Energetica India Magazine: september 2020

SOLAR POWER 45 energetica INDIA- September_2020 Table2: Key Financing Deals of Leaders in the Rooftop Solar C&I Segment nities among micro, small- and medi- um-sized enterprises if they can get ap- propriate financing. To this end, specialised non-banking fi - nancial companies (NBFCs) and funds have formed strategic partnerships to develop and scale commercial rooftop solar finance solutions. In June 2019, Encourage Capital LLC, an impact investment asset manager and advisory firm, announced the first close of its new $40 million Encourage Solar Finance LP private equity fund. In November 2019, technology-enabled small business lending platform U GRO entered a co-lending programme with Sunvest Capital, India’s first dedicated rooftop solar financing NBFC. By lever - aging the expertise and market intelli- gence of Sunvest and the tech-driven knowledge of U GRO in SME lending, the co-lending programme with capital of Rs20 crore ($267,000) intends to pow- er the clean energy initiatives of MSMEs. Other than these small specific initia - tives, innovative financing models sup - ported by MNRE and Ministry of MSME could lead extensive adoption of solar power in this segment. Some of the models that can be explored for MSME financing are: • Partial Risk Guarantee Fund / Credit Guarantee Mechanism This risk-sharing mechanism would act as a shield for the lenders against bor- rower defaults. If a borrower’s business were to shut down, this fund would par- tially cover the lender’s losses. Imple- menting a CGM would improve the risk profile of rooftop solar projects, reducing the interest rates on project loans for MS- MEs. • Standardisation of Solar Loan Prod- ucts A well-structured template for infor- mation collection, project assessment and risk evaluation would address the high transactional cost and time taken to finalise Capex loans for rooftop solar projects, especially more modest instal- lations. Such a loan product would en- able lenders to make informed decisions more quickly and provide greater clarity for borrowers. • First Loss Portfolio Guarantee In some jurisdictions, a first loss portfolio guarantee (FLPG) is established to pro- vide credit enhancement to lenders. A third party such as a government invest- ment fund indemnifies lenders against losses for a given amount or percentage of any losses they might incur from a de- fault, for example. In this way a development fund can be a guarantor for banks, enabling them to lend to SMEs because their first risk is already hedged to a certain extent. This mechanism ease some of the difficulty SMEs face in accessing finance mainly due to their lack of sufficient collateral and credit ratings below BBB+ which leads to high interest rates. Close private and public sector cooperation would be needed for such a mechanism to suc- ceed. Source: Powering up Sunshine – Untapped Opportuni- ties in India’s Rooftop Solar Market, July 2020, Institute for Energy Economics and Financial Analysis (IEEFA.org) , JMK Research & Ana- lytics.