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The "Wind Energy in Tamil Nadu - Business Feasibility Report" was developed by Protekan, a renewable energy consulting and advisory firm. The report provides in depth analysis of the wind energy ...

The "Wind Energy in Tamil Nadu - Business Feasibility Report" was developed by Protekan, a renewable energy consulting and advisory firm. The report provides in depth analysis of the wind energy market in Tamil Nadu. The primary objective of this report is to serve as a useful guide for companies and investors interested in venturing into the fast evolving wind energy IPP business in Tamil Nadu. This report was last updated in September 2012.

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    Wind energy in Tamil Nadu - Business Feasibility Report - Preview Wind energy in Tamil Nadu - Business Feasibility Report - Preview Document Transcript

    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu __________________________________________________________________________________________ Protekan Wind Energy in Tamil Nadu Business Feasibility ReportMarket Research | Advisory | Consulting
    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu__________________________________________________________________________________________ Contents Section I: Wind Energy in India – Sector Snapshot Section II: Electricity Sector in Tamil Nadu Section III: Potential & Installed Capacity in Tamil Nadu Section IV: Wind Policy and Regulatory Analysis Section V: Project Cost, Finance and IRR Analysis Section VI: Contact Info–Central & State Nodal Agencies
    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu__________________________________________________________________________________________PrefaceThe security of energy supply plays a major role in the economic growth of a country. The International EnergyAgency defines energy security as “the uninterrupted physical availability at a price which is affordable, whilerespecting environment concerns”.India is currently one of the fastest growing economies. For countries like India, addressing the security of energysupply is important to maintain its economic growth rate. The fluctuating prices of gas, the long gestation periodsof thermal power projects and the shortage of domestic coal has had a severe impact on India. Electricitydemand in India has continuously outstripped supply and this shortage in power supply is set to decelerate theIndia growth story.India is now faced with the challenge of ensuring energy security while dealing with the global threat of climatechange. This threat emanates from accumulated greenhouse gas emissions in the atmosphere,anthropogenically generated through long-term and intensive industrial growth and high consumption lifestyles.Climate change may alter the distribution and quality of Indias natural resources and adversely affect thelivelihood of its people. With an economy closely tied to its natural resource base and climate-sensitive sectorssuch as agriculture, water and forestry, India may face a major threat because of the projected changes inclimate.To address this dual challenge of ensuring energy security and combating climate change, renewable energyoptions including wind power will have to play a crucial role in India’s emerging energy mix. Not only are theyenvironmentally sound but also their project gestation periods are significantly shorter than those for thermal ornuclear power plants.The wind energy market in India has witnessed significant growth over the last few years. The installed capacityhas grown from a mere 1,666 MW in 2002 to 17,352 MW in 2012. The recent withdrawal of the AcceleratedDepreciation benefit for wind projects has opened up the Indian Wind energy market for investors and companieswho wish to enter this sector as an Independent Power Producer (IPP).The "Wind Energy in Tamil Nadu - Business Feasibility Report" was developed by Protekan, a renewable energyconsulting and advisory firm. The report provides in depth analysis of the wind energy market in Tamil Nadu. Theprimary objective of this report is to serve as a useful guide for companies and investors interested in venturinginto the fast evolving wind energy IPP business in Tamil Nadu. This report was last updated in September 2012.
