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April 23rd, 2010

INDIAN WIND POWER SECTOR

Highlights
SECTORAL REPORT
Wind energy is continuing to grow steadily in India. The countrys
installed capacity of wind energy was 10,833MW as of September
09, just a fraction of its total capacity of around 150,000MW.
Around 2,000MW wind energy capacity is expected to be added in
2010-11.

India is the fourth largest in the world in terms of wind energy


installation.

India has a potential of generating over 48,000 Mw through wind


energy farms, and for that it would require just 1 per cent of its
Janaki Rao.U land, according to an estimate by the Centre for Wind Energy
Analyst Technology (C-WET).
Equity Research Desk
The Ministry of Environment and Forests has issued guidelines
for diversion of forest lands for non-forest purposes, particularly
V.S.R. Sastry to enable wind generation.
Vice President
Equity Research Desk The wind industry has experienced much higher growth rates in
91-22-25276077 recent years, however. In the last five years, the average annual
vsrsastry@firstcallindiaequity increase in cumulative installed wind power capacity in India was
.com more than 35%; for the nine year period from 2000-2008, it was
over 28%.

Dr. V.V.L.N. Sastry Ph.D. Wind power in India has been concentrated in a few regions,
Chief Research Officer especially the southern state of Tamil Nadu, which maintains its
drsastry@firstcallindia.com position as the state with the most wind power, with 4.1 GW
installed at the end of 2008, representing 44% of Indias total
wind capacity.

India is aiming to rely more on renewable sources in coming years


as part of the global push for clean energy. The Central Electricity
Regulatory Commission, Indias power regulator, recently
introduced renewable energy certificates in a bid to reward clean
energy producers.

The central government is planning to remove the incentive cap in


wind energy which is currently restricted to projects up to 49mw.

The Indian government envisages the addition of 2 GW/annum in


the next five years.
April 23rd, 2010

CONTENTS

1. Sector Overview

2. Current Trends

3. Profile of top three Indian Companies

4. SWOT Analysis

5. Conclusion
April 23rd, 2010

1. Sector Overview

India has a vast supply of green energy resources, and has a significant program for
deploying these resources. An exclusive ministry for renewable energy called Ministry of
Non-conventional Energy Sources later renamed as Ministry of New and Renewable
Energy (MNES) has also been set up.

In the early 1980s, the Indian government established the Ministry of Non-Conventional
Energy Sources (MNES) to encourage diversification of the countrys energy supply, and
satisfy the increasing energy demand of a rapidly growing economy. In 2006, this
ministry was renamed the Ministry of New and Renewable Energy (MNRE).Renewable
energy is growing rapidly in India. With an installed capacity of 13.2 GW, renewable
energy sources (excluding large hydro) currently account for 9% of Indias overall power
generation capacity.

By 2012, the Indian government is planning to add an extra 14 GW of renewable


sources. In its 10th Five Year Plan, the Indian government had set itself a target of
adding 3.5 GW of renewable energy sources to the generation mix. In reality, however,
nearly double that figure was achieved.

In this period, more than 5.4 GW of wind energy was added to the generation mix, as
well as 1.3 GW from other REsources. The target set for the period from 2008-2012 was
increased to 14 GW, 10.5 GW of which to be new wind generation capacity. The Indian
Ministry of New and Renewable Energy (MNRE) estimates that there is a potential of
around 90,000 MW for power generation from different renewable energy sources in the
country, including 48,561 MW of wind power, 14,294 MW of small hydro power and
26,367 MW of biomass. The Indian government envisages the addition of 2 GW/annum
in the next five years.
April 23rd, 2010

Cost of Wind Power Projects

The cost of a small turbine is generally around Rs.50mn per MW while a large turbine
costs around Rs.60mn per MW. The cost of generation varies from site to site
depending on the wind resources and from year to year due to variations in the wind
speed. Other main factors governing wind power economies in the country are capital
costs, operation and maintenance cost (O & M cost), turbine life and the discount rate
which reflects the cost of capital. The projects have estimated to have a pay back period
of five-eight years.

Around 70% of the capital cost is for wind turbine & 1.5-2 percentages are for O & M
costs. Other major costs include electrical and evacuation. In the last few years, the
capital cost has been increased considerably due to the increasing input costs and
increasing demand.

Domestic Wind Energy Industry

The domestic wind energy industry is largely driven by private players, which account
for about 95% of the total investment in the sector. Some of the private as well as
public players involved in the power distribution have recently announced plans for
setting up wind-based capacity.

