Q Q Q Q Q e e

Central government tenders State government tenders Others

Source: BRIDGE TO INDIA research

Capacity addition continued to Installation activity should pick up gradually as 12,249 MW is scheduled to be slow in the quarter and is be completed over the next 12 months. But developers are likely to take likely to remain so until advantage of expiry of safeguard duty by July 2020 and we expect signiﬁcant delays in project completion. safeguard duty expires next

year Tender issuance has remained strong with new utility scale tenders aggregating 9,807 MW issued in Q3 2019. However, many tenders are getting undersubscribed due to operational challenges, low ceiling tariffs and loss of interest from the developers. Two tenders issued by GUVNL (750 MW and 200 MW) were undersubscribed due to unsuitable site conditions. SECI’s 1,200 MW ISTS tender and 2,000 MW PSU tender were also undersubscribed due to low market interest.

Rooftop solar has also slowed down considerably. A combination of unrelated factors including withdrawal of net metering from C&I consumers in many states, general elections in May 2019 and overall macro-economic weakness seem to have put off consumers. Our revised estimate for rooftop solar capacity addition during Q2 and Q3 is 986 MW, down 16% over the corresponding period last year.

Fortunately, capital costs are on the way down again. There was been a 13% reduction in costs across the value chain including modules, inverters and balance of systems (BOS) in comparison to last year.

On the policy front, the government has initiated action on pooling land to develop mega renewable parks in Gujarat and Rajasthan. Recent amendments in bidding guidelines are also favourable for the developers.

It is overall an excruciating time for the industry due to increasing policy uncertainty, delayed payments from DISCOMs and execution delays. Funding environment also remains tight and most developers are struggling to raise debt ﬁnancing.

© BRIDGE TO INDIA, 2019 Page 2 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. © BRIDGE TO INDIA, 2018 Page 8 1. Commissioned and pipeline capacity

India added 2,205 MW of solar power generation capacity in Q3 2019 taking total installed capacity to 36,359 MW by 30 September 2019. New capacity addition was split 79:21 between utility scale solar (1,734 MW) and rooftop solar – 471 MW (471 MW). Total utility scale, rooftop solar and off-grid solar capacity stands at 29,668 MW, 5,431 MW and 935 MW respectively.

Total project pipeline – projects allocated to project developers and at various stages of development – stood at 22,451 MW as on 30 September 2019. Figure 1.1: Total installed and pipeline capacity as on 30 September 2019, MW

State government NTPC offtake Public sector tenders 7,273 4,662 development SECI 130 offtake Central 5,083 government Public sector tenders development 11,333 1,091

Miscellaneous 497 Pipeline SECI offtake 22,451 Central 12,956 government Commissioned tenders 36,359 15,178 State government tenders 14,636

Rooftop solar 5,431 Others NTPC offtake Off-grid 4,071 2,092 solar 936

© BRIDGE TO INDIA, 2019 Page 4 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure 1.2: State-wise utility scale solar commissioned and pipeline capacity, MW

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Rajasthan Karnataka Telangana Andhra Pradesh Tamil Nadu Gujarat Madhya Pradesh Maharashtra Uttar Pradesh Punjab Odisha Others Uttarakhand Chhattisgarh Bihar West Bengal

Central government tenders State government tenders Pipeline ISTS Others ISTS

Source: BRIDGE TO INDIA research Notes: ‘Inter State Transmission System (ISTS)’ projects are connected to national grid. These projects are located mainly in Rajasthan and Gujarat, but power would be sold to other states.

Top 20 developers account for 61% of total commissioned capacity and 88% (75% in Q1 2019) of pipeline capacity. Adani is the largest developer with a commissioned capacity of 2,158 MW, closely followed by Acme (1,951) and Tata Power (1,654). SB Energy (2,130 MW), Acme (2,105 MW), ReNew (1,945 MW) and NTPC (1,933 MW) have the largest pipelines of all developers.

Figure 1.3: Top 20 developers by commissioned capacity, MW

4,000

2,000

0 i i r y e a a a e e e j g n C C N w i n m e r r r g e d n n n L f P E a g r t m u u u r a o w a t T t n c d e s l n z N D N e y p I a r o l

u n u E A A N v A e E l S A o a P F S

E e A

A s o Greenko a i B j r s T r r S Terraform e E d A o T n H o i p h a a h M S

Commissioned Pipeline

Source: BRIDGE TO INDIA research Note: Projects are assigned to developers based on current ownership.

© BRIDGE TO INDIA, 2019 Page 5 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 2. Capacity addition

1,734 MW of utility scale solar capacity was commissioned across 31 projects in Q3 2019, against our estimate of 3,134 MW. Capacity addition was split between state government tenders (1,159 MW, 67%), central government tenders (473 MW, 27%) and others (102 MW, 6%).

Figure 2.1: Utility scale solar capacity addition by type of tenders, MW

4,000 3,833

3,000 2,919 2,435 2,082 1,856 1,885 2,000 1,104 1,734 1,178 990 1,000 720

0 9 0 e e 7 7 8 8 8 8 9 9 9 t t 1 2 1 1 1 1 1 1 1 1 1 a a 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 m m

i i 4 1 t t 3 4 1 2 3 4 1 2 3 s s Q Q Q Q Q Q Q Q Q Q Q e e

Central government tenders State government tenders Others

Source: BRIDGE TO INDIA research

2.1 Performance of states

Rajasthan (553 MW) added the highest capacity, followed by Tamil Nadu (363 MW) and Karnataka (313 MW). Andhra Pradesh was a close fourth with 260 MW in the quarter.

Figure 2.2: State-wise utility scale solar capacity addition in Q3 2019, MW

600

400

200

0 l t a a a a a i h h u n a y r r s s k a n d r t m h h a a e e h a a h t a t d y d j d d N s a r T s a n u a a a a n a r r A j G r r M H P P a a a h R K a M Central government tenders State government tenders Others

Source: BRIDGE TO INDIA research

© BRIDGE TO INDIA, 2019 Page 6 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 2.2 Progress on key projects

Based on commissioning of schedules under different tenders and slippages from previous quarters, 3,134 MW of utility scale solar capacity was scheduled to be commissioned in Q3 2019.

However, due to problems in land acquisition and transmission connectivity, projects were not completed on schedule. Prominent tenders that missed target completion dates include TANGEDCO’s 1,500 MW Tamil Nadu tender (59% incomplete), MSEDCL 1,000 MW Maharastra tender (27% incomplete).

Figure 2.3: Capacity addition in Q3 2019 for key tenders, MW

Scheduled capacity addition 1,600 Actual capacity addition

1,200

800

400

- NTPC Andhra SECI Rajasthan KREDL TANGEDCO MSEDCL Pradesh 750 500 MW, Dec- Karnataka 650 Tamil Nadu Maharashtra MW, Apr-2018 2017 MW, Jul-2018 1,500 MW, Jul- 1,000 MW, Jun- 2017 2018

Central government tenders State government tenders

Source: BRIDGE TO INDIA research

We understand that NLC’s 709 MW project under TANGEDCO’s 1,500 MW tender (issued in May 2017) was physically complete, but only 358 MW was declared as commissioned by end September 2019.

Commissioning Details of key projects commissioned in the quarter are given below. progress

NTPC Andhra Pradesh 750 MW, Apr-2018 (Ananthapuram solar park: auction – Apr 2018, COD target – Aug 2019) 33% SB Energy commissioned 250 MW in September 2019. Remaining 500 MW (Ayana and Sprng, 250 MW each) is expected to be commissioned in Q4 2019.

