Case study: Lead arranger of project financing for a 380 MW greenfield solar farm in India
INR* denominated funding solution with Inner INR LC limits
Background
India is working towards carbon neutral economic development. But even though renewable electricity is growing at a faster rate in India than any other major economy, with new capacity additions on track to double by 2026, access to low cost long term capital remains key to the country’s ambition to achieve net zero.
Standard Chartered part-funded the development of a 380 MW greenfield solar power project in Jaisalmer, Rajasthan, India, a landmark in the Indian renewable sector. The project is being developed by the O2 Power Group (“O2”). Once completed, the project is expected to offset approximately 532000 tons of carbon.
This is O2’s largest greenfield solar power project till date, and Standard Chartered’s facility enabled O2 to optimise its capital structure by availing of long-term debt financing during a challenging economic environment.
Standard Chartered structured the facility to comply with our own Green and Sustainable Framework, and also with international sustainability standards like IFC’s Performance Standards, the Equator Principles and LMA’s Green Loan Principles.
Standard Chartered’s role
Standard Chartered is the Sole Structuring and Coordination Bank, Mandated Lead Arranger, Trade Bank and Hedging Bank for this transaction that included three other international banks.
Deal structure
The facility is a secured project finance term loan with a INR Letter of Credit as an inner limit. It also has project finance security and shareholder support, to mitigate any additional cost overruns or shortfall in debt servicing, until the project demonstrates satisfactory performance.
The Project is underpinned by a bankable NHPC 25-year PPA, and the construction and maintenance risks are well mitigated under the contractual structure. For these reasons, the structure sets a precedent for international banks funding Indian renewable energy projects.
“O2 Power is happy to collaborate with Standard Chartered on the NHPC 380 MW solar plant in Jaisalmer. This is one of our most critical solar projects, and we hope to gain from Standard Chartered’s global experience of financing big infrastructure projects. It also underlies our commitment to supporting the Indian government’s ambition of a net-zero future.”
Parag Sharma, founder and CEO, O2 Power
“Solar energy capacity addition is a critical element of India’s energy transition including 500GW power from non-fossil fuel sources by 2030. We are delighted to support O2 to raise a competitive financing package for this greenfield project as it continues to expand its pipeline across India.”
Prasad Hegde, Standard Chartered’s Managing Director, Head of Project and Export Finance, South Asia
*Indian Rupee