Renewable Energy 2012 Wind Conference

Innovative trends to increase project profitability per kwh

May 2012 Strictly private and confidential

REC, GBI and CDM can lead to significant upsides

20 15 10 5 0 7.8

Equity IRR Impact of REC, GBI and CDM 1.7

2.6

8.6

20.7

5,0 4,0 3,0 2,0 1,0 0,0 2.5

Tariff Impact of REC, GBI and CDM 1.5

0.3

0.18

4.5

Key Assumptions: 1) REC : Rs. 1.5 /u till FY17 and Rs. 1/u post FY17 2) CDM : 3.5 euro/CER is sale price; revenues from second year

REC market stabilizing (Non-solar), but limited government utilities participation

3500 3000 2500 2818 2000 1500 1500 1500 1505 1554 1789 2237 250 000 2710 2891 2950 3051 3065 2907 200 000 150 000 100 000 1000 500 0 50 000 0

MCP (INR/REC) MCV (RECs) мар 2011 2818 424 апр 2011 1500 260 май 2011 1500 18 502 июн 2011 1505 16 385 июл 2011 1554 18 568 авг 2011 1789 25 096 сен 2011 2237 46 362 окт 2011 2710 ноя 2011 2891 дек 2011 2950 янв 2012 3051 фев 2012 3065 мар 2012 2907 95 504 105 527 111 621 171 524 206 188 199 737

Source: www.recregistryindia.in

MCP (INR/REC) 1) REC Sale Price stabilised over second half of FY12 MCV (RECs) 2) Buy bids peaked in Jan-2012; modest decline in Feb & Mar 2012 3) For FY12, the closing balance of REC inventory was 38545 RECs against annual redemption volume of 1 million RECs 4) Most State Government owned utilities have not even opened trading account

RECs: An upside

•

REC option for power sale has its own risk, but might turn out to be more profitable than Feed-in tariff (FIT)

– It might be possible that REC market may be the only option for selling Renewable and FIT is not available or vice-versa 

Key Risk of REC is liquidity and if Discoms don’t participate and RE Generator’s RECs increases , without a market maker, it will become difficult to sell

GBI : IPP’s taking over AD investors Installed Capacity Addition in MW

3500

3000 3000 2500

2350 2000 1748 1778 1584 1500 1565 1484 1000 1115 500 0 608 285 239 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 1000 800 600 400 200 0 Source : MNRE

GBI Registered Projects (MW)

867 2010 449 2011

 Growth was largely on account of accelerated depreciation linked tax benefit market

 Growth in last two years is Independent driven by Power Producers (IPPs)  AD in FY12 might be approximately 1500 MW out of 3000 MW  The pace at which IPP segment is growing might replace atleast 1000 MW out of 1500 MW of AD, making FY13 end at 2500 MW

GBI: An upside

•

We understand that MNRE has been supporting GBI extension and decision is pending with Ministry of Finance

– Current GBI benefit might get extended to 4000 MW 

Key risks are some of the SERCs are asking for GBI benefits to be reimbursed to the Utilities (e.g. RERC latest order)

– This completely negates the objectives of MNRE to incentivize renewable

CDM: An upside

•

Inspite of lower CER prices, it is a significant upside

– CER Prices are expected to go up with recovery of demand in European Unions 

Key issues in CER

– One should target to get the CDM registration done by end of 2012, as EU, has extended certain regulation to bar applicability of CERs generating from project registered beyond 2012 from +5 nations in compliance of emission reduction targets, increases the risk of commercialization of such projects – Huge back lock at MoEF for Host Country Approval

Summary



Irrespective of key risk and uncertainty associated with each of the options, growth of Wind Industry is dependent on these upsides

 In Karnataka REC or TPS/Group Captive is the only viable option to invest, with FIT so low  In Gujarat REC is the only option, unless GERC revises FIT tariff to a comfortable level  In Rajasthan, with recent uncertainties on signing PPA, many investors are looking at RECs 

Currently FIT in most of the States other than Maharashtra, Orissa and to some extent Rajasthan are so low that it is impossible for making a project viable at FIT and hence one has to depend on one of these upsides or try for Group Captive or Third Party Sale structure

THANK YOU

Parag Sharma Chief Operating Officer ReNew Wind Power M: 9810052210; [email protected]