SECI Rajasthan 500 MW tender (Bhadla solar park: auction – Dec 2017, COD target – Aug 2019) 60% 100 MW had been commissioned by SB Energy in Q2 2019. SB Energy and Hero Future each commissioned 100 MW in Q3 2019 on schedule. Hero Future’s 200 MW capacity is delayed and is expected to be commissioned in Q4 2019.

© BRIDGE TO INDIA, 2019 Page 7 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. KREDL Karnataka 650 MW tender (Pavagada solar park: auction – July 2018, COD target – Jun 2019) 100% Only 500 MW capacity was allocated under this tender (Tata Power and Fortum 250 MW capacity each). Fortum commissioned remaining 250 MW in Q3 2019. Tata Power commissioned 250 MW in Q2 2019.

TANGEDCO Tamil Nadu 1,500 MW tender (auction – Jul 2017, COD target – Aug 2019) 46% 330 MW capacity had been commissioned until June 2019. NLC India commissioned 159 MW in Q3 2019 (200 MW in Q2 2019). Remaining capacity (811 MW – ReNew, NLC, Atha group, and Hindustan Clean Power) is expected to be commissioned in next six months.

MSEDCL Maharashtra 1,000 MW tender (auction – Jun 2018, COD target – Aug 2019) 50% Adani, Azure, Tata Power and JLTM Energy commissioned 200 MW, 130 MW, 150 MW and 20 MW respectively in Q3 2019. Remaining 500 MW (ReNew 250 MW, Acme 250 MW) is expected to be commissioned in Q4 2019.

Other projects Amplus commissioned a 58 MW open access project in Haryana in Q3 2019.

Rooftop solar We estimate rooftop solar capacity addition of 471 MW in Q3 2019.

2.3 Estimate for next two quarters

Utility scale solar capacity of 2,919 MW and 2,435 MW is due for completion in Q3 and Q4 2019 respectively. We expect signiﬁcant slippages due to ongoing challenges related to ﬁnancing land and transmission. Plus, developers are likely to go slow on project execution until after safeguard duty expires in Q2 2020. Maximum capacity addition is expected in Rajasthan (ISTS tenders), Maharashtra and Andhra Pradesh.

Figure 2.4: Capacity addition estimate for Q4 2019 and Q1 2020, MW 1,600 Q4 2019 1,200 Q1 2020

800

400

t a a a a h n h h u l m a r & n s s k a d e

r t a a e a a e h L a r n a h s t t j d g d e a N s s a s

u a a n a l K a n A r r m i a j G r r l P P a a a r Islands a

e m d r a h R a K T a n a a b r T t A o h t M c d i U n N A

Source: BRIDGE TO INDIA research

Rooftop solar We expect about 350 MW and 520 MW of capacity to be added in Q4 2019 and Q1 2020 respectively.

© BRIDGE TO INDIA, 2019 Page 8 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 3. Leading players

3.1 Project developers

SB Energy (350 MW), Fortum (250 MW) and Adani (200 MW) were the leading project developers by capacity commissioned Q3 2019.

Figure 3.1: Leading developers by capacity commissioned in Q3 2019, MW

600

500

400

300

200

100

0 i r r y y a e e L C w n m e r r e g g r L f D e a r u r u u w w n t E t d e N e z N I o r o u R n A n e A o P P F

E E K R

s a o t B y r M a a S e T T R L H J

Central government tenders State government tenders

Source: BRIDGE TO INDIA research

3.2 Module suppliers

Risen (300 MW) was the leading module supplier for projects commissioned in Q3 2019. Suntech (210 MW) and ZNShine (195 MW) are the other leading players. Based on the data available, 56% of the modules were supplied by Chinese companies, while 22% were sourced from domestic manufacturers. Domestic module manufacturers’ share has been rising steadily, starting from just 6% in Q3 2018 due to safeguard duty and completion of projects with mandatory use of domestically manufactured modules produced panels.

© BRIDGE TO INDIA, 2019 Page 9 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure 3.2: Market share of module suppliers for projects commissioned in Q3 2019

NA 22% 13% Risen

9% Suntech Canadian Solar 2%

Yingli 2% 9% ZNShine Amerisolar 2% Emmvee 2% 8% Waaree Vikram 5% 7% Adani

Trina 6%

Jinko 6%

6% Csun

Domestic manufacturer

Source: BRIDGE TO INDIA research Note: Module market share is calculated for 2,272 MW of DC capacity. Where exact DC capacity is not available, it is assumed to be 1.30 times AC capacity.

3.3 Inverter suppliers

TMEIC was the leading inverter supplier for projects commissioned in Q3 2019 with total share of 487 MW. It was followed by Huawei (400 MW) and TBEA (313 MW).

Figure 3.3: Market share of inverter suppliers for projects commissioned in Q3 2019

Kehua 6% ABB 1%

NA 2% Kehua 6%

28% TMEIC Sungrow 18%

23% Huawei

TBEA 18%

Source: BRIDGE TO INDIA research

© BRIDGE TO INDIA, 2019 Page 10 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 3.4 EPC contractors

Sterling & Wilson was the largest EPC contractor (408 MW) by capacity commissioned in Q3 2019. It has maintained its leadership position over the last few quarters. B-Electric (250 MW), Adani (200 MW) and Tata Power (150 MW) were the other leaders in the EPC segment.

Figure 3.4: Market share of EPC contractors in Q1 2019

Self EPC 13% Fourth Partner 1%

BHEL 1% Enrich 2% 23% Sterling Oriano 3% &Wilson Amara Raja 3%

KEC International 6% 14% B-Electric

Rays Power Infra 6% 11% Adani Infra

Refex 8%

Tata Power 9%

Source: BRIDGE TO INDIA research Notes: Market share is calculated for 1,734 MW of AC capacity. Self-EPC denotes projects where EPC work is completed by developers (or their sister companies in-house) that do not undertake any third-party EPC work.

3.5 Domestic manufacturers

Total module production by domestic manufacturers is estimated at 1,077 MW in Q3 2019 (718 MW in Q2 2019). Adani (290 MW), Waaree (276) and Vikram Solar (212) were the largest domestic manufacturers. Figure 3.5: Market share of domestic module manufacturers in Q3

2019 Premier Solar

Navitas 2%

HHV 1% Tata Power 6%

Emmvee 7% 26% Adani

Goldi 7%

25% Waaree 19%

Vikram Solar Source: BRIDGE TO INDIA research

© BRIDGE TO INDIA, 2019 Page 11 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. © BRIDGE TO INDIA, 2018 Page 29 4. Tender progress

4.1 New tender issuance

Utility scale solar

Twenty utility scale solar tenders including 13 ground-mounted PV, 4 ﬂoating solar, 2 wind-solar hybrid and one solar-storage hybrid aggregating 9,807 MW capacity were issued in Q3 2019 (down 5% over Q2 2019). Three EPC tenders including 2 ground-mounted PV (45 MW) and one solar-storage tender (1.95 MW + 2.15 MWh storage) were also issued during the quarter. Figure 4.1: Utility scale solar tenders issued in Q3 2019, MW

Pan India tenders with ISTS connectivity 1. SECI pan India, 1,500 MW 2. SECI pan India, 1,200 MW (storage) 3. NTPC pan India, 1,200 MW 4. NHPC pan India, 2,000 MW

54 52 40 PEDA UREDA UID 275 500 113 SECI UPNEDA RRECL 20 250 20 NTPC BREDA 300 NTPC 25 TPL NHDC 1,350

MSEDCL MSEDCL 50 500 CEL

MSEDCL Central government tenders State government tenders Others

Floating solar Wind-solar hybrid Biomass-solar hybrid

2 Storage SECI Source: BRIDGE TO INDIA research Notes: AEML: Adani Energy Mumbai Limited BREDA: Bihar Renewable Energy Development Agency

CEL: Central Electronics Limited MSEDCL: Maharashtra State Electricity Distribution Company Limited NHDCL: Narmada Hydroelectric Development Corporation Limited PEDA: Punjab Energy Development Authority RRECL: Rajasthan Renewable Energy Corporation Limited TPL: Torrent Power Limited UID: Uttarakhand Irrigation Department UPNEDA: Uttar Pradesh Non-conventional Energy Development Agency UREDA: Uttarakhand Renewable Energy Development Agency

© BRIDGE TO INDIA, 2019 Page 13 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure 4.2: Capacity tendered in Q3 2019

SECI was the most active central agency issuing 2,977 MW of tenders in Q3 2019. Tender issuance activity by states (3,050 MW) was up 62% compared to Q2 2019.

