SOLAR MONTHLY UPDATE. Vol. I. Issue VII June-July 2016

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1 SOLAR MONTHLY UPDATE Vol. I Issue VII June-July 2016

2 Creating value, partners in growth Incorporated in 1997, LSI Financial Services Private Ltd (LSI) is a leading provider of innovative financial solutions in India and abroad. It has successfully raised funds for companies through structured financial products, spanning various sectors. With in-depth domain knowledge, LSI strives to add value to the client's financial supply chain ensuring an effective and efficient capital structure. It is also providing Project Advisory services including preparation of Detail Project Reports (DPR) and Techno Economic Feasibility/Viability Reports (TEFR/TEVR) on behalf of Banks, Public and Private Sector Institutions and Companies. Our services include: Debt Syndication Private Equity Advisory Issue Management Mergers and Acquisitions Financial Restructuring/ Corporate Debt Restructuring Preparation of DPR/ TEFR/TEVR Lender's Independent Engineers' (LIE) Services Due Diligence Valuation of Assets/Equity

3 EDITORIAL How India finds Unique Solutions to Global Solar Challenges In our previous issues, we have been tracking the unique challenges thrown up in the Indian solar space to scale up generation and achieve the Government's ambitious target of 100 GW of solar power by 2022, requiring the private sector to expand solar infrastructure at a frantic pace. We have also explored what would happen once the situation results in surplus solar power and grid balancing issues. While addressing these challenges, one cannot fail to notice that the Indian solar market is continuously evolving itself, finding unique solutions early on to problems that are being faced by other advanced nations such as Germany and the US at a more advanced stage of industry maturity. In this issue we highlight these unique potential solutions that could prove a game changer in the industry. In the words of our Honorable Minister for Power, Coal, New and Renewable Energy, Shri. Piyush Goyal, "India will now lead the world towards clean energy rather than follow. With 21 GW of grid-connected new solar projects out in the market, India has signalled to the world that we are ready to lead." When we discussed issues relating to grid balancing, a solution to excess power supply, pumped hydro storage emerged as a solution to the problem. Our Government has now taken the solution a step further by testing the waters for floating solar parks combined with pumped hydro power projects. The MNRE has initiated a study to assess the potential of these floating solar parks, roping in Germany-based KfW Development Bank to build two large floating solar projects in Maharashtra and Kerala at an initial investment of about Rs.300 crore. Other institutions involved in the project are NHPC (National Hydropower Corporation), with the study entrusted to the National Institute of Solar Energy (NISE) and the Renewable Energy College, Kolkata. There are lakh hectares of still water surfaces in India, of which reservoirs are lakh hectares and tanks and ponds are lakh hectares, according to the Agriculture Ministry. Floating solar panels are more efficient than those on land because the water bodies cool them. Several companies and States have started looking at the option of such plants. Initial estimates by the MNRE suggest that the country could generate at least 310 GW of green power from these floating solar parks. Moreover, the efficiency of per capita power generation is also better for these units. As much as 17 lakh units of power can be generated from a floating solar facility of 1 MW, annually, compared to 16 lakh units from a land unit. The area required for setting up the panels is the same - 4 acres per MW and therefore, the generation cost too averages out to Rs.7 per unit for both. While cost-wise, floating panels are currently slightly more expensive at Rs.8 crore per MW, rising demand could level the playing field by driving down costs in due course. Another unique development that showcases Indian solar industry s adaptability is the recent Gujarat tender for Charanka Solar Park. The solar tender amended financing terms with a tweak to how Viability Gap Funding (VGF) was availed, leading to a sudden rise in interest in the tender by companies that earlier had not evinced any interest in the project due to higher costs associated with the solar park. The Government is also likely to come up with hybrid models for FDI financing in India by the end of July These factors are likely to whet the investors' appetite for investment in the Indian solar industry, with its unique adaptability. LSI believes that these positive steps would make India's solar growth model more sustainable than its more advanced counterparts in the long run and would attract global and local investors alike to invest in this sunrise sector. Raj Kajaria, Managing Director, LSI Financial Services Pvt. Ltd. 3