Most of the actions in the wind power segment will continue to remain in the states of
Gujarat, Maharashtra and Karnataka. Some key private players are Gujarat NRE Coke,
Ramco Energy, VRL Logistics, Tata Power etc. The details of major wind farm
developers of the country are given below:
April 23rd, 2010

Developer Capacity (MW)


DLF 161.2

Madras Cement 136.09

Enercon Wind. Ltd 128.8

MSPL Limited 113.15

Hindustan Zinc 123.20 123.3

Essel Mining & Indu. 75

Tata Power 71.15

Aban Llyod Chiles 65.59

Bajaj Auto 65.2

Rajasthan State Mines 52.3

JP Associates 49

REI Agro 46.1

Nuziveedu Seeds 45.85

Guj. NRE Coke 45.5

Patnaik Minerals 45.4

NEPC Micon 43.85

BP Energy India 40.00

Source: Power Line


April 23rd, 2010

Incentives:

Concession on import duty on specified wind turbine parts

80% accelerated depreciation over one or two years

10 year income tax holiday for wind power generation projects

Excise duty relief on certain components

Some states have also announced special tariffs, ranging from Rs 3-4 per kWh,

with a national average of around Rs 3.50 per kWh

Wheeling, banking and third party sales, buy-back facility by states


April 23rd, 2010

Guarantee market through a specified renewable portfolio standard in some

states, as decided by the state electricity regulator by way of power purchase

agreements

Reduced wheeling charges as compared to conventional energy

Land policies:

The Ministry of Environment and Forests has issued guidelines for diversion of
forest lands for non-forest purposes, particularly to enable wind generation

Clearance of leasing and forest land for up to a period of 30 years for wind
developers.

Financial assistance:

Setting up of the Indian Renewable Energy Development Agency (IREDA), the


premier finance agency of the Government of India to provide soft loans for
renewable energy projects, particularly for demonstration and private sector
projects.

Wind resource assessment:

The government set up the Centre for Wind Energy Technology (C-WET) to map
wind energy potentials.

The C-WET has set up more than 1,000 wind monitoring and wind mapping
centers across 25 states.

Wind mapping at 50 meters (C-WET) and 60-80 meters height (private


companies)
April 23rd, 2010

Wind Map of India:

Source:C-WET
April 23rd, 2010

Current Trends

India has a potential of generating over 48,000 Mw through wind energy farms,
and for that it would require just 1 per cent of its land, according to an estimate
by the Centre for Wind Energy Technology (C-WET).

Wind power in India has been concentrated in a few regions, especially the
southern state of Tamil Nadu, which maintains its position as the state with the
most wind power, with 4.1 GW installed at the end of 2008, representing 44% of
Indias total wind capacity.

India is aiming to rely more on renewable sources in coming years as part of the
global push for clean energy. The Central Electricity Regulatory Commission,
Indias power regulator, recently introduced renewable energy certificates in a
bid to reward clean energy producers.

The central government is planning to remove the incentive cap in wind energy
which is currently restricted to projects up to 49mw.

The Indian government envisages the addition of 2 GW/annum in the next five
years.

The government is expecting an investment of $300 billion to come in the XII


Five-Year Plan in the power sector.
April 23rd, 2010

Gamesa corp starts India operations with first facility near Chennai

Gamesa Corporation, Spain, ranked among the three main wind turbine manufacturers
in the world, is betting big on India both in the manufacture of wind turbines ( for
domestic and export markets) as well as in developing wind farms on its own. The
Indian subsidiary, Gamesa Wind turbines based in Chennai has set up a state of the
facility, the first one in India, at Red Hills near the city to produce cost effective G
58\850 kw wind turbines suited specially for the Indian grid and wind conditions.

Forecasting systems to aid wind energy generation

Wind turbine manufacturers are planning to set up real time wind forecasting
systems in three states by April, which they say would help enhance the role of wind
energy in Indias power generation. The systems will be set up in Chinnapudur in Tamil
Nadu, Kabadguda in Karnataka and Samana in Gujarat, said T.F. Jayasurya, manager
of communication at Indian Wind Turbine Manufacturers Association (IWTMA).

Hong Kong group raises Rs 3,900 cr for project

CLP India, the Indian arm of Hong Kong-based power major China Light and Power
(CLP) Group, is investing over Rs 12,000 crore in two new power projects and in wind
energy.