    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu__________________________________________________________________________________________Section I: Wind Energy in India – Sector SnapshotContents:1.1 Wind Energy Potential and Installed Capacity1.2 Wind Energy – Growth and Forecast1.3 Investments in Wind Energy1.4 Examples of Investment in Independent Wind Power Producers (IWPP)The Indian wind energy market has witnessed significant growth in recent years due to favourable policyenvironment and availability of sites with good wind resource.The short gestation periods for installing wind turbines coupled with increasing reliability and performance of windenergy machines have made wind power a favoured choice for capacity addition in India.1.1 Wind Energy Potential and Installed CapacityIn terms of installed capacity of wind based generation, India ranks 5th in the world. The total installed capacity inIndia is 17,352 MW (as of March 2012). The total wind energy potential in India is estimated at 48.5 GW (at 50 mhub height) by the Centre for Wind Energy Technology (CWET). This is seen as a very conservative estimate ofwind power potential in India. The Indian Wind Energy Association has estimated the potential for wind energy inIndia at 65 GW.Wind energy dominates the renewable energy sector in India and constitutes 70% of the total renewable energyinstalled capacity. Tamil Nadu accounts for more than 40% of the total wind energy installed capacity in India.Other states like Gujarat, Karnataka, Maharashtra and Rajasthan have seen significant growth in wind capacityover the last five years.1.2 Wind Energy – Growth and ForecastDuring the period of FY2002 - FY2012, wind energy installed capacity in India witnessed a Compounded AnnualGrowth Rate (CAGR) of 26.4%. The cumulative installed capacity increased from a mere 1666 MW in 2002 toreach 17352 MW by March 2012. The cumulative wind energy installed capacity from the year FY2002 to FY2012is shown in Figure 1-1.Protekan.in ©Protekan
    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu__________________________________________________________________________________________Bhilwara Green Energy raises $15 million from IFC for Wind Project (July 2011)International Finance Corp., an investment arm of the World Bank, plans to invest $15 million in Bhilwara GreenEnergy Ltd. to build a 51 megawatt wind power farm in western India. Bhilwara Green Energy is a unit of BhilwaraEnergy Ltd., in which IFC holds a 5.24% stake.Caparo Energy raises second tranche of funding from IDFC Project Equity (Aug 2011)Infrastructure Development Finance Company Ltd (IDFC) is investing $33.5 million or Rs 150 crore in the Indiansubsidiary of London’s AIM-listed (Alternative Investment Market) wind energy firm Caparo Energy Ltd. Thecompany is aiming to build a portfolio of wind farms with an installed capacity of up to 5,000 MW by 2017. This isthe second tranche of mezzanine funding for the wholly owned unit Caparo Energy (India) Ltd, which had earlierraised $78.5 million (Rs 350 crore) from IDFC Project Equity’s Indian Infrastructure Fund.ReNew Wind Power secures Rs 1000 crore investment from Goldman Sachs (Sep 2011)In what can be termed as the largest investment in Indias renewable energy sector, ReNew Wind Power, arenewable energy independent power producer (IPP), has announced that it had secured an equity investment ofRs.1000 crore from Goldman Sachs, a leading global investmentbank and active investor in alternative energy/clean technology.ReNew Wind plans to have 1,000 megawatts of wind-generation Note:capacity by 2015. Investment policy in India allowsMytrah Energy Raises Rs 100 Crore from PTC India (Dec 2011) Foreign Equity participation up to 100% in the power sector underMytrah Energy India Ltd (formerly Caparo Energy) has raised Rs the automatic route.100 Crore – mezzanine funding from PTC India Financial ServicesLtd. This was the third tranche of funding received by MytrahEnergy as part of a total mezzanine funding to $132 million. Therewould be no equity dilution for Mytrah Energys existing shareholders from the funding. The Group expects torepurchase all tranches of mezzanine funding from internal cash flows and the issue of senior debt instruments,bonds or other debt refinancing, within three to five years.Mytrah Energy, an independent power producer intends to acquire a portfolio of wind farms with a target totalannual installed capacity of up to 5,000 MW by 2017. Its investors include Henderson, Eton Park, CapitalInternational, and Black Rock.Bindu Vayu Urja Private Limited, subsidiary of Mytrah Energy has secured new senior loan funding of Rs 960Crore, comprising of Rs 600 Crore, which is fully underwritten by IDFC and Rs 360 Crore, which was at anadvanced stage of syndication.By end of December 2011, the company will have 500 MW of projects distributed over 11 sites that are eithercommissioned or are under construction.IFC to Invest $130 Mn in Inox Renewable (April 2012)IFC is planning to invest $130 Mn in INOX Renewables Limited, a subsidiary of Gujarat Fluorochemicals Limited.The funds raised will be used to fund 400 MW of wind projects in the states of Rajasthan and Gujarat.Protekan.in ©Protekan
