Renewable Power To Need Rs 12 Lakh Cr Investment In 5 7 Yrs Ptc

According to reports, in an interview with CNBC-TV18's Anuj Singhal and Ekta Batra, RM Malla, Managing Director and CEO of PTC India Financial Services, outlined developments in the renewable power space. PTC is a major lender to renewable projects, with about 40 percent of overall loan book exposed to the sector. The CMD said that with solar costs coming down, as well as with the government's renewed focus on alternative sources of energy, the market was staring at an investment of about Rs 12 lakh crore in the next five-seven years. Below is the transcript of the interview on CNBC-TV18.

Ekta: In the past few weeks and maybe even a couple of months now, we have been hearing about a lot of impetus and focus on the renewable energy space. We have seen a couple of big investors also which have come into renewable energy companies. You focus as well - in terms of your total loan book - on the renewable energy space. Can you tell us how sanctions are doing within that space at this point in time and how exactly are you increasing the focus if that is the case?

A: The country has realised the importance of renewable energy in a big way. From a mere 20,000 megawatt, which we were planning a couple of years back, we have now taken a mission to go up to 1 lakh megawatt in solar power. India has all the ingredients for making it a huge success. Fortunately, the project cost which used to be something like Rs 16 crore per megawatt has gradually come down to something like Rs 6 crore. If you compare this with coal-based (thermal) where project cost is in fact going closer to Rs 8 crore and hydro where it is Rs 10 crore or sometimes 11, I think it makes a huge sense for us Indians to go into solar energy in a big way. I believe that the beginning has been well made. The prime minister made a call and then the power minister the other day in February had a big conference of all solar developers, manufacturers in India. In quite some time I have not seen such a hugely successful seminar where as much as 2,80,000 megawatt in renewable energy has been promised. In next five-seven years, this opens a huge scope for financers like us and the banks. If I roughly calculate, 2 lakh megawatt multiplied by 6 crore per megawatt if we assume solar is the mode, it will work out to something like Rs 12 lakh crore. Assuming a debt-equity ratio of 70:30, it means something like Rs 9 lakh crore of lending in next five-seven years. So I think we are fortunately in the space at right time because we decided almost two years back to go to renewable and today our renewable portfolio is roughly 40 percent. The type of interest we are seeing both from domestic players as well as international players, I believe it is a very exciting time for non-banking financial companies (NBFCs) like us to go onto the path. It is highly sustainable, ensures a reasonable return to both equity as well as lenders and assured return of almost 25 years.

Anuj: Can you tell us the kind of companies that involved in this because we have only two-three names that we can count at this point in time in renewable energy. If you could tell us both in India and globally which would be the prominent players?

A: Globally, one of the largest solar producer companies is in Germany followed by USA and then other European countries and China. European and American companies are both developers as well as module manufacturers. They have also shown interest in coming to India. All big names whether it is SunEdison, or some European companies, Israeli companies - people have started coming and they see a huge scope in this country because Europe has sunshine for not more than six months whereas we have sunshine for almost 300-330 days. So a lot of American companies are coming. Apart from that, a large number of pension and retirement funds have shown interest in this activity. For two reasons - one of course is pension and retirement funds want a sustainable return over a long period. Unlike if they invest in cement, steel or textile where their fortunes are tied with economic activity going up and down, in power you almost get an assured return because other parties, state utilities [sign long-term contracts]. And unlike cement, steel, textile, which can be exported and imported, so what happens in the globe also impacts India, power so far fortunately is not exported in a long way. So apart from the actual entrepreneurs, a lot of funds have shown interest in partnering with Indian partners.

Ekta: Can you tell us which are the projects or the kind of clients that you service and how do you manage to maintain your asset quality within the renewal energy space and is there any risk of defaults or what is the risk of defaults within that space?

A: Essentially I may not be able to share the names but I can say the who's who - both globally as well as in India - have started entering this. Apart from that a large number of public sector companies have also decided to come to renewable sector either on their own or with their joint venture, all this augurs very well. As far as your second question was concerned, as a lender, we have to be very prudent. All said and done, we have to ensure that the people are using the latest technology, they are using tier I suppliers and the promoter has experience either in this line or in other line from which he is migrating. We have given virtually veto power to our risk department and of four-five proposals which come for our consideration, one passes the muster. Because the market is so large, we can be choosy. We have done the reverse thing - we choose the client whom we should go and in fact we market our products to good clients and that is how we are getting who's who of the world partnering with us.

Article source: http://panchabuta.com/2015/04/07/renewable-power-to-need-rs-12-lakh-cr-investment-in-5-7-yrs-ptc/

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