Indian solar market to see another consolidation: Fortum India

The Finnish energy firm is looking at Indian solar industry as a long term market for itself

Finnish state owned energy utility Fortum entered India by buying a 5 MW solar power plant during 2013 in Rajasthan. Looking to invest EUR 200-400 million now in India, Fortum’s global plan features India as the top priority market for solar power projects, Sanjay Aggarwal, MD, Fortum India told Business Standard.

“It is hard to ignore India. It is a market for large utilities like us. Fortum's investment in solar is just in India,” said Aggarwal. Fortum has total of 170 MW of solar power projects in the pipeline and currently has 15 MW of operational solar capacity in India.

The company is looking at Indian solar industry as a long term market for itself. “The Indian risk profile suits large utilities with robust financing. The Indian market is unlikely to give favourable and quick returns to PE-backed small players. Going ahead, large utilities are the way forward,” said Aggarwal.

He is hopeful that the Indian solar market would witness another round of consolidation with large utilities emerging as the long term and steady players. “Our strategy is to construct plant, get overflow and then capitalise on it, said Aggarwal.

The company has been an active and steady player in the Indian solar market and recently quoted the lowest tariff of Rs 4.3 per unit for 70 MW project in Rajasthan. Aggarwal however believes that it’s not the tariff that would drive the cost down, but technology will.

“The tariff should not be centerpiece of discussion rather how the tariff is built up. I am not sure if this tariff could be replicated. It differs on basis of location, site, radiation and the parties involved. At the end of the day market decides the tariff,” said Aggarwal.

He adds that focus shuld be on the quality of the plant. “People are no talking about solar technology space – from panel to inverter. There has been phenomenal work happening in that space. This is what would drive the tariff and the cost of project,” he said.

He says that the company decided to bid in NSM where there was land, evacuation available along with counter parties such as NTPC and SECI.

“We will not take land and evacuation risk, especially in bigger plants and not spread our self thin. Out of 12 tenders that came during last fiscal, we participated in only three. As for quoting tariff, we already have a floor price calculated earlier when we bid. We are not looking to acquire assets just to own them but what matches our financial planning,” he said.

NASDAQ listed Fortum operates in Nordic and the Baltic countries, Russia, Poland and India. In 2015 its sales were Euro 3.5 billion.