INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683

Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]

Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

DOIs:10.2017/IJRCS/WSRC-2023/006 --:-- Research Paper / Article / Review

The economic and technical feasibility analysis for solar

power plant

Rajeev Ranjan Sandilya

Assistant Manager, Engineering Management (Power Utility)
Alumnus of the Indian Institute of Management, Rohtak
Government-certified boiler operation engineer
Email ID: [email protected]

Abstract : Solar power plants connected to the grid have emerged as reliable sources of
renewable energy to supplement conventional fossil fuel power plants connected to the grid.
The capital investment for solar power projects has become economical in the present time due
to the advancement in photovoltaic module technology. The investment in a solar power project
is non-recourse in financial structure. The case study for project finance in the renewable
energy domain is narrated with the help of the operation research methodology of
mathematical models for financial statements. The economic viability of a project is analysed
by financial metrics, i.e., internal rate of return (IRR), net present value (NPV), and debt
service coverage ratio (DSCR). The mathematical model for financial statements provides
forecasts of revenue and cash flow. The mathematical model provides a risk assessment for
credit. The identification of technical requirements for a greenfield project is described for the
assessment of the technical feasibility of the project. The decrease in capital and operating
costs associated with the increase in efficiency of solar power plants, accompanied by the
financial incentive scheme introduced by the government, provides attractive business
opportunities for the renewable energy value chain.

Keywords: Economic indicator for the infrastructure project, Mathematical model for
financial statements, Project risk assessment by financial metrics

1. INTRODUCTION :

India has the potential to generate renewable energy through solar power plants connected to
the grid. Investment in solar power projects is typically non-recourse in financial structure. The
equity firm and venture capital firm invest in solar power projects. The efforts of Indian
government agencies and private business entities to achieve a greater share in the renewable
energy market segment have led to a substantial increase in the installation of solar power
projects in India. The generation of power from conventional fossil fuel power plants is a source
of greenhouse gas emissions, which contribute to global warming. The geographical location
of India provides solar radiation to almost all parts of the country, which accounts for 4–7 kW
h of solar radiation per square meter. Photovoltaic modules, or PV panels, are made of
semiconductors, which convert solar energy into direct current with the help of solar cells. The
economies of scale associated with an increase in production lower the cost of photovoltaic
(PV) modules. The power generated from a solar power plant has efficient utilization of energy
due to nil energy storage losses. The solar power plant connected to the grid supplies the excess

Available online on - WWW.IJRCS.ORG WSRC-2023 Page 52

INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

power after auxiliary consumption to the grid. Power generation by a solar power plant is
expensive due to its high initial capital cost and low operational cost.

A typical infrastructure project for a solar power plant with a capacity of 10 MW requires
approximately 50 acres of land. The solar power plant connected to the grid should have a
minimum distance from the grid to minimize losses due to transmission. The geographical
location and availability of unfertile land near canal sides and airport sides should be
considered for the installation of a solar power project. The individual solar panel block has a
generation capacity of approximately 625 kW. The total of sixteen blocks is combined to
generate power of 10 MW. The land allocation is done for the solar block and its ancillary
equipment. During the absence of solar radiation, power is imported from the grid for solar
power plant auxiliary power requirements. The typical solar power plant connected to the grid
consists of thin-film PV modules or crystalline silicon panels combined into arrays, inverters,
power conditioning units, and grid connection equipment. The crystalline silicon panels are
constructed by placing a single slice of silicon through a series of processing steps to create
one solar cell. These solar cells are then assembled in multiples to produce a solar panel. The
thin-film PV modules consist of CIGS, amorphous silicon, and CIS. Thin-film PV panels are
made by applying thin layers of semiconductor material to various surfaces, generally glass.
The optimal tilt angle of the PV module is kept near the latitude angle of the location for
maximum solar radiation reception. The optimal tilt angle is varied in the range of 2 degrees to
3 degrees, depending on the latitude angle of the location. The PV panel mounting structure is
designed to withstand rain, wind, and adverse weather conditions. The clamps, bolts, nuts, and
fasteners for PV module mounting are made of stainless steel. The optimum distance between
the lower level of the PV module and the ground is provided for maintenance work.

