Summary of IRR Calculations for MEL Wind Energy Generation Project

Without CERs Benchmark With CERs

Equity IRR without
tax shelter 7.99% 10.61%
Equity IRR with tax 16% Return
shelter 14.83% on equity 18.01%

Without CERs With CERs

Project IRR without
tax shelter 7.26% 9.25%
Project IRR with tax
shelter 11.64% 13.79%
Equity IRR calculations for Windgenerators of Mineral Enterprises, Bangalore

Sl. No. Item 1st Set of WEGs 2nd Set of WEGs 3rd Set of WEGs Overall

The windmill project of MEL has been implemented over a period

of 18 months starting from the first set of WEGs being installed in
October 2004, the second set in October 2005 and the last set in
March 2006. Information related to CAPEX, expenses, power
income have been presented in three sets of WEGs installed
only for purposes of clarity and transparency. The IRR calculated
in the "IRR" spreadsheet represents the IRR for the project
1 Project implementation October,2004, October, 2005 March, 2006 activity.
Capex consists of cost of Plant. Land being leased to windfarm
2 CAPEX in Rs. Lakhs 1500 1284.54 4500 developer, i.e. in this case Enercon India Ltd
3 Equity in Rs. Lakhs 1500 484.54 1511.13 3495.67
4 Loan in Rs. Lakhs 0 800 2988.87 3788.87
depreciation @80% as depreciation @80% as Accelerated depreciation
per Section 32 of the per Section 32 of the @50% for FY-05-06,
5 Depreciation Income Tax Act. Income Tax Act. subsequently @80% All Depreciation is claimed on WDV Basis. 3.337143
Salvage value has been calculated based on depreciation taken
at 15.33% written down value basis as per The Companies Act,
Salvage value at the end 1956. Therefore residual value at the end of 20th year is treated
6 of 20 years 3.59% as salvage value. 0.299658
Income tax Exemption Income tax Exemption
U/s.80 I (A) and tax U/s.80 I (A) and tax Income tax Exemption
benefit on account of benefit on account of U/s.80 I (A) and tax benefit
high depreciation high depreciation on account of high
7 IT benefits claimed.** claimed.** depreciation claimed.**
At the time of starting the CDM project in May 2004, the
prevailing PLF from incremental capacity additions in Karnataka
was just 18%.
Relevant MNRE reports are available at
http://mnes.nic.in/annualreport/2003_2004_English/ch5_pg3.htm
. Since the
project is using synchronous generators and gearless technology
from a world renowned supplier with sound management
processes for wind farms, we have assumed an improved
efficiency of 5% over the 18% that was prevalent. Therefore, the
PLF assumed is 23%. The acutal generation since Septemeber
2004 in the project has shown that the assumption is correct.
The PLF given by the
manufacturer is guaranteed only for a maximum period of 3
years out of 20 years of project life and has been considered by
the project proponent as an offer made only to make the deal
8 PLF 23% attractive.

O & M escalated as per contract. O&M contract for Phase 1 is to

be reviewed at the end of 6years, while for Phase 2 & 3 at the
end of 10th year. The O&M contract includes the cost of all
spares and consumables needed to maintain 95% machine
As per contract with As per contract with As per contract with availability. Therefore, we expect that as the machines age, the
ENERCON escalated at ENERCON and MMCL ENERCON escalated at 5% cost of maintenance is likely to increase. Therefore, O&M cost is
9 O&M 6.5% yearly. escalated at 5% yearly. yearly. not being capped.
As per Insurance policy As per Insurance policy As per Insurance policy Insurance premium is kept constant throughout the life of the
10 Insurance taken taken taken equipment

For projects commissioned after August, 2003, tariff is Rs.3.10 in base year 2003-04 escalated @ 2% per year on the base year for 10 years
11 Sale price of power from date of commissioning. From 11th year onwards tariff is considered conservatively as the Simple average of the first 10 years tariff.