By tendering authority By technology By development mode

Wind-solar hybrid 4% 1% Floating solar EPC 0.5%

Others 26% 30% SECI

13% NTPC States 31% 95% Ground-mounted PV 99.5% Project development

Source: BRIDGE TO INDIA research

Tender allocations slowed down in the quarter at 1,807 MW were down 47% compared to Q2 2019

Figure 4.3: Utility scale tender issuance and auctions, MW

25,000 Successful allocation Tender issuance

20,000

15,000

10,000

5,000

0 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019

Project development tenders EPC tenders

Source: BRIDGE TO INDIA research

© BRIDGE TO INDIA, 2019 Page 14 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Table 4.1: Key details of tenders issued in Q3 2019

Project development tenders

BREDA Bihar, 250 MW AEML pan India, 350 MW (wind-solar hybrid)

Tender issue date July 2019 July 2019

Tendering authority/ Offtaker BREDA/ Bihar DISCOM AEML/ AEML

Capacity 250 MW 350 MW

Location Bihar Pan India

Solar park availability No No

Allocation basis Tariff bidding (e-auction) Tariff bidding (e-auction)

Bid size 25 – 250 MW 50 – 350 MW

Ceiling tariff No No

Financial criteria 1. Minimum net worth of INR 50 Minimum net worth of INR 15 million/ MW million 2. Minimum annual turnover of INR 750 million

Deposits and bank guarantees 1. Earnest money deposit (EMD) - INR 1. EMD - INR 0.5 million/ MW 0.4 million/ MW 2. PBG - INR 2.0 million/ MW 2. Performance bank guarantee (PBG) - INR 20 million/ MW

UREDA Uttarakhand, 52 MW SECI Pan India, 1,500 MW

Tender issue date July 2019 August 2019

Tendering authority/ Offtaker UREDA/ Uttarakhand Power SECI/ Central and State PSU’s Corporation Limited

Capacity 52 MW 1,500 MW

Location Uttarakhand Pan India

Solar park availability No No

Allocation basis Tariff bidding (e-auction) VGF bidding (e-auction)

Bid size 5 – 52 MW 1 – 1,500 MW

Ceiling tariff INR 4.73/ kWh INR 3.50/kWh

Financial criteria Minimum net worth of INR 15 million/ MW 1. Minimum net worth of INR 12.5 million/ MW 2. Minimum annual turnover of INR 6.0 million/ MW or PBDIT of INR 1.2 million/ MW

Deposits and bank guarantees EMD - INR 0.5 million/ MW EMD - INR 0.4 million/ MW PBG - INR 0.5 million/ MW PBG – 50% of total VGF amount sanctioned

© BRIDGE TO INDIA, 2019 Page 15 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. SECI pan India, 1,200 MW (storage) TPL Gujarat, 300 MW

Tender issue date August 2019 August 2019

Tendering authority/ Offtaker SECI/ SECI TPL/ TPL

Capacity 1,200 MW 300 MW

Location Pan India Pan India

Solar park availability No No

Allocation basis Tariff bidding (e-auction) Tariff bidding (e-auction)

Bid size 50 – 600 MW 50 – 150 MW

Ceiling tariff No No

Financial criteria 1. Minimum net worth of INR 10.7 Minimum net worth of INR 15 million/ MW million/ MW 2. Minimum annual turnover of INR 10.2 million/ MW or PBDIT of INR 2.0 million/ MW or line of credit of 2.5 million/ MW

Deposits and bank guarantees EMD - INR 0.6 million/ MW EMD - INR 1.0 million/ MW PBG - INR 3.0 million/ MW PBG - INR 2.5 million/ MW

NTPC pan India, 1,200 MW SECI Uttar Pradesh, 275 MW

Tender issue date August 2019 August 2019

Tendering authority/ Offtaker NTPC/ NTPC SECI/ UP DISCOM

Capacity 1,200 MW 275 MW

Location Pan India Uttar Pradesh solar park

Solar park availability No Yes

Allocation basis Tariff bidding (e-auction) Tariff bidding (e-auction)

Bid size 50 – 600 MW 50 – 275 MW

Ceiling tariff INR 2.65/ kWh INR 2.93/ kWh

Financial criteria 1. Minimum net worth of INR 10.7 i. Minimum net worth of INR 10.7 million/ MW million/ MW 2. Minimum annual turnover of INR 5.0 ii. Minimum annual turnover of INR 5.0 million/ MW or PBDIT of INR 1.0 million/ MW or PBDIT of INR 1.0 million/ MW million/ MW

Deposits and bank guarantees EMD - INR 0.4 million/ MW EMD - INR 0.4 million/ MW PBG - INR 2.0 million/ MW PBG - INR 1.6 million/ MW

© BRIDGE TO INDIA, 2019 Page 16 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. UID Uttarakhand, 40 MW NHPC Pan India, 2,000 MW (ﬂoating solar)

Tender issue date August 2019 August 2019

Tendering authority/ Offtaker UID/ Uttarakhand Power NHPC/ NHPC Corporation Limited

Capacity 40 MW 2,000 MW

Location Uttarakhand Pan India

Solar park availability No No

Allocation basis Tariff bidding (e-auction) Tariff bidding (e-auction)

Bid size 40 – 40 MW 50 – 2,000 MW

Ceiling tariff No INR 2.95/ kWh

Financial criteria 1. Minimum net worth of INR 6.8 1. Minimum net worth of INR 10 million/ MW million/ MW 2. Minimum annual turnover of INR 2. Minimum annual turnover of INR 5.0 805 million million/ MW or PBDIT of INR 1.0 mi llion/ MW or line of credit of 1.25 million/ MW

Deposits and bank guarantees EMD - INR 0.8 million/ MW EMD - INR 1.0 million/ MW PBG - INR 0.8 million/ MW PBG - INR 2.5 million/ MW

MSEDCL Maharashtra, 500 MW MSEDCL Maharashtra, 1,350 MW

Tender issue date August 2019 August 2019

Tendering authority/ Offtaker MSEDCL/ Maharashtra DISCOM MSEDCL/ Maharashtra DISCOM

Capacity 500 MW 1,350 MW

Location Pan India Various sub stations in Maharashtra

Solar park availability No No

Allocation basis Tariff bidding (e-auction) Tariff bidding (e-auction)