2. Objectives :

The economic and technical assessment of solar power projects connected to the grid provides
guidance to entrepreneurs for the development of upcoming grid-connected solar power
projects in the future. The infrastructure project development for a solar power plant has one
of the highest initial capital investments in the domain of renewable energy. The infrastructure
project development cost is approximately ₹ 10 crore per MW of solar power generation. The
project development cost includes the cost of PV panels and the balance of plants, the cost of
land acquisition for the power plant, and the project support manpower cost. The mathematical
models for financial statements provide detailed financial figures for all expected developments
in the infrastructure project. The mathematical model for financial statements allows project
stakeholders to interpret project financial figures and hypothesize different development stages
of the project. A mathematical model for financial statements is a tool that facilitates the
decision-making power of equity investors, commercial banks, project developers, and
entrepreneurs.

3. Literature Review :

Solar power projects are built up through government entities, private enterprises, and public-
private partnerships (PPP) enterprises. The project financing model used by the PPP project
with separate incorporation, i.e., the special purpose vehicle (SPV), raises non-recourse debt
financing (Esty, 2004; Srivastava and Kumar, 2010). These SPVs, deemed bankruptcy-remote,
have high leverage due to the use of non-recourse debt and contractual arrangements, often up

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INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

to 90%-95% (Srivastava and Kumar, 2010). The provision of tie-ups with local business
enterprises as joint ventures or special purpose vehicles (SPV) for capital investment provides
a boost for solar power projects in India. Solar power projects are completed for commercial
operations in a much shorter timeframe in comparison to conventional fossil fuel power
projects. The turmoil, irrational panic, and breakdowns of financial markets impact public
confidence and the stability of the financial systems as a whole and necessitate governmental
interventions (Beltratti & Stulz, 2019; McKibbin & Fernando, 2020). In infrastructure projects,
due to the defined location and non-movability, private investment through PPP is found to be
more susceptible to hold-up pressures by local bodies post-investment, with a higher possibility
of such obsolescing bargaining in developing economies (Jenkins, 1986; Wells and Gleason,
1995). The equity firms provide large-capital and medium-capital investments. The venture
capital firm provides a smaller amount of investment. The equity and debt used to finance the
solar power project are paid back from the positive cash flow generated after the commercial
operation of the solar power project.

Anticipating the progress of financial instruments and attempting to pinpoint the next financial
crises are actively pursued aspirations of many practitioners and academics (Lo Duca &
Peltonen, 2013; Poon & Granger, 2003). The commercial bank and equity sponsor are
interested in cash flow generation from the commercial operation of the solar power project
and the debt service coverage ratio. Most of these capital-intensive projects have a high degree
of technical, managerial, and political risk, due to which innovative approaches are required
for effective financing and management, which are provided by PF structures (Beidleman et
al., 1990). The mathematical model for financial statements provides a tool for an entrepreneur
to make confident decisions after a potential risk assessment. The availability of big financial
data on a tick-by-tick basis reveals potential for a deeper understanding of stated properties,
trading processes, or the management and assimilation of financial asset risks (Cordis & Kirby,
2014; Bodnar & Hautsch, 2016). The best way to assess the profitability of the project is by
examining the financials it is expected to produce in the future.

4. Methodology :

The mathematical model for financial statements provides the economic indicators for project
feasibility through the computation of equity IRR, project IRR, DSCR, NPV of equity, and
NPV of the project. The mathematical model serves as a virtual representation of economic
activities. The main purpose is to build a reasonable proxy of the foreseen economic period in
the future and to validate project decisions based on facts and figures. The calculations
performed in the mathematical model for financial statements are logically related, and the
result of the calculation shows clear relationships between expenditure, revenue, cash flow,
and debt repayment. The mathematical model for financial statements provides a credit analysis
of the borrower’s ability to repay debt in the future on the basis of cash flow generation from
projects and the debt service coverage ratio (DSCR).

