Solar EPC players hit by spike in input costs, forced to rework contracts

By: |
January 7, 2021 4:00 AM

With an over 15-20% increase in raw material prices of steel, copper and aluminum along with a steep 20-25% rise in prices of solar modules, EPC players have been hit hard. With little margins possible under contract terms, many EPC players are renegotiating contracts.

solar panelRepresentational image.

With an over 15-20% increase in raw material prices of steel, copper and aluminum along with a steep 20-25% rise in prices of solar modules, EPC players have been hit hard. With little margins possible under contract terms, many EPC players are renegotiating contracts.

The solar panel prices are expected to continue the downward trend. Panel prices had dropped to as low as 18 cents per watt peak leading to aggressive bidding in solar auctions recently.

An artificial demand was created by Indian steel players who started exporting the steel products to derive benefits of increased prices in global markets, creating an unmet demand in the country, the solar EPC industry alleges. Similarly, the increase in global prices of copper and aluminum, too, impacted the demand scenario in the country.

Puneet Goyal, founder of SunAlpha, told FE, “People who had entered into contracts at prevailing aggressive margins will have to deliver the project at net loss due to increase in raw material prices. SunAlpha is standing by its clients to deliver the projects as promised, the situation has led to many other EPC players either renegotiate or cancel their contracts. Our straight forward dealing during volatile markets has led to repeat orders.”

Generally, the fourth quarter sees an increase in module and raw material prices as companies look to complete their projects. “This year, the prices increased substantially and coupled with the scarcity in raw materials, it has lead to failure in deliveries. For example, prices of steel have increased by more than 15-25% month-on-month and suppliers are denying delivery,” said Goyal.

The increase in raw material prices and the module prices are like a double-edged sword for an industry which is already bearing delayed deliveries during Covid-induced slowdown. The increase in module prices and other raw materials totally erodes the margin for the EPC player making the projects unviable.

Vineet Pandey, business development manager at Mahindra Susten, said higher commodity price is an EPC risk and no client bears that cost. As per agreement, it is only the force majeure-related issues that are negotiated. The current scenario of higher raw material and module prices have impacted the EPC players and it is difficult to get even 5% return on the project.

Kapiel Dongle, head business development (west) Fourth Partner Energy, said the last few weeks have definitely seen an unexpected volatility in module prices, and this surge could impact the margins of EPC players. “At Fourth Partner Energy, we believe in working transparently with our customers – we consult them on how to arrive at win-win solutions, without any impact on quality or electricity generation at our plants. Owing to our execution expertise, most clients appreciate this approach.”

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Apple CEO Tim Cook says business in India still quite low relative to size of opportunity
2Apple revenue crosses $100 billion for first time as iPhone sales soar globally
3New supercomputer in Wyoming to rank among world’s fastest