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Fourth time lucky for the manufacturing-linked tender?


04 December 2019 | BRIDGE TO INDIA

Fourth time lucky for the manufacturing-linked tender?

After several cancellations, extensions and modifications, SECI’s solar project development-cum-manufacturing tender finally received a somewhat encouraging response. In its final avatar, the tender was issued for 7,000 MW inter-state transmission system (ISTS) connected project development capacity. Bidders were given an option to bid for 2,000 MW project development capacity along with 500 MW cell and module manufacturing capacity, or 1,500 MW project development capacity along with 500 MW ingot and wafer manufacturing capacity or combinations thereof. Three bids have been received – Adani (4,000 MW with 1,000 MW of manufacturing capacity), Azure (2,000, 500) and Navayuga Engineering (2,000, 500), a local infrastructure player.

  • All bidders have opted for cell and module manufacturing capacity as ingot and wafer manufacturing is not competitive at this scale;
  • Higher ceiling tariff, higher ratio of project development capacity and longer project completion timelines have made the tender commercially attractive;
  • Lack of willingness of DISCOMs to pay higher tariffs could still jeopardise prospects of this tender;

The tender requires manufacturing capacity to be based on “advanced technologies” such that cell and module efficiency is a minimum 21% and 19% respectively. As expected, all bidders have opted for cell and module manufacturing over ingot and wafer manufacturing.

In the previous three iterations, SECI had received only one bid from Azure for 2,000 MW power generation capacity. Following several rounds of representations by the industry, many changes were made in the last round relating to manufacturing requirements (split in two different packages this time), manufacturing capacity ratio (reduced progressively from 50% of project development capacity to 25-33%), ceiling tariff (revised upwards to INR 2.93/ kWh), project completion timelines (increased from 2.5 years to 5 years) and ISTS usage (waived for all projects). Successful bidders are required to achieve COD for power generation and manufacturing capacity in a phased manner over five years and two years respectively. The level of cross-linkages between two activities has also been reduced – apart from usual delay penalties, power tariff would be reduced to minimum auction tariff discovered by SECI in one year preceding auction date in the event that manufacturing capacity is not commissioned within three years.

Sweetening ceiling tariff and increasing project completion timelines seem to have been sufficient carrots for the three bidders. On paper, the commercial provisions are certainly attractive in comparison to vanilla ISTS project tenders, where we have seen tariffs between INR 2.55-2.72/ kWh this year for projects to be executed in 18 months. However, it remains far from clear if DISCOMs would be prepared to pay higher tariffs to cross-subsidise manufacturing business. Lack of interest from the ultimate offtakers could still affect outcome of this tender.

We continue to maintain that combining project development and module manufacturing, two very disparate businesses in terms of risk profile and competitive characteristics, makes no sense. Unfortunately, all other manufacturing initiatives seem to be failing. If this tender is even partially successful, SECI may persist and launch more iterations.


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