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Caparo to set up 5GW of wind energy in India by 2017-Targets ambitious 500MW by March 2012

Caparo Energy, a Guernsey company that is the holding company for subsidiaries (together, the “Group”) that seek to generate wind power in India.

Caparo Energy is focused on becoming one of the leading independent power producers in India and is seeking to generate predictable and long-term cash flows by building up a portfolio of wind power generating assets in the Indian wind energy market. The Group intends, in due course, to acquire and develop a portfolio of wind farms with a target total annual installed capacity of up to 5,000 MW, which it intends to develop in two concurrent phases: Phase I consisting of 3,000 MW with a target completion date of 2016; and Phase II consisting of 2,000 MW with a target completion date of 2017.

For Phase I, the Company, through its subsidiary Caparo Energy (India) Limited (“Caparo Energy India”), has entered into a business partnership agreement with Suzlon Energy Limited (“Suzlon”), one of the world’s leading wind turbine generator manufacturers, to acquire up to 3,000 MW of wind power generation farms.

For Phase II, Caparo Energy India is in advanced discussions to acquire land and turbines from international vendors in connection with wind power farm development in wind-rich states in India, including Karnataka, Maharashtra, Tamil Nadu and Andhra Pradesh.

Caparo has been talking about its Phase I of the project from May of last year, and once again in January this year when they  posted their  maiden interim results and announced the details of senior debt facility of Rs 4.5 bn that they had finalized.

The current year is a milestone for the wind industry in India with wind energy-based Independent Power Producers having proven viability on their own strengths, according to Mr Ravi Kailas, Vice-Chairman and CEO, Caparo Energy Ltd.

Caparo Energy which plans to set up over 5,000 MW of wind energy generation capacity across the ‘windy States’ in India by 2017, is the “first IPP to get non-recourse funding.” Earlier, most projects have depended on a parent company’s balance sheet, says Mr Kailas.

Power-starved State Governments are receptive to wind energy projects, base tariff for wind energy is rising and conventional power is becoming more expensive. These together drive the growth of wind energy. As fossil fuel prices increase, the cost of power from next 100,000 MW of conventional power plant will be “on par with wind.” The company registered in the Channel Islands is listed on the London AIM, and has tied up for debt with IDFC Bank and equity from the London Market.

“Caparo’s shareholders have deep pockets and believe over time wind will be more competitive” in India. Its projects will be spread across Rajasthan, Gujarat, Maharashtra and Tamil Nadu.

Caparo has contracted equipment for the first 3,000 MW of machines with Suzlon, and will later finalise plans for the balance with other manufacturers. By March 2012, it will have a generation capacity of 500 MW in place and 500 MW more a year later. This involved investment of over Rs 5,200 crore and is being set up by Suzlon on a turnkey basis.

While the wind energy policy environment is encouraging, the change should be expedited. IPP’s requirements are different from that of the typical investor in captive generation capacity who had contributed to the growth of wind energy. IPPs need open access, which Maharashtra has permitted. Over 70 per cent of the power in the State is ‘contestable’ at least for deals of more than 1 MW. Other States too should emulate this, he added.

This is something they have been saying for about a year now with not much progress. However as Mr. Kailas has himself said, Caparo’s shareholders have deep pockets and hence probably the slow progress. 

What is also interesting is that the new S95 and S97 turbines just introduced by Suzlon are supposed to be used at wind farms for Caparo, including in the first 500 megawatts to be completed by next March, Lancy Tauro, a Suzlon deputy general manager, said  in an interview with Bloomberg.

With the delivery of the S95 turbines scheduled for the second fiscal quarter of this year, the 500MW installation seems to be a rather ambitious target, given that most IPP’s have a yearly target of about 200-300MW of wind installation in India.

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