12 IT rate
Minimum Alternative Tax
13 (MAT)
14 Life of wind generators
15 Year
16 Interest
17 CER price in Euros
18 CER price in INR
U/s 115 JAA, as it stood as on 31st March 2005, Tax credit is not
36.59% 36.59% 36.59% available for the companies liable to pay tax u/s 115 JB
MAT is applicable for the year where exemption is claimed
U/s.80 IA of the IT Act is claimed. Where MAT and Normal tax is
8.415% 8.415% 8.415% applicable, higher of the two is to be applied
20 years as per 20 years as per 20 years as per equipment
equipment supplier equipment supplier supplier
Since all taxes and other expenses are being calculated on this
Financial year Apr-Mar Financial year Apr-Mar Financial year Apr-Mar basis
interest @ 7% on Rs. 8 interest @ 6.5% on Rs.
Nil crores 29.88 crores
13
715
Profit & Loss Statement of MEL Wind Project

Sales
Realization Admin Insurance O&M Sub-Total EBIDT Depreciation
Year Rs. in Lacs
1 37.70 37.70 2.00 1.74 - 3.74 33.96 1,200.00
2 225.82 225.82 3.10 5.74 25.92 34.76 191.07 3,517.63
3 993.09 993.09 5.73 13.67 27.48 46.88 946.22 2,053.53
4 1,011.83 1,011.83 6.02 13.67 29.13 48.82 963.02 410.71
5 1,030.57 1,030.57 6.32 13.67 104.96 124.95 905.62 82.14
6 1,112.95 1,112.95 6.63 13.67 110.53 130.83 982.12 16.43
7 1,134.87 1,134.87 6.96 13.67 116.39 137.03 997.84 3.21
8 1,156.95 1,156.95 7.31 13.67 122.57 143.55 1,013.39 0.64
9 1,131.26 1,131.26 7.68 13.67 129.08 150.43 980.83 0.12
10 1,124.26 1,124.26 8.06 13.67 135.94 157.68 966.58 0.02
11 1,122.38 1,122.38 8.47 13.67 143.18 165.31 957.07 -
12 1,047.43 1,047.43 8.89 13.67 150.80 173.36 874.08 -
13 1,047.43 1,047.43 9.33 13.67 158.83 181.83 865.60 -
14 1,047.43 1,047.43 9.80 13.67 167.30 190.77 856.67 -
15 1,047.43 1,047.43 10.29 13.67 176.22 200.18 847.25 -
16 1,047.43 1,047.43 10.80 13.67 185.63 210.10 837.33 -
17 1,047.43 1,047.43 11.35 13.67 195.54 220.56 826.88 -
18 1,047.43 1,047.43 11.91 13.67 205.99 231.58 815.86 -
19 1,047.43 1,047.43 12.51 13.67 217.01 243.19 804.24 -
20 1,047.43 1,047.43 13.13 13.67 228.63 255.43 792.00 -
21 839.45 839.45 8.48 10.20 182.98 201.66 637.79 -
20,348.04 20,348.04 174.78 263.74 2,814.10 3,252.63 17,095.42 7,284.42
 All figures in Rs.lakhs

Tax benefit
on
Unabsorbed
Dpereciation
EBIT availed in
(Operating core Earnings
Profit) Interest EBT Tax business after Tax 100%

- 1,166.04 - 1,166.04 - - 1,166.04 426.65 -

- 3,326.57 31.13 - 3,357.70 - - 3,357.70 1,228.58 - 2,129.12
- 1,107.31 225.53 - 1,332.83 - - 1,332.83 487.68 - 845.15
552.31 198.65 353.66 29.76 323.90 - 323.90
823.48 190.02 633.46 53.31 580.16 - 580.16
965.69 965.69 81.26 884.43 - 884.43
994.63 994.63 83.70 910.93 - 910.93
1,012.75 1,012.75 85.22 927.53 - 927.53
980.72 980.72 82.53 898.19 - 898.19
966.56 966.56 81.34 885.22 - 885.22
957.07 957.07 350.19 606.88 - 606.88
874.08 874.08 319.82 554.25 - 554.25
865.60 865.60 316.72 548.88 - 548.88
856.67 856.67 313.45 543.21 - 543.21
847.25 847.25 310.01 537.24 - 537.24
837.33 837.33 306.38 530.95 - 530.95
826.88 826.88 302.55 524.32 - 524.32
815.86 815.86 298.52 517.34 - 517.34
804.24 804.24 294.27 509.97 - 509.97
792.00 792.00 289.79 502.21 - 502.21
637.79 637.79 233.37 404.42 - 404.42
9,811.00 645.33 9,165.67 3,832.21 5,333.46 2,142.92 8,215.76
Tax calculations for MEL Wind project

