When US-based SunEdison signed an agreement in October with the Rajasthan Government to set up 5,000-MW solar projects, many in the industry appeared surprised. But earlier this month, the company announced another project — a $4-billion polysilicon-to-modules project in Mundra, Gujarat, to be developed with the Adani Group. Even as the message was sinking in, it announced another 5,000-MW project in Karnataka. In an interview with BusinessLine , Pashupathy Gopalan, SunEdison’s Asia-Pacific head, explains the company’s strategy in the country and its partnership with the Adanis. Edited excerpts:

You have made a spate of major announcements. How do you look at the familiar problems of finance, land, and manpower?

First of all, I must admit that when we say we have signed an MoU for 5 GW with the Rajasthan Government and 5 GW with Karnataka, it’s not like we have figured everything out. We have taken a view that in five years, given the pricing we have seen in recent times, solar is very compelling. There are still some energy secretaries who keep comparing solar with their ‘average pooled purchase cost’, but that’s unfair because APPC (average power purchase cost) will increase year after year, whereas solar will not. When I give you a contract for ₹6.50 (a unit), I’m not going to change the price for the next 25 years. There is a value in the certainty.

I am convinced that the country can build 10,000 MW of solar annually from 2017-18.

What about funding?

The business model we follow is separation of development and construction of solar plants, and asset ownership. We will develop solar plants and drop them into the assets vehicle. There is precedence for this in other industries and we are following a proven business model. There is a gas pipeline company called Kinder Morgan. In a little over a decade, they have built as asset base of $60-70 billion from scratch.

Let’s say, we build a project for a return of 16 per cent, for $100 million. You are willing to buy it for a return of 12 per cent. So I can sell the plant to you for $125 million and I make a $25 million profit. This sustains the growth of further cash we need.

Will raising debt be a challenge?

If there is a clean, well-diligenced project and the off-taker is good, debt will come. Today, everybody (financiers) is talking debt, nobody is talking about equity. If we have to do 1 GW of solar, it will take $1 billion, and we will need $700 million of debt. There is liquidity in the Indian market, but the power sector is stretched a bit and we are seeking separation of renewable energy from the overall power sector basket. We are talking to banks such as SBI and IDBI, telling them that the issues of the power sector in general have nothing to do with renewables.

You have recently announced a deal with the Adani Group. Could you provide more details of the tie-up?

It’s a non-binding agreement that we will work together. The idea is to build an integrated solar photovoltaic manufacturing plant of 5,000 MW. That will be one of the largest single complexes in the world. India is going to be a big solar market, but no Government wants to import because of concerns of foreign exchange, jobs, etc. We realise that the pressure to produce things locally will only intensify every day.

We can bring the technology to build and run the factory, but we need a partner who understands the local environment better and can bring capital. Real estate is a big issue. Solar farms are built in remote areas, but solar manufacturing will need to be in semi-urban areas. We are not experienced in buying lands in India. And we needed a port.

If you add up all these, you will find that Adanis are a perfect fit for us. At a very high level, we have identified the complementarities of strengths and scope of work.

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