Cash Buffer Lures Risk Averse to India Solar Auction

Cash Buffer Lures Risk Averse to India Solar Auction

India’s first national auction of solar permits since 2011 offers improved revenue security to investors seeking a foothold in a market where the cost of sun power may equal that of other sources within three years. 

The state-run Solar Energy Corp. of India is inviting bids by Jan. 20 from companies to build 750 megawatts of capacity. For the first time, the government will provide as much as 18.75 billion rupees ($302 million) in grants to reduce plant-building costs to entice participation. 

That will help lower one of the main hurdles to Indian solar investment: the risk cash-strapped state utilities buying the power will default, leaving plants unable to service debt, said Vineet Mittal, managing director of the country’s biggest photovoltaic developer, Welspun Energy Ltd. The tender still may struggle to draw international firms put off by a volatile rupee, uncertainty before national elections due by May, and a fraction of the solar capacity available in China and Japan. 

“Security of payment has been addressed very nicely,” said Mittal, whose company is a unit of Leon Black’s Apollo Global Management LLC-backed Welspun Group. “But I don’t expect companies to queue up. It’s not as lucrative” with panel prices recovering from record lows.

The tender is India’s third under its National Solar Mission, which seeks to drive down the cost of sun power to diversify the country’s energy mix. India suffers from peak-hour power shortages of as much as 25 percent, and renewables offer a way to boost generation without increasing pricey fuel imports. 

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