Reliance Power closed the $308 million financing for the Rajasthan Sun project in India last year using a mixture of local bank, development finance institution and export credit debt. The 100MW facility will be one of the largest concentrating solar power (CSP) plants in the world once completed, and the first large-scale use of a new solar thermal technology. Reliance mitigated this technology risk with strong performance guarantees, and consumers have been protected against high energy prices through a unique offtake agreement.

Rajasthan Sun is one of several solar projects under development in India. The government is encouraging solar development through its Jawaharlal Nehru National Solar Mission scheme. The first phase of this scheme was launched in 2010 and featured tenders for 150MW of photovoltaic projects and 470MW of solar thermal developments. Reliance bid to construct a 100MW CSP plant in Jaisalmer district, Rajasthan, in November of that year and won the concession in January 2011. The government received bids within a tariff range of between Rs10.24 ($0.19) per kWh and Rs12.24 per kWh, with Reliance offering a mid-range bid of Rs11.97 kWh for the plant in Rajasthan.

Reliance is the sole owner of the CSP development, through its wholly-owned special purpose vehicle Rajasthan Sun Technique Energy. The developer selected Areva to supply the technology for the solar facility, utilising its new compact linear fresnel reflector (CLFR) system. The CLFR technology employs rows of parallel mirrors to reflect solar radiation onto a linear receiver. The receiver has water pumped through it, and this is subsequently heated until it turns to steam, which drives the turbine and generator.

No large commercial CSP project has used the CLFR technology before, though it essentially involves a simplification of the parabolic trough system. Some of the technology risk of the project is mitigated thanks to the strong reputation of Areva in the international solar PV market and the successful record of Reliance in the domestic power market. Siemens, a bankable name in power finance, is also providing the steam turbine generator for the plant. Areva has guaranteed a volume of steam sufficient to run the generator on a base case, and lenders are also protected with a performance guarantee, which runs up to five years after the completion of the plant.

Reliance will perform the engineering, procurement and construction contract under a turnkey arrangement, while Areva is handling operations and maintenance. NTPC Vidyut Vyapar Nigam (NVVN), a wholly owned subsidiary of domestic power generation company NTPC, is sole offtaker from the plant under a 25-year power purchase agreement. NTPC operates power plants in India with a total capacity of around 30,000MW, and will use its dominant position in the market to cut the effective price of power from Rajasthan Sun.

The PPA between Reliance and NVVN allows the offtaker to bundle the solar energy with less expensive coal power and sell it to three local distribution companies. This creates a blended tariff significantly cheaper than the government-capped feed-in-tariff of Rs15.31 kWh. Offtake risk is mitigated through the payment security scheme of the Indian government, which owns 85% of NTPC.

The sponsor used existing relationships to attract debt support from the Asian Development Bank (ADB), US Ex-Im and local lender Axis Bank. FMO joined the deal with an offer of subordinated debt, which looks sufficiently like quasi-equity to negate the need for additional covenants. Axis Bank’s loan and the sub-debt from FMO both have a tenor of 15 years, while the rest of the facility matures three years later. The deal has the longest tenor for any solar deal developed in India to date, further illustrating lender confidence with the construction and offtake package

ADB provided $103 million in debt, US Ex-Im has lent $80 million and Axis Bank has contributed the equivalent of $20 million in local currency. FMO has provided $90 million in senior debt and $15 million in sub-debt, selling down part its commitment to the Interact Climate Change Fund and the Belgian Investment Company for Developing Countries. The US Ex-Im tranche has a fixed margin of 2.6%, while the sponsor says the rest of the debt is priced well below the permitted ceiling stipulated in Indian law. 

Rajasthan Sun Technique Energy Private Limited
STATUS
Signed June 2012, first disbursement of funds July 2012
SIZE
$420 million
DESCRIPTION
Construction of a 100MW CSP solar plant in Jaisalmer District, Rajasthan India. The project is the first large scale commercial use of new CLFR technology.
SPONSOR
Reliance Power
EQUITY
$112 million
DEBT
$308 million

LENDERS
Asian Development Bank, FMO (participations from Interact Climate Change Fund, Belgian Investment Company for Developing Countries),
US Ex-Im, Axis Bank,
LENDERS’ LEGAL ADVISER
White & Case, Amarchand Mangaldas & Suresh A. Shroff & Co
SPONSOR’S LEGAL ADVISER
Luthra & Luthra
EPC CONTRACTOR
Reliance Infrastructure
TECHNOLOGY PROVIDER
Areva
O&M CONTRACTOR
Areva Renewable Energies India
ENGINEERS
3Tier, Black & Veatech, Lauren Engineers
ENVIRONMENTAL CONSULTANTS
Environmental Management Center
MARKET & TECHNICAL CONSULTANT
Mott MacDonald
INSURANCE ADVISER TO LENDERS
Marsh