Summary of Debt & Finance Webinar :- Date: 06/05/2020

Faculty:

1) Mr. Rohit- CFO (Ananya Renewables)

2) Mr. Mayank- Renewable Energy Team (Standard Chartered Bank)
3) Mr. Abhinav- Project Finance Team (HDFC Bank)
4) Mr. Karan- Debt Specialist
5) Ms. Kajal- Amplus
6) Mr. Prashant- L&T Finance
7) Mr. Sanjeev- Nexgen Financial Solutions
8) Chintan Shah- IREDA
9) Fourth Partner
10) Mr. Vinod- Debt Specialist

Prologue: If there’s debt, there’s equity. If there’s no debt, there’s no equity. As per the current
scenario, fly towards safer assets.

1) How people in the industry are looking at Force Majeure aspects.

 On 27th March, RBI issues Moratorium grant. It is at discretion of bank to grant moratorium and
not a mandate. It shall be proposed to extend moratorium to debentures & Bank guarantees.
 Expansion of Moratorium to NBFCs has already been declared by RBI.
 As long as it is non-performing asset, bank will not downtime on the devoid as per April released
RBI guidelines.
 In Financing, force majeure can’t be argued in common law. Epidemic specific clause shall be
there in Force Majeure.
 Orders released by RBI due to Covid-19 are not part of Law.

2) Impact of Covid-19 on crisis with Yes Bank & NBFCs.

 Yes bank is a prominent lender to Renewable Energy Projects. There will be no impact in long
run since umbrella shall be widened due to involvement of PSUs & more banks but there will be
impact in short run because of lack of confidence in financial fraternity.

3) Are Foreign banks/institutions interested in Renewable Energy Projects in India as of now.

 Most of the banks/institutes opted out coal projects are quiet interested in Renewable Energy
Projects in India. But, due to DISCOM policies, are hesitant to enter Indian Renewable Energy
sector.
 International dollarized accounting is necessary to lurk these banks/institutions.
 As of now, in last 18 months 5 billion dollar business done for 10 GW projects in India by Foreign
Banks funding.
 International Bond market is another option which is active for fetching funds.

4) Outlook on 25 years tenure funding.

 World Bank owned by 189 Governments is providing this kind of funding to countries, not
directly to private lenders. To private borrowers, these funds can be obtained by lending
through Government.
  Multilateral Investment programs & long tenure investment policies are required for direct
funding to private borrowers. As of now, no private borrowers.
 In long run, exit from coal/thermal is happening, but strategy is under development to divert
those finance towards renewable energy projects
Challenges: Change to demand projections & countrywide politics.

5) Impact of delayed payments by DISCOMs

 Due to Covid-19, debt & mutual funds are already under crisis.
 105 Lakh crore Rupees investment is planned for next 5 years for Renewable Energy sector in
India. On average, 7 billion dollar investment/year is required to achieve the target. In order to
achieve this, long term funding is mandate.

 DISCOMs are already into financial crunch. As a result, they have started Load shedding &
curtailing high cost power.
 Solar Energy cost has come down to about 2-2.5 Rs. Per unit in past year. Pooling of Renewable
energy by one agency is required to keep the accounts in flow.

6) Potential Investor’s concern.

 In this time of Covid-19, power sector has suffered but Renewable energy sector has been a star
performer in these tough times.
 MNRE is trying hard to attract the Investors. Investor friendly policies are going to be announced
soon.

 For captive plants- Power banking & open access policies are haunting developers as well as
investors.
 Investors need transparent policies & assurity on flow of returns.
 Clear exit of investment.
 LCs & BGs are not fully reliable.

 RBI is trying to push credit in the system & downgrading benchmark costs and as a result, non-
performing assets are coming out.

7) Investment scenario now

 Due to Covid-19, deals discussed in first quarter of year 2020 are on hold. In-spite, strong
lenders are supporting borrowers and disbursing funds.
 In year 2019 debt financing was done for around 2.5 billion dollars but for year 2020, scenario
will not be the same

8) Key Technical & Financial aspects in renewable energy projects

 Technology of PV modules
 Patient capital
 A clear understanding that all benefits are not upfront
 Financial Sustainability
9) Foreign bank keen on investing on debt side but they are selective, Conversion ratio is slow.
 Diligence Timeline is required.
 Not many foreign banks have experience of renewable energy projects.
 Developers must engage with banks as early as possible to avoid any disbursement delay.
 Hedging policies are not transparent.
 Off-taker role is crucial if financing is required for short tenure (5-6 years).

10) Concerns of Power Lenders

 In year 2019, Thermal PLF achieved was 56%. Technical limit of coal plants to be backed down.
 400 KVA & above connectivity shall be allowed since evacuation is a very critical aspect.

11) Key concerns & trends in near future

Concerns:
 Evacuation
 DISCOM policies & Land issues
 Delayed payments
 Capital Reallocation

Trends:
 Relaxed Guidelines on liquidity by RBI.
 Separation of Renewable energy from Power Sector Policy.
 Storage based projects.

12) Impact of Covid-19

 Cleaner Environment
 Flow of capital increased for renewable Energy Projects & diminishing for Coal & Oil based
projects.
 Economy may not be same as it was
 Hybrid & Energy storage will be areas of keen interest
 Residential Load will spike as work from home is going to be new culture.
 Agencies like IREDA & SECI will introduce guidelines for developing new structures for foreign
funding inflow.
 Money available right now in market for AAA institutions. For AA, it will take time.
 Entire year is for consolidation.

13) Investment fund security & concerns

 Payment Security Mechanism should be sturdy for due pay offs to developers. MNRE has now
intervene in this regard.
 For Liquidity & bond money, a reliable platform is required. It will take around 2 months for the
concrete policy to flow around.
14) Non repayment issues due to Covid-19
 Impact is much longer in certain sectors
 Specific CNS segments shall be less impacted
 For rooftops, there is no clarity. Although, off takers are able to run rooftop projects after
commissioning as there is minimal support required.
 For Rooftop PPA projects, force majeure is there. Off takers are asking for payment relaxation &
are ready for PPA extension. Meanwhile, Moratorium will take care of lenders.
 Financers need to be convinced by presenting data from off takers & sites.

15) Opportunity for Consolidation

 Asset Quality matters the most. A better understanding/clarity should prevail that falling tariffs
are not impacting the plant quality.
 Calibrated approach for PPA counter parties
 Liquidity management
 Proactive steps to be taken by MNRE & SECI

16) Liquidity Management in current scenario

 Schemes to be announced by IREDA & several banks
 Holding companies are unable to arrange for working capitals from banks.
 Renewable Energy sector has revenue drawability

17) Support for Debt financing restructuring

 Quantum of requirement to be understood first.
 DISCOM policies should be discussed and amended
 Bring insurance sectors bond in renewable energy sector
 Domestic institutional/bank support.
 Capital Recycling shall be mandate.