Rs 6cr/MW capital cost for new project: Suryachakra Power

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Rs 6cr/MW capital cost for new project: Suryachakra Power

Suryachakra Power Corporation Ltd recently entered into a MOU with Finnish based WinWinD Power Energy Private Ltd. In an interview on CNBC-TV18, he expects the capital cost to come to Rs 6 crore per megawatt with a debt equity mix of 70:30.

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Suryachakra Power Corporation Ltd recently entered into a Memorandum of Understanding (MoU) with Finnish based WinWinD Power Energy Private Ltd, (WPEPL). The deal states that the companies will set-up a 250 megawatt wind energy project at Dharapuram, Tamil Nadu.

WPEPL, a 100% subsidiary of Finland-based WinWinD Oy plans to take up to 20% stake in the project coming under Suryachakra Green Power Pvt Ltd. VSS Srinivas, CFO, Suryachakra Power says their Finnish partner will help raise funds from EU institutions.

In an interview on CNBC-TV18, he expects the capital cost to come to Rs 6 crore per megawatt with a debt equity mix of 70:30. As per his preliminary estimates, the project will give their project Internal Rate of Return (IRR) of 14% and equity IRR of 18%. "We expect the payback to be seven years and equity payback is nine years," says Srinivas.

Below is a verbatim transcript of his interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. For complete details watch the accompanying video.

Q: Tell us about this MoU that you have signed with WinWinD and what exactly it entails in terms of capital commitment?

A: This is a 250 mw wind power project to be setup near Coimbatore in Tamil Nadu. This is going to be implemented in phases - in the first phase we are going to implement 50 to 60 mw to catch-up with the next wind season. The balance will be implemented in the next couple of years. We estimate a capital cost of Rs 6 crore for this project which is to be funded in the debt equity mix of either 75:25 or 70:30.

WinWinD is an established player in wind energy generators based in Finland. They have supplied machineries across Europe and have proven to be good. After preliminary due diligence, we have concluded the MoU last week. They have issued us 27% plant load factor (PLF) on a take or pay basis. They are going to take up operation and maintenance (O&M) for ten years after the initial warranty period of one year.

Similarly, WinWinD will also assist to raise the required finances from European funding agencies and other agencies up to 60% of our total debt requirement. WinWinD will also assist us in getting CDM benefits and other generator based subsidies. We are exploring the business model of a third party sale and group captive with whatever mandatory power supply we have to give to state utility so as to maximise the power tariffs.

As per our preliminary estimates, this project will give our project Internal Rate of Return (IRR) of 14% and equity IRR of 18%. We expect the payback is seven years and equity payback is nine years.

Q: What will be the equity contribution from Suryachakra Power and would you need to raise any equity capital?

A: We are working out the structure. We have not yet decided whether it is to be implemented in Suryachakra Power Corporation or as an SPV. But if you consider 70:30 debt equity, our equity is going to be 30%, around Rs 450 crore but WinWinD is also investing 20% of the total equity requirement in the project.

Q: Would you need to raise this capital or do you have sufficient capital on books?

A: We are going in phases. To take care of the first 50-60% our parent company will support and 20% will come from WinWinD. Other internal accruals we are confident of meeting the equity requirement for our first phase.

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