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Financing Solar Projects in India

InterPV interviewed Craig O’Connor, Director of the Office of Renewable Energy and Environmental Exports, Ex-Im Bank of the United States, about their new Indian photovoltaic financing projects.

Reported by Stella Y. Lee (pved1@infothe.com)

 

 

Could you take a brief minute to introduce yourself and talk about The Export-Import Bank of the United States (Ex-Im Bank)?

The Export-Import Bank of the United States (Ex-Im Bank) is the official export-credit agency of the United States. Ex-Im Bank is an independent, self-sustaining executive agency and a wholly-owned U.S. government corporation.

Our mission is to finance exports that create and sustain U.S. jobs. Ex-Im Bank provides, short-term, medium-term and long-term financing products, including financing to creditworthy international companies and projects for the purchase of U.S.-made technology and services. The bank also provides working capital loan guarantees to U.S. exporters.

Ex-Im Bank has a top priority to increase our support for renewable energy exports. The bank more than doubled its support for renewable energy exports in Fiscal Year (FY) 2011 to US$721 million, after tripling its authorizations for financing these exports in FY 2010 to over US$350 million, compared to FY 2009 authorizations of US$100.4 million and FY 2008 authorizations of US$30.4 million.

Ex-Im Bank financing is usually the most cost-effective source of financing for international customers and end-user project developers to purchase U.S.-made systems. Currently Ex-Im Bank’s 18-year fixed-interest rate direct loan in U.S. dollars has an interest rate of 3.18%. (This rate is reset each month. The interest rate applicable at the time of the closing of the financing is then fixed for 18 years.)

 

What makes Ex-Im Bank decide to offer two recent new loans for Indian photovoltaic projects totaling US$25 million? (Why India? Why solar?)

Ex-Im Bank was one of the largest financers of renewable energy projects in India in FY 2011, authorizing nearly US$180 million in financing for seven solar transactions in the country. There has been an increased demand for solar power in India driven by the country’s commitment to its National Solar Initiative, but also as the result of continuously improving solar technologies. For example, solar energy can compete head-to-head with diesel and other sources of power during peak periods and can provide a long-term fuel-price hedge.

Ex-Im Bank became the first international financing institution to finance a solar power project under the Indian government’s Jawaharlal National Solar Mission to develop 20,000 megawatts of solar power by 2022. A strong national policy coupled with a clear process supporting renewable energy projects has recently led developers and U.S.-based suppliers into the Indian market. Ex-Im Bank is ‘demand driven’. U.S. technology has to be competitive, and the foreign buyers of this technology must be creditworthy.

Expanding Ex-Im Bank’s support for solar in India has been a top priority. Ex-Im Bank Chairman, Fred P. Hochberg has raised Ex-Im Bank’s profile in India, along with the bank’s Project and Structured Finance Division led by John Schuster and assisted by Jessica Farmer, Director of Power in the division. Chairman Hochberg and bank staffincluding members of Ex-Ims Legal and Engineering Divisionshave traveled to India to meet with NTPC, NVVN, central and state government officials, and project sponsors to fully understand the incentives offered by the National Solar Mission, and states such as Gujarat, under the power purchase agreements. Having gained an understanding that properly structured solar projects in India represented a reasonable assurance of repayment, the bank has been able to move forward in supporting these projects.

Ex-Im Bank’s support for these projects was, and is, critical due to the general lack of available long-term financing at commercially feasible terms.

Ex-Im Bank financing for these projects included an US$84.3 million direct loan to Dahanu Solar Power Pvt. Ltd. This financing will support the purchase of thin-film solar panels from First Solar Inc. in Tempe, Arizona., which has its manufacturing facility in Perrysburg, Ohio. The solar panels will be used for the construction of a 40 MW Photovoltaic (PV) solar power plant in Rajasthan, India. 

In another transaction, the bank approved an US$18.9 million direct loan to Tatith Energies of Gujarat, India. This loan will support the purchase of construction services from American Capital Energy and solar panels from SolarWorld California. The U.S. exports will be used in the construction of a 5 MW solar PV crystalline power project in Gujarat, India.

Ex-Im Bank has also financed solar module exports that are being used to power cell-phone towers, thereby displacing more costly diesel power.

Overall in FY 2011, the bank authorized a total of US$2.9 billion in financing to support purchases of U.S.-produced goods and services by Indian companies, a more than a 30% increase since FY 2009. India is expected soon to surpass Mexico as the largest market exposure in Ex-Im’s portfolio. Ex-Im Bank financed more than 17% of all U.S. goods to India in 2011.

 

How do you see the progress of the Indian projects so far?

So far, so good. We are now looking at a number of projects from the latest round of National Solar Mission projects.

 

What are your biggest challenges and opportunities for funding the solar projects in other countries?

There are great opportunities worldwide as renewable energy technology continues to become more cost-effective. The biggest challenge with solar, as in any other sector, is determining that the corporate or project borrower represents a reasonable assurance of repayment.

 

Do you have more plans for investing in PV projects worldwide?

Ex-Im Bank’s commitment to financing renewable energy projects remains strong. We continue to work with overseas developers and investors, as well as U.S.-based suppliers to ensure that we are growing exports while providing foreign borrowers high quality U.S.-made goods and services at attractive terms. In India, Ex-Im Bank is currently working with a number of project companies that won projects in the latest round of National Solar Mission projects. The bank is also in discussions on financing solar projects under state government initiatives, as well as projects that use solar energy to power cell phone towers.

 

Stella Y. Lee is Editor of InterPV. Send your comments to pved1@infothe.com.

 

 

For more information, please send your e-mails to pved@infothe.com.

2011 www.interpv.net All rights reserved.

 
 

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