OPEN ACCESS POWER CONTRACTING OF SOLAR POWER Rameez

OPEN ACCESS POWER CONTRACTING OF SOLAR POWER Rameez Shaikh (Senior Manager, RSM GC Advisory Services Pvt Ltd) Suryacon Conference, 04 October, 2016 @ The Westin, Koregaon Park, Pune

Agenda • • RSM GC – Introduction Open Access – Regulatory Framework for Solar Power Drivers – Push & Pulls Requirements & Operational Modes Transaction Costs & Challenges Typical steps, process and timeline Case Study

About us – RSM GC • Leading player in Energy and Sustainability Services • Led more than 500 sustainability service offerings (CSR, EIAs, LCAs, CDM, Environmental Finance etc. ) • • • Sectors( Energy and Infrastructure, Mines and Metals, Manufacturing, Habitats, Forestry, Agriculture) and Geographies (India, Srilanka, Thailand, Philippines, Indonesia, Nigeria, Kenya, Tanzania) Clients (Governments, Multilaterals, UN, Business groups, NGOs) • Delivered more than 500 million USD benefits to clients • Operating across India, South East Asia and Africa

• • • RSM International is the 7 th largest network of independent audit, tax & advisory firm in the world with over USD 4 billion in fee income and presence in over 700 offices in 103 countries RSM Astute is the 6 th largest accounting and consulting group in India has 1000 people strength and located in 19 offices in 13 cities with delivery capabilities in 90+ cities Some Clients of RSM Astute

RSM GC What We Do Energy • Energy Audit / Energy Management Systems [ISO 50001) • PAT Advisory and ESCerts Trading • Renewable Energy Purchase Obligation (RPO) / Renewable Energy Certificate (REC) Advisory and Trading • RE Power Contracting and Trading • RE project management, techno-commercial advisory and due diligence support • Financial, commercial, regulatory & legal advisory support for RE projects • Owner’s Engineer, Quality Assurance, Third party inspection services Sustainability • CSR – Planning and Implementation Support [Companies Act 2013] • Environmental and Social Due Diligence / ESG Assessments • Carbon and Water Footprinting / Management, enabling International Certifications [ISO, CDP, etc. ] • Carbon Credits [CDM, VCS, Po. A, GS] • Business Responsibility Reporting [Under SEBI Regulations] • Sustainability Reporting [GRI and Similar Standards] • Sustainability ERP Tools and Performance Improvement

Advantages - RSM GC • • Deep insight: Thought leaders, Helped in capacity building exercise in major states for open access. Rich Experience: – Advised IPPs on power sale strategy at the stage of finance raising to operations – Advised some of the largest industrial groups on power procurement strategies for their facilities across states – Advised one of the largest business groups on achieving carbon neutrality through RE procurement options – Reduced power procurement cost of few large commercial establishments by over 25%

Experience - RSM GC • • • Experience with over 8000 MWs power project portfolio – Wind projects of over 2000 MWs across India – Over 350 MW of REC projects across India Client list includes some of the largest IPPs & CPPs in India – Tata Power, Lanco, GVK, GMR, Renew, Green. Ko, JSW, Mahindra, etc. Broad spectrum of technological expertise – Wind, solar, hydro, biomass, Waste to Energy, etc. Executed innovative contract structures – Some of first third party sale contracts for renewable energy project Experience in project finance and project evaluation for renewable energy projects

RSM GC – a One Stop Solution for RE…!!! Transaction Project Management Project Finance & Insurance Commercial & Regulatory Legal Technical • Power / REC Transactions through exchange, bilateral, group captive route • Turnkey transaction support, PPA facilitation, Open access process documentation accreditation, & liaison • management, REC project development, registration, issuance & liaison activities • Project management and consultancy for wind / solar power project • Investment and Financial Advisory Services to RE projects • Renewable energy insurance solutions - Transit, Construction and • Operational Project valuation, feasibility studies, due diligence & financial analysis including asset acquisition support • Policy & Regulatory analysis for projects, power sale structures in • Legal variousreview states of positions /cases in power domain, particularly renewable energy • Petition / representation at regulatory forums (SERCs, CERC, APTEL, etc. ) turbine portfolio management & performance improvement • Wind • Owner’s engineer and Third Party Inspection to enhance Quality & Reliability through independent Engineering opinion & Inspection

