First NSM bid under the new government oversubscribed by over 10x

Bids were submitted last week for 10×50 MW of solar PV projects under the new phase of National Solar Mission (NSM) in Andhra Pradesh. This is the first round of NSM bids since the new government took office in May 2014. This is also the first time that bids have been called for projects to be set up in solar parks being developed under the new Solar Parks Policy. A total of 30 developers have submitted valid bids totaling 5.5 GW.

Six developers including SunEdison, Adani, Rattan India, Reliance, SoftBank and Energon have bid for the entire 500 MW capacity;
Prominent new entrants include SoftBank, Trina Solar, Enel, Energon, Solar Arise, Suzlon and Greenko;
Industry murmurs suggest very aggressive tariffs that can even fall below INR 5/kWh but we remain skeptical in view of high solar park infrastructure costs;

Existing prominent developers that have participated include Acme, Azure, SunEdison, Adani, Reliance, Tata Power, Renew, Welspun, SkyPower and SolaireDirect. Renew, Tata Power, Shapoorji Pallonji, Azure and Orange Renewables have all bid for capacities of 200 MW or more. A bid by a Scottish developer, Dundee Power, has been disqualified due to incomplete documentation.

At this stage of the tender, initial bids have been submitted independently by each developer. Based on the conditions set out in the tender, 28 developers are now expected to move on to the second round of open online bids. At that stage, developers will be able to see their relative position and bid successively until no further bid revisions are received from any of the developers. No date has been fixed yet for online bidding but it is expected to take place a month from now. This is the first time an online open bidding will take place in the Indian solar market. If similar bids in India for telecom spectrum and coal mine allocation are any indicator, this mechanism will lead to a further intensification of competition.

Going by the interest in this allocation process, there seems to be no let-up in competition. In fact, our discussions with market participants suggest that the next round of NSM projects in Rajasthan for 420 MW will get considerably higher interest. At last count known to BRIDGE TO INDIA, over 80 developers had shown interest in participating in the Rajasthan allocation. The relatively lower interest in Andhra Pradesh has been attributed to high cost of lease for the solar park and the lack of clarity on the park’s progress.

It is clear that the appetite per developer has also increased considerably. Analysis by BRIDGE TO INDIA shows that the capacity of projects under execution for top 15 developers in the country is almost four times the capacity of already executed projects by these developers. Developers such as Acme, Adani, Renew and SunEdison already have a pipelines exceeding 500 MW each and they have all bid for significant capacities under this round. It is likely that they will continue to bid for significant capacities under several upcoming allocations.

With the recent state policy bids in Madhya Pradesh, Telangana and even Punjab, tariffs have already come down considerably. In the past, we have noted that bids under NSM are typically more aggressive in terms of return expectations than those at the state level primarily due to better bankability of the off-taker, NTPC in this case. There have been industry murmurs suggesting that the current batch of NSM projects may see tariffs fall below INR 5/kWh. While we believe that would be very aggressive, recent bidding in Punjab, a state with relatively lower irradiation and higher cost of land, was an eye-opener with tariffs in the range of INR 5.09/kWh –INR 5.98/kWh.