Welspun Approached to Sell Security Backed by Solar Revenue

By Natalie Obiko Pearson – Dec 29, 2011 6:33 AM MT

Maintenance workers clean solar panels manufactured by Tata BP Solar India Ltd. at North Delhi Power Ltd.’s (NDPL) Keshavpuram power station. Photographer: Andrew Caballero-Reynolds/Bloomberg

Welspun Energy Ltd., India’s biggest solar photovoltaic developer, was approached by a bank proposing to use revenue from its first plant to create a security of the kind often used to raise funds for projects such as toll roads.

“While solar energy generation is a relatively new sector for banks, they’re interested in lending to those who have established credibility and lived up to their commitments,” said Vineet Mittal, managing director of Welspun Energy.

The energy unit of Welspun Group, which is backed by Apollo Global Management LLC co-founder Leon Black, gained interest to securitize revenue from its 15-megawatt unit in Gujurat after three months of operation, Mittal said, declining to identify the bank. Investors would be paid income from the solar revenue.

The first main batch of solar plants in India are nearing completion, spurring banks to explore ways to securitize their cash flows as they do with tolls from infrastructure projects such as roads, Mittal said in an interview in Mumbai.

First Solar Inc. (FSLR) and Suntech Power Holdings Inc. (STP) are among companies expecting India to become one of the fastest growing markets, countering faltering demand and shrinking clean-energy subsidies in a Europe weakened by a sovereign debt crisis. The banks’ increased interest would help overcome one of the biggest challenges for Indian solar developers, who last year struggled to win over lenders to an industry still in its infancy.

Solar Like Highways

Solar plants, like other infrastructure, lend themselves to securitization as cash flows are steady and predictable, said Vinayak Mavinkurve, project finance group head at Infrastructure Development Finance Co. (IDFC), which funds Indian power stations.

“When you compare a wind, solar or road asset, you know what the toll is if your car passes through, you know what the solar or wind price is for every unit that’s delivered,” he said in July. “It’s like an annuity. What’s your variable? It’s the amount of wind or sun or traffic flow on a highway.”

Private equity also has a “huge interest” in renewables in India, especially solar and wind, Mittal said. Apollo Global (APO) in August bought a 22.5 billion rupee ($424 million) stake in Welspun Group, in the private-equity firm’s biggest Indian deal.

Welspun Energy is planning its first wind farm investments, with sites obtained in Karnataka, Rajasthan and Gujarat states, and is targeting 500 megawatts of solar and wind capacity in India by 2014, Mittal said. It also signed an agreement with Gujarat to build as much as 100 megawatts of solar plants and will bid for projects in Karnataka, Rajasthan and Orissa.

Wind Foray

The company, which won bidding for 55 megawatts of solar photovoltaic capacity in two central government auctions, more than any other company, completed its first 15-megawatt plant in Gujarat in October with financing from ICICI Bank Ltd. (ICICIBC)

It also expects to complete a 5-megawatt project in Andhra Pradesh this week that’s financed by the Indian Overseas Bank.

Welspun Energy has used thin-film panels supplied by German, Japanese and U.S. manufacturers, Mittal said. It may use thin-film or crystalline panels for its next 50 megawatts of plants, scheduled to be built by January 2013 in Rajasthan.

Traditional crystalline panels are silicon-based. Thin-film technology coats panels with materials including cadmium telluride, copper indium gallium selenide and amorphous silicon.

Welspun Corp., the group’s main company and a supplier of oil pipelines for Exxon Mobil Corp. and Saudi Aramco, rose 0.8 percent to close at 87.55 rupees, the highest in six weeks.

To contact the reporter on this story: Natalie Obiko Pearson in Mumbai atnpearson7@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.


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