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Presentation given by Anmol Singh Jaggi, Director, Gensol Consultants at 'Reverse Bidding for Solar Projects' Conference in Ahmedabad. Please drop in an email at firstname.lastname@example.org to know further details.
Bidding for Profitability - Anmol Singh Jaggi
” “ Adversity is a great teacher, but this teacher makes us pay dearly for its instruction; and often the profit we derive, is not worth the price we paid. <ul><li>Elizabeth Hardwick </li></ul><ul><li>An American Writer </li></ul>
Why Reverse Bidding? 350 MW 1700 MW 150 MW 2500 MW NSM Phase I NSM Phase II
Factors for Bidding Costs Generation Financing Size | Contractor | Technology | Procurement Date | Land Land | Technology Interest | Tenor
Cost of Setting Solar Project Costs Parameter Bid Difference Size of Project 80 paise EPC Contractor 64 paise Technology 22 paise Procurement Date 24 paise Land 16 paise Total 206 paise
Expected Generation Generation Parameter Bid Difference Land 119 paise Technology 64 paise Total 183 paise
Debt Financing Financing Parameter Bid Difference Interest 82 paise Tenor 103 paise Total 185 paise
Comparison 135 Land 103 Tenor 82 Technology Interest 80 Size 86 64 EPC Contractor 24 Procurement Date
About Gensol Consultants Pvt Ltd <ul><li>Few Facts: </li></ul><ul><li>120+ Trained Team - all Graduates and Post Graduates in Energy and Environment </li></ul><ul><li>Presence in 22 states </li></ul><ul><li>250 MW+ Solar Power Projects under advisory </li></ul><ul><li>Recipient of multiple awards including BusinessWorld Hottest Young Entrepreneur and Economic Times Power of Ideas. </li></ul><ul><li>Offices at: </li></ul><ul><li>Ahmedabad | Gurgaon | Bangalore </li></ul><ul><li>Quoted In: </li></ul><ul><li>Business Dailies: Business Standard | Economic Times Business Magazines: Business India | Forbes India </li></ul><ul><li>Industry Journals: Power Line | Energetica </li></ul>
Solar Advisory Services Owner’s Engineer: As Owner's Engineer, we guide our clients or investors through the complete process of project feasibility, financial closure, bid process management, vendor finalization and supervision of project execution up till successful project commissioning which meets our strict quality criteria. Lender’s Engineer: Being consultants to some of the leading lending institutions in the country, we assess the key parameters impacting the returns from the project like generation, cost and conditions of the EPC Contract, preparedness of Project Developer for execution etc. Detailed Engineering and Vetting of Drawings: Gensol Solar Division is staffed with experienced Electrical, Electronics, Mechanical and Civil Engineers who undertake detailed engineering of Solar PV Power plants on behalf of EPC Contractors and vetting of drawings for Project Developers and investors. Pre Feasibility Analysis and Bidding Assistance: Every solar power policy is different in terms of eligibility criteria, method of allocation, allowed location of project etc. Gensol’s engineers and analysts help Project Developers select the sites most suitable for setting up solar power projects, assist in price discovery for securing allocation in cases of reverse bidding and in documentation to be submitted for the same. Detailed Project Report: A Detailed Project Report is one of the most important documents to assess the feasibility of project and to get financial closure. Gensol with its sector expertise and established standing in the renewable energy consultancy not only gives the most exhaustive analysis of the project but also enjoys the confidence of industries, investors and banks alike.
