Wind Power Investment Opportunities: Title. For Independent Power Producers. Suzlon Energy Limited Dummy Copy

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1 Wind Power Investment Opportunities: Title For Independent Power Producers Suzlon Energy Limited Dummy Copy

2 Structure of the Presentation Role of wind turbine manufacturers in India Opportunity for IPPs: The Indian Context o Winds of Change in India o Wind Energy: Answer to Power Sector Challenges o Investment Imperatives for IPPs o Overview of Market Framework Regulatory and Policy Environment in India o Regulatory Support: State Wise Tariff Structure (Existing) o SUO MOTO CERC Tariff Order: For Wind Zone 1 o SUO MOTO CERC Tariff Order: For Wind Zone 2 o SUO MOTO CERC Tariff Order: For Wind Zone 3 o SUO MOTO CERC Tariff Order: For Wind Zone 4 o Conducive Policy Environment

3 Title Suzlon: Global Scenario Dummy Copy

4 Resources & Capabilities Bandwidth Integrated Supply Chain capacities for timely deliveries and long term operations & maintenance support Secured Land Resources for better planning, flexibility & development of large scale wind park projects Power Evacuation capacity blocking & ability to develop grid infrastructure like sub-stations and transmission lines Project & Financial Planning assistance from experienced domain experts in wind energy and banking & finance sectors Wind Turbine Manufacturers In India Wind Resource Assessment with state-of-the-art technology and expertise for more accurate & scientific estimation Value Added Services to assist on financial closure, regulatory approvals, PPAs, CDM registration and CSR Life Cycle Asset Management with a truly comprehensive O&M contract and a dedicated CRM team End to End Solution with single source coordination & accountability over the entire project life cycle for hasslefree experience

5 Opportunity for IPPs: Title The Indian Context Dummy Copy

6 Winds of Change in India Wind energy market - a significant opportunity for IPPs Key drivers of paradigm shift: o Investment Conducive Regulatory Environment ~ CERC Tariff Regimes o New policy Initiatives ~ (GBI, RPS/RPO, RECs) o Rising power demand o Mounting pressure for action on climate change o Inherent growth potential of wind energy sector Source: Suzlon Internal

7 Wind Energy: Answer to Power Sector Challenges Capacity Augmentation Current capacity: 146 GW Peak Shortage: 13.8% Addition Req. by 2020: 150 GW Sustaining Fuel Mix Current Fuel Mix for Power Generation: Coal :52%, Hydro:25%, Gas & Oil:11%, RE:9%, Nuclear:3% Climate Change India is the 4 th largest emitter of GHG gases globally (total emission of 1293 MT CO2e* pa) Thermal 63.2% Large Hydro 25% Nuclear 2.8% Renewable 9% Wind 71% 10.2GW Other RE 29% Solution : Wind Power Proven ability & readiness to quickly augment capacities Lowers burden on fossil fuel need Mitigation of climate change by substantial CO2 displacement Source: WISE & GWEC Report and CII Report on Power Sector & * Wikipedia 2006 Statistics on GHG emissions

8 Investment Imperatives for IPPs High growth potential o Economic growth & power demand o 80% untapped potential in wind energy Matured market o 3rd largest in the world (10.2GW+) o Access to proven technology & skill-set Progressive Policy Support o Attractive feed in tariff & long term PPAs o Fiscal incentives (GBI), RPO & RECs Investment Economics o 20 yrs predictable cash flows & multiple revenue streams o Impressive Returns : 14-16% IRR o Flexibility to build green power portfolio o Easy End to End solution no hassles of managing market, material or manpower Source: Suzlon Internal

9 Overview of Market framework Key Stakeholders IPP Investor Financier End to End Solution Provider Equipment Supply, EPC, VAS Life Cycle Asset Management Local Power Utility ERC, Nodal Agency, IREDA Power Trading Options Procurement by Local Utilities RPO set by Regulatory Commission, mandates local distribution utilities to procure power from renewable at a binding feed-in tariff under a long term PPA Captive Usage After adjusting the losses / charges towards wheeling & transmission, a proportionate set-off is given in the monthly electricity bills Source: Suzlon Internal OA / Merchant Generation Investor can sell power to any open access consumer (with more than 1 MVA load) after paying OA charges

