The Hindu Business Line : Winds of financial grace

Asks Desdemona, in Othello, "Who is it that knocks?" And Emilia replies, "It's the wind." Call it `Tempests themselves, high seas, and howling winds,' as Cassio says in the same play, or `the cool and temperate wind of grace', as in King Henry V.

But the winds blowing steadily into annual reports smell of financial grace, as one learns from `windmill' data compiled by Global Data Services of India Ltd, Pune. Power generation from windmills is running to lakhs of units and their value equivalent, many crores of rupees.

For instance, going A to Z, one finds that in Apar Industries Ltd, wind power accounted for more than 15 lakh units in 2005-06, valued at more than Rs 1 crore. And Balkrishna Industries Ltd generated more than 55 lakh units of power, using windmills, for captive consumption, as the latest report of the directors informs. It is significant that the number of units generated was more than five times that of the previous year.

Take the case of Bannari Amman Spinning Mills, which has a windmill division. The company speaks of `4 windmills of 1250 KW each totalling 5 MW in Tirunelveli District, Tamil Nadu', as Unit 1, and `14 windmills, each of 800 KW capacity totalling to an aggregate capacity of 11.20 MW... erected and commissioned in Dharapuram Taluk, Erode District,' as Unit 2.

Windmills provided close to 1 crore units of power in 2005-06, compared to 36 lakh units the previous year. Close to 5 lakh units of wind energy was sold to TNEB (Tamil Nadu Electricity Board). Another company, Bannari Amman Sugars, sold more than 1 crore units to the TNEB grid.

Bullishness in the air

Bharati Shipyard shows less than Rs 0.5 crore as `windmill income', in comparison to Rs 167 crore as revenue from `ship manufacturing and repairs'. But the company is aggressively making additions. `Windmill' additions to `gross block' during 2005-06 were Rs 55 crore out of the total additions of Rs 61 crore.

Similar optimism is evident in the directors' report of Hercules Hoists Ltd. "The company had invested last year Rs 12.5 crore in the new business of wind energy of 2.5 MW, which has produced 39.51 lakh units of energy for 2005-2006 of value Rs 1.4 crore. The company has further invested Rs 6.25 crore for one windmill of 1.25 MW, which is installed at village Amkhel in Dhule District of Maharashtra." In Goldmohur Foods & Feeds Ltd, `power generating windmill' stands at Rs 6 crore, almost on par with `plant and machinery'.

At times, wind does take a hit. Borax Morarji Ltd has its chemical division in Ambamath, timber division in Kanyakumari, and wind farm in `Thoseghar/Maloshi/Vankusawade' in Satara. Electricity produced here meets part of the electricity requirements of the chemical division resulting in savings on account of electricity bill, says the company's 42nd annual report. Electricity generation, however, `was adversely affected due to the flood caused by heavy downpour on July 26 and 27, 2005,' informs the report. Despite that, 14.5 lakh units of electricity were generated during the year, against 22 lakh units the previous year.

Claims, carbon credit, and collateral

Wind claim? Read this snatch from the latest annual report of BSL Ltd: "Other income includes Rs 85 lakh against claim receivable from supplier of windmill being amount of shortfall against guaranteed generation during the year." Wonder if one can guarantee the blowing of winds!

Wind power is clean energy, which should earn companies credit. Such as, in this example, from DCW Ltd's 2005-06 annual report: "During the year company has completed the implementation of its windmill project of 11.2 MW capacity in the State of Tamil Nadu, comprising 14 windmills. The company is taking necessary steps to get carbon credit for this project."

Windmills can be good collaterals. For instance, a term loan of about Rs 3 crore from SBI `is secured by way of a first charge on the windmill situated at Tenkasi village,' says Elnet Technologies Ltd. With a gross block of Rs 3 crore, windmills match the company's computers, air-conditioners and UPS, all put together.

Fiscal benefit is evident, at times. Such as, in the `unsecured loans' schedule of Eimco Elecon India: `Sales Tax Deferment Account - Windmill'. Other sops may also help. In the case of Meridian Inds Ltd, the total capital investment during 2005-06 was Rs 12 crore, "incurred towards modernisation of existing machinery and a windmill to reduce the power cost... partly funded by a term loan under the Technology Upgradation Fund Scheme."

Visible savings

`Windmill income (net of wheeling charges)' stands at Rs 53 lakh in 2006, compared to a mere Rs 30,000 the previous year, in the case of Diamines & Chemicals. "During the year under review, your company has set up another windmill having capacity of 1.25 MW situated at Dhule, Maharashtra, which will help the company generate funds out of its power supply to the Maharashtra State Electricity Board," says the directors' report. "The windmill at Surajbari, Gandhidham, set up last year for captive consumption, has also proved to be very conducive in bringing down the cost of electricity to the company and thereby has made savings of nearly Rs 47 lakh during the year."

To tap the non-conventional energy resources and to reduce power cost, Lakshmi Machine Works has installed 12 high capacity windmills (18.2 MW) in the place of low capacity ones, says its annual report. Its windmills generated nearly 4 crore units last year, compared to about 3 crore units the previous year. "The same was adjusted against the power consumed from the grid," says the company.

Conservation of energy continues to receive increased emphasis at all the units of the company, says Precot Mills Ltd in its 2005-06 annual report. "The company's entire power requirement for its B unit is sourced from gas power, which is supplied by Andhra Pradesh Gas Power Corporation. The power requirement for its Weaving Unit is captively generated using windmills."

Polyspin Exports Ltd explains the power transaction thus: "The company has generated power out of windmill installed at Pazhavoor Taluk, Kanyakumari District, and the generated power was captively consumed by the company by drawing the power from TNEB grid. The power and fuel consumed is net of Rs 12.33 lakh being the credit given by TNEB for the transfer of power to the grid."

Per unit cost

Windmill division of Kovilpatti Lakshmi Roller Flour Mills Ltd, which is looking at `an additional generation capacity of 2.50 MW for captive consumption at a cost of Rs 12 crore', provides per unit cost of electricity generated through various modes. It is Rs 9.73 for diesel generation, which is more than double that of TNEB supply, at Rs 4.33 per unit. Lower still is wind power, at Rs 3.97.

A similar data presentation in the statements of Pidilite Inds Ltd shows Rs 4.39 against windmill power, while purchased electricity is at Rs 4.75. Power through diesel generation is at Rs 11.82, but the highest rate per unit is Rs 15.95, from fuel oil.

An informative bar chart shows `windmill generation during April 05 to March 06' in the annual report of Kandagiri Spg Mills Ltd. August 2005 stands tall, with 18.4 lakh units, followed by July and June that year.

Catch the wind

"The company is in the process of putting up windmill unit in the State of Maharashtra, as per other object of the company," states Khaitan Chemicals & Fertilizers Ltd in its Explanatory Statement dated June 7. "Members are required to approve the commencement of new business as required under Section 149 (2a) of the Companies Act. 1956," it adds. Kirloskar Pneumatic Co Ltd is a player in the supply chain. Its `transmission division' has a facility in Hadapsar (Pune), manufacturing "rail traction gears, windmill gearboxes, marine gearboxes for naval and commercial ships and gearboxes for industrial applications."

L&T provides `information regarding technology imported during the last 5 years', where it mentions 2002 as the year of import of `windmill components' technology. Status, though, is `under absorption'.

What of companies that are yet to catch the wind? Here is a helpful quote from Shakespeare's comedy, The Two Gentlemen of Verona, where Launce tells Panthino: "Why, man, if the river were dry, I am able to fill it with my tears; if the wind were down, I could drive the boat with my sighs."

http://AccountSpeak.blogspot.com

D. Murali

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