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BlackRock-Backed Mytrah Trips on Policy Vacuum

According to reports, wind-turbine installations in India will plummet this year as lenders shun projects amid a policy vacuum in the third-biggest market for the machines, according to BlackRock Inc.-backed Mytrah Energy Ltd. (MYT).

The country may install as little as 1,500 megawatts of capacity by the year ending March 31, about half what it did the previous year, said Ravi Kailas, chief executive officer of India’s third-largest wind farm developer, whose biggest investors include BlackRock and Henderson Global Investors Ltd.

The best wind projects in the country can now produce power at the same cost as coal-fired plants that pay market prices for the fuel.

“It looks like it’s falling off a cliff,” in India, Kailas said in an interview in Mumbai. “Investors and lenders don’t believe in the viability of the industry” without additional government support through a subsidy or higher rates paid for power, he said.

Wind financings in India declined 39 percent to $2.6 billion in the first three quarters compared to the same period last year, BNEF said in a Nov. 6 report. The country installed 851 megawatts of capacity in the six months ended Sept. 30 from 1,403 megawatts in the previous period, according to data from the Indian Wind Turbine Manufacturers’ Association in Chennai.

Indian installations topped a record 3,000 megawatts last year, a more than twofold increase from 2009 to 2011, helped in part by a subsidy known as a generation-based incentive, which expired on March 31. It’s not clear when the cabinet will approve its reinstatement, according to Tarun Kapoor, joint- secretary at the Ministry of New and Renewable Energy.

Wind farms need either the subsidy or an increase in tariff to compete against coal-based plants, most of which benefit from cheap fuel supplies, Kailas said. State-owned Coal India Ltd. (COAL), the main supplier of the fuel, sells to utilities at about half the price of the global benchmark.

The best wind projects in the country can now produce power at the same cost as coal-fired plants that pay market prices for the fuel, Kailas said.

Developers’ bids in auctions for coal-fired power stations have ranged from $50 to $80 a megawatt hour, compared with $63 to $102 for wind farms, according to Ashish Sethia, India country manager for BNEF.

“A few small changes could help the wind industry grow, rather than move backward,” Kailas said, estimating India could easily grow to a 5,000-megawatt market a year. “With the right incentives, policy makers could open the floodgates.”

State electricity regulators have also been slow to adjust tariffs to reflect rising energy costs for fear of a public backlash with India’s inflation rate at 7.45 percent, the highest among the biggest emerging markets.

Unless those rates are adjusted or the generation subsidy is revived, India will leave much of its wind potential untapped at a time when Asia’s third-largest economy is battling chronic power shortages, said Kailas.

Mytrah fell short of its goal to install 500 megawatts by June. “We could’ve done a lot more, if we’d had the incentive,” Kailas said.

The company is on track to meet a revised target of 600 megawatts of operating capacity by the first half of next year from 316 megawatts at present, Kailas said. It is close to securing 14 billion rupees of loans to fund its plans, he said.

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