Solar power projects struggle for finances

Most of the companies planning to set up solar power projects in Gujarat seems to have been struggling hard to get adequate finance from the lenders for their projects. Inexperience in executing solar power plants and improper due diligence of the project have led the bankers to remain passive in giving finances to these companies.

At a seminar on financing of solar power projects held in Gandhinagar on Monday, industry experts discussed major challenges of financing to solar power projects and how to tackle them in the interest of the growth of industry. Issues like lack of documentation, absence of EPC contractors, suppliers of equipment and unavailability of land were some of the key issues discussed at the seminar.

Solar power industry, which is in its infancy at present, faces severe challenge of finances as the bankers have been reluctant to lend money considering the lack of past track record of the companies taking up solar power plants.

"Bank finance is extremely required for setting up a solar power plant. The installation of a solar unit with capacity of one megawatt involves an investment of around Rs 12-13 crore. This is quite huge for a small entrepreneur, who has just ventured into solar power business. Banks do provide finance, but that is mostly considering the company strength and not taking into account the project strength. This means if the company is strong enough in other businesses, they will lend money for solar project. But for the beginners it is very difficult," said a solar power projects consultant from Mumbai.

However, bankers maintained that the financing was not an issue as long as the companies comply to the required documentation. "There are issues pertaining to due diligence of the project, lack of track record, no tie-up with the EPC contractor to execute the project and supplier of the equipment. Else, the finances are available for those meet the desired requirements of the lenders," said K S Popli, director, Indian Renewable Energy Development Agency (IREDA).