4 Inside this Issue: Solar News Round Up Solar State Focus - Maharashtra Company Limelight - ACME Group Solar Tender Tracker - June - August 2016 SOLAR NEWS ROUND UP MNRE ropes in Germany-based KfW Development Bank to fund two floating solar projects The Ministry of New and Renewable Energy (MNRE) has initiated a study to assess the potential of floating solar parks in India. It has roped in Germany-based KfW Development Bank to build two large floating solar projects in Maharashtra and Kerala at an initial investment of about Rs.300 crore. NHPC to invest Rs.3,000 crore on solar, wind projects National Hydroelectric Power Corporation (NHPC) is planning to invest around Rs.3,000 crore over the next five years to set up solar and wind projects across the country. The company is looking at opportunities in states like Maharashtra, Andhra Pradesh, Kerala, Uttar Pradesh and Tamil Nadu, among others. NHPC is planning to set up a 600-MW solar power project at the Koyna hydel power complex in Maharashtra as part of an initiative to expand its solar portfolio. The company is already carrying out the feasibility and financial viability study for the project, wherein it plans to set up floating solar panels with pumped storage system. India now plans 40 GW of Solar Power Parks The Indian Government has increased the target to set up ultra-mega solar power projects in an attempt to meet the monumental target of 100 GW operational solar power capacity by March The MNRE is reportedly planning to implement a second phase of the solar power parks program. At present, the Ministry has approved solar power parks in 21 states with cumulative capacity of 19,900 MW. Phase two of the program will add another 20 GW capacity. CIL and SECI sign two agreements for 200 MW of solar power projects in MP On 28th June 2016, Coal India Limited (CIL) and Solar Energy Corporation of India Limited (SECI) have signed two agreements for implementation of 200 MW solar power projects in the State of Madhya Pradesh. CLP India buys 49% stake in Suzlon's 100 MW solar power project in Telangana Hong Kong based CLP Group has forayed into the Indian solar energy market by acquiring 49% stake in Suzlon Energy's 100 MW project in Telangana, the two companies said in a joint statement. While the two companies will develop the project at Veltoor in Telangana in a joint venture, under special purpose vehicle namely SE Solar, CLP India will have the option to acquire the balance 51% stake later. Germany proposes new caps for wind and Solar Germany has released draft proposals on its Renewable Energies Act (EEG) to cap onshore wind and solar PV as renewable energy growth by these States need to be curbed due to rising electricity prices and unnecessary strain on the national grid. Under the plans, large solar projects will be capped at 600MW annually with systems under 750kW excluded from that quota. The proposals are the result of pressure from regional premiers. Adani Green Energy may tie up with SunEdison for $2 billion solar foray Adani Green Energy Ltd, the renewable energy arm of the Adani Group, is considering a technical partnership with global major SunEdison Inc for its $2 billion foray into integrated solar manufacturing. The collaboration is being considered despite SunEdison's recent troubles, which saw the renewable energy heavyweight file for protection from its creditors in the US in late April The company is also looking at two other companies, namely Golden Concord Holdings and OCI Solar Power but is yet to take a decision, according to the CEO of Adani Green Power. 4

5 SOLAR STATE FOCUS MAHARASHTRA MAHARASHTRA - COMMISSIONED SOLAR CAPACITY BY SCHEME SOLAR PARK MAHARASHTRA SOLAR POLICY HIGHLIGHTS CHANGES IN DISTRIBUTION TO ENCOURAGE RENEWABLE ENERGY CHANGES IN RPO THAT COULD HELP BOOST SOLAR ENERGY Among the renewable sources of energy, solar energy has a huge potential for power generation in Maharashtra. There are days of clear sun with an available average radiation of 4 to 6 kwh/square meter over a day. There is a capacity to generate 1.5 million units/mw/year through solar photovoltaic systems and up to 2.5 million units/mw/ year through solar thermal systems. Maharashtra had a total installed capacity of MW of Solar Power Projects across districts of the State as of , comprising over 6% of India's cumulative solar capacity of 6.76 GW. project capacity is specified at 1MW. Capacity of Solar Projects Commissioned in Maharashtra under Various Schemes by District (in MW) as of March 31, 2016 Satara, 30 Ahmednagar, 5 Solapur, Pune, 55 Chandrapur, 10 Osmanabad, 26 Nagpur, 4 Dhule, 130 Source: Maharashtra Electricity Development Agency (MEDA), Latur, 15 Jalgaon, 8.5 Maharashtra Commissioned Solar Capacity in MW by Scheme as on 31/01/ Maharashtra Rest of India , , MNRE Projects State Policy RPO Source: GW Solar Plan, January 2016, MNRE REC Scheme Pvt. initiative (Rooftop) CPSUs The Maharashtra Renewable Energy Policy 2015 has set an ambitious target of 7,500 MW of Solar energy projects to be commissioned across the State, out of which, 2,500 MW will be used to fulfill the State's Renewable Purchase Obligations (RPO) through Public Private Partnership in association with Maharashtra Power Generation Corporation (MAHAGENCO). and the remaining 5,000 MW will be developed by other developers. A total 10 % of all PPP projects i.e. 250 MW will be established on canals, lakes and irrigation projects. The minimum 5

