Rewa Solar India: PPP innovation unleashed

Publication Type

Case

Publication Date

4-2021

Abstract

Set in July 2020, this case talks about a solar park public-private partnership (PPP) project in Madhya Pradesh, India. Manu Srivastava, Chairperson of Rewa Ultra-Mega Solar Limited (RUMSL), and his team had decided to go ahead with the project without the support of viability gap funding (VGF). However, the project faced a setback when the central government lowered the solar VGF tariff by 10%, forcing RUMSL to look for innovative ways of attracting lower bids.

After consultations with solar developers and potential financiers, Srivastava and his team introduced many de-risking measures like payment security mechanisms, land availability guarantee, project termination and grid unavailability compensation and tax-change risk coverage clauses in the power purchase agreement. The team also implemented innovative features like an optimum scheduling mechanism (to attract a high credit off-taker) and a data room with updates on land and internal evacuation infrastructure availability before the start of the bidding process. The overall strategy was to avoid the 'Goldilocks syndrome' and create a perfect balance between risks being transferred and known risks being accommodated.

An e-reverse auction was used for the bidding process. The final tariff achieved was 40% less than the VGF tariff. RUMSL’s nuts and bolts approach of process innovation motivated the central government to shift its focus from VGF to scalable market-based financing models. A “Standard Bidding Guidelines” for solar projects was introduced by the government, incorporating many features of the Rewa project.

This case helps students understand some of the key risks associated with solar PPP projects, particularly in developing economies and how effective risk allocation and management strategies can improve project bankability. Students will also get to deliberate on government co-financing strategies in PPP projects and the benefits of e-reverse bidding for renewable energy projects.

Keyword(s)

Renewable Energy, Sustainability, Risk Management, Public-Private Partnership, Project Structuring, Project Financing

Discipline

Energy Policy | Marketing

Research Areas

Marketing

Data Source

Field Research

Industry

Energy and natural resources sector

Geographic Coverage

India

Temporal Coverage

2021

Education Level

Executive Education; Postgraduate; Undergraduate

Publisher

Singapore Management University

Case ID

SMU-21-0003

Comments

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Additional URL

https://cmp.smu.edu.sg/case/4836

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