A weakening rupee, if unhedged, will impact investor returns in bid solar projects in the event of a significant exchange rate variation between the time of bidding and finalisation of module supply agreement, it said in a statement.
Ind-Ra said the exchange rate deteriorated 5 per cent year-on-year in May 2018, when the bids were hovering around Rs 2.5 per unit.
However, it said post module supply agreements, the developer may opt to hedge the exchange rate risk evaluating the costs involved.
As per the agency's calculations, an increase of Re one in dollar/rupee exchange rate leads to a 2 paisa/unit increase in tariff.
The study is based on the premise that SPDs will pass on the full impact of increase in project cost, arising from rupee depreciation to the consumer.
The recent round of auctions conducted by NTPC for 750MW of solar power has witnessed winning tariffs of Rs 2.72/unit to Rs 2.73/unit.
As per Ind-Ra's analysis, if rupee depreciates to Rs 72 from the current around Rs 68, SPDs will incur a loss of about 8 paisa/unit until the actual payments, as currency fluctuation is not covered by the procurer under Change in Law' or any other clauses under the power purchase agreement (PPA).
SPDs may also opt for reducing direct current to alternating current overloading ratio due to increased module costs, thereby negatively impacting the project's generation performance.
Also, any sharp fall in rupee could lead to delays in project execution, if SPDs opt to renegotiate the module supply contracts to keep the costs at same levels as assumed for financial closure, it added.
The rupee has depreciated around 7 per cent since the beginning of 2018 until date, it added.
On April 2, 2018, the renewable energy ministry issued a clarification to guidelines for tariff-based competitive bidding for procurement of power from grid connected solar photovoltaic power projects.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)