Indian bankers said to be wary of solar as SunEdison totters

[NEW DELHI] Indian lenders are becoming increasingly reluctant to finance solar-power projects by foreign companies as bankruptcy looms for SunEdison Inc in the US, creditors familiar with the matter said.

Lenders in Asia's No 3 economy are hesitating as the world's biggest renewable energy company totters and record-low Indian solar tariffs stoke concern that projects could struggle financially, the three people said, asking not to be identified citing the sensitivity of the topic.

That's a threat to Prime Minister Narendra Modi's goal of a roughly US$100 billion expansion of solar power, aided by foreign investment, a target he set for energy security and to curb fossil-fuel pollution.

Indian bankers are sensitive to heightened risk as they grapple with the nation's worst bad-debt pile up in more than a decade after infrastructure investments soured.

SunEdison, facing potential technical defaults on at least US$1.4 billion of loans and credit facilities, is seeking to sell as much as 1 gigawatt of unfinished projects in India.

TerraForm Global Inc, a holding company founded and controlled by the clean-energy developer, in a lawsuit filed April 3 in Delaware alleged SunEdison misused US$231 million earmarked for projects in India.

One of the people, from an Indian bank, said it's unclear how much debt owed by SunEdison the bank will recover. Another lender said it's owed about 1 billion rupees (S$20.25 million) and is cautious about financing projects won at very low tariffs.

Ben Harborne, a SunEdison spokesman in California, didn't immediately address a request for comment. Pashupathy Gopalan, SunEdison's president in the Asia-Pacific region, didn't immediately reply to an e-mail seeking comment on debts in India.

Some 40 lenders have sanctioned 712 billion rupees of financing for renewable energy projects in India, with 295 billion rupees of that amount disbursed from February last year through to March 21, 2016, according to government data.

Companies win solar projects in the US$2 trillion economy if they offer to supply electricity at the lowest tariffs in competitive auctions. SunEdison helped drive down those rates, and by January 2016 they reached an historic low of 4.34 rupees per kilowatt-hour.

"My suspicion is that the developers in a race to bag projects by quoting low tariffs will eventually get into trouble," said New Delhi-based Nitin Zamre, vice president at ICF International Inc, who has over 15 years of experience as an energy consultant. He was talking generally rather than referring to any particular company.

Apart from SunEdison - which is based in Maryland Heights, Missouri - Canada's SkyPower Ltd, Japan's SoftBank Group Corp, Finnish utility Fortum Oyj and a local unit of France's Solairedirect SA are among foreign solar power providers in India.

SunEdison's fall follows an ascent fueled by borrowings that led the company to amass US$11.7 billion in debt by Sept 30 after a buying binge on wind and solar farms globally.

Renewable-energy companies have largely struggled since mid-2015, partly as depressed commodity prices hurt the energy industry broadly. SunEdison shares have slumped 99 per cent in the past year.

The company's unraveling has sent ripples across emerging markets such as India and China. Jinneng Group, the Chinese state-owned company that teamed with SunEdison to research and develop solar cells and panels, said that cooperation continues.

Mr Modi's objective is 100 gigawatts of solar by 2022, up from 5.25 gigawatts currently. India gets more than 300 days of sunshine a year across the seventh-largest land area in the world, signaling scope for solar farms to harness the sun's rays.

Right now the country relies on coal for about 60 per cent of power generation capacity.

Tycoons such as Softbank's Masayoshi Son, Foxconn Technology Group's Terry Gou, Liang Wengen of Sany Group, Chint Group Chairman Nan Cunhui and Bharti Enterprises Pvt's Sunil Mittal have announced plans for at least US$25 billion of investment in India's renewable energy sector.

The question is how much of that will materialize, and whether India can find the sums needed to fund its green-energy ambitions. There are already infrastructure financing hurdles in India, where central bank data shows that about 14 per cent of total loans have soured or been written off. Against that backdrop, the drama around SunEdison isn't helping renewable- energy businesses.

Solar finance will continue to be available longer term in India, but lenders are expected to impose stiffer terms, according to Kameswara Rao, a partner at PricewaterhouseCoopers in India who specializes in utilities and mining.

"This may reflect in higher tariffs eventually," Mr Rao said, referring to solar power rates.

BLOOMBERG