Bid size 5 – 500 MW 25 – 50 MW

Ceiling tariff INR 2.80/ kWh INR 3.15/ kWh

Financial criteria 1. Minimum net worth of INR 5.5 1. Minimum net worth of INR 5.2 million/ MW million/ MW 2. Minimum annual turnover of INR 2.5 2. Minimum annual turnover of INR 2.5 million/ MW or PBDIT of INR 1 million/ MW or PBDIT of INR 1.0 million/ MW or line of credit of 1.25 million/ MW or line of credit of 1.25 million/ MW million/ MW

Deposits and bank guarantees EMD - INR 0.5 million/ MW EMD - INR 0.5 million/ MW PBG - INR 1.4 million/ MW PBG - INR 2.0 million/ MW

© BRIDGE TO INDIA, 2019 Page 17 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. MSEDCL Maharashtra, 60 MW RRECL Rajasthan, 113.5 MW (wind solar hybrid)

Tender issue date August 2019 September 2019

Tendering authority/ Offtaker MSEDCL/ Maharashtra DISCOM RRECL/ Rajasthan DISCOM

Capacity 60 MW 113.5 MW

Location Beed district, Maharashtra Various sub stations within Maharashtra

Solar park availability No No

Allocation basis Tariff bidding (e-auction) Tariff bidding (e-auction)

Bid size 5 – 60 MW 0.5 – 2 MW

Ceiling tariff INR 2.80/ kWh No

Financial criteria Minimum net worth of INR 9.5 million/ Minimum net worth of INR 10.0 million/ MW MW Deposits and bank guarantees EMD - INR 1.0 million/ MW EMD - INR 0.5 million/ MW PBG - INR 2.0 million/ MW PBG - INR 1.0 million / MW

UPNEDA Uttar Pradesh, 500 MW

Tender issue date September 2019

Tendering authority/ Offtaker UPNEDA/ UPPCL

Capacity 500 MW

Location Uttar Pradesh

Solar park availability No

Allocation basis Tariff bidding (e-auction)

Bid size 5 – 500 MW

Ceiling tariff INR 3.25/ kWh

Financial criteria Minimum net worth of INR 6.8 million/ MW

Deposits and bank guarantees EMD - INR 0.7 million/ MW PBG - INR 1.7 million/ MW

© BRIDGE TO INDIA, 2019 Page 18 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. EPC tenders

NTPC Uttar Pradesh, 20 MW NHDCL Madhya Pradesh, 25 MW (ﬂoating solar) (ﬂoating solar)

Tender issue date July 2019 July 2019

Tendering authority/ Offtaker NTPC/ NTPC NHDCL/ UPPCL

Capacity 20 MW 25 MW

Location Rihand dam, Uttar Pradesh Omkareshwar reservoir in Madhya Pradesh

Tender scope EPC and O&M EPC and O&M for ﬁve years

Allocation basis EPC and O&M price bid EPC and O&M price bid

Solar park availability No No

Bid size 20 MW 25 MW

Benchmark cost No No

Financial criteria NA Minimum annual turnover of INR 2.6 billion

Deposits and bank guarantees NA EMD - INR 15 million PBG - 5% of contract value

SECI Lakshadweep, 1.95 MW CEL Maharashtra, 50 MW (with 2.15 MWh storage)

Tender issue date September 2019 September 2019

Tendering authority/ Offtaker SECI/ Lakshadweep DISCOM CEL/ Maharashtra DISCOM

Capacity 1.95 MW 50 MW

Location Lakshadweep

Tender scope EPC and O&M for ten years EPC and O&M for ten years

Allocation basis EPC and O&M price bid EPC and O&M price bid

Solar park availability No No

Bid size 1.95 MW 1 – 10 MW

Benchmark cost No No

Financial criteria 1. Positive net worth Minimum cumulative turnover of INR 2. Minimum annual turnover of INR 120 million in last 3 ﬁnancial years 76.8 million or working capital of INR 49.1 million

Deposits and bank guarantees EMD - INR 3.9 million EMD - INR 1.0 million/ MW PBG - 10% of contract value

Rooftop solar tenders (capacity > 5 MW) Seven rooftop tenders (total 126 MW) were issued in Q3 2019 (21.5 MW in Q2 2019).

© BRIDGE TO INDIA, 2019 Page 19 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Table 4.2: Rooftop solar tenders issued in Q3 2019

Issuing authority State Capacity (MW) Project type

RRECL Rajasthan 50 OPEX

UPNEDA Uttar Pradesh 25 OPEX

MPUVNL Madhya Pradesh 18 OPEX

NREDCAP Andhra Pradesh 15 OPEX

AEDA Assam 8 CAPEX

TSREDCL Telangana 5 CAPEX

APDCL Assam 5 CAPEX

Source: BRIDGE TO INDIA research

4.2 Auction results

Successful auctions were held for ﬁve project development tenders and two EPC tenders (total capacity 1,897 MW, down 48% over Q2 2019) in Q3 2019. NTPC, SB Energy, and Avaada together won 72% of the awarded capacity.

Figure 4.4: Project development capacity allocation, MW

Sukhbir Agro 50 MW

Tata Power 50 MW Others 63 MW

SCCL 90 MW

GSECL 100 MW

GRT Jewellers 150 MW 769.4 MW NTPC

Avaada 200 MW

SB Energy 330 MW Source: BRIDGE TO INDIA research

Tenders are undersubscribed due to various issues related to connectivity, land availability and low ceiling tariff. Tenders issued by GUVNL (750 MW and 200 MW) were undersubscribed due to unsuitable land. SECI’s 1,200 MW ISTS and 2,000 MW PSU tenders were also undersubscribed due to low market interest.

© BRIDGE TO INDIA, 2019 Page 20 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure 4.5: Auction results, INR/ kWh

Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 4.00 3.60

3.50 3.29 3.23 3.13 3.08 3.02 2.95 2.92 2.91 2.91 2.89 2.89 2.83 2.83

3.00 2.77 2.75 2.75 2.75 2.70 2.68 2.70 2.69 2.65 2.65 2.61 2.60 2.55 2.50 2.49 2.45 2.50

2.00

1.50

1.00

0.50

0.00 9 8 9 8 9 8 8 8 8 8 8 8 9 8 9 8 8 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 ------t t t v r c c c b p n g g g b b p c c c a o e e e e e e e e a u u u O O O J F F F S S A A A

N D D D

, ,

, , , , , , , , , , , , , , I I I I W I I

V V I W W W I

I W W W W W W W

M W M M

M W W M

M M M M M M

W W

W 0 M 0 0 0 0 M 0 M 0 0

0 0 6 0 M

0 M 0 0

0 0 0 5 5

2 5 0 0 a 5 1

1 0

1 5 0 0 0 0 0

7 0

0 , s , , 0

a 0 0 5 i h a 0 a 2 5 1 h , 2 2 k h n 2

, k 5 h s 7 k

, s t

2 s a a

a 1 t d a a e a t t a

1 i i e e a t r h

a t d a a a O r t a t i d d d d a

a r i a r a a n s i h a d a n n n r a j A d a n r I I r r a j s d r j

n j r u I n P a D a u a

I n P P u

n n a a I

G r r K E

a a G n r K

G r K R

n a

n R a L a a P P L t a h L L L t t a L t O P N t t a D C I

P C C N D N BREDA Bihar 250 MW, Aug 2019

P U D V

E U E

U V E P P M V

E C I

A U S R C I T T A R C I U U E R C I E G GUVNL, Gujarat, 750 MW, Aug-2019 GUVNL, Gujarat, 200 MW, Aug-2019 K D E N N G K G D S GUVNL Gujarat 700 MW III, May-2019 K C L E S SECI Rajasthan, 750 MW, II, Jun-2019 E SECI Maharashtra 250 MW, May-2019 SECI Pan India 1,200 MW II, May-2019 SECI Pan India 1,200 MW IV, Jun-2019 S GUVNL Gujarat 1,000 MW V, May-2019 E D S GUVNL Gujarat, 1,000 MW II, May-2019 N SECI, Pan India, 1,200 MW V, Aug-2019 N E P P S SECI, Pan India, 1,800 MW, VIII, Aug-2019 U UPNEDA Uttar Pradesh 500 MW, Jun-2019 U M

Source: BRIDGE TO INDIA research

BREDA Bihar 250 MW tender (auction date: 19 August 2019) The projects were successfully bid by Sukhbir Agro (50 MW, INR 3.58/ kWh), and Avaada (200, 3.60) but tariff was reduced to INR 3.45/ kWh after post-auction negotiations.

