IREDA to step up lending, issue masala bonds
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New Delhi: State-owned clean energy funding company Indian Renewable Energy Development Agency Ltd (IREDA) will step up its lending fourfold to Rs.40,000 crore a year by 2022, to support the 175 gigawatt (GW) renewable energy capacity that the country is trying to achieve in six years, a company official said on Thursday.
As part of raising resources for expanding the loan book, the non-banking finance company (NBFC) will in the next few months issue rupee-denominated bonds in overseas markets (called masala bonds) in the range of $100-200 million (Rs.660-1,320 crore), IREDA director (technical) B. Venkateswara Rao said on the sidelines of the Renewable Energy Expo here.
IREDA, set up in 1987, raises funds from the domestic market through taxable and tax-free bonds in addition to raising resources from international funding agencies such as the European Investment Bank, Japan International Cooperation Agency and Asian Development Bank.
“We have a lending target of Rs.10,000 crore for this year and a higher target of Rs.15,000 crore for 2017-18,” Rao said.
IREDA’s investments are expected to benefit solar power projects because rooftop solar power project developers often find it difficult to secure loans from banks which insist on having a lien on the building, instead of on the solar power installation that they finance.
Conventional banks do not consider solar power installations as adequate collateral as there is no secondary market for them, said Harish Ahuja, founder and chief executive officer of Indiagosolar.in, an e-commerce marketplace that connects equipment suppliers, project developers, lenders and rooftop power project customers.
Indiagosolar certifies technical and economic viability of rooftop projects with the aim of giving a level of comfort to lenders.
Rao of IREDA said the lender would be sensitizing conventional banks about the nuances of the solar power industry to help projects with easier access to credit.
In the value chain of the solar power industry, it is the panel manufacturer who has the highest cost of funding (in the range of 11-12%), due to the risks involved in the business such as the continued threat of dumping of cheaper Chinese panels in the market, said Ahuja. Imported panels from China are about 20% cheaper than those made locally.
“Chinese modules in India are currently available at $0.39 (Rs.26) per watt which is the cheapest price for modules anywhere in the world. Prices are expected to drop further due to the massive oversupply situation in China,” said the ‘India Solar Market Update’ brought out by Mercom Capital Group Llc. on Thursday.
The report said that the country has solar capacity of 8.1 GW as of August and a project pipeline of 21 GW.