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Orient Green Power has got about 531 Megawatts of assets; 425 megawatts in wind and 106 megawatts in biomass

Interviews
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Below are the excerpts of our recent interview with Mr. S. Venkatachalam, MD & CEO, Orient Green Power

What in your views are the key growth drivers for Orient Green Power? We  see you are undertaking a number of measures, when do you expect the measures to deliver tangible outcome?

Orient Green Power has an overall portfolio of 531MW of which 425MW is in Wind and 106MW is in Biomass. 310MW out of our 425MW wind portfolio is in Tamil Nadu. During the last three years, our overall performance had been severely affected due to unprecedented levels of Grid back down. In 2013-14 it was around 40%,  2014-15  and in 2015-16 it was around 25-27%, 2015-16. However, the wind associations have been closely working with the state and the centre to bring down these levels and, this year the back down is of the order of 10-11% - a significant improvement over the last 3 years and, going forward, we only see it improving further. The following measures have resulted in this improvement:

- Sale of Power outside the state during the wind season. This has started from this year and the Tamil Nadu CM has also pro- actively written to the PM to expedite the1000MW green corridor so that the entire wind power can be evacuated to even the northern states

- Scheduling and Forecasting by NIWE

- Increased Frequency Bandwidth form 150MW to 250MW to help better evacua- tion of Renewables

- Shutting down of Thermal Power Plants for maintenance, in a phase-wise manner during the wind season

- Completion of the green energy corridor within the state

Overall  a  very positive  approach   by the state  utility  (who  have  to  manage  a 7500MW wind  power  on  a  14000  MW grid) has helped bring about these improvements that will help us become profitable. Apart from this, our assets in A.P. (75MW), Gujarat (25MW) and Croatia (10.5MW) are doing well.

Further to the above, which I believe is a significant development, OGPL is on the verge of completing a 5/25 scheme on its major loan portfolio. This will help bring about a significant improvement in our cash flows from year 1 itself. In addition  to all this, OGPL is putting up a 43MW investment in Tadipatri (A.P.), where we already have an 75MW wind farm with the complete sub-station and grid infrastructure ready.

All of the above are major game changers that will have a very positive impact from the first year itself.

Do you think India would be able to reach the target of 60 gigawatts (GW) of wind energy capacity by 2022 especially given the stiff completion the segment faces from Solar energy & withdrawal of certain tax benefits for the wind segment?

The targets set by the government of 100GW of Solar and 60GW of wind have set the tone for a significant growth in these sectors. The wind segment has already achieved around 27-28GW and solar has very quickly reached a figure of 8GW. There are temporary issues related to both these segments. Very low rates have been quoted in solar and this has prompted the government to look for competitive bidding in wind also. We  must remember that the wind segment has had a history of performance over the last 25-30 years and has strict standards of certification, because of which, the quality of windmills in the country are excellent. The quality of solar panels, especially with steeply falling prices, is still to be proven on a long term. Incentives will be with- drawn and the introduction of GST may increase prices. Further, states are cautious about increasing their proportion of infirm power sources and are therefore going slow on signing PPAs or moving towards reduced tariffs. I believe that  all  these  are part of the growth phase and, with the kind of potential available, growth is bound to happen.

What are your views on repowering policies? Do you think they could be game changer for the wind segment?

In TN and, partly in Gujarat, a number of machines are over 15 years old and repowering is bound to happen. The evacuation of the excess power with higher PLF new generation machines, needs to be factored with free inter-state sale of power, scheduling and forecasting etc.

Couple of months back it was reported that Rs40bn investments in wind energy are on the brink of turning NPA’s, how difficult is it presently to obtain the requisite funding for the projects?

Tax incentives, GBI etc would definitely help the industry grow. But far more important is that each state must ensure 100% evacuation and also sign PPAs in a timely manner. It is clearly the government’s responsibility if Rs 4000 crore becomes an NPA because of not signing PPAs after having given all the approvals in the initial phase. The developer is unnecessarily labelled an NPA, for no  fault of his, and this shatters investor confidence in the long run. Further, the developer has nowhere to go if the government lets him down after he has put in an investment in good faith.

We recently heard the news that ~  40% of wind power capacity is  facing issues pertaining to payments and demand - Tamil Nadu, Rajasthan and Maharashtra are yet to clear payments to wind power producers. The report quoted industry experts citing falling solar tariffs as one of the reasons for reduction in wind power offtake. What are your views on it?

In our case, we are on a group captive model in TN and get our payments in a timely manner since we a good customer base.. Grid back down was the biggest issue here and as explained earlier, we are confident that this will be a thing of the past. In Gujarat and AP, we get our payments on the dot. Further, there are no grid back down issues. However, as I said earlier, the state governments must hon- our the Must Run status and ensure timely payments. I believe that the Uday scheme will help improve the financial health of the Discoms and these temporary set- backs will get corrected in the long term.