    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu__________________________________________________________________________________________Section IV: Wind Policy and Regulatory AnalysisContents:4.1 Wind Policy in Tamil Nadu4.2 Renewable Purchase Obligation - Regulation4.3 Pooled Power Purchase Cost4.4 List of Wind Projects under REC mechanism4.2.2 Renewable Purchase ObligationEvery obligated entity shall purchase not less than defined minimum percentage of its consumption of energyfrom renewable energy sources under the Renewable Purchase Obligation (RPO) during a year as specifiedbelow: Year Minimum Quantum of total renewable Minimum Quantum of solar renewable purchase obligation in percentage (in purchase obligation in percentage out of terms of energy in kWh) the total renewable purchase obligation (in terms of energy in kWh) Distribution Captive and Open Distribution Captive and Open Licensee Access Consumers Licensee Access Consumers 2011-12 9% 9% 0.05% 0.05% Table 4-1: Renewable Purchase Obligation in Tamil Nadu, Source: TNERCProvided that if the obligated entity has established the fact that the minimum quantum of power purchase fromsolar energy is not available in the market either in the form of solar Renewable Energy Certificate (REC) or solarenergy in a particular year and the Commission is satisfied with the fact, then in such cases, the other renewableenergy sources shall be purchased for fulfilment of the solar RPO:Provided further that such obligation to purchase renewable energy shall be inclusive of the purchases, if any,from renewable energy sources already being made by concerned obligated entity:Provided also that the renewable power purchased from the following sources and means mentioned againsteach obligated entity shall be accounted for RPO purpose:(a) Distribution Licensees: (i) Power purchased from Renewable Energy sources under preferential tariff as fixed by the Commission and consumed in their area of supply; (ii) Power generated from their own renewable energy sources and consumed in their area of supply; (iii) Power purchased from NTPC Vidyut Vyapar Nigam Ltd. (NVVN) as solar part of bundled power at the rate specified in the Central Electricity Regulatory Commission’s regulations/orders.(b) Captive consumers: Power wheeled and actually consumed from their own renewable energy sources without availing RECs or any preferential measures in the form of concessional/promotional transmission or wheeling charges, banking facility benefit and waiver of electricity duty/tax.(c) Open access consumers: Power wheeled and actually consumed from any renewable energy sources without availing RECs or any preferential measures in the form of concessional/promotional transmission or wheeling charges, banking facility benefit and waiver of electricity duty/tax.Protekan.in ©Protekan
    • ProtekanMarket Research | Advisory | Consulting Wind Energy in Tamil Nadu__________________________________________________________________________________________Section V: Project Cost, Finance and IRR AnalysisContents:5.1 Wind Project Cost5.2 Financing a Wind Project5.3 Assumptions – Cash Flow Analysis & IRR Analysis for 3 MW Wind Project5.4 Business Model 1: Preferential tariff + GBI5.5 Business Model 2: APPC + REC + GBI5.6 Business Model 3: Group Captive + REC5.7 Recommendations5.2.2 Financing OptionsTypically, in financing a project, the project owner would seek tomaximize the level of debt finance and reduce the level of equityfinance. This reduces the costs of finance for the project Note:owner/developer. The different debt financing options are: Majority of wind projects in India(i) Limited Recourse Financing: are financed based on the balance sheet of the company.In the case of limited recourse project financing, there are no extra Few Independent Powerobligations by the shareholders to the bank, apart from the agreementto subscribe to a certain level of equity. The project would be financed Producers (IPPs) have managedon a standalone basis, with no recourse to other company assets to to secure debt financing based onsupport the debt repayment. project cash flow and project assets.The lender repayments are only secured by the project assets andcash flow. This type of arrangement involves a complex series ofcontracts between the bank and the project owner, and is costly toarrange. By offering such form of financing, a bank will be interested in ensuring that payments are secured.The fixed assets of the project, such as machinery, equipment and property, could also be used as collateral, ascould bank accounts, share holdings or endowments.Protekan.in ©Protekan