Returns and risks
The tariff in a power purchase agreement is fixed in rupees for up to 25 years. That makes revenue predictable, but your return still depends on four things: the price you pay, the plant's output, how promptly the buyer pays, and the exchange rate.
Price is the biggest lever
Illustrative 25 MW plant, bought after two years of operation, 55% acquisition debt. Post-tax equity return in rupees, with the estimated US dollar figure in brackets.
| Plant type | Lower price | Mid price | Higher price |
|---|---|---|---|
| Central auction, ₹2.55, 23 years left | ₹2.6 cr/MW: 16.8% (~13%) | ₹3.0 cr/MW: 12.7% (~9%) | ₹3.4 cr/MW: 9.5% (~6%) |
| 2018–20 PPA, ₹2.9, 19 years left | ₹2.6 cr/MW: 17.2% (~13%) | ₹3.0 cr/MW: 12.6% (~9%) | ₹3.4 cr/MW: 9.1% (~5%) |
| Commercial buyer, ₹3.8, 20 years left | ₹3.0 cr/MW: 23.9% (~20%) | ₹3.5 cr/MW: 18.3% (~14%) | ₹4.0 cr/MW: 14.1% (~10%) |
Model estimates, not forecasts or promises. Assumes 24% capacity utilisation, 0.6% annual module degradation, O&M of ₹4 lakh per MW per year, 25.17% Indian corporate tax, debt at 9%, and the rupee weakening 3.7% a year against the dollar (its approximate 10- and 20-year average). Before Indian dividend withholding tax and home-country tax.