Advantages- RSM GC Advisory Leadership Team Leadership team with expertise and extensive consulting experience, more than 500 sustainability service offerings; developed over 250 emission reduction projects with a potential of >400 million CERs; assisted and advised over 8000 MW power project portfolio & over 2000 MW wind power projects, over 350 MW REC projects; delivered value of over US$ 500 Million to businesses in India Policy Formulation Active participation in policy formulation and thought leadership Strong Track Record Diverse Work Experience Strong track record of project delivery, combined with risk mitigation and structuring capabilities Working experience in diverse geographies & sectors, and a potent combination of technical & financial resources

RSM GC – Some Clients - Energy and Sustainability

Open Access: Regulatory Framework for Solar Power • • • The Electricity Act 2003… 13 year old intention? Inter-state and intra-state open access regulations NAPCC, NTP (8% solar by 2022), JNNSM, Revised Solar Targets (100 GW by 2022) RPO – Discoms, CPPs & other OA consumers of thermal power Promotional policy benefits for RE in general & solar in particular – Concessional transmission/ wheeling charges, losses, CSS, banking benefit, ED waivers, AD benefit, etc. Central & State RE policies NAPCC/ JNNSM/ RPO/ REC Electricity Act 2003 State level regulations & notifications

Key Drivers – Solar Open Access – Push & Pulls • • • Falling module prices & solar power tariffs – Over Rs 12/k. Wh (2010) to Below Rs 5/k. Wh now Increasing grid power rates – Grid parity of solar power? – Maharashtra: Industrial (~Rs 8/u) – Maharashtra: Commercial (~Rs 14. 5/u) Sustainability & CSR goals – Corporate targets, RE 100, etc. RPO compliance Favourable policies – Concessional benefits Not so favourable policies – Not signing PPAs at feed-in tariff? – RPO quota full? Voluntary – Sustainability / CSR goals Compliance - RPO Economics – Grid Parity

Requirements & Operational Modes • • Requirements – – Above 1 MW contract demand; 700 KVA recorded maximum demand – ABT meter installation – PPA between the parties – Open access approval Contract Structure – Exchange? – Inter-state? – Third Party Sale Mode • Through a trading licensee or directly • OA charges concessional, though CSS also applicable • Higher flexibility: Counterparty & tenure – Captive / Group Captive Mode • Operates as per Electricity Rules 2005 (min. 26% equity & 51% of power consumption) • Additional CSS cost saving (on top of concessional OA charges) • Preferential open access approval • Stronger agreements structuring

Transaction Costs & Challenges • • One-time: ABT meter at both the ends On-going: – Processing & Operating cost – Wheeling & Transmission losses / charges – CSS – Additional Surcharge? – ED? – Demand penalty / temporary charges for breaching CD? E. g. Category Losses (%) W&T charges (Rs/u) CSS Total OA cost HT-I E (Industrial) – 33 KV 3. 92% + 6% 0. 28 + 0. 11 0. 37 9. 92% + Rs 0. 76/u HT-II N (Commercial) – 11 KV 3. 92% + 9% 0. 28 + 0. 83 1. 08 12. 92% + Rs 2. 90/u Challenges: Approval process, new charges, frequent changes in policy

Typical Process for RE Power tie-up buyer/ seller • High level terms • Power Purchase , Share holding, etc. • ABT meter, etc. Agreement • Open access • Regulatory filings Approvals Billing & Payment Open access charges ess Power Generation Credit Adjustment c Pro LOI • Matching ly nth purchase • Qty, period & price Set-up Mo • Intent to sell / Term Sheet

Case Study – Solar power sale to commercial bldg • • • Mandate to source power for a commercial undertaking facilities across India Suitability study for their operation in various states, applicable policies & available power sources Contracted 1 MW Solar for one of their commercial malls in Maharashtra • Present Power Procurement – Business – Category – Annual consumption – Current Variable Power Tariff : MSEDCL : Commercial stand alone mall : HT 2 (Commercial Category) : 18 - 20 lac units : around Rs 15/u • Solar Power Procurement – Annual Supply – Annualized Saving : 1 MW solar plant : 15 lac units : 45 -50 lacs/year • Highlights: – About 20% saving in electricity bills – Hassle free transaction with complete liaison & implementation support – Contracting to power flow – within 3 months

THANK YOU FOR YOUR TIME AND ATTENTION Contact: Rameez Shaikh M: 9920033866, E: rameez. shaikh@general-carbon. com) RSM GC Advisory Services Pvt. Ltd 7 th Floor, B Wing, Kukreja Centre, Plot No-13, Sec -11, CBD https: //twitter. com/GC_Advisors www. linkedin. com/company/general-carbon