ENERCON WIND FARMS (INDIA) LIMITED

Ratings Assigned Facilities/Instruments Long-term Bank Facilities Total Facilities Rating Rationale The rating draws strength from experience and track record of the promoters of Enercon Wind Farms (India) Ltd. (EWIL) in operating wind farms, firm offtake arrangement by way of Power Purchase Agreements (PPAs) with Bangalore Electricity Supply Company (BESCOM), consistently high PLF achieved in past few years and favourable growth potential due to demand-supply gap for power in India. The rating is however, constrained by uncertainties arising due to the ongoing dispute between the majority shareholder (Enercon GmbH of Germany) and the Indian promoters, dependence on seasonal wind patterns for power generation and uncertainty associated with CER income. The amicable settlement of the ongoing dispute between the two promoter groups of EWIL and stable operations of the wind farms with high PLF remain the key rating sensitivities. The Rating is also placed under credit watch in view of the ongoing dispute between the two promoter groups of Enercon India Limited (EIL), with regard to management control of the company. CARE will continue to monitor the developments in this regard in future and will take a further view on the ratings once the implications of these developments on the credit quality of the company are clear. Background EWIL is a Special Purpose Vehicle (SPV) set up in 2005 by EIL and Enercon GmbH (Germany), for generating energy from wind mills and selling it to State Distribution Companies (Discoms). EIL holds 26% equity while Enercon GmbH holds the balance 74% in EWIL. EIL, promoted as a Joint Venture between Enercon GmbH (56%) and the Mehra Family of India (44%), was incorporated in 1994. EIL mainly manufactures Wind Energy Converters (WECs), and blades, based on gearless technology supplied by Enercon GmbH and develops wind farms. The company also undertakes project and advisory services related to wind farm development. The wind farms developed by EIL are largely owned by various SPVs of the company, while the operations and maintenance of the wind farms is undertaken by a team of professionals from Enercon India Power Development Private Ltd. (EIPD) another subsidiary company of EIL. Since FY07, Enercon GmbH and the Indian promoters have been in dispute seeking larger shareholding and management control of EIL. The matter is currently sub judice under the Company Law Board (CLB). Due to the continuing dispute, there is a lack of clarity on the ownership pattern and business strategy of EIL as well as EWIL going forward. Operations EWIL is an Independent Power Producer (IPP) owning wind farms with installed capacity of 8.4 MW located at Karnataka. The development of wind mill farms and its subsequent Operations and Maintenance (O&M) activity is carried out by EIL, for which EWIL pays an annual O&M fee, whereas the overall management is overseen by EIPD. The company has been able to achieve PLF of more than 30% in each of past four years. EWIL generated 23.33 Million Units (MUs) of electricity at a PLF of 31.71% in FY10 as compared to 25.18 MUs at a PLF of 34.22% in FY09. The generation was lower on account of lean wind season during FY10. The company did not receive any carbon credit income in FY10 on account of pending verification of the project by United Nations Framework Convention on Climate Change (UNFCCC). EWIL has entered into PPAs for its entire power generation capacity with BESCOM for a period of 10 years. to The tariff applicable, as per PPA, for FY11, and FY12 are Rs.3.85 per kWh, and Rs.3.92 per kWh respectively. Further, as per latest order of Karnataka Electricity Regulation Commission (KERC), tariff applicable at the end of the tenth year (i.e. 2012) under the existing PPAs has been fixed as the tariff for subsequent ten years for all renewable power generators in Karnataka. Amount (Rs. crore) 42.0 42.0 Ratings1 CARE BBB+ (Triple B Plus) Remarks Assigned and placed on Credit watch

Complete definition of the ratings assigned are available at www.careratings.com and in other CARE publications


Financials Net sales of EWIL increased by 8% in FY10 vis--vis FY09 on account of increase in tariff by Rs 0.06 per kWh. PBILDT margin dipped marginally in FY10 compared to FY09 due to increase in operating expenses. PAT margin declined in FY10 vis--vis FY09 on account of higher tax expenses. As on March 31, 2010, EWIL was a debt-free company. The company availed a term loan of Rs. 45 crore in April, 2010 for setting up of wind farms through a new SPV. Current ratio was below unity as at endFY10 on account of high current portion of debt. Receivable days remained range bound (22 days) in the past. Industry India has one of the largest programmes in the renewable energy covering a wide spectrum of resources such as wind, solar, biomass, small hydro etc. Out of these programmes, the highly successful wind power programme is entirely market driven. Grid-connected wind power generation has gained a high level of acceptability as compared to other renewable technologies available in the country. The installed wind energy capacity in the country stood at 10,925 MW as on December 31, 2009, out of which about 683 MW was added during April - December 2009. This made India the fifth-largest country in terms of installed capacity. Government policy and regulatory framework both at the State and Central levels are encouraging wind power generation in the country. India is undertaking one of the worlds largest efforts for wind resource assessment which is being coordinated by the Centre for Wind Energy Technology (C-WET) covering 25 States and Union Territories involving establishment of 1,050 wind-monitoring and wind-mapping stations. Moreover, the State Electricity Regulatory Commissions (SERCs) across India are announcing preferential tariffs for wind power and directing the State distribution utilities to source a fixed portion of their power compulsorily from renewable energy sources. Further as per the Kyoto Protocol the industry is eligible to receive credits for Carbon Emission Reduction (CER) under the Clean Development Mechanism (CDM). Prospects New technological development in wind energy design offering higher efficiency, coupled with Generation Based Incentive (GBI) for Grid Interactive Wind power projects issued by Ministry of New & Renewable Energy and attractive tariffs offered by State Discoms result in favourable outlook for IPPs like EWIL in medium term. Financial Performance For the period ended / as at March 31st, Working Results Net Sales Total Operating Income PBILDT Interest Depreciation PBT PAT (After Deferred Tax) Gross Cash Accruals Financial Position Equity Share Capital Net worth Total Capital Employed Key Ratios Growth Growth in Total Income (%) Growth in PAT [after D.Tax] (%) Profitability PBILDT / Total Operating Income (%) PAT / Total Income (%) ROCE (%) 2008 (12m, A) 13.09 13.09 9.28 0.02 2.50 6.79 4.20 8.52 16.00 37.86 37.86 2009 (12m, A) 8.56 8.56 6.33 0.00 2.60 3.86 5.24 5.99 16.00 41.25 41.25 (Rs. crore) 2010 (12m, A) 9.24 9.24 6.44 0.00 2.60 4.25 3.45 5.97 16.00 44.61 44.61

38.74 (66.21) 70.92 32.00 19.52

(34.56) 24.85 73.95 60.21 9.77

7.90 (34.06) 69.66 35.75 9.91


For the period ended / as at March 31st, Solvency Long Term Debt-Equity Ratio (times) Overall Gearing Ratio (times) Interest Coverage (times) Term Debt /Gross Cash Accruals (years) Liquidity Current Ratio (times) Quick Ratio (times) Turnover Average Collection Period (days) Average Creditors Period (days) Average Inventory Period (days) NM: Not Meaningful 2008 (12m, A) 0.00 0.00 NM 0.00 3.27 3.27 9 NM 2009 (12m, A) 0.00 0.00 NM 0.00 25.37 25.37 21 NM 2010 (12m, A) 0.00 0.00 NM 0.00 0.37 0.37 22 NM -

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