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SunEdison bankruptcy to make solar project financing difficult in India

U.S. solar company SunEdison’s bankruptcy filing will have a direct impact on its projects in India and will also make lenders more wary about financing projects in the sector.

SunEdison filed for bankruptcy last week due to its high debt portfolio, throwing into uncertainty around 1.7 GW of solar and wind projects in India.

SunEdison will likely offload their projects considering their financial situation, or these projects may get cancelled and re-auctioned.

Private sector lenders in India have already been wary about financing solar projects in India due to the low tariffs, which are seen as being prone to cost risks. Company financials especially when bidding for large projects or at very low tariffs may come under more scrutiny.

Most solar projects have a debt-equity ratio ranging between 60:40 and 70:30. What could happen is that the lenders might start looking at the balance sheets more closely and will try to do due diligence of the tariffs that the companies have bid for the projects. Solar public companies may be affected with investor perception taking a hit due to this bankruptcy. That said, most investors will understand that there are a lot of good solar companies out there and this is just one company that failed due to mismanagement.

 

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