1. The Rise of Solar Industry in India August 27, 2011 ITC Sonar, Kolkata

2. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 1 What we believe is possible by 2022…. Solar energy can meet 7% of our power requirement It can save 72 MTPA of coal imports (30%) or USD 5.5 bn of import bill annually from that year It can mitigate 2.6% of India’s carbon emissions which is one-tenth of our voluntary target of 20-25%

3. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. A PIPE DREAM? We don’t think so. This can be done! 2

4. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Here’s why… 55 x 55 km² of installed solar capacity is all we need to meet India’s energy needs today Even if 16%* of our middle class households install solar rooftops - It would generate enough power to meet the total power requirements of the country today Note: Number of Middle Class Households – 80 million; Avg. rooftop area – 250 sq.m, Avg. Solar Insolation – 5 kwh per sq.m per day; Conversion Efficiency – 15% 3

5. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. “But the cost is too high!”. Not for long! (1/2) 4

6. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. “But the cost is too high!”. Not for long! (2/2) 5

7. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. This is our forecast of the market Solar PotentialIn GW 2011-17~10.4 2017-22~57.3 6 Requires subsidy support

8. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. “But what will all this cost us?” Total financial impact over the next 6 years to meet Solar RPO obligations is USD 6 billion 7

9. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Is USD 6 billion a lot? 9 GW of Solar RPO Obligations Cumulative subsidy in the next 6 years 8 USD 1 per barrel rise of oil price Cumulative cost impact on economy over 6 years 5% shortage of domestic coal needing imported coal Cumulative cost over 6 years ==

10. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 9 Decentralized Stand-alone Applications can contribute 65% of the total demand during 2017-22 Solar Powered Agricultural Pumpsets 16,000 MW by 2022 Solar Water Heaters 70 million sqm of collector area by 2022 Solar Powered Telecom Towers 3,500 MW by 2022 Solar rooftops 19,000 MW by 2022

11. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 10 Solar water heating systems - Around 70 million sqm of collector area could be deployed in India within the next decade Solar Water Heating Systems India only has an estimated 3.5 million square meters of solar water heating collectors About 11 million tonnes of imported coal can be substituted by 2022 Annual Solar Water Heating System Market Size – Million Sqm China with relatively lower insolation has 125 million square meters of SWH collector capacity

12. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Solar powered agricultural pumpsets can potentially replace conventional powered pumpsets post grid parity Today, diesel powered pumpsets can be economically replaced by solar powered pumpsets… Note: Full cost comparison that includes pumpset cost and delivered power costs Power subsidy to electricity sector is likely to increase from USD 17 Bn to USD 50 Bn by 2022 Solar power is well suited as an alternate solution! 11 Diesel generated pumpsets Solar powered pumpsets Conventional power pumpsets

13. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 12 Centralized Grid-Connected Power Demand Utility Scale Solar Farm 20,000 MW by 2022 CSP provides the benefit of storage. Meet peak requirements and reduce intermittency Steam augmentation & hybridization

14. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Why we should give a thrust to distributed generation…  Solar power is already competitive for decentralized stand-alone applications For example:  Pay back period for residential solar water heating system is between 2.5 to 4 years  Solar lanterns replacing subsidised kerosene  Pay back period is between 1 to 2 years.  Potential annual savings, if 50% of un-electrified households switch to solar lanterns ~ USD 1.2 Billion*  Lower network losses  Reduce network burden  Savings in fuel consumption * Note: - Number of un-electrified households – 78 million, Kerosene consumption per household per year – 50 liters; Price of oil ~ USD 100 per bbl 13

15. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. What should we do to achieve this potential? (1/2) Government - Support creation of the ecosystem Provide a steady stimulus for market creation – “Market Certainty” is the keyword for investors! Support state power utilities financially; create a source for funding! Provide sufficient thrust to decentralized generation Support the banks in the first phase! 14

16. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. What should we do to achieve this potential? (2/2) Banks – invest in understanding this sector well: Bridge the “knowledge” gap – This is a big funding opportunity in the next 10 years! State Utilities & Regulators – Provide supporting infrastructure – grid connections, net-metering, Renewable Purchase Obligation enforcement Industry – Innovate – develop suitable solutions for the Indian market e.g. solarising agriculture pumps Vendor development & Value engineering to reduce costs – the large players need to invest in this area 15

17. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. What mankind achieved in 10-year timeframes… Examples: “Man on the moon by end of this decade”: JFK, 1961 Desktop computers in 1980s: From 1 to 9.5 (Million) Internet penetration in 1990s: 2.8 to 360 (Million) India’s teledensity in 2000s: 4% to 64% 16

18. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Thank You 17

19. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Santosh Kamath Partner KPMG Advisory Services Pvt. Ltd. Tel: +91 2230902527 Mo: +91 9967016369 E-Mail: skamath@kpmg.comskamath@kpmg.com Anupam Ray Associate Director KPMG Advisory Services Pvt. Ltd. Tel: +91 3344034022 Mo: +91 9903032879 E-Mail: aray@kpmg.com Website: www.in.kpmg.comwww.in.kpmg.com The information contained herein is of general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Contact Us 18

20. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. 19 A small piece of land in Rajasthan can meet the power requirement of India! ParticularsUnitsValue Area Required ( 55 KM * 55 KM)Sq. KM3,025 Area Required ( 55 KM * 55 KM)Sq.Meters3,025,000,000 Average Insolation in Rajasthan kwh per sqm per year2000 Conversion Efficiency%15% Total Power Generation PotentialMU 907,500 Indian Power Requirement in 2010 - (EPS Estimate)MU 891,163

21. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Cost Reduction potential – What aspects of solar power lead to cost reduction possibilities? 2. Localization 4. Competitive Intensity We believe multiple levers for cost reduction exist – the pace of cost reduction would largely depend on the pace of capacity addition 3. Govt Incentives 1. Technology innovation 20 Banker education/ incentivization for fair cost financing Sustained momentum – accelerates Indian industry; aligns international markets to Indian landscape 5. Other Enablers Tariff competition - percolation to suppliers leading to margin reductions on key high value imports Cost reduction of EPC ‘wraps’ through innovative contracting models Aggregation initiatives (Solar Parks) for scale economies Reduction of location sensitive charges – wheeling/ Tx to encourage Sun based siting Ongoing R&D – cost reduction/ efficiency improvement India suited technology - leveraging of India advantages Localization of multiple components possible Indigenous manpower for engineering design Cost Reduction Levers 20

22. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Solar PV Cost Reduction Potential – Manufacturing Innovations Polysilicon  $ 0.30 per Wp  27% Ingots/Wafers  $ 0.25 per Wp  23% Cell  $ 0.22 per Wp  21% Modules  $ 0.30 per Wp  29% Drivers for cost reduction Potential for cost reduction ●Costs of Si-FBR processes are around $ 20 per Kg ●Cost reduction potential by 35-40% ●Polysilicon usage is expected to come down from ~ 7-6.5g/W to ~ 3g/W within the next decade ●Cost reduction potential by 45- 50% ●Cell efficiencies expected to increase from 16-17% to 18-19% and then later on towards 22-23% ●Cost reduction potential per kWh by 15- 20% Reduction in polysilicon feedstock prices - Deployment of Fluidized Bed Reactor (FBR) process Technology improvements - Usage of innovations like: Diamond wire wafering, Ultra thin kerfless wafers etc. Improvement of cell efficiency - Increasing light absorption layers, Usage of better absorption material etc Source – DOE – USA Estimates, Other Analyst Reports, KPMG Analysis Cost Structure Module Costs: $1.1-1.2 per Wp 21

23. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Solar PV Cost Reduction Potential – Non module BOS Costs Transformers, switch gears and cables Inverters Potential for cost reduction LOW Majority of inverters are imported currently Players are looking at assembly of inverters in India which could contribute towards cost reduction Market and technology already established Driven by prices of commodities like Copper and CRGP coil Civil & General Works Installation and Commissioning IDC and Financing Charges Driven by localized site conditions and low labour costs Availability of manpower for design engineering Local sourcing of materials Driven by low cost innovative financing options Exim route Tax free solar bonds LOW HIGH Balance of System costs are likely to come down due to local sourcing and lower labor costs Key Considerations Balance of System (~45- 50% of total solar system cost) 22

24. © 2011 KPMG Advisory Services Private Limited, the KPMG India member firm of KPMG International, a Swiss cooperative. All rights reserved. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Solar CSP Localization Potential – Key high value CSP components lend themselves to high localization potential Parabolic Trough Mirrors Most raw materials available locally Manufacturers with required competence present in India Molten Salt Storage Components Requires fabrication of pipes, tanks Manufacturers with required competence present in India Pumps may still be imported Power Block Turbines are specialized but global suppliers have Indian presence – can localize Heat exchangers – Local designs available Trough Structures & Associated Works Most fabrication requirements – welding, casting etc available Localization possible with design transfer and hand-holding Engineering Design/ Execution Limited capabilities with Indian vendors however, required CAD/ CAM facilities available Local manpower available Most components can be localized readily or with limited assistance – pace would depend on industry willingness based on market size visibility Certain complex items (e.g. Absorber tubes, Heat transfer fluid, C&I components, Specialized pumps) may take time due to limited suppliers and concentration of technology 11-15%9-12%5-7%12-15%7-9% 23