Bridge India

500 MW of NSM bids in Andhra Pradesh to close below INR 5.37/kWh

First round bid results have been released today for the 500 MW National Solar Mission (NSM) tender in Andhra Pradesh. Bids were submitted for over 5.5 GW by 30 developers with tariffs ranging between INR 5.21/kWh and INR 6.45/kWh. 28 developers have been selected to move to the second round of electronic bidding and the highest qualifying bid to move into the second round stands at INR 6.01/kWh.

  • The winning bids in the online bidding tomorrow will be INR 5.37/kWh or lower
  • If there was no requirement for these projects to be inside a solar park, the cost-adjusted maximum tariff could have been INR 5.11/kWh
  • BRIDGE TO INDIA believes that in view of around 5 GW of projects due for auction in the next 3 months, such aggressive bidding is unlikely to continue

Trina Solar is believed to have quoted the lowest tariff of INR 5.21/kWh, followed by developers such as First Solar at INR 5.35/kWh, SunEdison at INR 5.37/kWh, Energon at INR 5.39/kWh, Renew Power at INR 5.39/kWh, Aditya Birla at INR 5.45/kWh, Essel Green at INR 5.49/kWh and Tata Power at INR 5.49/kWh, all quoting tariffs below INR 5.50/kWh. SoftBank, whose bid has been anticipated for some time now, played relatively safely with a tariff of INR 5.65/kWh. Some of the other prominent bidders who have moved to the second round include Reliance at INR 5.52/kWh, JSW Power at INR 5.71/kWh, Azure at INR 5.73/kWh, Fortum at INR 5.75/kWh, Acme at INR 5.89/kWh, Welspun at INR 5.90/kWh, SkyPower at INR 5.94/kWh and Hero Future Energies at INR 6.01/kWh. Suzlon is one of the two bidders who will not move into the second round of the bid.

With the entire 500 MW getting subscribed by just three bids at and under INR 5.37/kWh, the winning bids tomorrow will definitely close below INR 5.37/kWh. In this second round of bidding tomorrow, bids are likely to go down even further. However, BRIDGE TO INDIA is of the opinion that tariffs below INR 5.25/kWh will move into the realm of being unattractive investments.

There are two schools of thought on how to interpret these tariffs for future guidance. The first is that because Andhra Pradesh solar park has relatively very high solar park charges (refer) and most of the bidders will end up being unsuccessful, future bids in Rajasthan and Karnataka will be even more aggressive, probably breaching the INR 5.00/kWh level. The second school of thought is that the tariffs have already reached unsustainable levels and competition in this tender is higher because this is the first NSM tender after a long time. But as several new tenders are on the anvil, we will see some rationalization of tariffs in the next few months.

We will find out which school of thought is correct in the days to come.

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