According to reports, India Ratings in an analysis has said it believes that the viability gap funding (VGF) model for the batch I, phase II of the Jawaharlal Nehru National Solar Mission is prima-facie viable but needs the support of financial engineering techniques to enable timely debt service on these projects. The equipment costs, debt structure and the size of the viability gap funding (VGF) will drive the credit quality of these projects.
Besides the construction timeline, the projects would require an
amortization period of around 13 years, taking into account the seasonal
variations involved in solar projects. Seasonal variations in capacity
utilization factor must form a part of the capital structure analysis in
order to achieve success in these models. The tariff of Rs 5.45 per
unit would add to stress unless backed by sizable VGF. Ind-Ra determines
the minimal breakeven tariff, which would just about enable it to
service debt, to be Rs 6.50 per unit, in the absence of VGF.
The success of these projects would depend upon the Solar Energy
Corporation of India’s (SECI) payment track record. Government ownership
and its strong linkages with the government help mitigate
revenue-counterparty risks. Ind-Ra’s full report “Financially
Engineering the Solar Projects to Shine” offers detailed insight into
structuring these projects.
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