According to State Bank of India (SBI), the biggest domestic lender, the investment in the solar project of Gujarat will be adversely affected, if the tariff of solar parks commissioned in Gujarat is reduce as per the petition submitted by Gujarat Urja Vikas Nigam Limited (GUVNL).
The petition submitted by GUVNL. seeks to lower the average tariff from Rs. 12.54 per unit to Rs. 9.0 per unit for projects comprising 857 megawatts of capacity.
However, as per the SBI, which has funded for around 95 MW Solar Projects, the petition alone had an adverse impact on investors' outlook and if improved by GERC it will further hurt their sentiments.
SBI is also considering to draft a letter to Gujarat State Electricity Regulatory Commission (GERC) to put up its case in this regard.
According to the analysis done by SBI's Investment Banking arm:
- The projects were based on certain assumptions, including tariffs that wouldn’t be revised during the 25 year power purchase agreements.
- If the tariffs are changed, the entire financials of the companies/projects would change and debt will barely be serviced from the project cash flows.
- This kind of phenomenon will especially be negative for the nascent industry like sola project where non-recourse funding were started just two years back.
Gujarat seems to join the case of countries like Spain, Greece, Romania and the Czech Republic which are also working on the retrospective cuts in solar tariffs. Spain, after installing the most capacity worldwide in 2008, stalled growth in the industry by capping the number of hours :solar plants could earn preferential rates and holding up new installations.
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In the utility solar category, about 300 MW of capacity was added, and 46 MW was installed in residential solar. Wind energy capacity additions were a record 2.8 GW. These numbers reflect balanced investments in India, where 45 percent of financing ($4.6 billion) was directed to wind resources and 41 percent ($4.2 billion) went to solar. India’s growth propelled it from 10th to sixth place in the G-20, and the country ranks fifth in terms of five-year investment growth.