Astonfield RenewableResources Ltd.

An AstonfieldGroup Company

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Astonfield Renewable Resources, Ltd.

Developer’s perspective on an enabling framework for renewable energy

November 2009

Ravi Raina

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INDIA’S POWER SECTOR : POINTS TO PONDER

Current power mix is fossil fuel dependent and has following negatives

Price volatility/ subsidy dependent Energy security Impact on environment Long gestation period

Utility scale “carbon-less” SOLAR POWER, with NIL environment impact is need of the day to support

Sustainable rural development (electricity in rural areas)

Use existing T&D network Decentralized power generation at remote

locations across the country Replacement for existing DG sets being used

for irrigation where subsidised cost is Rs 15 /kwh

Utility scale solar power addresses India’s growing energy needs

India’s Installed Generating Capacity Total = 147,716MW

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Solar power will be a significant source of global energy mix in future , with critical mass building after reaching grid parity

OilCoalGasNuclear PowerHydroelectricity

Biomass(traditional)

Biomass(advanced)

Wind

Solar power(photovoltaics and solar thermal generation)

Solar thermal(heat only)

Other renewables

Geothermal

200

400

600

800

1,000

1,200

1,400

1,600

02000 2010 2020 2030 2040 2050 2100

Prim

ary

Ene

rgy

Use

(EJ/

a)

Source: Climate Change

Solar subsidies required

Solar hits grid parity

Solar cheaper than conventional energy

4

Key issues impeding the growth of solar program

Affordability of power (Outlook on

grid parity)

Industry players (across the value

chain)

Government Policy environment

(subsidy)

Regulatory Framework (RPPO,

tariff orders)

Ground level issues (land, permitting)

Open access to consumers

Central / State government need to support the solar program by way of feed in tariff subsidy and regulatory framework till grid parity is achieved

5

Holistic lifetime cost comparison of solar versus conventional energy (Rs. / kWh) for 1,000MW

Base Thermal Tariff

Healthcare(12.5 L people impacted)

Fuel EscalationComponent

Transmission & Wheeling Charges

Peak power premium

O&M EscalationComponent

Water Cost

3.50

22.56

Conventional Tariff Solar Tariff

17.0012.40

4.60

Rural jobscreated(2.5 L jobs)

Effective solar tariff

5.00

0.68

3.58

0.84

0.03

8.93

PEAK POWER

Source: Astonfield analysis / Public data

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With government support starting in 2009, solar can achieve Peak Grid Parity as early as 2013-15

Source: Stephen O’Rourke/Deutsche Bank / Astonfield Analysis

7%6%

PHASE I(Govt Policy

very important)

PHASE II(Post- Govt Policy)

5%4%

India – Estimated price of peak electricity today:

Rs. 6.50/KWh

Convergence /Peak Grid Parity

Post 2013, India can substitute expensive sources such as diesel with solar to meet growing peak power demand Astonfield estimates that base load grid parity can be achieved by 2020-23 - beyond that point, abundantly

available domestic solar power will be cheaper than imported coal, positioning India to be energy independent*

* Assumes that conventional power tariff escalates at roughly 5-7% per annum

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While Solar tariffs are more incentivized in Europe, large scale program can bring economies of scale to support low tariffs in India

15 -17 Rupees

22-24 Rupees

22-24 Rupees

28-35 Rupees

2.5MW grid connected solar capacity in all of India

50MW experimental solar program announced by Government of India; more than 1500MW of applications

Two States have now established independently funded programs of 500MW and 50MW respectivelyIn addition, Government of India expected to announce landmark 20,000MW solar program in 2009

Comparison of Feed-in Tariffs Globally (INR per kWh) Scale of India’s Solar Program (MW)

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CERC tariff determination guidelines is a step in the right direction…

SERCs needs to keep the above factors into account, while adopting the CERC guidelines at State level

Project Variable CERC Assumption Observation

Capital Expense Rs 1700 L / MW Feasible in tandem with a large solar program

Net Capacity Utilization Factor 19.0% Needs to be in accordance with insolation levels of each state.

Interest Rate SBI PLR + 150 bps (~ 13.5%)

Long term cost of capital will decline once the initial few projects are in successful operation

O&M expense Rs 9 L / MW ; 5.72% annual escalation

Insurance expenses need to be provided for separately

ROE Pre tax rate : 19% (year 1-10); 24% (year 11 onwards)

CERC assumptions consistent with investor expectations

Annual Output degradation Nil Industry data indicates panel degradation of ~ 0.5-0.8% p.a.

Useful life 25 years Provides long term certainty to developers

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CUF needs to be customized for each state

Varying solar insolation levels across the country (4-7 kwh / sqm/day) affects the project economics, hence CUF needs to be in accordance with insolation levels of each state

India’s Solar Radiation MapIndicative levels of Solar Insolation level (kwh /sqm/day)

CUF States

6.0 & above 18.97% & above

Rajasthan , parts of J&K (Leh)

5.75 18.18 % Parts of Gujarat, M.P.

