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Q3INDIA SOLAR COMPASS 2017

Waiting for new tenders, anti-dumping duty decision and some profits

Growing but anxious

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Contents

Executive summary 5

1. Installed capacity 9

2. Capacity addition 122.1 Progress in Q3 2017 122.2 Estimate for Q4 2017 15

3. Leading players 183.1 Project developers 183.2 Module suppliers 183.3 Domestic manufacturers 193.4 Inverter suppliers 203.5 EPC contractors 20

4. Tender progress updates 224.1 New tender issuance 224.2 Tender cancellation 264.3 Tender results 274.4 Tenders pending allocation 294.5 Anticipated tenders 30

5. Pricing updates 325.1 EPC costs 325.2 Solar modules 325.3 Inverters 33

6. Funding 346.1 Equity funding 346.2 Debt funding 366.3 Mergers and acquisitions 37

7. Policy and regulatory updates 387.1 Central government 387.2 State governments 397.3 Other updates 40

8. Key market insights 438.1 ADD petition 438.2 Project renegotiations and cancellations 438.3 Delays in commissioning 44

9. International developments 469.1 US ITC ruling 469.2 EC decision on MIP 469.3 Lowest solar bid in Saudi Arabia 47

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List of figuresFigure 1.1 Total installed and pipeline capacity as on September 30, 2017 9Figure 1.2 State-wise utility scale solar installed and pipeline capacity 10Figure 1.3 State-wise rooftop solar installed capacity 11Figure 1.4 Top 20 developers by commissioned capacity 11Figure 2.1 Quarter-wise utility scale solar capacity addition 12 Figure 2.2 State-wise utility scale solar capacity addition in Q3 2017 13Figure 2.3 Anticipated/scheduled vs. capacity commissioned in 15

Q3 2017 for key tendersFigure 2.4 Likely capacity addition in Q4 2017 16Figure 3.1 Developer wise capacity installed in Q3 2017 18Figure 3.2 Market share of module suppliers in Q3 2017 19Figure 3.3 Market share of domestic module manufacturers in Q3 2017 19Figure 3.4 Market share of inverter suppliers in Q3 2017 20Figure 3.5 Market share of EPC contractors in Q3 2017 21Figure 4.1 New tender announcements and allocations 22Figure 4.2 Number of tenders issued 22Figure 4.3 New tenders issued in Q3 2017 23Figure 4.4 Rooftop solar tenders issued in Q3 2017 26Figure 4.5 Auction results in Q3 2017 27Figure 4.6 Bid results of Gujarat 500 MW tender 28Figure 4.7 Bid results of NLC 20 MW tender 28Figure 5.1 BTI India Solar EPC Price Index 32Figure 5.2 BTI India Solar Module Price Index 32Figure 5.3 BTI India Solar Inverter Price Index 33Figure 6.1 PE investment in the Indian solar sector 34Figure 6.2 Renewable stock trading pattern vs indices 35Figure 6.3 M&A in the Indian solar market 37Figure 8.1 Commissioning status of NTPC, SECI and state tenders 45

List of tablesTable 4.1 Key details of tenders issued in Q3 2017 24Table 4.2 Tenders cancelled in 2017 26Table 4.3 Tenders pending allocation 29Table 4.4 Tenders likely to be announced shortly 30Table 6.1 Key PE transactions in 2017 34Table 6.2 Key mezzanine funding deals in Q3 2017 35Table 6.3 State Bank of India MCLR 36Table 6.4 Offshore debt funding deals 36Table 6.5 M&A transactions in Indian solar sector in Q3 2017 37Table 7.1 Forecasting and scheduling regulations in Andhra Pradesh 40

and RajasthanTable 8.1 Timeline for anti-dumping petition in India 43Table 8.2 Cancelled tenders 44

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Executive summary1

India’s total installed solar capacity is estimated to have reached 17,794 MW as on September 30, 2017. This includes 15,933 MW of utility scale (90%) and 1,861 MW of rooftop solar capacity (10%). Bulk of this activity continues to be in the frontline states in south and west India. Telangana (2,721 MW), Rajasthan (2,219 MW) and Andhra Pradesh (2,148 MW) are the top three states by commissioned capacity for utility scale solar projects.

Q3 was a busy quarter for project construction with 2,164 MW of utility scale capacity getting commissioned (+50% over Q2). We estimate the next two quarters to be even busier with up to 5,600 MW of projects in advanced stages of construction. We estimate the capacity addition in 2017 to reach a record 9,370 MW (+115% over 2016).

Figure 1 Quarter-wise utility scale solar capacity addition

ReNew commissioned the largest total capacity in Q3 2017 (258 MW), followed by SkyPower (200 MW), Adani (180 MW), Suzlon (160 MW) and Azure (150 MW). In module supply, the Chinese players including JA Solar, Canadian Solar, Jinko, Hareon and Chint continue their dominance accounting for quarterly market share of 86% and twelve out of the top fifteen positions. Indian manufacturers supplied 215 MW of modules (10% market share) mainly for projects tendered with domestic content requirement (DCR) stipulation. But total production of domestic manufacturers in the quarter was significantly higher at 655 MW with remaining modules going to rooftop, off grid and export markets.

1 In this report, all references to project or tender capacities refer to utility scale solar projects unless explicitly mentioned otherwise.

