SunEdison bankruptcy to make solar project financing difficult in India

However, the consensus view is that there is nothing too serious to worry about for the sector.

April 26, 2016 12:19 am | Updated October 18, 2016 02:20 pm IST - NEW DELHI:

BENGALURU, KARNATAKA, 07/11/2014: Grid-connected solar rooftops are set to become a reality in Bengaluru with the project being launched on November 07, 2014. Photo: V. Sreenivasa Murthy

BENGALURU, KARNATAKA, 07/11/2014: Grid-connected solar rooftops are set to become a reality in Bengaluru with the project being launched on November 07, 2014. Photo: V. Sreenivasa Murthy

U.S. solar company SunEdison’s bankruptcy filing will have a direct impact on its projects in India and will also make lenders more wary about financing projects in the sector, according to industry analysts.

SunEdison filed for bankruptcy last week due to its high debt portfolio, throwing into uncertainty around 1.7 GW of solar and wind projects in India.

“One immediate impact is the timely rollout of the projects it has successfully bid for in India, whether that will still happen,” Sabyasachi Majumdar, Senior Vice President at ICRA, told The Hindu. “Another thing to see is whether fresh investors will be willing to enter the market at the tariffs that SunEdison has secured for its projects.”

“They will likely offload their projects considering their financial situation, or these projects may get cancelled and re-auctioned,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group, a global solar consultancy.

Private sector lenders in India have already been wary about financing solar projects in India due to the low tariffs, which are seen as being prone to cost risks. This bankruptcy is likely to exacerbate this cautious approach. “Company financials especially when bidding for large projects or at very low tariffs may come under more scrutiny,” Mr. Prabhu said. “This will generally be a big wake up call for solar companies loaded with debt.”

“Most solar projects have a debt-equity ratio ranging between 60:40 and 70:30,” Mr Majumdar said. “What could happen is that the lenders might start looking at the balance sheets more closely and will try to do due diligence of the tariffs that the companies have bid for the projects.”

However, the consensus view is that there is nothing too serious to worry about for the sector.

“This is not going to affect the whole sector in the long term,” said Raj Prabhu, CEO and Co-Founder of Mercom Capital Group, a global solar consultancy. “Solar public companies may be affected with investor perception taking a hit due to this bankruptcy. That said, most investors will understand that there are a lot of good solar companies out there and this is just one company that failed due to mismanagement.”

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