Taxable Tax on (1) Tax on (2) Net tax

Year Income (2) @8.415% @35.7% payable
1 - 1,166.04 -
2 - 3,357.70 -
3 - 1,332.83 -
4 353.66 29.76 29.76
5 633.46 53.31 53.31
6 965.69 81.26 81.26
7 994.63 83.70 83.70
8 1,012.75 85.22 85.22
9 980.72 82.53 82.53
10 966.56 81.34 81.34
11 957.07 80.54 350.19 350.19
12 874.08 73.55 319.82 319.82
13 865.60 72.84 316.72 316.72
14 856.67 72.09 313.45 313.45
15 847.25 71.30 310.01 310.01
16 837.33 70.46 306.38 306.38
17 826.88 69.58 302.55 302.55
18 815.86 68.65 298.52 298.52
19 804.24 67.68 294.27 294.27
20 792.00 66.65 289.79 289.79
21 637.79 53.67 233.37 233.37
IRR Calculations for MEL Wind Project without tax shelter

Without CERs
Project IRR

Year Investment Net Cash Flow Investment Net Cash Flow

0 (1,500.00) (1,500.00) (1,500.00) (1,500.00)
1 (1,995.67) (1,961.71) (5,784.54) (5,750.58)
2 - (40.07) 191.07
3 - 320.69 946.22
4 - 534.60 933.26
5 - (2,326.57) 852.31
6 - 900.85 900.85
7 - 914.14 914.14
8 - 928.17 928.17
9 - 898.31 898.31
10 - 885.25 885.25
11 - 606.88 606.88
12 - 554.25 554.25
13 - 548.88 548.88
14 - 543.21 543.21
15 - 537.24 537.24
16 - 530.95 530.95
17 - 524.32 524.32
18 - 517.34 517.34
19 - 509.97 509.97
20 556.00 556.00
21 611.85 611.85
Equity IRR 7.99% Project IRR 7.26%
 With CERs With CERs
CER
GEF 0.93kg sales(Rs.
Year CO2Eq/kWh CER's Lacs) Net cash flow Net Cash Flow
2004-05 (1,500.00) (1,500.00)
2004-05 - (1,961.71) (5,750.58)
2005-06 - (40.07) 191.07
2006-07 - 320.69 946.22
2007-08 - 534.60 933.26
2008-09 0.93 28,106.5 200.96 (2,125.61) 1,053.28
2009-10 0.93 28,106.5 200.96 1,101.82 1,101.82
2010-11 0.93 28,106.5 200.96 1,115.10 1,115.10
2011-12 0.93 28,106.5 200.96 1,129.13 1,129.13
2012-13 0.93 28,106.5 200.96 1,099.27 1,099.27
2013-14 0.93 28,106.5 200.96 1,086.21 1,086.21
2014-15 0.93 28,106.5 200.96 807.84 807.84
2015-16 0.93 28,106.5 200.96 755.21 755.21
2016-17 0.93 28,106.5 200.96 749.84 749.84
2017-18 0.93 28,106.5 200.96 744.17 744.17
2018-19 - 537.24 537.24
2019-20 - 530.95 530.95
2020-21 - 524.32 524.32
2021-22 - 517.34 517.34
2022-23 - 509.97 509.97
2023-24 - 556.00 556.00
2024-25 611.85 611.85
Equity IRR 10.61% Project IRR 9.25%
IRR Calculations for MEL Wind Project with tax shelter

