3,000-Mw wind power projects up for sale

With tax benefits drying up, tariffs plunging to new lows after the introduction of competitive bidding, and demand from states remaining bleak, a number of wind power producers are putting up their assets for sale.

Wind power projects — with total capacity of nearly 3,000 megawatts (Mw) and worth ~15,000 crore — are on sale in seven states. Most of these assets are owned by non-energy companies, which earlier received significant accelerated depreciation (AD) tax benefit under the Income Tax Act.

Cement majors, steel companies, Indian arms of foreign energy firms are among the sellers. Independent power projects, which were built on the generation-based incentive (GBI), are also scouting for buyers.

In the last Union Budget, the government announced the capping of the AD tax benefit at 40 per cent effective from April, 2017, and scrapping it from the next financial year. It was 80 per cent earlier. Also, the GBI of 50 paise per unit to wind power producers ceased to exist from March 31, 2017.

The goods and services tax (GST), which was implemented from July 1, has added to the woes of some wind power generators. The Tamil Nadu textile industry owns close to 1,000-Mw capacity of wind power units. Industry sources said the textile sector in the state had taken a hit due to new GST rates.

Another 700 Mw of projects are on sale in Tamil Nadu, followed by Maharashtra with 400 Mw, 100 Mw each in Gujarat, Madhya Pradesh and Karnataka, and 300 Mw in Rajasthan.

“While the Indian government is giving a hard push to the growth of the renewable energy sector, the state governments seem to working in the opposite direction. Frequent grid curtailments on high wind days to delayed payments up to 18 months in Maharashtra, Rajasthan and Tamil Nadu are some of the examples,” said Animesh Damani, managing partner, Artha Energy Resources - a portfolio matching company for investors in renewable sector.

“Further trouble brews as state governments now want to renegotiate the existing PPAs (power purchase agreements) and lower the tariff based on the price in recent auctions,” Damani said.

Competitive bidding was introduced in the wind power sector with tariff falling to ~3.46 a unit in maiden auction in February, 2017. The sector worked under the ‘feed-in-tariff’ (FiT) regime till then, which means the power price would be in accordance with the cost of the project.

Lately, states have been backing down wind power as their discoms battle cash crunch and weak finances. Madhya Pradesh is also likely to take away ‘must run’ status of renewable energy, Business Standard reported recently.

Damani said the discom in Karnataka was believed to have sent a notice to cancel all PPAs to all wind turbine owners. “In such a scenario, anyone invested into the wind energy sector is looking to sell their assets as the returns have diminished and the asset has become more of a liability,” he said.

Of the 32,000 Mw of wind power in the country, around 70 per cent is built on accelerated depreciation, a tax benefit scheme to be availed of by anyone who sets up or invests in a wind farm irrespective of the power generation. The rest are independent power projects, share of which has increased over the years. Most of these projects get benefits under the GBI.