As China curtails solar projects, tariffs back home head south; ACME’s ₹2.44 bid sets record

ksenia kondratieva Mumbai | Updated on July 15, 2018

The declining prices of solar panels due to a change in Chinese policy, and the quest for better valuation by domestic renewable companies going for IPOs, could be pushing solar power prices further down in India.

After showing signs of rising, solar tariffs have once again hit record lows, with the Solar Energy Corporation of India (SECI) auctioning 2 GW of the Interstate Transmission System (ISTS)-connected solar project to ACME Solar for ₹2.44 per unit. The auction that concluded on Monday equals the bid for the 500 MW Bhadla Phase-III solar park project in May 2017.

Solar tariffs had been steadily rising after May 2017’s record low, supported by uncertainty over a proposed 70 per cent safeguard duty on imported PV modules and the GST impact. But this was reversed after China put its enormous solar capacity development programme on hold in May this year.

“After the curtail on solar installation in China, developers expect a reduction in solar panel prices over the next three-four months,”Ankur Agarwal, analyst with India Ratings and Research (Ind-Ra), told BusinessLine.

According to Sunil Jain, MD of Hero Solar, the pricing discovered in the latest auction “is not good, but fair”. Jain noted, though, that an extra 15 paise would make the lowest bid more fair, as all the other bidders had to reduce their pricing by at least 9 paise, which translates into an 1.8 internal rate of return, to match the L1 bid.

Speaking about insecurities associated with aggressive bids, Jain said the projects auctioned by SECI are outside of the solar park, unlike in the case of Bhadla, hence the developers will have to acquire land and arrange power evacuation, which always poses challenges.

“Solar tariff is dependent on the Global Horizontal Irradiance (GHI) of the area, cost of solar panel, cost of money (ie, the interest rate and the land cost). Factoring all the above, our tariff of ₹2.44 per unit is viable and sustainable,” Nikhil Dhingra, CEO, ACME Group, told BusinessLine.

A source close to ACME said the company is going to bid even more aggressively in the upcoming SECI auction of 3 GW, expected to be rolled out mid-July.

IPO rush

ACME Solar, which has been mulling an IPO for more than six months now, won the winning bids quoting the L1 tariff in the last two auctions conducted by SECI, Mercom notes.

The company had first filed its DRHP with SEBI to raise ₹2,200 crore in September 2017, but shelved the plan, according to sources, as it wanted to realise better valuation.

Sumant Sinha-led Renew Power, too, is planning a ₹7,500-8,000 crore IPO.

Published on July 03, 2018

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