Published On:May 10 2014
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Viability Gap Funding model for solar projects needs financial engineering techniques:India Ratings.

India Ratings in an analysis has said it believes that the viability gap funding (VGF) model for the batch I, phase II of the Jawaharlal Nehru National Solar Mission is prima-facie viable but needs the support of financial engineering techniques to enable timely debt service on these projects. The equipment costs, debt structure and the size of the viability gap funding (VGF) will drive the credit quality of these projects.

Ind-Ra, in its analysis has concluded that the projects under this batch would need a minimum VGF grant of 16% of the project costs (under certain set of assumptions) with an annual declared capacity utilization factor of 19% to be able to achieve timely debt service. The optimum debt/equity mix is 69:31 to achieve a break-even debt service coverage ratio of 1.0x. VGF grants below 16% of project costs could be stressed to meet timely debt service.


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