” “ Experience Snapshot Gensol Consultants is the exclusive Lender’s Engineer to L&T Infra Finance. Total portfolio of Solar Power Projects under advisory at Gensol Consultants is 250 MW. <ul><li>60 MW (4 Projects) – Haryana Power Generation Corporation Ltd, Haryana Govt. enterprise </li></ul><ul><li>25 MW – Alex Astral Solar Power Ltd., Gujarat </li></ul><ul><li>5 MW – Konark Group, Gujarat </li></ul><ul><li>5 MW – Swiss Park Vanijya Pvt Ltd, Rajasthan </li></ul><ul><li>5 MW – OPG Energy Pvt Ltd, Rajasthan </li></ul><ul><li>5 MW – Alex Spectrum Radiation Pvt Ltd, Rajasthan </li></ul>Owner’s Engineer: <ul><li>25 MW – Sun Group, Gujarat </li></ul><ul><li>25 MW – Sun Edison, Gujarat </li></ul><ul><li>10 MW – Greeninfra Solar, Gujarat </li></ul><ul><li>20 MW – PLG Power, Gujarat </li></ul><ul><li>6 MW – Indiabulls Power, UP & Maharashtra </li></ul><ul><li>10 MW – Millenium Synergy, Gujarat </li></ul><ul><li>5 MW – ESP Urja, Gujarat </li></ul>Lender’s Engineer: <ul><li>20 MW – Client Confidential, Gujarat </li></ul><ul><li>8.5 MW – Jain Irrigation, Maharashtra </li></ul><ul><li>1 MW L&T ECC, Rajasthan </li></ul>Detailed Designing <ul><li>2 MW – R V Akash Ganga, Uttarakhand </li></ul>Detailed Design Vetting <ul><li>5 MW – RSB Energy, Orissa </li></ul><ul><li>5 MW – Chemtrol Industries, Rajasthan </li></ul><ul><li>5 MW – Shashi Kiran Group, Karnataka </li></ul><ul><li>2 MW – Shri Bhagirathi Textiles Ltd </li></ul>Feasibility Analysis & DPR:
” “ Experience Snapshot Gensol Consultants is the exclusive Lender’s Engineer to L&T Infra Finance. Total portfolio of Solar Power Projects under advisory at Gensol Consultants is 250 MW. <ul><li>161 MW Grid Connected Gujarat </li></ul><ul><li>60 MW Grid Connected Haryana </li></ul><ul><li>15.5 MW Grid Connected Maharashtra </li></ul><ul><li>15 MW Grid Connected Rajasthan </li></ul><ul><li>5 MW Grid Connected Karnataka </li></ul><ul><li>5 MW Grid Connected Orissa </li></ul><ul><li>2 MW Grid Connected Uttarakhand </li></ul><ul><li>1 MW Grid Connected Maharashtra </li></ul><ul><li>200 kW off Grid Gujarat </li></ul><ul><li>100 kW Off Grid Gurgaon </li></ul><ul><li>100 kW off Grid Assam </li></ul><ul><li>5 kw Off Grid Delhi </li></ul><ul><li>5 kW Off Grid Rajasthan </li></ul>Advisory: Execution:
Gensol Consultants Pvt Ltd Western Business Unit: 205 - 206, Sarthik II, S.G. Highway, Ahmedabad - 380015 Gujarat, India Northern Business Unit: 105-106, Infotech Centre, Plot No. 14/2, Opp. Amdoc's Building, Old Gurgaon-Delhi Road, Gurgaon - 122001, Haryana, India Southern Business Unit: 503, 5 th Floor, Benaka Towers, 17 th Main D, Indranagar, Bangalore – 560075 Karnataka, India E: [email_address] W: www.gensolsolar.com Ph: +91 79 39122200 F: +91 79 39122220
The story of National Solar Mission Phase 1 was nothing short of an adversity having 10.96 to 12.76 as its final bidding range. We have the Global Recession to thank which resulted in downward revision of feed-in-tariffs in developed countries, in turn resulting in an oversupply pulling the prices of modules down to never-before levels and making the projects somewhat viable. But, to expect that Europe’s poison shall be our messiah time and again is foolhardy. Much alike this quotation, the story of Projects allocated by way of Reverse Bidding share a similar fate. The most important question remains is that whether the profit we derive is worth the price we paid.
The investor and project developer interests has reached feverish pitch. There were applications of 1700 MW for a total of 150 MW of Allocations for Phase 1 of NSM and 2500 MW for the ongoing 350 MW of project allocations to be doled out as part of NSM Phase II. To accommodate such interest, Reverse Bidding is and will be the mantra of Solar Power Project Allocations. Because, for all its criticism, Reverse Bidding does offer a agreeable-to-all solution: Transparent & Just Independent of Vagaries of Luck Easy to Understand
Rakesh Jhunjhunwala – one of my personal favorites – often quips ‘ Bhaav bhagwaan hai, hum kadardaan hain ’ So what does bhaav actually depend on? The 3 critical inputs which go into your top secret all important Returns Calculation Sheet are Costs of Project, Expected Generation and Financing Arrangements. These 3 inputs in turn depend upon other parameters.
