RENEWABLE ENERGY

IREDA NCEF Refinance Scheme

Eneregtica India

Indian Renewable Energy Development Agency Ltd. (IREDA) has published a revised refinance scheme under the support by The National Clean Energy Fund (NCEF)elaborating about the revival of the operations of existing biomass power & small hydro power projects affected due to unforeseen circumstances

Background

As a major initiative to promote ecologically sustainable growth while addressing India’s energy security challenge and also as a contribution to the global effort to meet the challenges of climate change, the National Clean Energy Fund was established by the Government of India by levying a cess on coal produced in India as also from imported coal.

A large number of renewable energy projects in the recent past have been affected/ suffered difficulties in view of uncertainties in policy/regulatory matters such as low tariffs, higher wheeling and banking charges, cancellation of PPAs, higher transmission & cross subsidy charges, in addition to abnormal escalation of biomass fuel costs (in case of biomass power projects) apart from the force majeure conditions such as floods, cloud bursts, draught etc. Due to the above unforeseen circumstances, the projects viability & ability to repay the loan has been affected. In order to overcome these difficulties to some extent and to improve the viability of the above projects, it is proposed to use the NCEF funds for refinancing of their loans outstanding (including Funded Interest Term Loan, FITL).

The proposed scheme would provide comfort in the form of refinancing of loan component (including FITL) at concessional rates to these needy projects. For effective utilization of NCEF Funds, it is proposed that the support would be provided to projects where there is a possibility of revival of their operations.

The Scheme to be implemented by Indian Renewable Energy Development Agency Ltd. (IREDA) will be known as the “IREDA - NCEF Refinance Scheme For Revival Of The Operations Of Existing Biomass Power & Small Hydro Power Projects Affected Due To Unforseen Circumstances”.

Objective of the Scheme

The scheme aims to revive the operations of the existing biomass power &small hydro power projects by bringing down the cost of funds for these projects by providing refinance at concessional rates of interest, with funds sourced from the National Clean Energy Fund (NCEF).

Scope of the Scheme

Technology: Small Hydro Power (SHP) & Bio-mass combustion based grid connected power generation projects.

Financing Structure

IREDA would provide funds received from NCEF by way of refinance to scheduled commercial banks and financial institutions (including IREDA) in respect of their lending to the above category of Renewable Energy projects.

Refinance not exceeding 30% of the loans outstanding (including Funded Interest Term Loan, FITL) of above category of projects, in the books of scheduled commercial banks/ financial institutions (including IREDA) would be made available to them at concessional rate of interest under the scheme by IREDA. However, the refinance amount, shall in no case be more than Rs. 15 crs per project.

Rate of Interest

The rate of interest on the refinance from IREDA to Banks/FIs shall be two per cent per annum. The scheduled commercial Banks/FIs are required to provide the refinanced component of loan to the borrower at the same interest rate i.e. two per cent per annum.

Tenure of Refinance

Repayment period for the refinance amount should be co-terminus with the repayment period of Bank/FIs for that project and the maximum repayment period shall be 10 years apart from 6 months moratorium/ grace period from the date of disbursement/ release of refinance amount from IREDA.

Eligibility

Institutions eligible to avail refinance

Scheduled commercial banks and financial institutions would be eligible for refinance from IREDA under this Scheme. Grant of refinance shall be at the sole discretion of IREDA who would also determine the availability and extent of refinance. The scheduled commercial banks / financial institutions shall be required to satisfy, inter alia, the following parameters to be eligible for availing refinance under the Scheme:

i) They should be profit-making for the last three years and should have no accumulated losses.

ii) Gross Non-Performing Assets as a percentage of Gross Advances should normally not exceed five per cent for the entire portfolio of the lending institution. The condition will not be applicable to State/ Central PSU Banks/Govt. NBFC’s/ Govt. FIs.

iii) The Capital Adequacy Ratio should be in conformity with the prescribed regulatory norms

Other eligibility conditions

a) Operational grid connected power generation projects:

• Combustion based Biomass power projects (Upto installed capacity of 10 MW)*
• All Small Hydro Power Projects upto installed capacity of 25 MW**

* In case of combustion based Biomass Power, the projects of more than 10 MW may also be considered, however, the refinance amount will be limited to the amount as per pro rata basis upto 10 MW only, subject to maximum refinance amount that can be availed as per scheme i.e. Rs. 15 Crores.