5.50 17.39% Parts of A.P., Tamil Nadu, Karnataka, West Bengal, Bihar

5.25 & less 16.60% & less

Rest of India

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Solar RPPOs: Critical to Ensure Visibility of Solar Sector Growth to Attract Up-Front Investment

CERC can play a critical role in guiding the SERCs to declare solar-specific RPPO targets

The rationale for Solar RPPO

Demand is generated by State DISCOMs – in the absence of solar energy

procurement targets, they will tend to opt for cheaper renewable power sources

In addition to targets, there must also be penalties on DISCOMs that fail to achieve these targets

Path to Grid Parity is dependent on creating visibility through RPPO to build manufacturer and developer confidence in economies of scale

Indian Experience Gujarat : Solar specific RPPO ( 1.5% in 2009, increasing to 2.5% by 2011)Maharashtra : 0.5%

Available Benchmarks

Global Experience EU : 20/20/20 (20% cut in emission norms, 20% renewable energy portfolio, 20% cut in energy consumption by 2020)Germany : solar accounts for 4% of renewable portfolio

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To realize potential of solar power, India should have capabilities across PV Value chain Crystalline Value Chain

7% 7% 8% 13% 30%

(%) = relative weight of cost structure

35%

Polysilicon Ingot Wafer Cell Module Balance of System

PV Raw Materials PV Deposition & Module Integration Module Encapsulation

Schematic diagram of a CdTe moduleThin-Film manufacturing line where deposition and integration take place

Glass that is used as substrate

Thin film Value Chain

India can be a global solar PV manufacturer then presence across the value chain is imperative

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Successful solar sector begins with robust solar policy and right regulatory framework stimulating demand for solar power generation

1. Stimulating generation creates domestic demand for solar manufacturing and fulfills nation’s electricity needs

• 15-20 GW of demand stimulation to attract large scale cost efficient manufacturing

2. As demand is created, a vibrant manufacturing base opens up, creating domestic jobs and fueling overseas exports

• Drive manufacturing of all solar technologies and create export base market

3. With an established downstream demand, investment in R&D and talent flow into the sector, helping India become a global solar technology hub

Growth of the value chain begins downstream

Stimulating generation lays the foundation for long-term viability of the sector

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To realize the potential of the large scale solar program, a robust regulatory framework is a must at state level based on CERC notified norms

Solar Program Development Required: Why this is necessary:

In the absence of an RPPO mandate for PV solar , states will steer towards cheaper renewable energy sources and subsidies will be compromised

Gives developers and manufacturers line of sight to standardized project return expectations across States and facilitates early installations

Accelerate Adoption of CERC Guidelines at State Level

Renewable Power Purchase Obligations

Development delays are costly barriers for developers - land assistance, permits should be granted through a single window clearance

Ensure Administratively Simple Processes

Given fast implementation cycle for solar, serious developers can accelerate new capacity addition if subsidy process is streamlined

Streamline Central Subsidy Application and Payment Process

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Each State ERC can ensure strong foundations for solar sector rollout even as details of National Solar Mission become more understood

1. Initiate study to confirm CERC solar tariff guidelines (with adoption of specific CUF assumption for each state)

2. Declare a tariff for Solar PV (framework can be declared contingent on National Solar Mission subsidies)

3. Pursue allocation approach rather than competitive bidding in early years of the program (incubation is still required)

4. Declare an RPPO with solar-specific carve out

5. Work with Discoms to standardize bankable PPAs for solar projects <25MW

The states that have already gone through this process or that can complete it by 1Q10 will establish early leadership of solar sector

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India has a small window of opportunity to capture global attention on solar sector development

UNITED STATESStill questions on budget /capital availability for solar rollout

EUROPE•Spain has already cut back program•Germany should be a steady market but no more than 15% global manufacturing offtake•Italy potentially to re-evaluate feed-in-tariff in next 18 months

CHINAHas declared target of rolling out 20GW of solar by 2020 but specifics on incentives and budget are still largely unclear

Global manufacturers are looking for a secure long-term market at the moment and will sacrifice margin for scale

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West Bengal2x 5MW Solar10MW Biomass

Rajasthan5MW Solar

Gujarat200MW Solar

Haryana3MW Solar

Bihar100MW Biomass

Karnataka10MW Solar

KarnatakaPhase 2 Solar

Uttar PradeshPhase I Solar / Biomass

West BengalPhase 2 WTE / Biomass

► Total of 338MW solar project currently in the MOU/Allocation stage

► Close to 1000 MW of pre-MOU opportunities currently in the public sector pipeline

► Of that pipeline, at least 500MW expected to convert into formal concession by 1Q10 with remainder by 1Q11

► In addition Astonfield is in process of finalizing 400MW in pipeline from four leading industrialists in India under co-development structure

RajasthanPhase 2 Solar

Astonfield has become the largest diversified renewable energy company in India

MOU/ AllocationPipelineInitial Dialogue

Madhya PradeshPhase I Solar

Orissa

Tamil Nadu

Andhra Pradesh

Jammu & KashmirPhase I Solar

Bihar Phase I solar

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THANKS FOR YOUR ATTENTION