The World Bank directed its resources to the removal of key barriers to private investment. It played a fundamental enabling role by financing key environmental and social management and institutional strengthening activities, as well as the solar park’s evacuation infrastructure. Rewa Ultra Mega Solar Limited (RUMSL), the project implementing agency, mandated International Finance Corporation (IFC) as a Public Private Partnership (PPP) transaction adviser to help structure the Rewa solar project and mobilise private investment along with the World Bank loan.
Later, IFC also advised on the structuring of the power project as a PPP. It supported the project preparation process and the processing of the World Bank loan.
On IFC’s inputs, the Government of Madhya Pradesh (GoMP) agreed to a moderate charge for the land required for three units, common infrastructure in the solar power project, allowing for deferred payment over the life of the project for land acquisition, construction of internal evacuation infrastructure, local area development costs, and solar park administration costs.
World Bank’s support for IREDA and for setting up solar parks
The World Bank in March 2017 approved a loan of US$ 100 million to help India increase its power generation capacity through cleaner, renewable energy sources. The purpose of the loan for the project – Shared Infrastructure for Solar Parks Project – was to establish large scale solar parks in the country and support the GOI’s plans to install 100 GW of solar power out of a total renewable-energy target of 175 GW by 2022. The loan of US$ 100 million is shared between International Bank for Reconstruction and Development (IBRD) and Clean Technology Fund (CTF) to the tune of US$ 75 million and US$ 25 million respectively. The US$ 75 million loan from the IBRD, has a 5-year grace period, and a maturity of 19 years. The US$ 23 million loan from the CTF has a 10-year grace period, and a maturity of 40 years. The US$ 2 million is an interest-free CTF grant.
The project is supporting Ministry of New and Renewable Energy’s (MNRE) announced Solar Park Scheme for installing large-scale, grid- connected solar parks by 2022, with a targeted, collective installed capacity of 40 GW. IREDA, through the state Prospective Implementing Agencies (PIA)s, will utilise project funding to develop the enabling common infrastructure (such as power pooling substations, as well as intra-park transmission infrastructure and access roads). The objective was also to facilitate solar power investment by private or public-sector developers.
The JV company will offer plots of 50 MW (minimum in size) within a solar park to solar power developers/generators (the one putting up the generation assets within the solar parks) in return for user fees that is designed to gradually recover the upfront investment cost in the shared infrastructure.
In the first phase of this project, US$ 200 million, including US$ 75 million from IBRD, US$ 25 million from CTF and US$ 100 million from the GOI and state governments have been mobilised. The solar parks supported by the project are expected to mobilise additional US$ 1,828 million of private and public sector financing for solar PV generation capacity and transmission. The CTF funding would comprise US$ 23 million to be extended under softer concessional terms and US$ 2 million to be extended in the form of a grant.
Each of the participating states, along with MNRE, has drawn up a list of candidate solar parks. The GOI requested the World Bank’s support to IREDA for setting up solar parks in interested states, with Madhya Pradesh serving as a frontrunner with its two solar parks in Rewa (750 MW) and Mandsaur (250 MW) districts. Beyond the future solar parks in Madhya Pradesh, other states where potential solar parks could be supported under this project are Chhattisgarh, Haryana, and Odisha.
Given, that RUMSL had already awarded the contracts for the two solar parks in MP to be funded under the project with TA support from IFC in 2017 and other states still in process of identifying suitable land areas for establishing their solar parks, IBRD and CTF funding (lending portion) were allocated to Rewa and Mandsaur projects.
Funding Allocation to projects (in US$ million)
|States (solar park)||IBRD/ CTF funding||Counterpart funding||Total funding|
|Project Component 1 (IBRD)|
|Madhya Pradesh (Mandsaur)||16||16||32|
|Madhya Pradesh (Rewa)||22||24||46|
|Other solar parks (to be selected)||60||60||120|
|Project Component (CTF grant)|
For the Rewa Solar park, IBRD has provided US$ 22 million for financing for such shared infrastructure as access roads, water supply and drainage, telecommunications, and pooling stations (with 220/66/33 kV or switchyard and respective transformers as may be suitable) inside the solar parks and transmission lines connecting these internal pooling stations to the external 400/220 kV substation that may or may not be at the periphery of the park, feeding into the national/state grid. Rewa and Mandsaur solar parks, this includes Madhya Pradesh Power Transmission Company Limited (MPPTCL) services of about US$ 7 million. The total counterpart funding is expected to be higher than 50 percent of the total project cost.
CTF has provided US$ 2 million as common fund for technical assistance and has been used for capacity-building support to IREDA, the SNAs in the states where selected solar parks are located, and the selected state PIAs, which will include the SNA and/or JV companies or state agencies across the participating states.
MPPTCL, the STU, is hired by RUMSL as a sub-PIA to carry out the planning, design, bid advisory, implementation and operations and maintenance (O&M) of the shared infrastructure assets inside the solar park. RUMSL/ MPPTCL are undertaking the entire work for shared infrastructure for internal evacuation in the solar park in two packages: one transformer package and a substation package with three lots consisting of building three 33/220 kV substations and connected 220 kV lines to transfer power from the solar plant to the 400/220 kV substation being constructed by PGCIL.
As per seventh Implementation Status & Results Report of the World Bank Project (May, 2020) of the shared Infrastructure for solar Parks, the project is supporting two solar parks – 250 MW Mandsaur Solar Park and 750 MW Rewa Solar Park, with a total commitment amount of US$ 31.5 million (or 31.5% of the loan amount).
For the uncommitted amount, the Bank team has been approached by the GoMP for additional parks of 1500 MW. The cumulative commitment for these new parks is expected to commit an additional amount of US$ 40-50 million. The restructuring of the project will be undertaken to extend the project closing date as well as to expand the project scope to allow for any balance funds, if any, after committing funds to pipeline solar parks.