GUVNL Gujarat 750 MW tender (Dholera solar park, auction date: 21 August 2019) The tender was undersubscribed with only 50 MW of capacity awarded to Tata Power at INR 2.75/ kWh. This was despite GUVNL reducing solar park charges by 47% as the ceiling tariff (INR 2.75/ kWh) was perceived to be too low by developers.

GUVNL Gujarat 200 MW tender (Raghanesda solar park, auction date: 21 August 2019) The tender was undersubscribed and only 100 MW capacity was awarded to Gujarat State Electricity Corporation Limited (GSECL) at INR 2.65/ kWh. Solar park charges for this tender were also lowered by 47%, but developer interest was subdued due to low ceiling tariff (INR 2.65/ kWh).

© BRIDGE TO INDIA, 2019 Page 21 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. SECI pan India 1,200 MW tender (auction date: 28 August 2019) Bids were submitted for only 600 MW capacity and the auction was conducted for 480 MW. The projects were allocated to SB Energy (330 MW, INR 2.65/ kWh) and GRT Jewellers (150, 2.53).

SECI pan India 2,000 MW tender, (PSU scheme) (auction date: 26 September 2019) Auction was conducted for only 922 MW. The projects were allocated to NTPC (769 MW, VGF of INR 7.00 million/ MW), SCCL (90, 6.00), Assam Power Distribution (30, 6.80), NHDC (25, 5.50), Nalanda University (5, 6.99) and DMRC (3, 6.97).

NTPC ﬂoating solar EPC tenders TATA Power (70 MW) and BHEL (25 MW) won EPC contracts in Kerala and Andhra Pradesh respectively under two separate tenders.

4.3 Tenders pending allocation

58 utility scale tenders with a total capacity of 29,952 MW were pending allocation as on 30 September 2019.

Table 4.3: Tenders pending allocation

Tendering authority Capacity, MW Date of tender Location Solar park issuance availability

Project development tenders

SECI 7,500 Q4 2018 Jammu & Kashmir No 6,000 (Manufacturing-linked) Q2 2019 Pan India (ISTS) No

1,200 Q2 2019 Pan India (ISTS) No 500 Q2 2019 Tamil Nadu No 2 Q2 2019 Jammu & Kashmir No 1,500 Q3 2019 Pan India (ISTS) No 1,200 Q3 2019 Pan India (ISTS) No 275 Q3 2019 Uttar Pradesh Yes

NTPC 8 Q1 2018 Andaman & Nicobar Islands No 1,200 Q4 2018 Pan India (ISTS) No 1,200 Q3 2019 Pan India (ISTS) No 20 Q3 2019 Uttar Pradesh No MAHAGENCO 750 Q2 2018 Maharashtra No 100 Q4 2018 Maharashtra No

MSEDCL 100 Q1 2019 Maharashtra No

1,350 Q3 2019 Maharashtra No

500 Q3 2019 Maharashtra No

60 Q3 2019 Maharashtra No

REMCL 50 Q3 2018 Chhattisgarh No

140 Q2 2019 Gujarat, Karnataka No and Madhya Pradesh

© BRIDGE TO INDIA, 2019 Page 22 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Tendering authority Capacity, MW Date of tender Location Solar park issuance availability

NHPC 2,000 Q3 2019 Pan India (ISTS) No

Railway Energy Management 113.5 Q3 2019 Rajasthan No Company Limited AEML 350 Q1 2019 Maharashtra No 350 Q3 2019 Maharashtra No UID 40 Q1 2019 Uttarakhand No 40 Q3 2019 Uttarakhand No

Haryana Power Generation 10 Q1 2019 Haryana No Corporation Limited

UREDA 200 Q1 2019 Uttarakhand No

MAHAGENCO 184 Q1 2019 Maharashtra No

PEDA 54 Q2 2019 Punjab No

APGENCO 10 Q2 2019 Andhra Pradesh No

TPL 300 Q3 2019 Gujarat No

UPNEDA 500 Q3 2019 Uttar Pradesh No

UREDA 52 Q3 2019 Uttarakhand No

Sub-total 28,859

Tendering authority Capacity, MW Date of tender Location Solar park issuance availability

EPC tenders

SECI 10 Q2 2018 Karnataka No 50 Q1 2019 Kerala Yes 1.95 Q3 2019 Lakshadweep No NTPC 22 Q2 2018 Uttar Pradesh No 21 Q2 2018 Gujarat No 15 Q2 2018 Telangana No 174 Q4 2018 Karnataka No 100 Q4 2018 Telangana No 20 Q4 2018 Uttar Pradesh No 20 Q1 2019 Rajasthan No 15 Q1 2019 Himachal Pradesh No CEL 100 Q2 2018 Maharashtra No 50 Q3 2018 Maharashtra No 11 Q1 2019 Maharashtra No 50 Q3 2019 Maharashtra No

Indian Oil Corporation 5 Q3 2018 Rajasthan No

Tirupati Smart City 4 Q3 2018 Andhra Pradesh No Corporation

Greater Visakhapatnam Smart 15 Q4 2018 Andhra Pradesh No City Corporation Vijayawada Municipal 15 Q4 2018 Andhra Pradesh No Corporation

© BRIDGE TO INDIA, 2019 Page 23 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Tendering authority Capacity, MW Date of tender Location Solar park issuance availability

KREDL 50 Q4 2018 Karnataka Yes

NHPC 32 Q4 2018 Uttar Pradesh No

40 Q2 2019 Odisha No MAHAGENCO 138 Q1 2019 Maharashtra No NHDCL 25 Q3 2019 Madhya Pradesh No

Sub-total 1,094

Total 29,952

Source: BRIDGE TO INDIA research

4.4 Tender cancellations SECI’s 160 MW wind-solar-storage hybrid tender by the state.

© BRIDGE TO INDIA, 2019 Page 24 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. © BRIDGE TO INDIA, 2018 Page 32 5. Pricing

5.1 Modules

Module prices dropped to USD 0.21/ Wp during the quarter, a reduction of 13% y-o-y. Slowdown in capacity addition in China has led to decline in module prices. We expect module prices to dip further over the next two quarters.

Figure 5.1: BTI India Module Price Index, US cents/ W

40.0 36.0 Net annual reduction 34.0 33.0 33.0 of 13% 35.0 30.0 30.0 27.0 23.0 25.0 22.0 20.0 20.0 19.5 24.0 20.0 21.0 15.0 10.0 5.0 0.0 9 9 9 8 8 8 8 7 7 7 7 e e t t 1 1 1 1 1 1 1 1 1 1 1 a a 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 m m

i i 3 2 1 4 3 2 1 4 3 2 1 t t s s Q Q Q Q Q Q Q Q Q Q Q e e

0 9 2 1 0 0 2 2

1 4 Q Q Source: BRIDGE TO INDIA research Note: These prices are for imported multi-crystalline modules on a CIF basis before any local tax or duty.