Without CERs
Project IRR

Year Investment Net Cash Flow Investment Net Cash Flow

0 (1,500.00) (1,500.00) (1,500.00) (1,500.00)
1 (1,995.67) (1,535.06) (5,784.54) (5,323.93)
2 - 1,188.51 1,419.65
3 - 808.38 1,433.90
4 - 534.60 933.26
5 - (2,326.57) 852.31
6 - 900.85 900.85
7 - 914.14 914.14
8 - 928.17 928.17
9 - 898.31 898.31
10 - 885.25 885.25
11 - 606.88 606.88
12 - 554.25 554.25
13 - 548.88 548.88
14 - 543.21 543.21
15 - 537.24 537.24
16 - 530.95 530.95
17 - 524.32 524.32
18 - 517.34 517.34
19 - 509.97 509.97
20 556.00 556.00
21 611.85 611.85
Equity IRR 14.83% Project IRR 11.64%
 With CERs With CERs
CER
GEF 0.93kg sales(Rs.
Year CO2Eq/kWh CER's Lacs) Net cash flow Net Cash Flow
2004-05 (1,500.00) (1,500.00)
2004-05 - (1,535.06) (5,323.93)
2005-06 - 1,188.51 1,419.65
2006-07 - 808.38 1,433.90
2007-08 - 534.60 933.26
2008-09 0.93 28,106.5 200.96 (2,125.61) 1,053.28
2009-10 0.93 28,106.5 200.96 1,101.82 1,101.82
2010-11 0.93 28,106.5 200.96 1,115.10 1,115.10
2011-12 0.93 28,106.5 200.96 1,129.13 1,129.13
2012-13 0.93 28,106.5 200.96 1,099.27 1,099.27
2013-14 0.93 28,106.5 200.96 1,086.21 1,086.21
2014-15 0.93 28,106.5 200.96 807.84 807.84
2015-16 0.93 28,106.5 200.96 755.21 755.21
2016-17 0.93 28,106.5 200.96 749.84 749.84
2017-18 0.93 28,106.5 200.96 744.17 744.17
2018-19 - 537.24 537.24
2019-20 - 530.95 530.95
2020-21 - 524.32 524.32
2021-22 - 517.34 517.34
2022-23 - 509.97 509.97
2023-24 - 556.00 556.00
2024-25 611.85 611.85
Equity IRR 18.01% Project IRR 13.79%
MEL Sensitivity Analysis based on PLF and Tax Shelter

0% Tax Shelter 80% Tax Shelter 100% Tax Shelter

Without Without Without
CDM With CDM CDM With CDM CDM With CDM
PLF Equity IRR Equity IRR Equity IRR
20.0% 5.67% 8.44% 10.42% 13.69% 12.06% 15.48%
22.0% 7.23% 9.90% 12.21% 15.34% 13.92% 17.18%
23.0% 7.99% 10.61% 13.09% 16.15% 14.83% 18.01%
24.0% 8.74% 11.32% 13.94% 16.94% 15.72% 18.83%
25.0% 9.48% 12.01% 14.79% 17.73% 16.60% 19.64%
26.0% 10.21% 12.70% 15.62% 18.50% 17.46% 20.44%

PLF Project IRR Project IRR Project IRR

20.0% 5.46% 7.60% 8.79% 11.08% 9.80% 12.11%
22.0% 6.67% 8.71% 10.04% 12.21% 11.04% 13.24%
23.0% 7.26% 9.25% 10.63% 12.75% 11.64% 13.79%
24.0% 7.83% 9.78% 11.22% 13.29% 12.23% 14.32%
25.0% 8.39% 10.30% 11.79% 13.82% 12.80% 14.85%
26.0% 8.94% 10.81% 12.35% 14.33% 13.36% 15.37%
Loan taken for 2nd Set of WEGs

Period Loan interest principal emi

Oct-05 80,000,000 500,000 3,333,333 3,833,333
Nov-05 76,666,667 479,167 3,333,333 3,812,500
Dec-05 73,333,334 458,333 3,333,333 3,791,666
Jan-06 70,000,001 437,500 3,333,333 3,770,833
Feb-06 66,666,668 416,667 3,333,333 3,750,000
Mar-06 63,333,335 395,833 3,333,333 3,729,166
Apr-06 60,000,002 375,000 3,333,333 3,708,333
May-06 56,666,669 354,167 3,333,333 3,687,500
Jun-06 53,333,336 333,333 3,333,333 3,666,666
Jul-06 50,000,003 312,500 3,333,333 3,645,833
Aug-06 46,666,670 291,667 3,333,333 3,625,000
Sep-06 43,333,337 270,833 3,333,333 3,604,166
Oct-06 40,000,004 250,000 3,333,333 3,583,333
Nov-06 36,666,671 229,167 3,333,333 3,562,500
Dec-06 33,333,338 208,333 3,333,333 3,541,666
Jan-07 30,000,005 187,500 3,333,333 3,520,833
Feb-07 26,666,672 166,667 3,333,333 3,500,000
Mar-07 23,333,339 145,833 3,333,333 3,479,166
Apr-07 20,000,006 125,000 3,333,333 3,458,333
May-07 16,666,673 104,167 3,333,333 3,437,500
Jun-07 13,333,340 83,333 3,333,333 3,416,666
Jul-07 10,000,007 62,500 3,333,333 3,395,833
Aug-07 6,666,674 41,667 3,333,333 3,375,000
Sep-07 3,333,341 20,833 3,333,333 3,354,166
8 0 8 8