6 Solar Park The MNRE has approved 33 solar parks across 21 States with aggregate capacity of 19,900 MW. SECI, the implementing agency, of the Rs.374 crore sanctioned, has released Rs crore to respective States development agencies. The details for the solar parks in Maharashtra and the funds sanctioned for them are given below: Name of the Solar Park Capacity (MW) Name of the implementing Agency Fund Sanctioned (Rs.Crore) Solar Park in Sakri, Dhule district, Maharashtra 500 M/s Pragat Akshay Urja Ltd Solar Park in Dondaicha, Dhule district, Maharashtra 500 M/s K. P. Power Pvt. Ltd 0.25 Solar Park in Taluka Patoda, Beed district, Maharashtra 500 Maharashtra State Electricity Generating Company Ltd. (MAHAGENCO) 0.25 Source: MNRE Solar Policy Highlights and Incentives Land acquired for solar projects will be granted deemed status of Non-agricultural land Solar projects having capacity up to 2 MW can be given 4 hectors of land as per availability and 50% discount shall be given on rental/ lease charges. All such transactions will be governed as per Maharashtra Land Acquisition Act Government land, if available, for manufacturing of solar modules/panels/etc. shall also be given 50% discount on lease/rental charges Concessions shall be granted for these projects to get NOC from Pollution Control Board Solar project developers can sell electricity generated from solar projects to distribution companies /captive use/third-party sale/ REC Open Access (OA) shall be granted for interstate as well as intrastate projects as per MERC regulations Exemption from Supervision charges for evacuation Projects can register themselves as industrial units Exemption from E-duty for captive power plants for 10 years from the date of commissioning Developers will be given the necessary support for development of solar projects, but there will be separate provisions for interstate power transfer Changes in Distribution Regulations to encourage renewable energy MERC (Maharashtra Electricity Regulatory Commission) has come up with the new distribution Open Access Regulation, 2016 on 30th March 2016 in the State of Maharashtra. The key changes in the regulation are: 1. Allowing sourcing of power from multiple sources. 2. Allowing sourcing of power from power exchange. 3. Day ahead open access- The application for grant of day ahead shall be made only 1 day prior to the date of scheduling (Before it was 2 days) 4. Consumer shall install Special Energy Meter (SEM). 5. The draft OA regulation had proposed that a consumer having Contract Demand of 500 kw and above will be eligible for OA. However, in the final regulation the existing limit of 1MW has been retained. Had MERC lowered the limit, it would have potentially resulted in a much larger OA market in Maharashtra. 6. Banking of Renewable Energy is introduced. LSI believes that allowing multiple sources for power procurement will increase the competitiveness in the market and it will promote open access. It will also help the renewable energy sector to boom in Maharashtra as the rate will become more competitive. Banking of non-firm power will also act as a booster for the renewable sector and solar in particular as the generated units from solar energy in the off-peak and morning peak time can be adjusted in the peak hours. Changes in Renewable Purchase Obligations (RPO) that could help boost Solar Energy Maharashtra has published RPO regulations covering the period FY to FY

7 The highlights of the regulation are: RPO % in FY is 11% in total (10% nonsolar and 1% solar). This will increase to 15% by FY (11.5% non-solar and 3.5% solar) The regulations are broadly in line with the standard regulations of RPO across various States, except the following clauses RPO is no longer exempt on co-generation power. The Statement of Reasons (SOR) accompanying the regulations refers to the National Tariff Policy as a reason for removing exemption from RPO on co-generation power RPO is applicable only on consumption of conventional power. This is a significant deviation as the Electricity Act/ CERC/ other States require calculation of RPO on total consumption. By leaving out RE power from RPO calculation, Maharashtra risks providing double benefit to RE generators it is possible that a consumer that consumes power from renewable energy sources does not attract RPO provisions and at the same time claims offset of such renewable energy power towards meeting RPO on conventional power RPO is applicable on CPPs with installed capacity of 5MW or more and open access consumers with a contract demand of 5 MVA or more. This will leave out significant open access and captive capacity form the ambit of RPO applicability. 7

