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Caparo Energy raises $78.5 million of Mezzanine finance for wind farms in India from IDFC

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

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.

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. Again in April this year, Caparo Energy announced plans to raise $150 million (Rs. 7 billion) through private equity.

 Caparo Energy Ltd., the Indian wind farm developer backed by Blackrock Inc., may need $510 million in financing to begin paying for the $3 billion in wind turbines it has ordered, according to Religare Enterprises Ltd.

Caparo Energy (India) Limited (“CEIL”) in an announcement today said the Company has secured a first tranche of US$78.5m of this funding. This first tranche of mezzanine financing, which is in the form of preference shares with a six year term, of Rs. 3,500m (US$78.5m) is being provided by The India Infrastructure Fund, managed by IDFC Project Equity Company Limited. Morgan Stanley acted as a sole advisor to CEIL on this transaction.

The second tranche of this funding, which is expected to be Rs. 1,500m (US$33.5m), is at an advanced stage of discussion and a firm commitment in respect of this second tranche is expected to be finalised in the next few weeks.

he terms of both these tranches of financing entail no equity dilution for Caparo Energy’s existing shareholders and the Directors believe that this will result in enhanced equity returns for investors. The Company expects to repay the preference shares from internal cash-flows, the issue of senior debt instruments, bonds or other debt refinancing, within a time period of 3-5 years.

 The Board believes that securing this financing is a significant step forward for the business and further believes that it is the first time that an Independent Power Producer (“IPP”) in the wind sector in India has been able to arrange this type of financing. The Board anticipates that this additional Rs 5,000 (US$112m) of non-dilutive financing, along with the Company’s existing resources, would enable the Company to develop approximately 700 MW of wind projects. 

The Company’s first project, totalling 42 MW and comprising 20 Suzlon S-88 2.1 MW wind turbine generators (“WTG”), has begun commissioning in Tejwa (Mokal), Rajasthan (“Project 1”). An initial five WTGs, totalling 10.5 MW, are currently connected to the grid and the Company expects a total of 42 MW will be fully connected by mid-July 2011. The Mokal site is currently considered by the Board to be one of the best sites available in Rajasthan and has an overall potential for over 400 MW.      

In relation to Project 1, the Company has entered into a 20 year Power Purchase Agreement (“PPA”) with the Rajasthan State Electricity Board for the sale of power generated by the 20 WTGs at a rate of Rs. 4.22 per kWh.  This newly notified price represents an increase of Rs. 0.39 per kWh, equivalent to approximately 10% above last year’s tariff.  Project 1 will also receive an additional incentive of 4% over and above the energy tariff, resulting in a net tariff of Rs. 4.39 per kWh. Furthermore, Project 1 is eligible for approval under the Generation Base Incentive Scheme to earn an additional Rs. 0.50 per kWh. The Board also expects the Company to receive revenues through CER credits.

The Company’s second project is approaching completion in Mahidad, Gujarat, and comprises 12 Suzlon S-88 2.1 MW WTGs, totalling 25.2 MW. The Company expects that the 12 WTGs will begin commissioning in July 2011 and will be fully completed by mid-August 2011. The Company believes that the Mahidad site has an extremely favourable wind profile, as independent studies undertaken by internationally recognised firms in this field have reported that the expected Plant Load Factors (“PLF”) for this site are in excess of 30%, (at the top end of the industry averages of 25-30%).

The Company’s third project in Maharashtra comprising 16 Suzlon S-88 2.1 MW WTGs and totalling 33.6 MW is progressing according to schedule and is expected to be completed by December 2011.

 All of the sites under construction are fully permitted and have detailed wind data collected over a period of over four years, using site based met masts and with measurements at different heights.

“The commissioning of the first projects and the securing of mezzanine financing are two extremely important milestones, both of which the Company achieved ahead of a very tight schedule. This financing, together with the second tranche expected to be secured shortly, puts the Company in a position to fund approximately 700 MW of projects, with no further equity dilution to the existing shareholders and we extend a warm welcome our new investors.”, said Ravi Kailas, Caparo Energy’s Chief Executive Officer.

He added, “Caparo Energy’s strong relationship with Suzlon has also enabled us to identify an attractive portfolio of additional wind projects totalling 750 MW for delivery by March 2013. This takes our portfolio of projects with Sulzon to 850 MW and we are confident that we will meet our target 1GW by March 2013.  

“With India’s continued power deficit and the increased price of coal, wind power is rapidly becoming a cost effective and mainstream source of power and Caparo Energy is well positioned to lead this transformation which is taking place in the Indian power infrastructure.”

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