5.2 Inverters

Inverter prices marginally rose marginally to INR 1.47/ W in Q3 2019 but are expected to reduce by 5% over the next two quarters.

Figure 5.2: BTI India Solar Inverter Price Index, INR/ W

2.00 1.90 1.80 1.80 1.70 1.50 1.60 1.80 1.80 1.80 1.47 1.40 1.58 1.20 1.45 1.45

0.80

0.40

0.00 7 7 7 7 8 8 8 8 9 9 9 p P 0 1 1 1 1 1 1 1 1 1 1 1 9 0 0 0 0 0 0 0 0 0 0 0 2 1 0 2 2 2 2 2 2 2 2 2 2 2 0

2 2

1 2 3 4 1 2 3 4 1 2 3

1 4 Q Q Q Q Q Q Q Q Q Q Q Q Q

Source: BRIDGE TO INDIA research Note: These prices are before any local tax or duties.

© BRIDGE TO INDIA, 2019 Page 26 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 5.3 EPC cost

EPC cost for utility scale projects fell to INR 29/ Wp (10% drop from Q2 2019) mainly due to falling equipment cost and lower safeguard duty. Reducing safeguard duty and falling BOS prices are expected to push total EPC cost down further over the next two quarters.

Figure 5.3: BTI India Solar EPC Cost Index, INR/ Wp Net annual reduction 45.0 41.0 of 11% 38.9 39.9 36.1 34.0 34.7 35.0 30.8 31.7 29.0 27.5 26.1 32.1 28.5 25.0

15.0

5.0

9 9 9 8 8 8 8 7 7 7 7

e e

t t

1 1 1 1 1 1 1 1 1 1 1

a a

0 0 0 0 0 0 0 0 0 0 0

2 2 2 2 2 2 2 2 2 2 2

m m

i i

3 2 1 4 3 2 1 4 3 2 1

t t

s s

Q Q Q Q Q Q Q Q Q Q Q

e e

0 9

2 1

0 0

2 2

1 4

Q Q Source: BRIDGE TO INDIA research Note: EPC cost includes GST and safeguard duty, as applicable in each quarter.

Average EPC cost for rooftop solar dipped to INR 35/ Wp (down 8% over Q2 2019). We expect EPC cost to drop over the next two quarters due to falling module and inverter prices, as well as a reduction in safeguard duty.

Figure 5.4: BTI India Rooftop Solar EPC Cost Index, INR/ Wp

50.0 45.0 46.0 47.0 46.0 43.0 41.0 39.0 37.0 38.0 38.0 40.0 35.0 33.6 32.3 30.0

20.0

10.0

0.0 7 7 7 7 8 8 8 8 9 9 9 e e t t 1 1 1 1 1 1 1 1 1 1 1 a a 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 m m

i i 2 3 4 1 2 3 4 1 2 3 1 t t s s Q Q Q Q Q Q Q Q Q Q Q 9 e 0 e 1 2 0 0 2 2

1 4 Q Q Source: BRIDGE TO INDIA research Note: EPC cost includes GST and safeguard duty, as applicable in each quarter.

© BRIDGE TO INDIA, 2019 Page 27 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 6. Funding

6.1 Equity funding

Private equity (PE)

There was only one major deal announced in the quarter. GIC and Abu Dhabi Investment Authority (ADIA) invested a further USD 329 million in Greenko, in addition to USD 495 million invested Q2 2019.

Figure 6.1: PE fund ﬂow in the Indian solar sector, USD million

900

800

700

600

500

400

300

200

100

0 9 9 9 8 8 8 8 7 7 7 7 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2

3 2 1 4 3 2 1 4 3 2 1 Q Q Q Q Q Q Q Q Q Q Q

Source: BRIDGE TO INDIA research

Table 6.1: PE transactions in the sector

Company Investor Amount, USD Quarter million SolarArise Thomas Lloyd NA Q4 2018 Freyr Energy Services Ltd. C4D Partners 3.81 Q4 2018 Avaada Energy ADB 50 Q1 2019 ZunRoof Livspace, Intelle Grow NA Q1 2019 ZunRoof Godrej 1.2 Q1 2019 Cleantech project SPV Exide 2.8 30% STAKE Q1 2019

Cleanmax Solar United Kingdom Climate 39 Q2 2019 Investments LLP

Avaada Energy ADB, DEG, FMO 144 Q2 2019 AMP Solar project SPV Cipla 1.85 (26% stake) Q2 2019 Greenko GIC, ADIA 329 Q3 2019

Source: BRIDGE TO INDIA research

© BRIDGE TO INDIA, 2019 Page 28 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Mezzanine capital

There was no mezzanine deal in Q3 2019.

Initial public offerings (IPO)

Sterling & Wilson launched the ﬁrst major renewable energy IPO in many years. The company was intending to raise INR 31.25 billion (USD 440 million) from the markets, but the offer saw only 85% subscription due to weak market conditions, and high perceived valuation. The stock opened on a weak note and ended at INR 726 on opening day compared to its issue price of INR 780. It ended the quarter down by 10% and continues to trade below offer price.

Gensol Engineering, an engineering services company, raised INR 170 million (USD 2.4 million) from the markets for a 25% stake sale. The offer was oversubscribed 1.25 times. The listing date for the stock is 15 October 2019.

Energy Efﬁciency Services Ltd. (EESL) is also planning to raise INR 50 billion (USD 705 million) through the IPO route in early 2020.

Capital markets

Among the listed IPPs, Azure traded broadly in line with its benchmark index but started rising above the benchmark index towards the middle of the quarter. It ended the quarter 14% higher in absolute terms. Adani Green traded above its benchmark throughout the quarter and ended the quarter 28% higher than at the beginning of the quarter.

Figure 6.2. Renewable stock trading pattern vs indices

140 120 100 80 60 40 20 0 Jul-19 Aug-19 Sep-19 Jul-19 Aug-19 Sep-19 Aug-19 Sep-19

Azure NYSE Adani NSE Sterling & Wilson NSE

Source: BRIDGE TO INDIA research, www.investing.com

6.2 Debt funding

State Bank of India cut its marginal cost of funds-based lending rate (MCLR) thrice in the quarter, by ﬁve, ﬁfteen and ten basis points to 8.15% by the end of the quarter.

Solar projects can raise up to 20-year INR denominated project finance debt at a cost of around 11-12% per annum. Debt funding environment remains very challenging due to tight liquidity in the financial markets and concerns over financial position of DISCOMs.

© BRIDGE TO INDIA, 2019 Page 29 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure 6.3: State Bank of India MCLR

8.60 8.50 8.40 8.30 8.20 8.10 8.00 7.90 7.80 7.70 7.60 Jul 2018 Jul 2019 Oct 2018 Apr 2018 Apr 2019 Jan 2019 Jan 2018

Source: State Bank of India

Offshore debt funding

There were three green bond issuances by Greenko (two) and Azure (one) aggregating USD 1.65 billion. The bonds were issued at a cost of between 5.65-6.67%. The developers have been keen to tap into green bonds to free up bank lines for their pipeline projects. However, this option is available to only select developers with the necessary scale and reputation.