The company, which today raised Rs 3,900 crore from a consortium of 15 banks to
fund a 1,320 Mw coal-fired project in Jhajjar, Haryana, is also planning a 1,060 Mw
gas-based power project near its existing facility at Paguthan, Gujarat. This latter
project will cost Rs 4,000 crore. Further, CLP India is setting up close to 450 Mw of
wind power capacity in Gujarat, Rajasthan and Karnataka with Rs 2,500 crore.
April 23rd, 2010

Suzlon opens wind farm in Australia

Wind energy major Suzlon Energy has officially opened Infigen Energys Capital wind
farm, the largest wind farm in Australia at Bungendore in New South Wales.

The 67-turbine wind farm, located near Australias capital Canberra, was delivered by
Suzlon through a turnkey contract that covered engineering, procurement and
construction. The farm will produce 141 Megawatt (Mw) of energy,

IDFC PE arm buys wind power biz of BP Energy

IDFC Private Equity promoted Green Infra Ltd (GIL) acquired British firm BP Energy's
wind power business in India. The firm operates 100 MW wind energy 60 MW in
Karnataka and 40 MW in Maharshtra. Though IDFC PE refused to divulge any figure, it
is learnt that the size of the deal is Rs 1,500 crore, making it the largest ever in the
renewable energy sector in the country. With this deal, BP's interest in clean energy
sector in India will cease to exist

NTPC eyes 1000 Mw renewable power project

National Thermal Power Corporation Ltd (NTPC) plans to undertake renewable energy
power projects having capacity of more than 1000 Mw. Taking a first step forward in
this direction, the public sector giant has entered into a memorandum of
understanding (MoU) with the state government-run Gujarat Power Corporation Ltd
(GPCL) for putting up solar and wind power plants to the tune of 500 Mw in Gujarat
April 23rd, 2010

Profile of top three Indian Companies

1. Suzlon Energy Ltd

Suzlon is Asias leading manufacturer of wind turbine generators (WTGs) and ranks

fifth globally in terms of annual installations, with a market share of around 10%.

Suzlon is a fully integrated wind power company that provides customers with

consultancy, design, manufacturing, operation and maintenance services. The

company has been the No. 1 supplier of WTG solutions in India and has expanded its

presence in Australia, Brazil, China, Italy, Portugal, South Korea and the US.

Suzlon has developed and implemented several large-scale windfarms throughout

India. In Vankusavade, Maharashtra Suzlon has developed a windfarm that is stretched

over 29 km of rugged mountainous terrain averaging over 1,000 meters above sea level.

This windfarm has 566 WTGs and has an installed capacity of over 205 MW.

Vankusavade windfarm successfully demonstrated the viability of large, utility-scale

windfarms in India. In Sanganeri, Tamil Nadu, Suzlon is developing a windfarm with a

planned capacity of over 500 MW. Similarly, in Dhulia, Maharashtra, Suzlon is

developing one of the largest windfarms of its kind in the world with a planned capacity

of over 1,000 MW once complete.

Particulars FY09 FY10E % Chg.


YoY
Net Sales (Rs. Mn.) 262590.00 228202.00 -13.00

Ad.PAT (Rs. Mn.) 8813.00 (7014.23) -

EPS (Rs.) 5.9 - -


April 23rd, 2010

2. NTPC Ltd

NTPC, India's largest power company, was incorporated on November 7, 1975 to


accelerate power development in India. Today, it has emerged as an Integrated Power
Major, with a significant presence in the entire value chain of power generation
business.

With a current generating capacity of 30,144 MW, NTPC has embarked on plans to
become a 75,000 MW company by 2017. NTPC is emerging as a diversified power
major with presence in the entire value chain of the power generation business.
Apart from power generation, which is the mainstay of the company, NTPC has
already ventured into consultancy, power trading, ash utilization and coal mining.

The thermal power major is working on plans to begin rolling out a cumulative 1,000
MW of greenfield wind power installations across Karnataka, Gujarat and Andhra
Pradesh over the next few years.

NTPC has already signed an MoU with the Karnataka Power Corporation Ltd. (KPCL)
for setting up the 500-MW wind power capacity, under which KPCL will provide the
land while NTPC will set up and operate the wind farms. The total investment in the
Karnataka venture is estimated at around Rs 2,500 crore

Particulars FY09 FY10E % Chg.