** Subject to maximum refinance amount that can be availed as per scheme i.e. Rs. 15 Crores.

b) Projects viability affected, in view of tariff, abnormal fuel cost escalation issues & Force majeure conditions

c) Project should be revived/operationalized after the utilization of NCEF refinance loan from IREDA.

d) Plants should have operational history of atleast 2 years after commissioning of the project and the 2 year’s average PLF (in case of plant operated for more than 2 years, then the average PLF of any 2 years) should be atleast 20% in case of Biomass Power and 15% in case of Small Hydro Power (SHP) Projects.

e) Refinance not exceeding 30% of the loan outstanding, @ 2% interest rate from IREDA to Scheduled commercial banks / FIs (including IREDA) and the same shall be extended by the Banks/FIs to the project developers at the same rate of 2%, subject to, maximum Refinance amount Rs. 15 Cr. per project.

f) The project should also have min. of average DSCR of 1.1 after taking into account IREDA refinance amount and should be able to service the loan.

g) The project should be revived/operationalized within 6 months from the date of disbursement, In case Bank / FI do not provide the confirmation on revival of the plant within 6 months, the refinance disbursed may be recalled, and the amount has to be refunded to IREDA in one go. (However, in exceptional cases, additional time period of upto 1 year, apart from above 6 months may be given for operationalization/ revival of projects, subject to submission of suitable reasons/ justifications by FIs/ Banks to the satisfaction of IREDA.)

The following components of finance/loans are not eligible under the scheme:

a) Loan Sanctioned against securitization of future cash flows will not be eligible.

b) Working Capital Limits/Loans.

Security

Security for refinance from IREDA

The credit risk of the loan to the consumer will be fully taken by the scheduled commercial bank/ financial institution. Refinance from IREDA would be secured by charge on the book debts of the scheduled commercial bank / financial institution. Additional security such as charge on immovable properties / movable properties, guarantee of government, promoter, sponsor bank, etc. in favor of IREDA may be stipulated at the discretion of IREDA. The nature and extent of security will be determined to the satisfaction of IREDA on a case-to-case basis.

Security for loans to borrowers at the primary level

The scheduled commercial banks and financial institutions may have secured the loans extended by them to the primary borrowers by adequate security in accordance with their internal lending norms as approved by their Board of Directors / Competent Authority, in conformity with the applicable guidelines of the Reserve Bank of India (RBI) / other regulators. This may include primary security of adequate value in the form of hypothecation / other charge over the assets financed or, at the discretion of the primary lending institution, security of adequate value in the form of other assets such as receivables, property, life insurance policies, bank fixed deposits, or such other security as may be deemed appropriate to fully secure the loan.

Repayment of Refinance

Repayment of principal shall be made by the scheduled commercial bank / financial institution to IREDA as follows:

(a) Repayment period for the refinance amount should be co-terminus with the repayment period of Bank/FIs for that project and the maximum repayment period shall be 10 years apart from moratorium/grace period of 6 months from the date of disbursement/ release of Refinance Loan from IREDA, the amount will be repaid to IREDA in accordance with the repayment schedule as may be specified by IREDA.

(b) The due date for repayments of quarterly installments shall be the last day of each calendar quarter (i.e. 31st March, 30th June, 30th September and 31st December each year).

(c) The date of repayment will be reckoned as the date on which credit of the amount is received in the account of IREDA. However, if the repayment of installment is made before the due date, credit will be given only on the due date.

Other Terms and Conditions

a) Operation of the project: The scheduled commercial banks/FIs can obtain an undertaking from the promoter that they will run the project for atleast 3 years after the refinance with an average PLF of 40% in case of biomass power projects and 25% of the designed PLF/generation for SHP Projects.

ii) Periodical Returns: IREDA may call for information or returns at periodic intervals from the scheduled commercial bank / financial institution availing of refinance from IREDA. The scheduled commercial bank / financial institution should be prompt and regular in submission of the requisite returns.

iii)Inspection: The books of account, registers, and all other relevant records of the scheduled commercial bank / financial institution as also the sites of the project loans, can be inspected by IREDA or any authorized representative on behalf of IREDA.

iv) Monitoring: Scheduled Commercial Banks/FIs to submit the generation details of the project/s under consideration every 6 months as per IREDA format.