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Spotlight | April 2014

Following the sun

In a market plagued by project delays, Welspun Energy is trying to carve out a niche for itself in the renewable space by accelerated execution of its plans, says Devarajan Mahadevan.

Welspun Energy is one of India´s biggest players in the renewable energy space. A subsidiary of the $3.5 billion Welspun Group, the company is planning to set up capacity of an ambitious 1.75 GW of renewable energy over the next three years. Its focus continues to be on solar power projects Welspun recently inaugurated India´s biggest solar plant with a capacity of 151 MW at Neemuch, Madhya Pradesh.

In January, Welspun signed an MoU with the Punjab Government for setting up a 150 MW solar project. At the beginning of this year, the company said that it has targeted a generation capacity of 1,750 MW (also including wind-based projects) by 2017. For this fiscal, Welspun is looking at grid-based solar projects with a total capacity of 325 MW. In December 2013, Vineet Mittal, Managing Director, Welspun Energy, said that Welspun plans to invest a total of $1.6 billion in renewable energy projects.

With the government continuing to push its goal to generate 20,000 MW of solar capacity by 2020, Welspun says that it is also gearing up to meet the demand that will be thrown up by this government push. "As a clean energy development company, we are always looking at opportunities to set up solar and wind projects in the country. The government's recent programme of setting up solar UMPPs gives us an opportunity to expand our capacities and become a leading clean energy developer," said Mittal. When asked about Welspun´s functional expertise in setting up solar projects of the scale of UMPPs, Mittal said, ´The launch of Jawaharlal Nehru National Solar Mission (JNNSM) created a lot of interest in the India solar sector. Phase I had a target of 1,100 MW for Grid solar power and 1,684 MW was achieved including the state initiatives. In terms of Off-grid solar applications, 200 MW was the target and 252.5 MW was achieved. These figures from the MNRE clearly indicate that JNSSM has achieved beyond the set under Phase I. JNNSM has provided an impetus to states for developing a robust renewable energy portfolio.

´ ´According to the data provided by MNRE India, under JNNSM, plans to generate up to 20 GW grid-based solar power, 2 GW of off-grid solar power and cover 20 million square metres with solar energy collectors by 2020. Under Phase II of JNSSM the government has setup ambitious targets of 10,000 MW (10 GW) of Grid solar power and Off-grid solar applications of 1,000 MW (1 GW),´ he added.

´Welspun Energy Limited (WEL) is the only company to have been awarded 50 MW-scale projects under JNNSM bids and that is definitely a great indicator of our capability to develop large-scale projects. WEL won the 'Solar Power Developers' award presented by Prime Minister Dr Manmohan Singh in 2013 to recognize the same ability. We are vying for as many projects as we can under the second phase of the Solar Mission. This is in line with our own target of installing 1.75 GW of clean energy projects in the next three years,´ adds Mittal.

The Action Plan
Power Today asked Mittal on how the company plans to generate 1750 MW of solar and wind projects over the next three years, and the geographies it plans to focus upon. ´Welspun Energy has already commissioned 50 (DC) MW capacity solar projects in Gujarat, 55 (DC) MW solar, 5.5 (DC) MW solar and 20 MW wind projects in Rajasthan, 151 (DC) MW in Madhya Pradesh and 22 (DC) MW in Maharashtra, with a 50 (DC) MW solar project recently awarded to WEL in Baramati, Maharashtra. Welspun Energy has more than 600 MW clean energy capacity in the pipeline, of this 217.02 MW clean energy projects are operational. We have a detailed business plan under which projects have been commissioned and are being developed in states like Tamil Nadu, Andhra Pradesh and Karnataka,´ says Mittal.

´The leading states in India currently, in order of commissioned capacities, are Gujarat, Rajasthan, Maharashtra and Madhya Pradesh. There is tremendous potential for solar power in Gujarat and Rajasthan considering the number of sun days being on the higher side. Also, favourable state solar policies in Rajasthan propel investments in this sector. It is expected that Rajasthan will produce more than 20 GW solar energy by 2022. Madhya Pradesh is closer to both Rajasthan and Gujarat, and also has a great potential for solar power,´ says Mittal on the rationale behind Welspun´s growth strategy.