YoY

Net Sales (Rs. Mn.) 441260.80 476673.48 8.03%

PAT (Rs. Mn.) 82013.00 91716.25 11.83%

EPS (Rs.) 9.95 11.12 11.76%


April 23rd, 2010

3. Neyveli Lignite Corporation Ltd

Neyveli Lignite Corporation (NLCL) is engaged in the business of lignite mining and

power generation. Incorporated in 1956 as a government-sponsored commercial

concern, NLC has a mining capacity 24 million tonnes of lignite per and power

generating with installed capacity of 2490 MW of power. The company is engaged in

lignite deposits explorations. It has received Mini Ratna status from Government of

India.

The company has an in-house research and development centre -- Centre for Applied

Research and Development (CARD). This R&D Centre focuses on diversifying the use

of lignite, waste utilization, soil reclamation and much more.

The company is planning to invest Rs 10,000-12,000 crore in setting up power

projects. It is also planning to foray into renewable energy, by setting up wind energy

farms and solar units.

Particulars FY09 FY10E % Chg.


YoY
Net Sales (Rs. Mn.) 33,549.10 43318.97 29.12%

Net Profit (Rs. Mn.) 8,210.90 12821.43 56.15%

EPS (Rs.) 4.89 7.64 56.24%


April 23rd, 2010

SWOT Analysis

Strengths

Wind energy is very cheap compared to other technologies. It is also renewable


unlike coal or the rest which are non-renewable and hard to maintain.

It is safe, cheap and good for the environment.

Weaknesses

Opportunities

Increasing Energy requirement Reduction of Fossil Fuels

Increased awareness of green technologies amongst the public

Overall cost of the energy technology decreases with large scale utilization

Investments in wind energy make most economic and financial sense in the time
of economic downturn. This is because wind generation is a mature technology
which backed by 20 year power purchase agreements. This can provide a stable
and predictable cash flow for the investor

For investors, who desire a limited exposure of Rs.10-20mn small turbines are a
good choice. Wind farmswith small turbines can be expanded in a phased
manner and are considerably easier to manage. The durability of small turbines
and their simpler technology make servicing easier and reduce the material
handling costs.
April 23rd, 2010

Threats/ Challenges

There are several challenges that the domestic wind energy industry is facing. In
the absence of a grid code for wind power, grid managers and generators face
difficulties in integrating wind power efficiently with the grid. The variability of
wind speed and absence of advanced computing technologies to predict wind
generation make it challenging for grid operators in India as grid operators of the
country as grid capacities and inter-regional transfer capabilities are limited.
This results in low capacity utilization factor.

Current method of financing wind project is another problem that the players in
this field are facing. Investment in wind power projects are not treated as
infrastructure finance, despite wind-based generation being a proven technology.
If investments in wind projects were to be treated like other power projects,
longer-term debt at better rates will be available.

Another main problem that the industry is facing is of land acquisition. A long
time is required to getland clearance despite the fact that most sites suitable for
the project are barren and often on hilltopsand in deserts where the topsoil has
been completely eroded.

The cost of private land is gettingexpensive day-by-day and its transaction


requires a lot of government certificates and clearances. Manufactures are facing
problems due to the poor infrastructure facility while transporting turbines from
the manufacturing facility to the sites. Developers also face shortage of skilled
personnel in remote sites.
April 23rd, 2010

Conclusion:

In India, the renewable energy sector has been getting increasing attention from the
Government and industry. Recently, the Ministry of New and Renewable Energy
announced a generation-based incentive scheme for grid-connected wind power
projects.

India has seen a 12% increase in investment in the renewable energy sector with an
investment of $3.7 billion in 2008. The largest portion of investment went to wind
sector, which grew at 17% from $2.2 billion to $2.6 billion.

That's an impressive investment indeed in absolute terms, though a 12% increase does
scant justice to the big needs the country has from renewable energy. It is expected
that this growth rate will be much higher in future. Clearly, investment in renewable
energy is on the rise. To meet its future energy needs, India will have to invest over
$800 billion by 2030. With an increasingly favorable regulatory and policy environment
along with a growing number of entrepreneurs and project developers, India ranked as
the third most attractive country to invest in renewable energy, after the U.S. and
Germany.

This is an opportune time for businesses small and large to invest in the alternative
energy industry in India.

_______________________________________________________
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This document prepared by our research analysts does not constitute an offer or solicitation
for the purchase or sale of any financial instrument or as an official confirmation of any
transaction. The information contained herein is from publicly available data or other sources
believed to be reliable but we do not represent that it is accurate or complete and it should
not be relied on as such .Firstcall India Equity Advisors Pvt.Ltd. or any of its affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any
inadvertent error in the information contained in this report. This document is provide for
assistance only and is not intended to be and must not alone be taken as the basis for an
investment decision.
April 23rd, 2010

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