8 COMPANY LIMELIGHT ACME About the Group ACME Solar Focus Director's Quote About the ACME Group The ACME Group is a leader in the field of clean energy with operations in solar power generation, lithium-ion based energy storage solutions and energy management of telecom towers in India. Established in 1983, ACME has enabled telecom expansion to farthest as well as most interior and hitherto unconnected regions of India while reducing carbon emissions from the telecom site as well. The Company today enjoys an international presence, through its own establishments, channel partners, and associates. ACME Solar Focus In last four years, ACME has been focusing on building new generation utility using solar energy and energy storage solution. ACME is committed to excel with a vision of Building next generation utility and mission of Providing Sustainable Green Energy at Affordable Rate. ACME is committed to develop 7,500 MW of Renewable Energy Projects during the five year period between 2015 and Besides generating 12,000 Million Units of green and clean power annually, these projects will also create employment for nearly 4,000 persons, directly and indirectly and prevent Carbon Emissions of around 10,000 MT per year. As an early entrant into the solar field and leading solar power developer in India, ACME has been able to add almost 725MW of new solar projects through successfully bidding in various tenders in last 12 months at an average tariff of Rs per unit. As of June 2016, ACME's commissioned projects stood at about 700 MW DC. The company's portfolio totalled 1,654 MW and continues to grow steadily. ACME has been responsible for a number of firsts in the industry and providinginnovative solutions for the Energy sector. In the Energy Storage Sector, ACME has been one of the pioneers in solar energy storage solutions in the country. Energy Storage is one of the key focus area of ACME and the company provides customized solutions to meet application specific requirements. While the technology is still at a nascent stage in India, recently it has received a fillip from SECI's initiative to float tenders for solar PV projects with a small storage component attached. SECI is testing the waters in a bid to encourage solar storage as a solution to grid connectivity and balancing issues in solar energy transmission and distribution. Source: ACME group ACME's Solar Portfolio across India,

9 Director's Quote "Our nature is bestowed with 5000 times more energy as compared to the energy required by all living being on this earth in a year and this infinite energy is a free gift from the Sun. All we need to understand is its effective conversions into a form that suits our energy needs. This effective conversion would also require management of energy when produced. Therefore, lots of thrust will be given to the tools which would manage energy in the near future. We are heading to a situation wherein Solar energy in its primary form shall be the predominant energy source for all of us." Manoj Kumar Upadhyay, Founder & Chairman 9

10 SOLAR TENDERS FOR THE MONTHS OF JUNE-AUGUST 2016 Organiser State Capacity Tendered (MW) Submission Date Technical Bid Date NTPC Andhra Pradesh Development of 625 MW (5 Blocks of 125 MW each) Ananthapuramu Solar PV Project(s) at Ananthapuramu Ultra Mega Solar Park in Andhra Pradesh, India SECI 160 MW Grid connected solar PV SECI Odisha Part A-450 MW Grid connected Solar PV (Original tender scaled down to 300 MW) SECI Uttar Pradesh Odisha Part B-50 MW Grid connected Solar PV (tender scrapped as solar targets of State revised downward) SECI Maharashtra 50 MW Grid Connected Solar PV Projects under Part-A (DCR) in Maharashtra under NSM Phase-II Batch-IV, Tranche-III SECI NTPC Maharashtra Karnataka 450 MW Grid Connected Solar PV Projects in Maharashtra under NSM Phase-II Batch-IV, Tranche-III Setting up Grid-Connected Solar PV Power Projects of 100 MW (50 MW x 02 Projects) capacity under DCR category in Pavagada Solar Park in Tumkur District of Karnataka under National Sola Mission (NSM) Phase-II, Batch-II, Tranche-I N.A. N.A SECI Telangana Design, Engineering, Procurement & Supply, Construction & Erection, Testing, Commissioning, & Comprehensive Operation & Maintenance 5 (FIVE) years of 5 MW (AC) Grid connected DCR Solar PV Power Plant at BDL, Bhanur (Telangana) NTPC Andaman & Nicobar 18 MW Solar PV project at Chidiyatapu, A&N islands SECI Andhra Pradesh 650 ( ) MW in Kadapa Solar Park under NSM Ph-II, Batch-IV Source: LSI Financial Services Pvt.Ltd. 10

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