Further, despite immense potential, areas like the North-East are starved for renewable energy projects. But Welspun also has plans to tap these areas.

´We believe that the North-East region is as important as any other region in the country. WEL is continuously upping efforts to install solar power projects in Assam. The estimated investment stands at Rs 200 crore. We are in the process of acquiring land and finance to develop the project in the region, and our plan would also depend on the state government's policy for renewable energy projects in Assam,´ says Mittal.

Execution Strength
In 2013, Welspun commissioned a 50-MW solar power project in Rajasthan ahead of schedule. In a country where project delays are commonplace, we asked Welspun on how it manages to stick to its schedules. Mittal says, ´The 55 (DC) MW project in Rajasthan was commissioned in March 2013. We believe in developing projects that can guarantee maximum results for longer period. According to recent industry and MNRE reports, our plants have been performing much better than our competitors. The entire credit goes to our EPC team and our use of innovative designs and technology. Our 55 (DC) MW project in Rajasthan is one of the highest PLF generating plants of the country. It touched 26% DC PLF, a figure proved to be much higher than those of its neighbouring plants.

How about factors that are not directly under the control of Welspun? ´In the renewable energy sector land acquisition for projects is a common problem. However, at Welspun Energy, we usually select areas with barren tract of land where we can augment social development. We have been resolving the land acquisition problems with the right approach of having transparent and fair compensations,´ says Mittal.

´A real roadblock that solar power developers face is the availability of long-term project finance. Almost all the state and national level policies envisage that seventy per cent of the fund requirement will come or can be raised through debt. WEL´s ability in commissioning their projects before the stipulated deadline has helped win the trust of major financial institutions in the country who finance most of company´s projects,´ he adds.

Corporate Restructuring Welspun Corp received sanction for its demerger in January from the Gujarat High Court (Welspun Corp Ltd will focus on the pipes and plates business and Welspun Enterprises will focus on steel, infrastructure, oil & gas exploration and the energy business). Earlier, Welspun Corp was a conglomerate with three main businesses: Pipes (pipes & plates), Steel and Infrastructure (including energy and oil & gas).

The main objective of the demerger was to create focused business entities. BK Goenka, Chairman, Welspun Corp Ltd had said during the proposed demerger plan, ´We believe that the demerger will create two focused, independently run companies with enhanced value creation across each business. The demerger will better enable the management team to protect, grow and nurture each line of business in a more distinct manner, bring more clarity on each business to pursue its strategic objectives and enhance shareholder value.´

In December 2013, in its continuing bid to hive off non-core businesses, Welspun Corp sold its stake in the Joint Venture that it had with Australian construction major Leighton for $99 million. Welspun entered into the transaction to cut down its debt and de-leverage its balance sheet. ´Welspun Group intends to concentrate on businesses which have potential to give it scale consistent with its quest for being in leadership position,´ Welspun had said in a regulatory filing.

About Welspun Energy Ltd
Welspun Energy Ltd. is part of the $3.5 billion Welspun Group, which has businesses in power generation, infrastructure, exploration and production of oil and natural gas, steel pipes and textiles. Welspun Corp, the flagship company of the group is the world's largest large diameter steel pipe producer.

The Three Key Critical Success Factors
Cost Leadership: The company has maintained that it has a cost advantage in the solar energy business. Its expertise is in building robust in-house design, engineering and procurement capabilities enabling the company to be one of the lowest cost generators. With in-house solar EPC capabilities, Welspun has cost-control advantages which can be a key differentiator in the solar energy business.

Strong Execution Track Record: With an experienced management team, Welspun has a track record in conceptualisation, execution and commissioning projects ahead of scheduled time, Stable Cash Flows From Parent: Welspun´s strong presence in the export market and robust cash flows from the $3.5 billion parent company have helped it compete aggressively for new projects.

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