Caparo Energy Limited
(“Caparo Energy” or the “Company”)
Caparo Energy secures first tranche of Mezzanine
The board of directors of Caparo Energy (the “Board”) is pleased to announce a number of important developments in connection with the Company’s financing and operations:
- Secured US$78.5m of Mezzanine finance without equity dilution
- In advanced stage of negotiations for an additional US$33.5m mezzanine finance on similar terms
- Following the commitment of the second tranche of finance, the Company believes it will have sufficient funds for the development of approximately 700 MW of wind projects
- First 10.5 MW in Rajasthan connected to the grid and revenue generating with a further 31.5 MW to be connected by mid-July 2011
- Agreement with Suzlon on sites for further 750 MW to be delivered by March 2013, of which 400 MW of orders, due for delivery by March 2012, are expected to be placed ahead of schedule
Further to the Company’s announcement on 17 May 2011, relating to the advanced discussions regarding the provision of mezzanine financing, the Company is pleased to announce that Caparo Energy (India) Limited (“CEIL”), the Company’s wholly owned subsidiary, 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.
The 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.
First project begins commissioning
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.
Future project sites
The Company also announces that in addition to the first 100 MW detailed above, it has agreed with Suzlon Energy Limited (“Suzlon”) on the locations for the next 750 MW of projects that are to be delivered under the existing BPA, fully commissioned and connected to the grid in stages by March 2013, 400 MW of which are expected to be commissioned and connected to the grid by March 2012. The Board expects that the purchase orders for these sites, being funded by the mezzanine finance, will be issued ahead of the original schedule and that the Company will have a total of 500 MW fully operational and connected to the grid by March 2012.
The 750 MW comprises five individual projects located in the states of Gujarat (300 MW), Andhra Pradesh (100 MW), Maharashtra (100 MW), Rajasthan (75 MW), Karnataka (100 MW) and Tamil Nadu (75 MW). All of these sites have wind data using a met mast measured at different heights for an average period of over four years and are fully permitted.
The Company has selected these sites based on detailed analysis and independent wind studies completed by internationally recognised firms in this field, and the Board is confident that these projects represent some of the best sites being commissioned in India over the next two years and that the PLF’s for these sites are very attractive.
The Company anticipates reaching an agreement with Suzlon with respect to a further 150 MW of projects for delivery by March 2013, thereby achieving the full 1 GW with Suzlon by March 2013 under the terms of the BPA.
In addition and further to the Company’s announcement on 17 May 2011, the Company now has 150 MW in development with Gamesa Wind Turbines PVT LTD, which will be commissioned on sites totalling 3 GW secured by the Company, as referred to in the previously released announcement. The Company believes that these sites can be fully developed by 2016 and have indicative PLFs of higher than 28%, based on preliminary analysis by internationally reputed consultants.
Ravi Kailas, Caparo Energy’s Chief Executive Officer, commented:
“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.
“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.”