5. Analysis & Discussion :

The financial analysis of the solar power project is narrated with the help of a case study of a
solar power project developer in India. The mathematical model for financial statements is
applied to provide an assessment of the economic feasibility of the project. The output of the
mathematical model allows an entrepreneur to make confident decisions.

Available online on - WWW.IJRCS.ORG WSRC-2023 Page 54

INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

The project developer has signed a PPA (power purchase agreement) for 25 years with a utility
electricity distribution company for a 10 MW solar power plant at a fixed tariff of ₹ 3.50 per
kWh. They are expecting a net annual energy production of 18 million kWh per year, with a
degradation rate of 1% per year. The expected capital expenditures are ₹ 3 crore per MW, and
operational expenditures are ₹ 30 crore per annum for the whole plant. They are seeking a non-
recourse debt with a debt-to-equity ratio of 70:30 from leading commercial banks in India as a
12-year (maximum) term loan. The calculations in the mathematical model for financial
statements are done in Indian rupees.

Table 1 provides data for capital expenditures. The capital cost for the project consists of land
acquisition, erection, and commissioning activities for a solar power plant connected to the
grid.

Table 1. Data for capital expenditures

Project Cost (Cap Ex)

Installation cost (MW / INR lakhs) MW 300 % of Project Cost
100.0%
Solar project capacity installed (MW) 10 3,000

Total solar project cost (INR lakhs) 3,000

Table 2 provides data for operational expenditures. Operation and maintenance costs consist
of the maintenance costs of solar equipment and operational expenses.

Table 2. Data for operational expenditures

O & M Cost (yearly Breakdown) (OpEx)

Solar plant cost (Operation & Maintenance) 30 30

Total O&M Cost (In INR lakhs) 30

Table 3 provides financial projection data for project finance through the debt and loan
repayment schedule. The total cost of the project is ₹ 3000 crore. The funds raised 70% by debt
through commercial banks provide a total debt amount of ₹ 2100 lakh. The term loan is for 12
years. The total payment given to the commercial bank, including an interest rate of 10% on
the principal amount, is ₹ 3629.40 lakh.

Table 3. Debt and loan repayment financial projection data

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INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

