Accoridng to reports, Gas transmission and marketing company, Gail (India), has decided to foray into commercial generation of wind energy. The company plans to set up 100 megawatt (mw) of wind energy generator (WEG) spread over Tamil Nadu and Karnataka in the present financial year.
As per the proposal discussed by Gail board last month, four modules of 25 mw each will be installed in two southern states with an investment of Rs 616 crore. The company plans to commission the project in this financial year to avail income tax benefits under section 80IA of the Income Tax Act 1961.
“Power and Energy Consultants (PEC) prepared a detailed feasibility report (DFR) for setting up of wind energy farms in eight states — Andhra Pradesh, Madhya Pradesh, Kerala, Tamil Nadu, Gujarat, Rajasthan, Maharastra and Karnataka. It was found that internal rate of return (IRR) will be highest in Karnataka (14.74 per cent), followed by Tamil Nadu (13.26 per cent). So, the company decided to set up the project spread over these two states,” said an official privy to the development. Global consultants, Deloitte and PwC, further carried out studies to determine financial viability of WEG project in the two states, he added.
Gail proposes to execute the project within nine months beginning May 2011. Out of this, supply of equipment, erection and commissioning of project will take six months, starting September 12. The project is expected to complete by March 12, 2012. Gail also intends to claim 80 per cent accelerated tax depreciation benefits under schedule 15 of Income Tax Act for the project so as to increase returns from the project.
The project will be financed with a mix of long-term debt and equity in the ratio of 60:40. According to analysis done by PwC, the project will generate revenues of Rs 10.13 crore in the first year that will translate into profit after tax of Rs 2.33 crore.
The lifetime of the project is estimated to be at least 20 years. The revenue to be generated at the end of 20th year is pegged at Rs 164.17 crore and a net profit of Rs 74.44 crore. Gail operates 4.5 mw wind energy generator for captive consumption in Gujarat.