Loan taken for 3rd Set of WEGs

ECB taken interest Principal repaid

Year 1 2,989 4
Year 2 2,989 194
Year 3 2,989 194
Year 4 2,989 190 2,989
 All Figs in Rs. Lakhs
Yearly interest payment Principal repayment

27 200

31 400

4 200
Tariff calculation for projects comissioned after August 2003

Base year
tariff Rs. 3.1 2003-04
Annual
escalation on
base year
tariff 2% 0.062
Period 10 years

Tariff
Tariff in Year Set 1 Set 2 Set 3
Base
year2003-04 3.10
2004-05 3.16 3.16 3.16
2005-06 3.22 3.22 3.22
2006-07 3.29 3.29 3.29
2007-08 3.35 3.35 3.35
2008-09 3.41 3.41 3.41
2009-10 3.47 3.47 3.47
2010-11 3.53 3.53 3.53
2011-12 3.60 3.60 3.60
2012-13 3.66 3.66 3.66
2013-14 3.72 3.72 3.72
2014-15 3.44 3.78 3.78
2015-16 3.44 3.47 3.47
2016-17 3.44 3.47 3.47
2017-18 3.44 3.47 3.47
2018-19 3.44 3.47 3.47
2019-20 3.44 3.47 3.47
2020-21 3.44 3.47 3.47
2021-22 3.44 3.47 3.47
2022-23 3.44 3.47 3.47
2023-24 3.44 3.47 3.47
2024-25 3.47 3.47
Salvage value calculations All figs in Rs. Lacs
Set 1 Set 2 Set 3
Cost of Project 1,500.00
Depreciation @ 15.33% 1,270.05 1,284.54 4500.00
1,075.35 1,087.62 3,810.15
910.50 920.89 3,226.05
770.92 779.72 2,731.50
652.74 660.19 2,312.76
552.67 558.98 1,958.21
467.95 473.29 1,658.02
396.21 400.73 1,403.85
335.47 339.30 1,188.64
284.04 287.29 1,006.42
240.50 243.24 852.13
203.63 205.96 721.50
172.42 174.38 610.90
145.98 147.65 517.25
123.60 125.01 437.95
104.66 105.85 370.81
88.61 89.62 313.97
75.03 75.88 265.84
63.53 64.25 225.08
wdv at the end of 20th year 53.79 54.40 190.58
46.06 161.36