World Bank’s larger role in India’s Renewable Sector
The World Bank is seen playing a larger role in the renewable sector in India. The above mentioned project is one in a series of engagements requested by the GOI from the World Bank for US$ 1 billion of funding in the solar power sector in 2016. This support includes projects like solar rooftop technology, infrastructure for solar parks, bringing innovative solar and hybrid technologies to the market, and transmission lines for solar-rich States (In particular, the World Bank has approved GOI on its two requests to (i) support the establishment of grid-connected rooftop solar PV (US$648 million) and (ii) demonstrate innovative technologies in the renewable-energy sector (e.g., solar-wind hybrid, energy storage, and floating solar PV) (US$200 million). It is the largest financing of solar projects for any country in the world.
This funding from the WB has helped GoI mobilise funds from other other development partners, including the German Development Bank (KfW) and Asian Development Bank (ADB) who are also working closely with the GOI to mobilise investments in the solar energy sector.
KfW has provided US$ 100 million to IREDA for promoting investments in the solar sector in the country including financing for grid integration, open access, viability gap funding and rooftop systems. KfW is also providing a total of Euro 1 billion for the construction of “green corridors”.
The ADB is preparing a project to provide US$ 500 million financing for rooftop solar systems through Punjab National Bank, an Indian financial institution. The ADB is also providing another US$ 500 million government-backed loan, along with an additional financing of US$ 500 million in non-sovereign lending to PGCIL, India’s national transmission company. These transmission lines will feed the electricity generated from renewables into the national grid.
The World Bank’s role in leveraging investment from the private sector and integration of private sector in traditional public sector arenas is critical. India’s Country Partnership Strategy (CPS) also includes private sector integration as a primary building pillar. The objective of the World Bank is to also accelerate private-sector investment in solar power in some of India’s solar resource-rich states. In Madhya Pradesh, for example, an estimated US$ 30 million investment in shared infrastructure from the World Bank is leveraging an investment of US$ 1 billion in solar PV assets.
Role of International Finance Corporation (IFC)
IFC of the World Bank group has been promoting mega solar projects in India through its multiple projects at different levels. IFC is undertaking transaction advisory projects with government agencies like New and Renewable Energy Department (NRED), GoMP and SECI in identifying and structuring renewable energy projects across various states in the country.
One of the transaction advisory projects is for the Rewa Ultra Mega Solar Power Plant in Madhya Pradesh. IFC will provide transaction advisory support to the NRED, GoMP to assist in the implementation of a grid connected ground mounted solar UMPP in Rewa district of Madhya Pradesh which involves installation and operation of grid connected solar panels by a competitively selected private sector developer(s). (MP Solar UMPP)
As part of another advisory project, IFC will advise the Rewa Ultra Mega Solar Ltd and the GoMP in designing, structuring and tendering a solar power IPP project with a total capacity of 1500MW. This advisory role builds off the work done to structure and tender the first 750MW Rewa Ultra Mega solar project in 2017, which achieved record low solar tariffs in India. (MP Solar PPP – 2)
Another advisory project in pipeline is wherein IFC will provide advisory support to the SECI in identifying and structuring of renewable energy PPP projects across several states in India, as mutually agreed. IFC will also help SECI in competitive bidding for selection of private sector developers for the installation and operation of renewable energy projects to be identified.
Under Rewa Ultra Mega Solar Power Plant, IFC is providing investments and loans to each of the three private company contracted to build and operate 3×250 MW solar plants, totaling to 750 MW.
One unit of 250 MW project has been awarded to Solenergi Power Private Ltd. (“SPPL”) within the 750 MW Rewa Ultra Mega Solar Park. The Project will be developed by Arinsun Clean Energy Private Limited (the “Company”), a subsidiary of SPPL.
The estimated project cost is around $200 million. The proposed IFC investment involves providing an IFC A loan /subscribing to Non-Convertible Debentures (“NCDs”) of up to $50 million and mobilisation of loan of up to $100 million (together “the Investment”) from other lenders. Proceeds from the IFC investment will be used by the Company for the construction of the Project.
Similarly, the second unit has been awarded to Mahindra Renewables Private Limited (MRPL), a 250MW solar power project within the 750MW Rewa Ultra Mega Solar Park. The project to be developed by MRPL, which is a 100% subsidiary of Mahindra Susten Private Limited (MSPL).
The estimated project cost is around INR 12,800 million. The proposed IFC investment involves providing an IFC A loan of up to INR 3,200 million and a potential mobilisation of loan of up to INR 6,400 million (together “the Investment”) from other lenders. Proceeds from the IFC investment will be used by the Company for the construction of the project.
The third unit of 250 MW has been awarded to ACME Solar Holdings Limited for development, financing, construction, operation and maintenance of a 250 MW solar photovoltaic plant. The project will be developed by ACME Jaipur Solar Power Private Limited, a wholly owned subsidiary of ACME Solar. The total project cost is US$ 200 million and the loan amount for the project from IFC to ACME Solar is US$ 50.41 million.
As it has been discussed earlier, the solar park is being developed by Rewa Ultra Mega Solar Limited (RUMSL), a joint venture between Madhya Pradesh Urja Vikas Nigam Limited (MPUVNL) – a GoMP agency and the SECI.
GoMP appointed IFC as the lead transaction advisor to enable RUMSL and GoMP to facilitate the entire private investment for the Rewa Solar project. IFC’s role includes advising on a robust project structure, identifying, recommending and upon request helping implement solutions for key commercial, legal, regulatory, technical and system operations related issues and designing a transparent auction process to help select private entity to develop the units in the Rewa Solar project.
Excerpts from an upcoming report on Rewa Ultra Mega Solar Power Project