Some of the biggest Chinese manufacturers of silicon-based panels such as Suntech and Trina Solar Ltd. bought equipment and signed long-term supply contracts preventing them from taking advantage of falling costs, he said. Their prices can be 20 percent higher than nimbler Chinese rivals, Lepercq said.
Source Material Cheaply?
Solairedirect and co-bidder Jupiter Solar Power Ltd. won an auction on Dec. 2 to sell photovoltaic power to India at 7,490 rupees ($138) a megawatt-hour, about 30 percent cheaper than the world average. It's also in talks about a 10-megawatt site in Chile to supply electricity at $92 a megawatt-hour, avoiding the need for the buyer to subsidize generation, Lepercq said.
An ability to source materials cheaply is behind such record-low bids, Lepercq said. Solairedirect plans to help Kolkata-based Jupiter buy wafers at "extremely competitive" prices, he said. It's also a long-time buyer of equipment from India's Websol Energy System Ltd, he said.
"If you take the best-in-class wafer prices and process in India, you're more or less matching Chinese costs," he said.
The decision to buy Indian panels bucks a trend among local developers of using imports to cut costs and gain financing from foreign state-backed banks eager to boost global sales. Reliance Power Ltd. in August received an $84 million loan from the U.S.
Export-Import Bank to buy First Solar modules. The lender's interest rate then was 3.96 percent.
'Artificial Help'
"We're not playing with American or French or any other finance to give us artificial help," said Lepercq of subsidized, below-market loans. Solairedirect's average cost of capital is 6 percent, he said. "We want solar to be taken seriously, not like some child that's receiving subsidies."
The company seeks low-risk commercial paper to fund operations and will finance the project entirely with equity if needed to avoid Indian lending rates of 13 percent, he said.
Solairedirect, which since its founding in 2006 has raised 500 million euros ($650 million), keeps its financing costs low by managing investors' expectations of returns, Lepercq said.
"People want to maximize their internal rates of return but we try to minimize them," he said. Indian borrowing costs and inflation will decline and "the right level of financial return to expect is maybe a range of 12 to 15 percent."