Asian Development Bank (ADB) has announced its intention to offer around $150 million towards solar development program in India to broaden out its energy mix.
ADB will provide its investments in the form of credit guarantees to the commercial banks of Indian as well as overseas origin that provide funding for private solar power projects in India. Though India is estimated to have approximately 300 sunny days annually, the private sector participation in solar power projects did not grow appreciably due to high level of initial investments and dearth of long term loans from banks.
According to a statement released by ADB, the proposed partial guarantee loans for a period of 15 years will make solar projects more attractive both for the investors and the banks. The guarantee will meet around 50% of the payment evasion risks on bank loans by the project developers. The proposed guarantee will sustain solar projects with a maximum of 25 MW power production capabilities. ADB is also planning to directly finance the bigger sized private sector solar power projects in India. In addition to the credit guarantees ADB is also planning to organize a training program on solar technology and the risks related to the technology and to assist the banks to perform due diligence while sanctioning loans for private solar projects.
Don Purka, who works as Senior Investment Officer in the private sector operations of ADB, stated that banks participating in the funding program along with ADB will gain more confidence about risks involved in solar power production, which in turn will persuade other banks to join the program without the backing of ADB.