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The exit of a few foreign firms and investors in solar power projects is part of the normal churn in the renewables sector and will not stall its robust growth, industry insiders say

Some overseas companies are moving out of India’s solar sector (Photo by Bishnu Sarangi)

As India’s solar energy sector expands at a brisk pace, increased competition and declining margins due to fall in tariffs has seen a few foreign firms wanting to exit from projects, but that could be a passing phase, experts said.

In the first quarter of 2018, solar capacity rose by 3.3 GW, a 34% increase compared with 2.4 GW installed in the December quarter of 2017 and 3 GW installed in the first quarter of 2017, according to clean energy consultancy Mercom India. At the end of March, total solar power capacity stood at 22.8 GW.

Corporate funding increased in the second quarter of 2018, with USD 2.8 billion in 34 deals, compared with the USD 2.5 billion in 44 deals in the three months ended March, Mercom said. The increase in funding was about 102% higher compared to the USD 1.4 billion in the June quarter of 2017, it said.

Despite these encouraging numbers, there have been some reports of foreign firms exiting solar projects in India. For instance, the Madrid-based developer of large-scale solar power plants, Fotowatio Renewable Ventures (FRV), is in talks to sell its 100-MW power project in India in a deal worth around INR 6 billion, the Economic Times reported. French energy firm Engie SA, one of the largest foreign investors in India’s solar space, plans to sell a stake in its Solairedirect unit that has been actively bidding for local projects, the Mint newspaper reported.

Some foreign firms are reluctant to compete on compromised quality parameters, said a source in the renewable energy sector, declining to be named. As competitive bids for solar power projects heat up, there is a chance of compromises being made on quality, which many foreign firms are not comfortable with, the source said.

The drastic fall in tariffs — some companies are bidding for projects at INR 2.44 (4 US cents) per unit of electricity produced — is putting huge pressure on margins, making it difficult for firms to execute projects unless they cut corners, which makes for a risky proposition, the source said.

Another source in the renewable energy space said the biggest concern now in renewable projects is their viability. “State distribution companies (discoms) are not reliable when it comes to payments. There are huge delays (in contravention to the power purchase agreement (PPAs) signed, with limited actual recourse to project owners) with receivables piling up to six to 12 months,” the second source said. “The PPAs are not being honoured and states are forcing for a price renegotiation, time and again. These factors are the primary concerns for anyone who’s operational or is looking to invest in this space.”

There’s no exodus

However, Pranav Mehta, Chairman, National Solar Energy Federation of India and Chairman-Elect, Global Solar Council, believes that there is no exodus. “In my opinion, the funds are coming and there is no dearth of funds for good solar projects,” Mehta told

“Asset flipping is very common in the business. Platforms are known to acquire and sell assets depending on the profile of their source of funds, return expectation and deal flow in the market for such assets,” said Vinay Kumar, Managing Director, Renewables, India, Brookfield Renewable Partners. “There is no trend that would indicate that investors are in an exodus mode from the Indian renewable energy space. The recent transactions are normal and par for the course.”

Mergers and acquisitions happen in the renewable space all the time. There is no indication that foreign investors are reluctant to invest in the space, Kumar told

Bidding a challenge?

The Solar Energy Corporation of India (SECI) has auctioned 3 GW of grid -connected solar photovoltaic (PV) projects in which ACME Solar emerged as the lowest bidder by quoting a tariff of INR 2.44 per kWh to develop 600 MW, according to a Mercom reports. The lowest solar bid in a reverse auction in India has remained at INR 2.44 per kWh since May 2017.

Most international firms have a perspective on the kind of revenue generation they will get, the management they need to do and they understand the qualms, but a lot of those firms that are bidding unrealistically are taking a lot of risks and they are assuming a lot of things, another source said. “India will overtake China in terms of solar production, but not in a very constructive manner. All this emphasis on price and not quality is killing the ecosystem, instead of creating a healthy one,” he said.

However, Mehta stresses, “We are not compromising on quality in any way and even at INR 2.44, the projects have been executed. As for the number of INR 2.44, I will take it with a pinch of salt. The reason is that there are several enablers in such projects. At a solar park, facilities are available at an affordable cost and connectivity is also there. Moreover, the World Bank is involved… and in the case of Madhya Pradesh, they have given a covering guarantee. So, if you take these enablers out, INR 2.44 will work out to somewhere around INR 3.20. Therefore, the reality is somewhere around INR 2.90 to INR 3 (per unit of electricity). If our own people are bidding aggressively, it is at their risk because they expect the solar panels prices to come down, and this has happened. Otherwise banks will not give them funds.”

Mehta also said that India could never overtake China as far as manufacturing is concerned. “Their capacity is over 60 GW, and we just don’t have that capacity and I don’t see it happening in the near future,” he told “We may at the most go to 5GW or 10GW. In fact, we have a lot to learn from China.”

Role of policy

“We have seen a lot of activity in recent times. Companies are raising foreign denominated bonds and there are a lot of secondary transactions being funded by global entities. This is also fuelled by the impetus the government is giving for renewable policy. At least on paper, the projections are highly attractive for investors to consider investments in India’s solar and wind programs. Though policy blueprints are in place, the execution in letter and spirit is to be ensured and it is a work in progress,” another industry insider said.

Vinay Kumar differs and feels that over a period of time, India’s policy has matured and is now stable. It has given the investors comfort and has whetted their appetite for investments in the space, he said.

Some experts emphasise that the situation is not all that gloomy and there is immense hope for the sector. “As far as foreign investments in India is concerned, it is still a hot space since India remains a highly attractive destination, despite some obstacles,” an industry expert said. Mehta believes that since India is a large market, more people are keen on coming here and setting up plants.


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