The Capital Costs to setup the project depends upon various parameters: As Owner’s Engineer and Lender’s Engineer we are exposed to a lot of Solar EPC Contracts. To just give a comparison, the per MW cost difference between a 5 MW and 25 MW EPC Contract is about 60 lacs allowing the larger project to bid 80 paise lower. In India today, we have about 150 EPC Contractors – it seems every alternate building in Hyderabad houses a Solar EPC Contractor. The engineering expertise and execution experience varies among them. In such a case, the likes of L&T – arguably, the EPC Contractors with longest history of engineering Project Execution In India can come at a premium. But, makes it up by ease in Project Financial Closure and peace of mind that deadlines will be met. So, the bidding cost difference if you want to go between the best in class vis a vis your average neighborhood contractor can be upto 64 pasie. This is no news to anyone that Thin Film comes about 10 – 15 cents cheaper per Wp than crystalline modules, but it leads to higher construction and steel cost as its area requirement is about 50% more than crystalline. Though the decision of technology can not be taken in isolation and the radiation, temperature, cost of land etc need to be taken into consideration. But, from a bidding standpoint, there is a difference of 22 paise between the two. The PV Industry in India has had a massive cut down in prices over the past 3 years starting from costs as high as 17 crores / MW 2 years back to 14 crores / MW 1 year back to hovering around 11 crores / MW today. This has been aided by oversupply, upgradation in technology and localization of raw materials. It is also agreed upon that markets will undergo a correction and this steep decline shall slow down. However, the difference between bids for projects signing an EPC Contract today and 6 months down the line might still remain around 24 paise. This is particularly relevant when you compare Karnataka State Policy to National Solar Mission with the former having 18 months execution period while the latter 13 months. India is fortunate that we have good radiation land available in plenty at relatively cheaper costs. So, the difference in a good land having roads access, substation proximity and good radiation will be about 3 to 4 lacs more than the not-so-good land leading to a bid price difference of about 16 paise.
The Generation expected is probably the most tricky and important issue in Solar Industry. We can have our fancy P 50, P 75 and P 90 figures for generation but the underlying data is very weak. With time as the generation data for the existing power plant and the ones being constructed becomes public and the measured data from weather stations becomes available, we might be able to predict with accuracy the generation expected. That said, the generation is a function of our site or land as it depends on the radiation received and the ambient temperature. Japanese researchers have found that Himalayas are the most suitable site in the Indian sub continent to set up a solar power plant with low temperatures and high radiation. In Gujarat itself, we can have annual radiation from 1900 to 2100 kwH/m2, which can make a difference of upto 119 paise. Before I go into technology, let me present a disclaimer that Gensol is technology agnostic and that different technologies have different pros and cons. While thin film gives a better generation in hot areas like Rajasthan and Gujarat, crystalline plants have actually completed 25 years and were still found to be working fine. Though, the decision is and will always be subjective but the generation difference between thin film and crystalline can be as much to make a difference of 64 paise is bidding.
And finally, the bidding also depends on the financing arrangements that you can secure which largely changes from Project Developer. If you are a Reliance Infra then you might be able to get a 3.8% 17 year loan from Exim Bank or you may decide to go with one of our national banks at around 12.75% interest for 10 to 12 years. It isn’t very easy to secure exim bank financing but assuming that a lucky project developer is able to get a currency risk hedged financing of 9% and another not-so-lucky project developer gets it as 12.75%, the difference in bidding tariff can go upto 82 paise. Similarly, it isn’t very easy to get long terms loans but a 3 year difference in the payment tenor for a loan can lead to a difference of 103 paise in bidding.
To give a comparison of everything that has just been said. In all we can get a bidding range of more than 5.5 rupees if we do everything right.