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Financial Model of 200 MW Solar Park:Levelised tariff LCOE=Rs 2.44/KWh ;ROE(pre-tax)21.2 %;IRR (Equity_Pre-Tax)17.3%;DSCR = 1.59;Grid parity=Rs3.2/KWh

Analysis
Typography

Solar Power Levilised Tariff LCOE pf Rs. 2.44 per KWh 

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On 10th May , the lowest bidder for the solar park in Rajasthan had quoted Rs 2.62 per unit for Bhadla Solar Park phase IV and after two days, on Friday May 12th, ACME Solar Holdings quoted lowest solar tariff at Rs.2.44/kWh for 200 MW followed by Japan's SBG Cleantech One at Rs.2.45/kWh for remaining 300MW during an auction carried out by Solar Energy Corporation of India Limited (SECI) for 500 MW capacity in Bhadla Phase-III Solar Park, Rajasthan. The solar park is being set up by Saurya Urja Company of Rajasthan Ltd, a joint venture between Rajasthan and IL&FS Energy Development Company Ltd. Respectful players like Acme, SBG, Vinnet Mittals – Avada, Hero, Renew Power, Shapporji Palonji etc participated in the bid and it is really heartening and charismatic to see that LCOE of Rs. 2.44 per kWh is not only a finance game but a big game of technology as well.

The projects are likely to be completed in about 12-13 months.

The quoted tariff is fixed for 25 years with no escalation and the bidders have sought no VGF (viability gap funding) from the government.
The entire solar power will be consumed in Rajasthan, and power sale agreement with the state distribution companies is already tied up.
The developers are responsible to connect to the pooling sub-station of solar park. The developers will be paying solar park charges of Rs 45.2 lakh per megawatt towards land, connectivity (from pooling substation to state network) and other infrastructural facilities. 

Solar IRR-

 

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 Return on Equity and Annual earnings yield(in %)-

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 CAPEX Breakup : Total CAPEX Rs 400 Lakh/MWp

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 Actual solar discounted revenue yield-

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Solar Tariff Calculation:-
Levelised Cost of Electricity (LCOE)-

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Components of Levelised tariff (LCOE)-

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 Per Unit Solar Tariff component -

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 Per Unit Solar Tariff component Calculation after Discounting using WACC-

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 Net Generation or saleable generation-Net Generation or saleable generation-

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Calculation of Generation parameters

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 Interest payment

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 Levelised tariff (LCOE) component after financial "discounting" using WACC to bring costs from the future to the present-

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 Marginal cost of electricity and Grid Parity-

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Marginal cost of electricity-Marginal cost of electricity-
Solar generation is cheaper at the margin, and therefore has achieved grid parity in this location or region.
Grid Parity-
(i) Using Grid parity, LCOE can be compared with the marginal cost of electricity offset from the grid
(ii) On Nov 2015, two companies (SunEdison and SB Energy) had lowest bid of Rs. 4.63/kWh in India to win several 100 MW of solar in reverse auctions, and at that point of time it was rightly envisaged by the solar think tank that "we are very close to grid parity in India at both the wholesale and retail levels"
(iii) After the recent bid of ACME Solar Holdings and Japan's SBG Cleantech, during May 2017, the grid parity price in markets like India during Nov-2015 was Rs.5.8 - 7.5 at the retail level , and around Rs.3-4.5/kWh at wholesale.

61

 Unit Generation-

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 Tariff Component -

63

Sensitivity analysis through Financial Model-Sensitivity analysis through Financial Model-
LCOE = Rs 2.44 KWh; ROE (pre-tax) = 21.2 %; ROE (post-tax) = 15.6%; Earnings yield = 25.7%; Grid parity = 3.16 Rs./KWh; IRR (Equity_Pre-Tax) = 17.3%; IRR (Equity_Post-Tax) = 13.06%; IRR (Project_Pre-Tax) = 10.96%; IRR (Project_Post-Tax) = 9.36%; DSCR = 1.59; WACC = 7.02%
Sensitive parameter is CUF %-

64

Sensitive parameter is Normative Capital cost Rs Lakh/KW-

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Sensitive parameter is Leverage Ratio i.e. Debt:Equity-

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Sensitive parameter is Cost of Debt or After-tax cost of debt or Interest rate in %

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 Sensitive parameter is Market Beta (Ba) or stock's beta or Beta of the asset 

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 INPUT & ASSUMPTIONS-

Power Generation Inputs

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 Financial Assumption-

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 Interest payment and Interest on Working Capital-

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 Profit & Loss Statement-

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Discounted Cash Flow-

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 Solar Cash Flow Statement-

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 Solar Balance Sheet Statement-

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 Solar Depreciation Statement-

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Solar Debt Repayment Statement-

95

 

ujjwal

 

About Author: Ujjwal Kumar Gupta, MBA - XLRI; B.Tech - IIT; Sectorial experience - Infrastructure, Energy, EPC, OEM, Power, Mining, Construction, Steel

Author's Linkedin Profile: https://www.linkedin.com/in/ujjwal-kumar-gupta-178221101/

Article Link -https://www.linkedin.com/pulse/financial-model-200-mw-solar-parklevelised-tariff-lcoers-gupta

Disclaimer: The author contributed to this article in his personal capacity out of the passion of writing as a hobby and also by doing judicious utilization of available free time. The views and opinions expressed in this article are those of the author and do not necessarily reflect or represent the views or the official policy or position of the any entity, institution and organization. Assumptions made within the analysis are not reflective of the position of any entity, institution and organization. The author disclaim any liability in connection with the use of this information. Examples of analysis performed within this article are only examples. They should not be utilized in real-world analytic products as they are based only on very limited and dated open source information.

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