Source: BRIDGE TO INDIA researchNote: DCR – Domestic content requirement

Q3 was a busy quarter for project construction with 2,164

MW of utility scale capacity getting commissioned (+50%

over Q2). We estimate the next two quarters to be even busier

Chinese module players continue their dominance

accounting for quarterly market share of 86% and

twelve out of the top fifteen positions

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In the inverter market, ABB continued its market dominance with commissioned capacity of 856 MW (40%). Huawei surged up in the charts with commissioned capacity of 380 MW (18%). The company has been gaining rapid market share in India and supplied inverters to Adani and SkyPower projects during the quarter. These companies were followed by TMEIC (326 MW, 15%), SMA (293 MW, 13%) and GE (152 MW, 7%).

Q3 was a slow period for new tender issuance. Only 1,095 MW of new tenders were issued as against 3,150 MW of new tenders in Q2. DISCOMs remain reluctant to buy additional power as they have already contracted sufficient power and demand growth continues to be weak. Moreover, procurement agencies are working on new bidding guidelines and we expect tender issuance to pick up by end of this year.

Only 45% of the new tendered capacity (510 MW) is for project development. NTPC has issued a DCR-based project development tender for 250 MW, won by Azure in a competitive auction at a tariff of INR 3.14/ kWh. Power from this project will be ultimately sold to New Delhi Municipal Corporation. Maharashtra State Power Generation Corporation Limited (MAHAGENCO) issued the other two project development tenders with a total capacity of 260 MW. NTPC also issued multiple EPC tenders aggregating 368 MW including a 225 MW DCR tender in Uttar Pradesh and a host of other smaller tenders for co-location at its thermal power plants.

Source: BRIDGE TO INDIA researchNote: 1. This chart excludes Jharkhand 1,200 MW tender, which is believed to be under

tariff negotiations. 2. All figures are in MW 3. SECI - Solar Energy Corporation of India Limited CPSU - Central Public Sector Undertaking

Figure 2 Total installed and pipeline capacity as on September 30, 2017

In rooftop solar, increased government push has led to

growing tender activity with an aggregate capacity of 115 MW

being tendered in Q3 2017

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Results were announced for two tenders in Q3 2017 – Gujarat 500 MW state tender and NLC Andaman and Nicobar Islands 20 MW EPC tender. The Gujarat tender saw intense bidding and winners included GRT Jewellers (90 MW, INR 2.65/ kWh), Gujarat State Electricity Corporation Limited (75 MW, 2.66), Gujarat Industries Power Company Limited (75 MW, 2.67) and Azure (260 MW, 2.67). These tariffs are higher than the all-time lows (INR 2.44/ kWh) seen in SECI Bhadla auction in May but adjusted for increases in module prices and GST related costs, they are just as aggressive in our view.

NLC also announced results for its EPC tender for a 20 MW solar project integrated with 28 MWh of storage capacity – the first utility scale storage project in India to take off – in Andaman and Nicobar Islands. The tender was won by Mahindra at a total EPC and O&M price of INR 144.40 million/ MW.

In rooftop solar, increased government push has led to growing tender activity with an aggregate capacity of 115 MW being tendered in Q3 2017. However, capacity addition in Q4 is expected to remain steady at 200 MW, the same level as in Q3 2017, mainly due to increase in module prices.

Open access capacity addition also jumped to 144 MW in Q3 2017 (105 MW in Q2) largely because of Karnataka’s attractive open access policy. However, a consultation paper released by the Ministry of Power recommends increasing cost of open access, which, if implemented, would negatively affect this market.

EPC costs increased by 12% to INR 37/ W in Q3 2017 due to increase in module prices and implementation of GST. We expect EPC costs to increase further by 5% in the current quarter. Module prices increased by 13% to USD 0.34/ W due to rising global demand and are expected to increase further to USD 0.36/ W in Q4. Such sharp increase in costs would hurt developers badly particularly for recently auctioned projects at tariffs below INR 3.00/ kWh. Prices for central inverters remained stable at around INR 1.80/ W.

Q3 was a quiet period for equity financing but very active for green bond issuance. After huge transactions in Q1 (by ReNew, Greenko, Hero) and Q2 (by SPRNG/ Actis), the only notable PE transaction in Q3 was Warburg Pincus’ USD 70 million investment in leading rooftop solar developer, CleanMax. ACME sprung a surprise by filing a draft prospectus for an IPO to raise INR 22 billion. Meanwhile, Mytrah raised USD 300 million of structured financing from Piramal Capital and APG to buy out its existing investors. Offshore debt activity peaked during Q3 2017 mainly on account of green bond issuances by Greenko (USD 1,000 million), Azure (500) and Rural Electrification Corporation (450).

M&A activity is thriving with small/ mid-size developers and financial investors seeking exits. There were two notable transactions in Q3 2017 – Sembcorp Industries acquired 28% stake in Sembcorp Green Infra from IDFC Alternatives to become its sole owner, while IDFC Alternatives acquired 190 MW of operational solar capacity from First Solar (Telangana 500 MW and Andhra Pradesh 500 MW state tenders).

Overall, this is a time for consolidation in the sector. Slowdown in tender issuance has given breathing room to developers to focus on project execution, financing and M&A. Despite operational challenges, increase in module process and indirect taxes (GST), construction pace is picking up. Anticipated pick up in tender issuance and clarity on anti-dumping duty (ADD) will provide new lease of life to the sector.

Offshore debt activity peaked during Q3 2017 mainly

on account of green bond issuances by Greenko (USD 1,000 million), Azure (500)

and Rural Electrification Corporation (450)

EPC costs increased by 12% to INR 37/ W in Q3 2017 due to increase in module prices and

implementation of GST. We expect EPC costs to increase further by 5% in the current

quarter

Disclaimer

© 2017 BRIDGE TO INDIA Energy Private Limited

AuthorsSurbhi Singhvi, BRIDGE TO INDIAVinay Rustagi, BRIDGE TO INDIA

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