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.

1. Protekan
Market Research | Advisory | Consulting Wind Energy in Tamil Nadu
__________________________________________________________________________________________
Protekan
Wind Energy in Tamil Nadu
Business Feasibility Report
Market Research | Advisory | Consulting

2. Protekan
Market 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

3. Protekan
Market Research | Advisory | Consulting Wind Energy in Tamil Nadu
__________________________________________________________________________________________
Preface
The security of energy supply plays a major role in the economic growth of a country. The International Energy
Agency defines energy security as “the uninterrupted physical availability at a price which is affordable, while
respecting environment concerns”.
India is currently one of the fastest growing economies. For countries like India, addressing the security of energy
supply is important to maintain its economic growth rate. The fluctuating prices of gas, the long gestation periods
of thermal power projects and the shortage of domestic coal has had a severe impact on India. Electricity
demand in India has continuously outstripped supply and this shortage in power supply is set to decelerate the
India growth story.
India is now faced with the challenge of ensuring energy security while dealing with the global threat of climate
change. 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 India's natural resources and adversely affect the
livelihood of its people. With an economy closely tied to its natural resource base and climate-sensitive sectors
such as agriculture, water and forestry, India may face a major threat because of the projected changes in
climate.
To address this dual challenge of ensuring energy security and combating climate change, renewable energy
options including wind power will have to play a crucial role in India’s emerging energy mix. Not only are they
environmentally sound but also their project gestation periods are significantly shorter than those for thermal or
nuclear power plants.
The wind energy market in India has witnessed significant growth over the last few years. The installed capacity
has grown from a mere 1,666 MW in 2002 to 17,352 MW in 2012. The recent withdrawal of the Accelerated
Depreciation benefit for wind projects has opened up the Indian Wind energy market for investors and companies
who 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 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.

4. Protekan
Market Research | Advisory | Consulting Wind Energy in Tamil Nadu
__________________________________________________________________________________________
Section I: Wind Energy in India – Sector Snapshot
Contents:
1.1 Wind Energy Potential and Installed Capacity
1.2 Wind Energy – Growth and Forecast
1.3 Investments in Wind Energy
1.4 Examples of Investment in Independent Wind Power Producers (IWPP)
The Indian wind energy market has witnessed significant growth in recent years due to favourable policy
environment and availability of sites with good wind resource.
The short gestation periods for installing wind turbines coupled with increasing reliability and performance of wind
energy machines have made wind power a favoured choice for capacity addition in India.
1.1 Wind Energy Potential and Installed Capacity
In terms of installed capacity of wind based generation, India ranks 5th in the world. The total installed capacity in
India is 17,352 MW (as of March 2012). The total wind energy potential in India is estimated at 48.5 GW (at 50 m
hub height) by the Centre for Wind Energy Technology (CWET). This is seen as a very conservative estimate of
wind power potential in India. The Indian Wind Energy Association has estimated the potential for wind energy in
India at 65 GW.
Wind energy dominates the renewable energy sector in India and constitutes 70% of the total renewable energy
installed 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 capacity
over the last five years.
1.2 Wind Energy – Growth and Forecast
During the period of FY2002 - FY2012, wind energy installed capacity in India witnessed a Compounded Annual
Growth Rate (CAGR) of 26.4%. The cumulative installed capacity increased from a mere 1666 MW in 2002 to
reach 17352 MW by March 2012. The cumulative wind energy installed capacity from the year FY2002 to FY2012
is shown in Figure 1-1.
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5. Protekan
Market 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 Green
Energy Ltd. to build a 51 megawatt wind power farm in western India. Bhilwara Green Energy is a unit of Bhilwara
Energy 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 Indian
subsidiary of London’s AIM-listed (Alternative Investment Market) wind energy firm Caparo Energy Ltd. The
company is aiming to build a portfolio of wind farms with an installed capacity of up to 5,000 MW by 2017. This is
the second tranche of mezzanine funding for the wholly owned unit Caparo Energy (India) Ltd, which had earlier
raised $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 India's renewable energy sector, ReNew Wind Power, a
renewable energy independent power producer (IPP), has announced that it had secured an equity investment of
Rs.1000 crore from Goldman Sachs, a leading global investment
bank 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 allows
Mytrah Energy Raises Rs 100 Crore from PTC India (Dec 2011)
Foreign Equity participation up to
100% in the power sector under
Mytrah Energy India Ltd (formerly Caparo Energy) has raised Rs the automatic route.
100 Crore – mezzanine funding from PTC India Financial Services
Ltd. This was the third tranche of funding received by Mytrah
Energy as part of a total mezzanine funding to $132 million. There
would be no equity dilution for Mytrah Energy's existing shareholders from the funding. The Group expects to
repurchase 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 total
annual installed capacity of up to 5,000 MW by 2017. Its investors include Henderson, Eton Park, Capital
International, and Black Rock.
Bindu Vayu Urja Private Limited, subsidiary of Mytrah Energy has secured new senior loan funding of Rs 960
Crore, comprising of Rs 600 Crore, which is fully underwritten by IDFC and Rs 360 Crore, which was at an
advanced stage of syndication.
By end of December 2011, the company will have 500 MW of projects distributed over 11 sites that are either
commissioned 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.
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6. Protekan
Market Research | Advisory | Consulting Wind Energy in Tamil Nadu
__________________________________________________________________________________________
Section IV: Wind Policy and Regulatory Analysis
Contents:
4.1 Wind Policy in Tamil Nadu
4.2 Renewable Purchase Obligation - Regulation
4.3 Pooled Power Purchase Cost
4.4 List of Wind Projects under REC mechanism
4.2.2 Renewable Purchase Obligation
Every obligated entity shall purchase not less than defined minimum percentage of its consumption of energy
from renewable energy sources under the Renewable Purchase Obligation (RPO) during a year as specified
below:
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: TNERC
Provided that if the obligated entity has established the fact that the minimum quantum of power purchase from
solar energy is not available in the market either in the form of solar Renewable Energy Certificate (REC) or solar
energy in a particular year and the Commission is satisfied with the fact, then in such cases, the other renewable
energy 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 against
each 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.
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7. Protekan
Market Research | Advisory | Consulting Wind Energy in Tamil Nadu
__________________________________________________________________________________________
Section V: Project Cost, Finance and IRR Analysis
Contents:
5.1 Wind Project Cost
5.2 Financing a Wind Project
5.3 Assumptions – Cash Flow Analysis & IRR Analysis for 3 MW Wind Project
5.4 Business Model 1: Preferential tariff + GBI
5.5 Business Model 2: APPC + REC + GBI
5.6 Business Model 3: Group Captive + REC
5.7 Recommendations
5.2.2 Financing Options
Typically, in financing a project, the project owner would seek to
maximize the level of debt finance and reduce the level of equity
finance. 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 Power
obligations by the shareholders to the bank, apart from the agreement
to subscribe to a certain level of equity. The project would be financed Producers (IPPs) have managed
on a standalone basis, with no recourse to other company assets to to secure debt financing based on
support the debt repayment. project cash flow and project
assets.
The lender repayments are only secured by the project assets and
cash flow. This type of arrangement involves a complex series of
contracts between the bank and the project owner, and is costly to
arrange. 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, as
could bank accounts, share holdings or endowments.
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