Renewable energy major SunEdision took everybody by surprise when it bid a record low tariff of Rs 4.63 per kWh for NTPC's solar power project in Andhra Pradesh. And the company again created a stir when it called off its agreement to acquire Continuum Wind.
Pashupathy Gopalan, who heads SunEdison's Asia-Pacific operations, says India is a key market and the company will invest $2 billion in India over the next three years. The government has set a 175 GW renewable energy target by 2022 and India will need $100 billion investment to generate 100 GW of solar energy.
"We have had a phenomenal journey in India so far, emerging as one of the largest renewable energy developers in the country. We will continue to contribute to India's renewable energy story in a meaningful way," says Gopalan. SunEdison has since 2009 built 350 MW of solar energy plants and has a pipeline of solar and wind power plants that will generate 2 GW in the next 18 months.
In November, SunEdison won a 500 MW NTPC project in Kurnool district in Andhra Pradesh, bidding Rs 4.63 per kWh, less than Japan-based SoftBank Group's bid of Rs 4.80. The project will be commissioned by early 2017. Many have questioned the viability of the project, saying it will be difficult for SunEdison to raise finance at the quoted tariff.
However, Gopalan says solar panels that contribute 70 per cent to the cost of solar plants have come down from $3-3.5 per watt in 2008 to 52 to 55 cents in 2015 and are falling even now. "The other bidders were not too far away in their final prices, which shows solar power is now at grid parity," he adds.
The cost of capital for the project could be half a percentage point lower because NTPC will be evacuating power from the plant, points out Gopalan. With the government providing land and assured evacuation of power, the project is different from past solar tenders in India in many ways, and SunEdison is confident of making healthy returns.
SunEdision has a target of setting up 2 GW of solar and wind power plants in India over the next 18 months, which will need an investment of $2 billion. Of this, the company intends to borrow $1.4 billion. SunEdison plans to sell cash-yielding assets to TerraForm Global, which raised $675 million during its initial public offering in August, when SunEdison also said it would issue $800 million in green bonds. TerraForm Global, focused on emerging markets, says it will own 1.4 GW capacity by the year-end, almost 60 per cent of it wind power. Also in August, a $1 billion clean-power fund through Goldman Sachs and a number of banks was announced for SunEdison.
So far, SunEdison has developed and sold projects worth $3 billion globally, in a warehouse approach to raising capital. Typically, SunEdison sells 10 per cent of its international portfolio on average. Some of the major investors include Goldman Sachs, JPMorgan and First Reserve. It is trying to adopt this concept for India. The company plans to use a portion of the $231 million it expects to raise by selling a series of projects in India to TerraForm Global to pay down its margin loan.
"We are looking at strategic alternatives to bring equity to build our projects in India. We are very early in the process and have received a good response so far," says Gopalan. Renewable energy projects provide secure and reliable cash flows for 30 years and can be of interest to pension funds and insurance companies. "As investors become comfortable with renewables, this type of platform can become successful in India and will bring down the cost of capital," Gopalan adds.
On terminating its agreement with Continuum Wind, Gopalan says SunEdison wanted to safeguard liquidity and preserve cash. This is in line with SunEdison's decision to align its business operations globally with market opportunities.