USAID announces $41 million financing for sector as Adani secures S1 billion debt package.
A raft of new initiatives, market reforms and investments last week have given a fresh boost to India’s burgeoning renewable energy sector – making one of the biggest sunrise industries in the country even more attractive for investors and companies.
The United States Agency for International Development (USAID) and the US International Development Finance Corporation (DFC) announced a $41 million-loan guarantee program to finance investment in renewable energy solutions by Indian SMEs.
“USAID and DFC are jointly sponsoring a $41 million loan portfolio guarantee to help finance investments by Indian small and medium enterprises (SMEs) in renewable energy solutions, including rooftop solar installations. These loans will enable SMEs to access reliable power and cut costs,” USAID said in a statement.
“Investments in solar solutions, secured by these credit guarantees, will improve access to clean, steady, and affordable energy as well as further progress towards India's clean energy transition and climate change mitigation,” said Karen Klimowski, USAID-India's acting mission director.
While SMEs account for 48 per cent of the total energy consumed in India’s industrial sector, rooftop solar power generation offers a win-win solution – providing lower monthly energy costs that drive important social benefits, including job creation and economic growth, while reducing carbon emissions and improving air quality.
Although India’s commercial and industrial sectors pay steep energy bills for their electricity, making rooftop solar power a sustainable and cheaper alternative, SMEs and residential consumers face various constraints in securing the finance to install solar panels.
USAID and DFC have partnered with the New York-based Encourage Capital, an environmentally focused investment firm, and two Indian non-banking financial companies, cKers Financial and woman-owned Electronica Finance Limited (EFL), to address this challenge. Encourage Capital has invested $15 million in EFL, which will use the USAID-DFC loan portfolio guarantee to stimulate the rooftop solar market – worth a $9 billion market opportunity – for SMEs.
The development came in the same week that India-based Adani Green Energy (AGEL) raised more than $1 billion debt package for its 1690MW renewables portfolio through agreements signed with global lenders – a major validation of the large corporate footprint in the sector. The $1.35 billion revolving project finance facility will initially fund a 1.69GW portfolio of solar and wind projects to be built by four special purpose vehicles in Rajasthan.
“We see this as yet another validation of our execution ability in the renewable space. The banks that have committed to this strategic transaction are our key partners in ensuring seamless access to global capital for our underlying renewable asset portfolio. This revolving nature of the facility will help AGEL to achieve its goal of a 25GW portfolio by 2025. In addition, it positions AGEL well to capture growth in the attractive Indian renewable sector,” said Adani chief executive Vineet Jaain.
Separately, Moody's Investors Service noted that although Indian renewable energy companies failed to meet generation targets in the fiscals 2019 and 2020, they will be able to withstand the impact of this underperformance thanks to large and diversified portfolios.
“About 15-20 per cent of Indian wind and solar projects did not meet capacity utilization targets in fiscal years 2019 and 2020 because of wind generation curtailments and lower irradiance for solar projects, which were responsible for 56 per cent and 68 per cent of the underperformance respectively,” said Abhishek Tyagi, Moody's Vice President and Senior Analyst.
Given the large scope of the sector and its potential to unlock massive social benefits and robust economic growth for the country, the outlook for India’s renewable sector therefore remains sunny for the months and years ahead.