HK Summit: India’s economic woes weigh on renewables

Panellists say financing renewable projects is becoming more difficult due to slowing economic growth in the country.

Indian developers are facing challenges in financing renewables projects in the country, industry leaders told the audience at Infrastructure Investor’s Hong Kong Summit on Tuesday.

“India is going through economic difficulties, and the liquidity crunch [on the financial sector] is having an effect on the industry,” said Rohit Nanda, head of Asia, principal investments – infrastructure at Sumitomo Mitsui Banking Corporation.

Credit ratings agency Moody’s downgraded India’s outlook from ‘stable’ to ‘negative’ last week, saying that the country’s “prolonged financial stress among rural households, weak job creation, and a credit crunch among non-bank financial institutions have increased the probability of a more entrenched slowdown”.

Adding to macroeconomic woes, Nanda said that lenders have become “more cautious” due to regulatory uncertainty, including recent efforts to renegotiate feed-in-tariffs by the state of Andhra Pradesh, and long delays in payments from distribution companies.

“Domestic rating agencies have downgraded the ratings of around 2GW of solar projects,” he added.

Vinod Giri, head of direct investment at India’s National Investment and Infrastructure Fund, acknowledged that financial institutions are now taking into account these risks. “That means that financing costs are a bit higher,” he said.

Despite this, Giri said that he remains bullish on the sector’s overall development. “We continue to be positive and believe it is a good time to enter the market,” he said.

Srini Viswanathan, chief executive of developer Vibrant Energy, said that he also remained optimistic on the prospects of the renewables sector.

“Even if there’s a slowdown now, the need for energy assets will continue growing, and the energy mix of the country will dramatically change,” he said, adding “we are going to see massive growth”.

The panellists stressed that new opportunities are emerging both in the secondaries market as well as through the growth of corporate PPAs in the country.

“Large companies aiming for 100 percent renewable energy usage are one of the drivers of the industry,” Viswanathan said.