10 Title Regulatory & Policy Environment in India Dummy Copy

11 Regulatory Support: State- Wise Tariff Structure (Existing) States Feed In Tariff Rates (Rs/kWh) Tenure ( Number of Years) Other Conditions RPO (%) Maharashtra Rs Escalation of 15 Paisa per year 6% Rajasthan Rs 4.28/ Rs NA 7.5% Madhya Pradesh Rs Depreciation of 17 paise for 3 years, 16 paise in the 4 th year. Constant rate of Rs 3.36/Unit thereafter 10% Gujarat Rs 3.37 (Proposed: Rs 3.55/ Unit) 20 No Escalation 2% (10% Proposed) Karnataka Rs No Escalation Min 7.5% Andhra Pradesh Rs No Escalation 5% Tamil Nadu Rs No Escalation 12-13% Kerala Rs No Escalation 2% Source: Suzlon Internal, SERC Orders

12 SUO MOTU CERC Tariff Order: For Wind Zone 1 Assumption Head Unit Particulars Wind Power Density Watts/ m Power Generation Capacity MW 1 Capacity Utilization Factor % 20 Project Cost Rs Lacs/ MW 515 Tariff Period Years 13 Debt Equity Ratio % Repayment of Debt Years 10 Return on Equity for 1 st 10 years % 19 Return on Equity 11 th year onwards Levelised Tariff Depreciation Benefit GBI, as a pass through : Rs per kwh : Rs per kwh : Rs per kwh Currently applicable to Central Generating Stations. Different SERCs may chose to adhere to these guidelines, at a future date % 24 Source: CERC Petition Number: 284/2009 SUO MOTU Most Sites, now fall under this category

13 SUO MOTU CERC Tariff Order: For Wind Zone 2 Assumption Head Unit Particulars Wind Power Density Watts/ m Power Generation Capacity MW 1 Capacity Utilization Factor % 23 Project Cost Rs Lacs/ MW 515 Tariff Period Years 13 Debt Equity Ratio % Repayment of Debt Years 10 Return on Equity for 1 st 10 years % 19 Return on Equity 11 th year onwards % 24 Levelised Tariff Depreciation Benefit GBI, as a pass through : Rs per kwh : Rs per kwh : Rs per kwh Currently applicable to Central Generating Stations. Different SERCs may chose to adhere to these guidelines, at a future date Some places in MH, KAR, AP and TN Source: CERC Petition Number: 284/2009 SUO MOTU

14 SUO MOTU CERC Tariff Order: For Wind Zone 3 Assumption Head Unit Particulars Wind Power Density Watts/ m Power Generation Capacity MW 1 Capacity Utilization Factor % 27 Project Cost Rs Lacs/ MW 515 Tariff Period Years 13 Debt Equity Ratio % Repayment of Debt Years 10 Return on Equity for 1 st 10 years % 19 Return on Equity 11 th year onwards % 24 Levelised Tariff Depreciation Benefit GBI, as a pass through : Rs per kwh : Rs per kwh : Rs per kwh Currently applicable to Central Generating Stations. Different SERCs may chose to adhere to these guidelines, at a future date Some places in KAR, AP and TN (Although very few) Source: CERC Petition Number: 284/2009 SUO MOTU

15 SUO MOTU CERC Tariff Order: For Wind Zone 4 Assumption Head Unit Particulars Wind Power Density Watts/ m Power Generation Capacity MW 1 Capacity Utilization Factor % 30 Project Cost Rs Lacs/ MW 515 Tariff Period Years 13 Debt Equity Ratio % Repayment of Debt Years 10 Return on Equity for 1 st 10 years % 19 Return on Equity 11 th year onwards Levelised Tariff Depreciation Benefit GBI, as a pass through : Rs per kwh : Rs per kwh : Rs per kwh Currently applicable to Central Generating Stations. Different SERCs may chose to adhere to these guidelines, at a future date % 24 Source: CERC Petition Number: 284/2009 SUO MOTU Sites with above mentioned WPD are nearly exhausted

16 Conducive Policy Environment Prime Minister s National Action Plan on Climate Change (NAPCC) o To attain 5% National RPO by 2010 o To increase by 1% every year for 10 years, reach 20% National RPO by 2020 o Special focus on Solar: Announcement of Solar Mission, to attain 1000 MW by 2013 (Phase I) Provision of Tax Incentives, via the 80% Accelerated Depreciation route o Makes Wind Power Investment attractive for investors with high tax appetite Introduction of Generation Based Incentives (GBI) o GBI of 50 paise/kwh o Applicable Cap of 62 lacs per MW o Co-existent with Accelerated Depreciation till 2012, or till implementation of DTC Proposal for framework for Introducing RECs in Indian Markets rolled out o RECs envisaged to aid fulfillment of RPS in non windy states o Trading of RECs to take place, via power exchanges Source: Suzlon Internal

17 Thank TitleYou Chintan Shah Head Strategic Business Development Suzlon Energy Limited Dummy Copy