Salvage % 3.59% 3.59% 3.59%

1st Set

All Figs in Rs.lacs

depn Power Power
Year Capex Admin Insurance O&M IT total exp purchase price income
0 -1500
1 2 1.74 0 -1200 -1196.26 3.16 37.70
2 2.1 3.47 -17.50 -240 -251.93 3.22 194.87
3 2.21 3.47 -18.64 -48 -60.96 3.29 198.62
4 2.32 3.47 -19.85 -10 -23.66 3.35 202.37
5 2.43 3.47 -21.14 -2 -17.16 3.41 206.11
6 2.55 3.47 -22.51 0 -16.87 3.47 209.86
7 2.68 3.47 -23.98 -17.83 3.53 213.61
8 2.81 3.47 -25.53 -19.25 3.60 217.36
9 2.95 3.47 -27.19 -20.77 3.66 221.10
10 3.10 3.47 -28.96 -22.39 3.72 224.85
11 3.26 3.47 -30.84 -24.12 3.44 207.99
12 3.42 3.47 -32.85 -25.96 3.44 207.99
13 3.59 3.47 -34.99 -27.92 3.44 207.99
14 3.77 3.47 -37.26 -30.02 3.44 207.99
15 3.96 3.47 -39.68 -32.25 3.44 207.99
16 4.16 3.47 -42.26 -34.63 3.44 207.99
17 4.37 3.47 -45.01 -37.17 3.44 207.99
18 4.58 3.47 -47.93 -39.88 3.44 207.99
19 4.81 3.47 -51.05 -42.77 3.44 207.99
20 5.05 3.47 -54.37 -45.84 3.44 207.99
1500
1200
300
240
60
48
12
10
2
2
0
0
0
2nd Set
All Figs in Rs. Lacs
depn Power
Year Capex Admin Insurance O&M IT total exp purchase price Power
0 -1284.54
1 0.5 2.27 -8.42 -1027.63 -1033.28 3.22 30.75
2 0.53 2.27 -8.84 -205.53 -211.57 3.29 158.90
3 0.55 2.27 -9.28 -41.11 -47.56 3.35 161.89
4 0.58 2.27 -23.21 -8.22 -28.59 3.41 164.89
5 0.61 2.27 -24.37 -1.64 -23.14 3.47 167.89
6 0.64 2.27 -25.59 -0.33 -23.01 3.53 170.89
7 0.67 2.27 -26.87 -0.07 -24.00 3.60 173.89
8 0.70 2.27 -28.22 -25.24 3.66 176.88
9 0.74 2.27 -29.63 -26.62 3.72 179.88
10 0.78 2.27 -31.11 -28.06 3.78 182.88
11 0.81 2.27 -32.66 -29.58 3.47 167.89
12 0.86 2.27 -34.30 -31.17 3.47 167.89
13 0.90 2.27 -36.01 -32.84 3.47 167.89
14 0.94 2.27 -37.81 -34.60 3.47 167.89
15 0.99 2.27 -39.70 -36.44 3.47 167.89
16 1.04 2.27 -41.69 -38.38 3.47 167.89
17 1.09 2.27 -43.77 -40.41 3.47 167.89
18 1.15 2.27 -45.96 -42.55 3.47 167.89
19 1.20 2.27 -48.26 -44.79 3.47 167.89
20 1.26 2.27 -50.67 -47.14 3.47 167.89
-377.90
1285
1028
257
206
51
41
10
8
2
2
0.41
0.33
0.08
0.07
0.02
0.01
0.00
3rd Set
All Figs in Rs.lacs
depn Power
Year Capex Admin Insurance O&M IT total exp purchase price Power
0 -4500
1 0.5 0 0 -2250 -2249.50 3.22 0.20
2 3.00 7.93 0 -1800 -1789.07 3.29 635.58
3 3.15 7.93 0.00 -360 -348.92 3.35 647.57
4 3.31 7.93 -60.61 -72 -121.37 3.41 659.56
5 3.47 7.93 -63.64 -14 -66.64 3.47 735.20
6 3.65 7.93 -66.82 -3 -58.13 3.53 750.37
7 3.83 7.93 -70.16 -1 -58.98 3.60 765.70
8 4.02 7.93 -73.67 -0.12 -61.84 3.66 733.28
9 4.22 7.93 -77.35 -0.02 -65.23 3.72 719.53
10 4.43 7.93 -81.22 -68.86 3.78 731.52
11 4.65 7.93 -85.28 -72.70 3.47 671.56
12 4.89 7.93 -89.55 -76.73 3.47 671.56
13 5.13 7.93 -94.03 -80.96 3.47 671.56
14 5.39 7.93 -98.73 -85.41 3.47 671.56
15 5.66 7.93 -103.66 -90.08 3.47 671.56
16 5.94 7.93 -108.85 -94.98 3.47 671.56
17 6.24 7.93 -114.29 -100.12 3.47 671.56
18 6.55 7.93 -120.00 -105.52 3.47 671.56
19 6.88 7.93 -126.00 -111.20 3.47 671.56
20 7.22 7.93 -132.30 -117.15 3.47 671.56
-934.85 13094.08
 Guarante
ed
generatio Total
n& Amount amount
-4500.00 payback payable payable
-2250.00 709.64 74.06
-2250.00 723.03 75.46
-1800.00 736.42 76.85 226.37
-450.00
-360.00
-90.00
-72.00
-18.00
-14.40
-3.60
-2.88
-0.72
-0.58
-0.14
-0.12
-0.03
-0.02
-0.01
0.00
0.00
0.00
0.00