Debt /Loan Repayment Schedule

Debt Amount 2100.00 Period No. Date (EoQ) Int. Pmt. Prin. Pmt. Total Pmt. Prin. Balance Date (EoQ) Int. Pmt. Prin. Pmt. Total Pmt. Year
Debt rate 10.00% 0 19-Oct-2023 52.50 0 52.50 2100.00 31-Oct-2024 206.47 95.98 302.45 1
Moratorium 0.25 yrs 1 17-Jan-2024 52.50 23.11 75.61 2076.89 31-Oct-2025 196.51 105.94 302.45 2
Term 12.0 yrs 2 16-Apr-2024 51.92 23.69 75.61 2053.20 31-Oct-2026 185.51 116.94 302.45 3
Payment Periods 48 3 15-Jul-2024 51.33 24.28 75.61 2028.91 31-Oct-2027 173.37 129.08 302.45 4
One period is one quarter 4 13-Oct-2024 50.72 24.89 75.61 2004.02 30-Oct-2028 159.97 142.48 302.45 5
COD 19-Oct-2023 5 11-Jan-2025 50.10 25.51 75.61 1978.51 30-Oct-2029 145.18 157.27 302.45 6
First Quarter End 17-Jan-2024 6 11-Apr-2025 49.46 26.15 75.61 1952.36 30-Oct-2030 128.86 173.59 302.45 7
7 10-Jul-2025 48.81 26.80 75.61 1925.56 30-Oct-2031 110.84 191.61 302.45 8
8 8-Oct-2025 48.14 27.47 75.61 1898.09 29-Oct-2032 90.94 211.51 302.45 9
9 6-Jan-2026 47.45 28.16 75.61 1869.93 29-Oct-2033 68.99 233.46 302.45 10
10 6-Apr-2026 46.75 28.86 75.61 1841.06 29-Oct-2034 63.15 239.30 302.45 11
11 5-Jul-2026 46.03 29.59 75.61 1811.47 29-Oct-2035 57.17 245.28 302.45 12
12 3-Oct-2026 45.29 30.33 75.61 1781.15 Total 1586.97 2042.43 3629.40
13 1-Jan-2027 44.53 31.08 75.61 1750.07
14 1-Apr-2027 43.75 31.86 75.61 1718.20
15 30-Jun-2027 42.96 32.66 75.61 1685.55
16 28-Sep-2027 42.14 33.47 75.61 1652.07
17 27-Dec-2027 41.30 34.31 75.61 1617.76
18 26-Mar-2028 40.44 35.17 75.61 1582.59
19 24-Jun-2028 39.56 36.05 75.61 1546.55
20 22-Sep-2028 38.66 36.95 75.61 1509.60
21 21-Dec-2028 37.74 37.87 75.61 1471.72
22 21-Mar-2029 36.79 38.82 75.61 1432.90
23 19-Jun-2029 35.82 39.79 75.61 1393.11
24 17-Sep-2029 34.83 40.78 75.61 1352.33
25 16-Dec-2029 33.81 41.80 75.61 1310.53
26 16-Mar-2030 32.76 42.85 75.61 1267.68
27 14-Jun-2030 31.69 43.92 75.61 1223.76
28 12-Sep-2030 30.59 45.02 75.61 1178.74
29 11-Dec-2030 29.47 46.14 75.61 1132.59
30 11-Mar-2031 28.31 47.30 75.61 1085.29
31 9-Jun-2031 27.13 48.48 75.61 1036.81
32 7-Sep-2031 25.92 49.69 75.61 987.12
33 6-Dec-2031 24.68 50.93 75.61 936.19
34 5-Mar-2032 23.40 52.21 75.61 883.98
35 3-Jun-2032 22.10 53.51 75.61 830.47
36 1-Sep-2032 20.76 54.85 75.61 775.62
37 30-Nov-2032 19.39 56.22 75.61 719.39
38 28-Feb-2033 17.98 57.63 75.61 661.77
39 29-May-2033 16.54 59.07 75.61 602.70
40 27-Aug-2033 15.07 60.55 75.61 542.15
41 25-Nov-2033 13.55 62.06 75.61 480.09
42 23-Feb-2034 12.00 63.61 75.61 416.48
43 24-May-2034 10.41 65.20 75.61 351.28
44 22-Aug-2034 8.78 66.83 75.61 284.45
45 20-Nov-2034 7.11 68.50 75.61 215.95
46 18-Feb-2035 5.40 70.21 75.61 145.74
47 19-May-2035 3.64 71.97 75.61 73.77
48 17-Aug-2035 1.84 73.77 75.61 0.00

Table 4 provides financial projection data for revenue. The revenue for solar power plants
comes from the power purchase agreement (PPA) with the utility electricity distribution
company for a period of 25 years. The utility electricity distribution company purchases
renewable energy from solar power plants at a rate of ₹ 3.50 per kWh. The revenue from the
sale of 18 million kWh per year to the utility electricity distribution company is ₹ 630 lakh per
year. The solar power plant's efficiency reduces by 1% per year, resulting in a degradation of
revenue of 1% per year. The net revenue after 25 years is ₹ 490.03 lakh.

Table 4. Revenue financial projection data

Revenue Parameters
Project Location India
Tariff rate (INR/Kwh) 3.50
Production (Kwh/annum) 1.80E+07
Degradation/annum 1.00%

Year---> 1 2 3 4 5 6 7 8 9 10
Revenue (in INR lakhs) 630.00 623.70 617.46 611.29 605.18 599.12 593.13 587.20 581.33 575.52
Degradation(INR Lakhs) 6.30 6.24 6.17 6.11 6.05 5.99 5.93 5.87 5.81 5.76
Net Revenue (INR lakhs) 623.70 617.46 611.29 605.18 599.12 593.13 587.20 581.33 575.52 569.76

Available online on - WWW.IJRCS.ORG WSRC-2023 Page 56

INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
569.76 564.06 558.42 552.84 547.31 541.84 536.42 531.05 525.74 520.49 515.28 510.13 505.03 499.98 494.98
5.70 5.64 5.58 5.53 5.47 5.42 5.36 5.31 5.26 5.20 5.15 5.10 5.05 5.00 4.95
564.06 558.42 552.84 547.31 541.84 536.42 531.05 525.74 520.49 515.28 510.13 505.03 499.98 494.98 490.03