Table 6.2: Offshore debt funding deals

Company/ entity Facility Amount, Quarter USD million Rural Electriﬁcation Corporation Bond offering 700 Q4 2018

Oakridge Energy Maanaveeya Development & Finance - Q4 2018

ReNew Green bonds 375 Q1 2019

Bank of Baroda Loan from KfW 113 Q1 2019

Tata Cleantech Capital Green bonds from FMO 26 Q1 2019

Azure Power Debt from IFC, FMO & OeEB 135 Q2 2019

Clean Step Power (Hero Future Energies) IFC 43.3 Q2 2019

Greenko Green bonds 950 Q3 2019

Greenko Green bonds 350 Q3 2019

Azure Power Green bonds 350 Q3 2019

Source: BRIDGE TO INDIA research

© BRIDGE TO INDIA, 2019 Page 30 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 6.3 Mergers and acquisitions

There was only one M&A deal in Q3 2019. Adani Green Energy acquired 100% stake in 10 projects owned by Essel Infra with a total operational capacity of 205 MW at an enterprise value of USD 183 million. The deal is expected to close by mid-October 2019. Essel Infra is also looking to sell its remaining solar portfolio of 480 MW.

Table 6.3: M&A transactions in Indian solar sector

Investor/ acquirer Company Capacity Stake Deal value, Quarter acquired USD million ReNew Ostro Energy 1,100 MW 100% 1,550 Q2 2018

Hinduja National Power Kiran Energy 85 MW 100% 136 Q2 2018

Statkraft BLP Bharat Light & Power 35 MW 50% - Q2 2018

Greenko Orange Renewable 140 MW 100% 850 Q3 2018

CLP India Suzlon project SPV 70 MW 49% - Q3 2018

Canadian Solar Suzlon project SPV 30 MW 51% 4 Q4 2018

CLP India Suzlon project SPV 20 MW 51% 2 Q4 2018

Engie Simpa Energy India - 90% - Q4 2018

Reliance Industrial Investments Kanoda Energy - 88% 11 Q4 2018 Systems

Sprng Energy Shapoorji Pallonji 194 MW 100% 200 Q1 2019

CLP India Suzlon project SPV 150 MW 51% 14 Q1 2019

AMP Solar Suzlon project SPV 15 MW 51% 2 Q1 2019

Adani Green Energy First Solar project SPV 20 MW 51% 0.2 Q1 2019

Petronas Amplus Energy 500 MW 100% 392 Q2 2019

Ostro Energy (ReNew) Suzlon project SPV 20 MW & 10 MW 49% 2 Q2 2019

Adani Green Energy Essel Infra project SPV 205 MW 100% 183 Q3 2019

Source: BRIDGE TO INDIA research; company press releases

© BRIDGE TO INDIA, 2019 Page 31 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. © BRIDGE TO INDIA, 2018 Page 15 7. Policy and regulations

This quarter witnessed slightly increased activity on policy and regulatory front in comparison to the previous quarter.

7.1 Central government

7.1.1 Amendment in guidelines for tariff-based competitive bidding process for wind power projects

The Ministry of Power has amended tariff-based bidding guidelines for wind power projects. The changes are relatively minor but positive for project developers:

- Land possession and related activities are required to be completed on or before scheduled commissioning date (as against seven months earlier);

- Declared CUF can be revised once within three years of COD (previously, one year);

- Penalty for shortfall in energy output has been ﬁxed at 50% of PPA tariff (previously, 75% of PPA tariff);

- Commissioning deadline has been deﬁned as 18 months from date of execution of PPA or power sale agreement, whichever is later (previously, 7 months from the date of execution of PPA);

- On early commissioning, the procurer may purchase power output at full PPA tariff (previously, 75% of full PPA tariff).

Project developers would welcome these changes as they have been grappling with extensive delays owing to challenges relating to land allocation, transmission connectivity and debt ﬁnancing. Funding woes of some wind turbine manufacturers have also contributed to the execution problems.

7.1.2 Modiﬁcation in scheme for development of solar parks and ultra-mega solar power projects for central public sector undertaking (CPSU) units

MNRE has modiﬁed the solar parks scheme to allow CPSUs to pool land from central or state government agencies to set up solar parks. Earlier, land had to be compulsorily owned by the CPSUs for development of any solar parks. Financial closure and issue of tender to build internal infrastructure of the solar park is required to be completed within 12 months of issue of solar park status. The move assumes signiﬁcance in light of various bottlenecks faced in solar park development and the Indian government’s recent initiative to restrict subsidy support to only SECI parks.

7.1.3 MNRE issues clariﬁcation on compensation by DISCOMs to RE generators in case of non-drawal of power

MNRE has clariﬁed that if DISCOMs are not able to draw contracted power from RE projects, they will be required to compensate the projects for 100% lost revenues based on declared CUF or pro-rated

© BRIDGE TO INDIA, 2019 Page 33 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. actual power output in the last 12 months. This follows a direction issued to all states to ensure ‘must-run’ status of wind and solar power plants in light of several instances of curtailment.

RE curtailment is legally permissible only in the event of grid safety and physical security. However, the provision has been abused by several state government agencies and the Government of India is trying to curb this practice.

7.1.4 Issue of draft National Resource Efﬁciency Policy

Ministry of Environment, Forests and Climate Change (MOEFCC) has proposed to establish solar panel recycling infrastructure to deal with growing volume of PV waste. As in the current e-waste policy, it has proposed that module manufacturers would be held responsible for end of life recycling of panels. The policy proposes targets 85% recovery rate from recycling of modules. It also envisages establishment of 4 major recycling centres by 2020 and 8 centres by 2030.

BRIDGE TO INDIA estimates that PV waste volume in India would grow to 200,000 tonnes by 2030 and around 1.8 million tonnes by 2050. Use of potentially hazardous material in manufacturing and lack of commercially viable module recycling technologies warrant a strong regulatory approach to this problem. The policy initiative is much needed and consistent with efforts undertaken in other countries.

7.1.5 Proposal for basic customs duty (BCD) on imports of modules, cells and other components

MNRE has recommended imposition of BCD, starting at 10% in 2021 and ramping up to 30% by 2023-24, on cells and modules. 15% duty is also proposed on components such as glass, metal frames, silver paste, EVA, wafers, structures and other raw materials.

The long implementation time seems designed to give module manufacturers enough time to plan their investments and ensure no adverse impact on current project pipeline. Another potential beneﬁt of the long implementation timeline is that if module prices fall sufﬁciently during the gestation period, the cost impact on solar power would not be overly negative. In the interim period, the government seems to be banking on existing PSU, KUSUM and rooftop phase II schemes to sustain demand for domestically manufactured modules.

The proposal has been submitted by MNRE to the Ministry of Finance. However, we understand that BCD may only be imposed if PV products are declassiﬁed from inclusion under IT products at the World Trade Organisation (WTO), which could be a difﬁcult and protracted process.

7.2 State government 7.2.1 Announcement of a residential solar scheme in Gujarat

Gujarat has announced a new residential rooftop solar scheme with a target of 200,000 installations by March 2020 and 800,000

© BRIDGE TO INDIA, 2019 Page 34 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. installations by March 2022. In line with phase 2 of MNRE’s grid connected rooftop solar programme, the state government is proposing a capital subsidy of 40% for systems up to 3 kW in size and 20% for systems between 3-10 kW in size. Surplus power output would be purchased by DISCOMs at INR 2.25/ kWh for a contract period of 25 years.

It is encouraging to see Gujarat taking lead on residential rooftop solar. Other states are likely to follow with similar initiatives. This market has been relatively small, but we believe that there is a vast untapped potential and expect growth to pick up in the next 1-2 years.

