How much of my project cost will the Indian Renewable Energy Development Agency (IREDA) lend: 70, 75 or 80 percent?

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Accepted Answer

Normally up to 70% of project cost, with you putting in 30%. IREDA may go to 75% for solar, wind, hydro, bagasse cogeneration and energy efficiency projects, and to 80% for some solar, wind, hydro, energy efficiency and equipment manufacturing projects, if loan-repayment cover and track-record tests are met. Some sectors, such as biomass direct combustion, are capped lower. The quantum of loan from the Indian Renewable Energy Development Agency (IREDA) shall normally be up to 70% of the total project cost, with a promoter contribution of 30%. The promoter is you, the person bringing the project. Your 30% is the money you put in yourself. A new term appears below: Debt Service Coverage Ratio (DSCR). In plain words (ours, not IREDA's), it checks that the money your project earns, after running costs, covers the loan instalments due, the way a household checks that pay covers rent with something left over. A DSCR of 1.25 means income is 1.25 times the instalments. Applies in solar, wind, hydro, bagasse based cogeneration (power and useful heat from the fibre left after crushing sugarcane) and energy efficiency and conservation projects. IREDA may consider a minimum promoter contribution of 25% and a loan of up to 75%. The norms list three conditions without saying whether they are alternatives. Repeat IREDA borrowers with an operational renewable energy or energy efficiency project should have a good repayment record and a financially viable proposal. New clients should show an average DSCR of at least 1.25 for solar and wind, 1.3 for other sectors, and 1.4 for manufacturing. Only for energy efficiency and conservation technology projects, the underlying contract or project is with a government or government-owned entity. Ask IREDA which of the three applies to you. For energy efficiency projects, the norms' last condition names a government or government-owned contract. Our page on what IREDA energy efficiency loans fund reads that as the only route to 75% for them, so a private factory retrofit should plan on 70% unless IREDA says otherwise. Debt to equity of up to 4:1 and a loan of up to 80% of project cost can be allowed in solar, wind, hydro and energy efficiency and conservation technology, meeting these criteria (the norms list four; we read them as all required). Promoter experience of a successful project plus two years of satisfactory operation of at least one project of 50% of the proposed capacity. A minimum internal risk rating of Grade-III, or at least A(-) (A minus) external rating. Average DSCR of at least 1.2 for the tenure of the loan. For energy efficiency and conservation projects, the underlying contract or project must be with a government or government-owned entity. Makers of renewable energy equipment can reach up to 80% with debt to equity of up to 4:1. The conditions: the plant is set up by an existing IREDA borrower or its holding company, the borrower or group has at least 2 years of good repayment with its existing lenders, the promoter has two years of satisfactory operation of at least one such manufacturing project of 50% of proposed capacity, and a minimum A(-) (A minus) external rating. Biomass direct combustion power projects: IREDA's loan exposure may be limited up to 50% of the project cost. Cogeneration projects: IREDA's exposure to the main loan may be limited up to 50% of the project cost. Biomass fuel processing machines (baler, shredder, choppers, tractor with front end loader and trailer): IREDA can finance up to 75% of equipment cost. Biomass gasification projects of 1000 kilowatts thermal (kWth) or more: up to 75% of equipment cost, only for captive thermal use. Scheme sheets, such as the ones for biomass plants, can set other shares, so read the sheet for your sector. In the hydro part of the norms (loans above 50% and up to 80% for projects up to 25 MW), borrowers with no experience in the sector face these terms. The norms ask for 70% of your total contribution upfront, brought in and spent, a cash sweep of at least 50% of the surplus in the Trust and Retention Account after the debt service reserve is created, and money released in steps. The release table pairs your contribution with the share of the IREDA loan released: 70% of contribution for up to 30%, 80% for up to 55%, 90% for up to 75% and 100% for up to 95%. The table does not say what the loan percentage is a share of; our reading is the sanctioned loan. Ask IREDA whether these terms apply beyond hydro. The same part of the norms says that in solar, including the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) scheme, and in wind, IREDA considers a minimum capacity of 5 megawatts (MW) for funding, and for hydro a minimum of 2 MW. It prints this right after the 80% step, so ask IREDA whether it applies to your project at every step. Separately, the norms set a minimum loan of rupees (Rs) 50 lakh unless a scheme or programme exempts it.

How much of my project cost will the Indian Renewable Energy Development Agency (IREDA) lend: 70, 75 or 80 percent?

The normal rule

The 75% step

The 80% step

Some sectors differ

If you have no experience in the sector (hydro projects)

A size floor to know about

Example: a Rs 2 crore project at each step

What Senseible does here