Table 5 provides financial projection data for project cash flow. In the mathematical model for
the projection of cash flow to compute the financial return from the project, a few assumptions
have been made. The assumptions help in the mathematical model for the projection of cash
flows, the internal rate of return (IRR), the net present value (NPV), and the debt service
coverage ratio (DSCR).
The inflation rate is taken to be 4% by observing the economic conditions. The tax rate is taken
to be 25%.
The debt rate is taken to be 10%.
The discount rate for the investment is 10%.

The estimation of cash flow is done after considering all the assumptions. The steps involved
were the following:

The revenue was calculated as per the available financial data set. The project developer did
not mention additional revenue sources, so other sources of income were not added for the
computation of the financial figure.

The operating expenses were subtracted from the revenue, and EBITDA was calculated. After
this, non-operating expenses were deducted from EBITDA.

Income before tax was generated

Then tax was deducted, and finally income after tax was calculated. The depreciation was
added back to get the final cash flow.

Table 5. Project cash flow financial projection data

PROJECT DETAILS ASSUMPTIONS

Installation cost / MW 10 3000.00 Inflation 4.00% Debt rate 10.0% USD/INR 70.00
Equity 30% 900.00 DDT 0.00% Moratorium 0.25 yrs Discount 10%
Debt 70% 2100.00 Tax Holiday 0 yrs Debt tenure 12.0 yrs Construction Time 0.25 yrs
Debt Service Resv (DSR) 0.25 yrs Tax rate 25.00% Depreciation 7.00% MAT 18.5%

Year ------> Today COD 1 2 3 4 5 6 7 8 9

Date ---> 20-Jul-2023 19-Oct-2023 31-Oct-2024 31-Oct-2025 31-Oct-2026 31-Oct-2027 31-Oct-2028 31-Oct-2029 31-Oct-2030 31-Oct-2031 31-Oct-2032
Revenue Collection
Revenue (in INR lakhs) 630.00 623.70 617.46 611.29 605.18 599.12 593.13 587.20 581.33
Degradation (INR Lakhs) 6.30 6.24 6.17 6.11 6.05 5.99 5.93 5.87 5.81
Net Revenue (INR lakhs) 623.70 617.46 611.29 605.18 599.12 593.13 587.20 581.33 575.52
Operating expenses
Whole plant O & M (INR lakhs) 30.00 31.20 32.45 33.75 35.10 36.50 37.96 39.48 41.06
Total Operating Expenses (INR lakhs) 30.00 31.20 32.45 33.75 35.10 36.50 37.96 39.48 41.06

EBITDA 593.70 586.26 578.84 571.43 564.03 556.63 549.24 541.85 534.46
Non Operating Expenses
Interest payment -206.47 -196.51 -185.51 -173.37 -159.97 -145.18 -128.86 -110.84 -90.94
Depreciation -210.00 -195.30 -181.63 -168.91 -157.09 -146.09 -135.87 -126.36 -117.51
Total Non-Operating Expenses -416.47 -391.81 -367.14 -342.29 -317.07 -291.28 -264.73 -237.19 -208.46
Income before taxes 177.23 194.45 211.70 229.14 246.96 265.35 284.52 304.66 326.00
Tax -44.31 -48.61 -52.92 -57.29 -61.74 -66.34 -71.13 -76.16 -81.50
Net Income 132.92 145.84 158.77 171.86 185.22 199.02 213.39 228.49 244.50
Cash Flow
Equity -900.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Net Income 132.92 145.84 158.77 171.86 185.22 199.02 213.39 228.49 244.50
Add back depreciation 210.00 195.30 181.63 168.91 157.09 146.09 135.87 126.36 117.51
Principal Payment (-) -95.98 -105.94 -116.94 -129.08 -142.48 -157.27 -173.59 -191.61 -211.51
CSR (0.50 % of Net Income) (-) -1.71 -1.71 -1.70 -1.70 -1.71 -1.73 -1.75 -1.77 -1.81
Final Project Cashflow (Equity) -900.00 0.00 245.23 233.49 221.76 209.99 198.13 186.12 173.92 161.46 148.70