7.2.2 New regulations for captive and renewable energy plants in Uttar Pradesh

The regulations grant the right to ‘open access’ to solar power projects (excluding rooftop solar plants). Key provisions include:

i 100% banking of energy is allowed, with banking charges set at 6% for solar plants;

ii No waiver for OA costs.

This is the ﬁrst time UPERC has issued regulations for captive and renewable energy plants. The policy contains standard provisions and exemptions (CSS, additional surcharge) that most states follow, but does not provide targets for RE generation.

7.3 Others

7.3.1 Extention in deadline for BIS certiﬁcation of solar inverters

MNRE has extended deadline for certification of solar inverters from 31 September 2019 to 31 December 2019. The extension has been necessitated by lack of certified laboratories and testing facilities – similar problems faced by module manufacturers. Earlier, the deadline for module certification was also revised several times and took nearly 2 years to come into force.

We expect similar challenges in certiﬁcation of solar pumps under KUSUM and Approved List of Modules and Manufacturers (ALMM) policy for PV modules and cells.

7.3.2 Reduction in benchmark cost for rooftop solar systems

MNRE has issued benchmark costs for rooftop solar systems for FY 2019-20. The revised costs are about 13% lower in comparison to last year:

– 1-10 kW size: INR 54/ Wp (2018-19: INR 60/ Wp) – 10-100 kW size: INR 48/ Wp (2018-19: INR 55/ Wp) – 100-500 kW size: INR 45/ Wp (2018-19: INR 53/ Wp)

Benchmark costs are provided as a guide to procurement agencies and also used to calculate subsidy amount provided under various central or state government ﬁnancial assistance schemes.

© BRIDGE TO INDIA, 2019 Page 35 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. 8. Market trends and developments

8.1 States reneging on PPAs, payment delays rising

Andhra Pradesh has persisted in its attempts to renegotiate RE PPAs aggregating 5.2 GW. The Andhra Pradesh High Court has directed the state to scrap the state renegotiation committee but more disappointingly, it has: i) referred the case to APERC for a decision within 6 months; and ii) directed DISCOMs to pay a much reduced interim tariff of INR 2.43/ kWh and INR 2.44/ kWh to wind and solar projects respectively. Meanwhile, the state government has challenged MNRE’s order directing DISCOMs to provide letter of credit in advance to procure power. It continues to hold back payments to developers resulting in payment delays of more than a year in many instances. Many project developers are also complaining of rising curtailment.

In August 2019, Uttar Pradesh also stopped procuring 650 MW wind power. 440 MW of 650 MW was won by bidders in the ﬁrst ever reverse auction for wind power in India. Affected developers include Sembcorp, Mytrah, ReNew and Inox Wind. These projects were stopped from supplying power citing non-approval of PPAs by CERC. The matter is due for a hearing in November.

Meanwhile, DISCOM overdues (payment delays > 60 days) to power producers continue to soar and touched INR 696 billion (USD 9.7 billion) by September 2019, an y-o-y increase of 27%. Total amount owed to RE producers has also shot up brieﬂy to INR 97 billion at the end of July 2019, which came down to INR 48 billion by end September, indicating that the letter of credit (LC) mechanism is improving payment schedules. Worst offenders include Tamil Nadu, Andhra Pradesh, Karnataka and Telangana.

Figure 8.1: DISCOM dues to power producers, INR billion

700 600 500 400 300 200 100 0 Punjab Gujarat Haryana Rajasthan Karnataka Telangana Tamil Nadu Maharashtra Uttar Pradesh Andhra Pradesh Madhya Pradesh

Outstanding dues to RE generators Outstanding dues to thermal generators

Revenue

Source: PRAAPTI portal as on 14 November 2019, state tariff orders

© BRIDGE TO INDIA, 2019 Page 36 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Growing incidence of payment delays, reneging of PPAs and curtailment has hit investment sentiment badly and heightened risk perception in the sector.

8.2 Balance of system (BOS) costs drop signiﬁcantly

BOS costs, accounting for up to 30% of total EPC cost, have reduced by nearly one-third in the last year. The fall owes partly to drop in aluminium and copper prices and partly due to a competitive market environment.

Figure 8.2: BOS costs for utility scale solar projects, INR/ Wp

14.00 40%

12.00 35% 30% 10.00 25% 8.00 20% 6.00 15% Cost, INR/ Cost,INR/ Wp 4.00 10%

2.00 5% costaofBOS total%cost as

- 0% Q1 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 Q1 2020p Q1 Q4 2019P Q4

Source: BRIDGE TO INDIA research Note: EPC cost includes GST and duties, as applicable in each quarter.

Falling BOS cost is welcome news for developers struggling with execution challenges and rising costs for land acquisition and debt ﬁnancing. However, it is also again raising concerns about poor quality of execution.

8.3 Chinese solar market stays depressed

A rush of capacity expansion was expected in China in H2 2019 due to a new solar policy coming into force in August 2019. However, expectations failed to materialize mainly due to a delay in announcing the policy which reduced time available to developers to commission projects this year as well as relaxed commissioning timelines. China added only 16 GW of new solar capacity during Jan-Sep 2019, and only 4.6 GW in Q3 2019. Revised estimates suggest capacity addition of around 25 GW this year, against original estimates of 40 GW. Sharp fall in demand would be disappointing for Chinese cell and module manufacturers, who have been retooling production facilities to meet the expected surge in demand.

Global cell prices have already dropped as much as 20% between June-August 2019. Module prices have also started declining since August 2019. We expect to see a signiﬁcant drop in prices in Q4 2019 and Q1 2020.

© BRIDGE TO INDIA, 2019 Page 37 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Figure 8.3: International multicrystalline cell prices, USD/ Wp

Reduction 0.120 of 9%

0.115

0.110

0.105

0.100

0.095 9 9 9 9 9 9 9 9 9 8 8 8 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 / / / / / / / / / / / / 1 1 1 1 1 1 1 1 1 1 1 1 / / / / / / / / / / / / 2 1 0 9 8 7 6 5 4 3 2 1 1 1 1

Source: www.energytrend.com

8.4 International auctions witness record low bids

Brazil’s 211 MW solar auction in July 2019 saw record low bids of EUR 0.016/ kWh (USD 0.0175). In August, Spain’s 1.4 GW tender received another record low bid of EUR 0.0147/ kWh by Akuo Renováveis Portugal. These are lowest ever tariffs for solar projects anywhere in the world.

Transition from government-supported FIT schemes to auction based allocation is leading to signiﬁcant falls in solar tariffs across the world. There is high competitive intensity in the sector because of huge investment interest. Part of the tariff reduction could also be due to expectations of fall in module prices and long gestation period of these projects (expected COD – between 2021-2023). There is increasing pressure on equipment suppliers to drive down costs.

© BRIDGE TO INDIA, 2019 Page 38 This report is for use only by authorised, paying subscribers of BRIDGE TO INDIA Energy Private Limited. Unauthorised use, reproduction, production, distribution and transmission of this report is expressly not permitted. Subscribe to the most comprehensive insight into India’s burgeoning RE sector

India RE Weekly Our analytical comment on latest developments in the sector

India Solar Compass A quarterly sector update covering project and tender progress, auctions, industry players, policies and other market trends

India RE Policy Brief and India RE Market Brief A series of 6 reports across the year with a deep dive into critical issues facing the sector

Analyst time Your chance to ask us what you want, when you want

For subscription enquiries, please contact – [email protected]