Gamesa, Caparo India units in $2 bn deal on wind turbines

Gamesa, Caparo India units in $2 bn deal on wind turbines

Mumbai/Hyderabad: Power producer Caparo Energy (India) Ltd (CEIL) has placed a $2 billion (Rs 9,000 crore) order with the Indian unit of Spanish wind turbine maker Gamesa Corp. Tecnologica SA for the supply of turbines to generate 2,000 megawatts (MW) of wind power in what the two firms billed as the largest deal of its kind in India.

The contract entails supply and commissioning of turbines by the end of 2016, starting with around 150MW in the first phase of the agreement in the fourth quarter of the next calendar year.

The order is part of Hyderabad-based CEIL’s long-term strategy to secure supply of turbines at a preferential pricing, chief executive officer Ravi Kailas said. Deliveries under the agreement are expected to be completed by 2016. The agreement will be serviced by the local manufacturing capacities of Gamesa’s Indian unit, Gamesa Wind Turbines Pvt. Ltd.

“The deal is valued at about $2 billion," Kailas said in a phone interview. “It is a big step for us to get to our goal of 5,000MW (of wind energy) by 2017."

He didn’t elaborate on the preferential pricing that CEIL had secured from Gamesa. The long-term nature of the deal offers investors and financiers “visibility" on the expansion plans of CEIL, he said. The company in January ordered $1.28 billion worth of turbines from Suzlon Energy Ltd to generate 1,000MW of wind power.

Suzlon will start deliveries next month, ahead of the previously announced schedule of the fourth quarter of 2011. CEIL plans to commission 500MW of capacity by March 2012 and a further 500MW by March 2013.

“This order underlines the acceptance of wind energy as a viable and profitable solution to meet the increasing appetite among corporates for reducing their carbon footprint and meeting energy needs through sustainable energy sources," Ramesh Kymal, chairman and managing director of Gamesa Wind Turbines, said in a statement.

India saw the installation of 2.5 gigawatts (GW) of wind energy capacity in 2010 and is expected to add 5GW yearly by 2015. Total installed wind power capacity is projected to reach 64GW by 2020, the joint statement by Gamesa and CEIL said.

“This shows a lot of commitment (on CEIL’s part). It’s a sign of strategic intent to be a significant player in the wind energy business," said Arvind Mahajan, who oversees the energy practice at consulting firm KPMG India Pvt. Ltd. “It’s a wind-only company so far. Even conventional power producers are looking at adding renewables in their portfolio. This should speed up action in that direction."

Gamesa has an order backlog of 600MW booked until September, apart from the order from CEIL. Gamesa is setting up three factories in the country to cater to likely demand. It will begin delivery of its first 100MW order in June 2012.

CEIL raised £52 million (Rs 380 crore today) in October by listing on London’s Alternative Investment Market (AIM).

“We listed on AIM and we have sophisticated investors, including some of the world’s largest funds with deep pockets and strong appetites, so we can go back for follow-on offerings should we need to," Kailas said.

The company will look at both power purchase agreements with state governments and sale of merchant power through long-term agreements with customers, he said.