Viability Gap Funding to Power Phase II Batch-I of the JNNSM

Monday, April 22, 2013 0 comments

To incentivize setting up of a large number of Solar Power Projects and minimizing the impact of tariff on the distribution companies, various alternatives have been considered viz. (i) Bundling Scheme (ii) Viability Gap Funding (VGF) Scheme and (iii) Generation Based Incentive (GBI) Scheme. Phase-I was largely based on the option of Bundling Scheme and on GBI option to some extent. According to the Draft Policy released by MNRE today, In Phase-II Batch-I of JNNSM, the option of “Viability Gap Fund” Scheme has been given top priority. The scope of these guidelines is to select 750 MW grid connected solar projects and provide the necessary policy framework for development of projects under the “Viability Gap Funding scheme for 750 MW of Phase II Batch-I of the JNNSM”

The mechanism of operation of Viability Gap Funding shall be as enumerated below:

1) The tariff to be paid to the developer is fixed at Rs.5.45 per kWh. This tariff will remain firm for 25 years project period. In case benefit of accelerated depreciation is availed for a project, the tariff will get reduced by 10% to Rs.4.95 per kWh in line with CERC regulations.

2) The developer will be provided a viability gap fund based on his bid. The upper limit for VGF is 30% of the project cost or Rs.2.5 Cr./MW, whichever is lower. The developer will be required to indicate his preliminary estimate of project cost.

3) The developer has to put his own equity of at least Rs.1.5 Cr./MW.

4) The remaining amount can be raised as loan from any source by the developer.

5) The VGF when paid by the SECI may be used to return part of the loan or developer contribution (in excess of Rs.1.5 Cr./MW) or a combination thereof as the case may be, in case investments have already been made. SECI will issue a letter confirming release of VGF so that bidder is able to achieve financial closure for full amount if required at the time of signing of PPA.

6) The VGF will be released in three tranches as follows:

i) 25% at the time of delivery of at least 50% of the major equipment at the site and after inspection by a Committee to be constituted by MNRE. The major equipment will comprise of (a) Modules-40%, (b) Mounting Structures-15%, (c) Power Conditioning Units-25% and (d) Switchgear and Transformers-20%. In case the inspection is taking time, SECI may release the VGF due on selfcertification by the developer against BG of equivalent amount.

ii) 50% on successful commissioning of the full capacity of the plant. The project’s commissioning will be declared by a Committee to be constituted by MNRE. The project would be considered as Commissioned if energy has flown into the grid after the entire plant equipment is installed and connected.

iii) Balance 25% after one year of operation meeting requirements of generation.

7) If the project fails to generate any power continuously for 1 year within 25 years or its assets are sold or the project is dismantled during the tenure of the project, SECI will have a right to claim assets equal to the value of VGF granted and paid.

Click here to Download the draft report.

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