A 300 MW solar plant sells power at Rs 2.6 a unit and pays Rs 95 crore a year of debt service. Compute its debt service cover in an average year and in a bad-weather P90 year, and judge whether the debt is sized right.

Cover is 1.42x in an average year and 1.30x in a P90 year. The plant generates 57.82 crore units, earning Rs 150.3 crore; after Rs 15 crore of costs, Rs 135.3 crore covers Rs 95 crore of debt service. At P90 that falls to Rs 123.3 crore. The debt looks sensibly sized on weather; the bigger risk is the power buyer paying late.

A farmer who borrows against the harvest does not plan repayments on an average monsoon; the bank asks what happens in a weak one. Project debt is repaid only from the project's own cash, so it is sized to a year that is worse than average but not extreme. For a solar plant the uncertain line is sunlight. The P90A level of output the plant is expected to beat in nine years out of ten, from the statistical spread of weather and equipment performance. case is that year, and lenders test the debt service coverage ratioCash available for debt service divided by the interest and principal due in the same period. against it.

Generation: 300 MW times 8,760 hours times 22% is 578,160 MWh, or 57.82 crore units. At Rs 2.6 a unit, revenue is Rs 150.32 crore. Less Rs 15 crore of operating cost leaves Rs 135.32 crore of cash for lenders. Divided by Rs 95 crore, cover is 1.42x at P50; at P90, 8% less generation gives Rs 123.30 crore and a cover of 1.30x. Notice cover falls by more than 8%: costs and debt service stay fixed while revenue falls.

On weather, yes. A P90 cover of 1.30x and a breakeven 27% below average output leave a real cushion for a plant whose output varies only a few per cent from year to year. Many lenders set a minimum P90 cover in this region, though the exact covenant is a matter for the term sheet. The first-pass omissions all push cover down: panels degrade each year, inverters need replacing, and a multi-year P90 differs from the one-year figure used here.

The larger risk in many solar projects is not the sun but the buyer. If the state distribution company that signed the power purchase agreement pays six months late, the plant can generate perfectly and still miss debt service. So the second half of the answer is the counterparty: its payment track record, any payment security mechanism, and the size of the debt service reserve account relative to a realistic delay.