New Delhi: The country’s largest power generation company, NTPC Ltd, plans to spend Rs6,000 crore to set up two wind power projects of 500MW each in Karnataka and Maharashtra, said a top company official.
The Income-tax Act, 1961, provides tax breaks for up to 10 years to companies setting up wind energy projects in the country. It also offers depreciation benefits of up to 80% of the investment in the very first year of the project’s operation.
However, NTPC chairman and managing director R.S. Sharma said this was not why they had decided to set up the projects.
“We will get the depreciation advantages, but that is not our main motive. We want to develop our renewable portfolio and are looking at commissioning the Karnataka wind power project within the 11th Plan period (2007-12),” he said.
Sharma said NTPC was working on the feasibility report of the projects, adding that “the projects will be developed on a debt-equity ratio of 30:70”.
He didn’t specify the locations in the two states where NTPC plans to set up the projects.
Sharma said this capacity was separate from the one it had planned in a joint venture (JV) with the Asian Development Bank, or ADB, and others.
The JV with ADB, which would also have GE Energy Financial Services, Kyushu Electric Power Co. and Brookfield Renewable Power as partners, would have a renewable energy power generation capacity of 500MW. NTPC will hold 40%, ADB 20%, and other companies the rest 40% in the proposed venture, as reported by Mint on 12 October 2007.
“The JV agreement with ADB is to be signed up...500MW through the JV does not mean that we are going to limit this capacity,” Sharma added.
Wind power capacity creation requires relatively high capital compared with conventional power projects based on coal or gas.
While it takes a capital investment of Rs4.2-4.5 crore per MW of power generated through coal-based or gas-based projects, wind-based projects require Rs6-7 crore per MW.
“The clarity on the value of the wind energy project is yet to emerge as there is an expected increase in wind energy tariff. Given the size of NTPC’s power generation, this is a small capacity but will help them in claiming tax benefits,” said Madanagopal R., an equity research analyst at Mumbai-based Centrum Broking Pvt. Ltd.
NTPC has a total capacity of 30,144MW with total cash reserves of around Rs44,393 crore. The company registered a profit of Rs7,414 crore on a turnover of Rs36,946 crore in 2007-08.
India has a renewable power generation capacity of 13,878.58MW, which is not even 10% of the total power generation capacity of 147,000MW in the country. Of this, wind power accounts for around 7,844MW.