SoftBank-Backed SB Energy Accused Of Cartelization In India’s Largest Solar Tender


Clean Power

Published on September 19th, 2018 |
by Saurabh

September 19th, 2018 by Saurabh 

Sector experts were puzzled when the Solar Energy Corporation of India (SECI) partially cancelled the country’s largest-ever solar power auction. The fact that SECI had offered 3 gigawatts of capacity in one go was a milestone in India’s solar power sector. Several developers — Indian and foreign — had collectively offered to set up 10.3 gigawatt capacity.

The cancellation sent shockwaves across the Indian government establishment, and forced the Ministry of Finance to question SECI’s decision with Ministry of New and Renewable Energy. The cancellation was a major hit for SB Energy, the joint venture company between SoftBank, Bharti Enterprises, and Foxconn Technologies. SB Energy has pledged to invest $20 billion to set up 20 gigawatts of solar power capacity in India. SB Energy was the largest winner in this auction, and the cancellation threatened investment worth hundreds of millions of dollars. 

In a stunning accusation, the MNRE replied to the Ministry of Finance that the cancellation of 2.4 gigawatts of the 3 gigawatt capacity was done because SB Energy had formed a cartel with other project developers with a likely motive to collectively quote higher tariff bids.

The pattern of bidding by various developers did raise some questions but given the fluid situation regarding imposition of safeguards duty it was difficult to determine whether some other market forces were at play.

Weird Tariff Bids

The 3 gigawatt tender attracted initial bids from 11 developers which offered to set up 10.3 gigawatts of capacity. The largest of these bids was placed by SB Energy, which intended to set up 1.8 gigawatts of capacity of the 3 gigawatt on offer. The lowest bid was placed by Acme Solar at Rs 2.44/kWh (¢3.37/kWh) for 600 megawatts of capacity. This tariff was on expected lines as the company had on multiple occasions bid at this tariff for large tenders issued by SECI. Given that this was among the single largest allocation of capacity in a solar power tender in India, the economics of scale indicated that the bid was sound.

However, bids submitted by other developers were significantly greater than Acme’s. Azure Power placed a bid for 300 megawatts at Rs 2.64/kWh (¢3.66/kWh), a premium of 8.2% to Acme’s bid. Adani Green Energy (300 megawatts), Canadian Solar (200 megawatts), ReNew Power Ventures (500 megawatts), and SB Energy (1,100 megawatts) placed bids of Rs 2.70-2.71/kWh (¢3.75/kWh), a premium of 11.1% to Acme’s bid.

These bids represented little competition when compared to other similar auctions. Being a 3 gigawatt tender scale of economics would dictate that developers would put in competitive bids. SB Energy, in particular, has placed much lower bids in auctions that offered as little as 750 megawatts of capacity.

A strong indication of the possible cartelization emerged when NTPC Limited conducted an auction for 2 gigawatts of capacity a few weeks later. The NTPC tender had virtually identical provisions to that of SECI’s tender. In the SECI 3 gigawatt tender, SB Energy had submitted a bid for 1.8 gigawatts of capacity at Rs 2.71/kWh (¢3.75/kWh), while in the NTPC 2 gigawatt tender the company placed a bid of Rs 2.60/kWh (¢3.60/kWh) for the entire capacity. More importantly, NTPC had asked developers to re-submit their initial financial bids after inclusion of possible safeguards duty, which means the initial bids could have been even lower.

Acme Solar quoted a bid of Rs 2.59/kWh (¢3.59/kWh) for 600 megawatts of capacity in the NTPC tender. So, Acme — the lowest bidder in both auctions — increased its bid by 6.1% to account for the safeguards duty, while SB Energy reduced its bid by 4% for almost the same capacity.

SB Energy, in a statement to a business daily denied the allegations of cartelization.

We respect the open and transparent bidding process set by the ministry of new and renewable energy. We have always followed this process of the reverse auction since 2015 when it was initiated. As a global corporation, we abide by the stringent norms of governance and compliance with all the applicable laws and always practice ethical norms across the world. 

In hindsight, and going merely by the tariff bids, things do look a bit fishy when one compares the nearly identical tenders of SECI and NTPC. It would interesting to see how the Indian government reacts, as any adverse move could jeopardize investment worth billions of dollars pledged by SB Energy.

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Tags: ACME Solar, Azure Power, India, India Solar Power, India Solar Power Auctions, Ministry of New & Renewable Energy, MNRE, NTPC Limited, SB Energy, SECI, softbank, Solar Energy Corporation of India

About the Author

Saurabh An avid follower of latest developments in the Indian renewable energy sector.

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