DSCR 1.82 1.78 1.74 1.70 1.66 1.62 1.58 1.54 1.50

Final Project Cashflow -3000.00 0.00 547.68 535.94 524.21 512.44 500.58 488.57 476.37 463.91 451.15

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INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
31-Oct-2033 31-Oct-2034 31-Oct-2035 31-Oct-2036 31-Oct-2037 31-Oct-2038 31-Oct-2039 31-Oct-2040 31-Oct-2041 31-Oct-2042 31-Oct-2043 31-Oct-2044 31-Oct-2045 31-Oct-2046 31-Oct-2047 31-Oct-2048

575.52 569.76 564.06 558.42 552.84 547.31 541.84 536.42 531.05 525.74 520.49 515.28 510.13 505.03 499.98 494.98
5.76 5.70 5.64 5.58 5.53 5.47 5.42 5.36 5.31 5.26 5.20 5.15 5.10 5.05 5.00 4.95
569.76 564.06 558.42 552.84 547.31 541.84 536.42 531.05 525.74 520.49 515.28 510.13 505.03 499.98 494.98 490.03

42.70 44.41 46.18 48.03 49.95 51.95 54.03 56.19 58.44 60.77 63.21 65.73 68.36 71.10 73.94 76.90
42.70 44.41 46.18 48.03 49.95 51.95 54.03 56.19 58.44 60.77 63.21 65.73 68.36 71.10 73.94 76.90

527.06 519.66 512.24 504.81 497.36 489.89 482.39 474.86 467.31 459.71 452.08 444.39 436.66 428.88 421.04 413.13

-68.99 -63.15 -57.17 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-109.29 -101.64 -94.52 -87.91 -81.75 -76.03 -70.71 -65.76 -61.15 -56.87 -52.89 -49.19 -45.75 -42.54 -39.57 -36.80
-178.27 -164.79 -151.69 -87.91 -81.75 -76.03 -70.71 -65.76 -61.15 -56.87 -52.89 -49.19 -45.75 -42.54 -39.57 -36.80
348.79 354.87 360.55 416.90 415.61 413.86 411.68 409.11 406.15 402.84 399.18 395.20 390.92 386.33 381.47 376.33
-87.20 -88.72 -90.14 -104.23 -103.90 -103.46 -102.92 -102.28 -101.54 -100.71 -99.80 -98.80 -97.73 -96.58 -95.37 -94.08
261.59 266.15 270.41 312.68 311.70 310.39 308.76 306.83 304.61 302.13 299.39 296.40 293.19 289.75 286.10 282.25

0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
261.59 266.15 270.41 312.68 311.70 310.39 308.76 306.83 304.61 302.13 299.39 296.40 293.19 289.75 286.10 282.25
109.29 101.64 94.52 87.91 81.75 76.03 70.71 65.76 61.15 56.87 52.89 49.19 45.75 42.54 39.57 36.80
-233.46 -239.30 -245.28 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-1.85 -1.84 -1.82 -2.00 -1.97 -1.93 -1.90 -1.86 -1.83 -1.80 -1.76 -1.73 -1.69 -1.66 -1.63 -1.60
135.56 126.65 117.83 398.58 391.49 384.49 377.57 370.73 363.94 357.21 350.52 343.87 337.24 330.63 324.04 317.45

1.45 1.42 1.40

438.01 429.10 420.28 398.58 391.49 384.49 377.57 370.73 363.94 357.21 350.52 343.87 337.24 330.63 324.04 317.45

6. Results

Table 6 provides financial figures from the final calculations performed on the spreadsheet-
based mathematical model for financial statements, generally known as the financial modelling
technique.
The equity IRR turned out to be 22.89%, which is more than the discount rate of 10%, with a
net present value (NPV) of ₹ 1186.48 lakh. The value of this investment is worth ₹ 1186.48
lakh today.
The project IRR turns out to be 14.89%, which is more than the discount rate of 10%, with a
net present value (NPV) of ₹ 1091.68 lakh. The value of this investment is worth ₹ 1091.68
lakh today.
The minimum debt service coverage ratio is 1.40, and the average debt service coverage ratio
is 1.60.
Table 6. The mathematical model computed the economic indices NPV, IRR, and DSCR.

