Welspun sees solar power tariff matching thermal by 2016

S. Shanker Mumbai | Updated on July 09, 2013

With 111 MW of solar and wind power operational, Welspun Energy, the country’s largest solar energy major, will have 250 MW of solar facility online by end-December, besides 50 MW of wind power. It has over 1,000 MW under development, with a target of putting up 1,400 MW across eight States by 2016 at an investment of over Rs 15,000 crore.

Welspun is confident that the solar tariffs of today will match conventional energy rates by 2016 and make green power the most sought after in the years to come.

“As such, solar power unit rates are lower than the retail tariff of Rs 12-plus a unit for over 1,000-unit consumption in Maharashtra and Gujarat,” says Vineet Mittal, Managing Director, Welspun Energy.

(Power distribution utilities in these States purchase thermal power between Rs 3.50 and Rs 6. However, the regulated tariff structure is designed to make big consumers pay more to subsidise the lower strata and ensure that the distribution entities get their return on investment.)

In a chat with Business Line, Mittal spoke of the merits of solar power and the distinct benefits one could reap over the long term.

In last four months you have got over Rs 1,200 crore from banks. Are banks really open to such funding in the current economic scenario?

Next month I will be closing Rs 445 crore. Banks have four criteria. What you commit you should deliver in terms of cost and PLF (plant load factor) and within the scheduled timeline. In addition, the plant should satisfy the lender engineers’ quality check.

The Rs 885-crore funding for our Madhya Pradesh project came in three months. For the Maharashtra project, the power purchase agreement was signed on May 27 and financial closure for Rs 135 crore happened in less than a month.

So far, all our projects are among the top performers in the country. Every project is completed ahead of schedule. I intend commissioning the MP project a year ahead of schedule, which reduces the IDC (interest during construction) and kick-starts revenue flows.

The top three plants as per MNRE data in term of PLF are Welspun plants. Our units deliver 15 per cent more PLF than what we assure the bankers. The PLF across projects is 20.5. In some it is 23.5 and in a few others 19.5. We take 20-year insurance for our module performance with bankruptcy and annual maintenance risks underwritten. For inverters, we take a 10-year annual maintenance contract and for transformers, a five-year AMC with the vendors. Not all developers do this.

So, the banks know I am a long-term player, else why would I take long-term insurance? Banks love this sector because of the annuity revenues and the limited risks involved.

How much will this affect your profits?

Does it matter if I make one per cent less profit on a 25-year project. In India, 8 am to 6 pm is peaking time for power, and solar generation aligns with this timing.

We have signed up with NVVN (NTPC Vidyut Vyapar Nigam). (Welspun has bagged 50 MW under the National Solar Mission programme.) In another case, we have an escrow and revolving letter of credit for 12 months. So, both payment and performance security is there for the bankers.

Published on July 09, 2013

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