1. 1
Policy Hiccups Not-withstanding, Credit Outlook for
India’s Wind Power Producers Remains Stable
The credit outlook for the wind power generators remains stable due to persistent energy
deficits, relative cost competitiveness compared with conventional sources, government
impetus to wind power through preferential feed-in tariffs, renewable purchase
obligation targets, benefit from extension of 80IA and recent revision of tariffs by the
State Electricity Regulatory Commissions (SERC).
While yearly wind generation capacity additions increased at a healthy pace from 1485 MW in
FY09 (refers to period April 01 to March 31) to 3197 MW in FY12, the policy changes in 2011-
12 led to a significant drop in capacity additions to just 1,699 MW in FY131
; this drop is
attributable to change in government policy - removal of Accelerated Depreciation (AD)
benefit and lack of clarity on continuation of Generation Based Incentive (GBI).
Year wise Capacity addition of wind based generation capacity(MW)
1
Total installed capacity of renewable energy in India was 28,068 MW as on March 31, 2013, with wind energy
contributing a major share at 19,051 MW.
1658
1485 1565
2349
3197
1699
0
500
1000
1500
2000
2500
3000
3500
FY08 FY09 FY10 FY11 FY12 FY13
RatingsAugust30,2013

2. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 2
However CARE Ratings believe the wind turbine operators to deliver stable performance and
capacity additions to pick up going forward due to:
 Changing construct of business - utility scale windfarms: With the phasing out of AD, going
forward the growth in wind based generation capacity shall be primarily driven by the Independent
Power Producers (IPPs). Majority of the IPPs that are operating windfarms are backed by established
financial investors having a long-term investment horizon. These companies are focused on improving
efficiencies and are utilizing more scientific tools in assessment of potential of wind sites and in
selection of equipments which in CARE’s opinion augurs well for achieving the envisaged operating
performance levels.
 Higher operating efficiencies: While the cost of setting of wind power projects has gone up from
Rs.5.50 crore/MW to around Rs.6.30 crore/MW in the recent years mainly on account of increase in
the cost of critical components, the equipment designs are better thereby delivering higher
efficiencies even at low wind sites. Over a period of time larger megawatt scale equipment, which
deliver better performance have come into existence which is likely to translate into improvement in
operating efficiencies.
 Regulatory and policy push: CARE Ratings believes that there is a continued commitment by the
state governments to improve share of renewable power in the overall power mix. While there may
be intermittent policy upheavals as seen recently, long-term outlook for wind power continues to be
strong.
o SERCs in various states have announced an increase in the preferential feed-in tariff rates to
reflect the increase in the cost structure. Furthermore, the states like Maharashtra have adopted a
wind-zone-based tariff to align the tariff with potential generation capacity of wind sites in
different wind speed zones in the state. Despite an increase in the tariffs of the wind-based
projects, it still remains competitive in the states of Tamil Nadu, Gujarat and Karnataka, compared
with the tariffs of new conventional power plants due to steep increase in prices of fossil fuel (coal
and RLNG).

3. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 3
Table 1: State-wise tariffs
(Rs. per unit)
State FY11 FY12 FY13 FY14
Tamil Nadu 3.39 3.39 3.51 3.51
Gujarat 3.56 3.56 4.23 4.23
Maharashtra Zone 1 - 5.07
Zone 2 - 4.41
Zone 3 - 3.75
Zone 4 - 3.38
Zone 1 - 5.37
Zone 2 - 4.67
Zone 3 - 3.97
Zone 4 - 3.58
Zone 1 - 5.67
Zone 2 - 4.93
Zone 3 - 4.20
Zone 4 - 3.78
Zone 1 - 5.80
Zone 2 - 5.04
Zone 3 - 4.29
Zone 4 - 3.86
Karnataka 3.70 3.70 3.70 3.70
Rajasthan Jaisalmer, Jodhpur &
Barmer - 5.18 Others -
5.44
Jaisalmer, Jodhpur &
Barmer - 5.18 Others -
5.44
Jaisalmer, Jodhpur &
Barmer - 5.18 Others -
5.44
Jaisalmer, Jodhpur &
Barmer - 5.48 Others -
5.75
Andhra Pradesh 3.50 3.50 4.70 4.70
Source: Wind tariff order of respective SERCs
o Reintroduction of GBIs: With a view to
move away from capital subsidies towards
performance incentives for promoting
renewable sources, the Government
reintroduced GBI (budgetary allocation of
Rs.800 crore to the Ministry of New &
Renewable Energy as per the Union
Budget for 2013-14). GBI focuses on
incentivizing higher efficiencies with the
help of a generation/outcome-based
incentive and provides an additional stream
of revenue. As per the scheme, GBI is
currently valued at Rs.0.50 per unit of
electricity fed into the grid with a cap of
Rs.0.62 lakh per MW over a period of 10
years. The GBI is over and above the tariff that may be approved by the SERCs. Although this
is likely to improve the debt coverage indicators for the project, in CARE’s opinion effective
implementation of the scheme with timely receipt of funds from Indian Renewable Energy
Development Agency (IREDA) remains crucial.
Counterparty Risk - A Key Challenge
In CARE’s opinion, the counter-party risk
remains the biggest credit concern with
delays in payment ranging from 12 to 15
months in few of the states, owing to weak
financial risk profile of the off-takers (power
distribution companies). Timely receipt of
payment from the off-taker is crucial for the
viability of the project, which otherwise is
likely to put a strain on the cash flows of the
power producers. In its credit assessment,
CARE also factors in the parent’s ability and
willingness to support the project by way of
timely infusion of funds to enable the
companies to tide over the liquidity crisis.

4. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 4
o Renewable Energy Certificates (REC) mechanism was introduced in November 2010, as an
alternative market designed to facilitate renewable energy power producers. RECs are traded
through a power exchange platform that provides market-based price discovery mechanism (1 REC
= 1 MWh of electricity injected into the grid from renewable energy sources). Also as per the
National Action Plan on Climate Change (NAPCC), by the year 2020, 15% of the power generated is
to be procured from the renewable energy sources. Currently, the states are required to procure 5-
10% of the electricity from the renewable energy sources as per the state-wise Renewable Purchase
Obligation (RPO) targets specified by the respective SERCs.
CARE Ratings believes that going forward effective implementation of various policy initiatives and
improvement in the credit risk profile of the off-takers would be the positive triggers for the credit
ratings of wind-based power producers.
Rating Dispersion of CARE Rated IPPs in Wind Energy
As of July 31, 2013, CARE Ratings had outstanding ratings on seventeen wind-based power generators, for
whom rating dispersion is indicated above.
0
1
2
3
4
5
6
7
8
CARE BB CARE BBB- CARE BBB CARE BBB+

5. Ratings
Credit Outlook for India's Wind Power Producers Remains Stable 5
Disclaimer
This report is prepared by the Economics Division of Credit Analysis & Research Limited [CARE]. CARE has taken utmost care to ensure
accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor
completeness of information contained in this report is guaranteed. CARE is not responsible for any errors or omissions in
analysis/inferences/views or for results obtained from the use of information contained in this report and especially states that CARE (including
all divisions) has no financial liability whatsoever to the user of this report.
Contact:
Amod Khanorkar Dhaval Patel Mekhala Leelasagar
Ratings Head Sr. Manager - Corporate Ratings Deputy Manager - Corporate Ratings
amod.khanorkar@careratings.com dhaval.patel@careratings.com mekhala.leelasagar@careratings.com
+91-22-67543520 +91-22-67543438 +91-22-67543544