RESULTS
Equity IRR 22.89% 1186.48 NPV Equity
Min DSCR 1.40
Avg DSCR 1.60
Project IRR 14.89% 1091.68 NPV Project

7. Recommendations

NPV positive values are an indication of a feasible project, and NPV negative values are
indications of a non-feasible project. A debt service coverage ratio of 1 or above indicates that
the solar power plant is generating sufficient operating income to cover its annual debt and
interest payments. The mathematical model generates positive NPV and DSCR values greater
than 1. The output of the mathematical model for the financial statement should encourage
entrepreneurs to pursue business opportunities in the renewable energy solar power plant
segment.

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INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

The SWOT analysis for a solar power plant is as follows:

Strengths:
A high-growth industry with significant potential. The sun is available in sufficient quantities
in many regions. The technology is proven to have low operation and maintenance costs. The
debt facility is available through a government incentive scheme for the growth and expansion
of solar power projects.

Weakness:
The solar power project has a high capital cost, and as a result, the project promoter needs
external incentives to be economically feasible, thus increasing dependence on governmental
policies. The capital-intensive nature of the project might favour larger business entities over
smaller business entities. The distributed and intermittent nature of solar energy makes it
difficult for utilities connected to the grid to rely on solar power for base load and peak load
demand.

Opportunities:
The government's promotion and financially attractive policies in the solar power segment open
up many avenues for investment. Opportunities exist all along the solar power business value
chain. The innovative technology causes a reduction in operating costs and provides better
efficiency.

Threats:
High-innovation technology creates the risk of obsolescence. The off-peak seasons reduce cash
flow. The solar power plant is a relatively new business segment, so the availability of skilled
manpower is relatively low.

8. Conclusion

The Indian government has undertaken a national solar mission to provide significant
incentives to solar power project developers. The return on investment (ROI) depends on
different parameters like cash flow, internal rate of return (IRR), and payback period. The
return on investment (ROI) is calculated based on inputs like installed plant capacity, bank rate,
debt, equity, loan term, and moratorium. The cost components involved in a solar power project
are equipment costs, manpower costs, infrastructure development costs, and bank processing
fees. The positive cash flow generated from the commercial operation of the project is first
utilized to repay the debt from the commercial bank and provide working capital for power
plant operation and maintenance. The residual fund is used to pay dividends to sponsors of the
project.

List of abbreviation

NPV: Net Present Value; IRR: Internal Rate of Return; DSCR: Debt Service Coverage Ratio;
EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization; MAT: Minimum
Alternate Tax; DDT: Dividend Distribution Tax

Available online on - WWW.IJRCS.ORG WSRC-2023 Page 59

INTERNATIONAL JOURNAL OF RESEARCH CULTURE SOCIETY ISSN: 2456-6683
Monthly Peer-Reviewed, Refereed, Indexed Journal [ Impact Factor: 6.834 ]
Volume - 07, Special Issue - 31, Nov - 2023 Publication Date: 30/11/2023

REFERENCES:

1. Shailendra Singh, Majed Alharthi, Abhishek Anand, Amritanshu Shukla, Atul Sharma,
& Hitesh Panchal. (2022). Performance evaluation and financial viability analysis of
grid associated 10 MWp solar photovoltaic power plant at UP India. Scientific Reports
12, Article number: 22380.
https://doi.org/10.1038/s41598-022-26817-4

2. Ashish Kumar, Vikas Srivastava, & Mosab I. Tabash (2021). Infrastructure project
Finance: a systematic literature review and directions for future research. Qualitative
Research in Financial Markets, Vol. 13 No. 3, pp. 295-327.
https://doi.org/10.1108/QRFM-07-2020-0130.

Available online on - WWW.IJRCS.ORG WSRC-2023 Page 60