Professional Documents
Culture Documents
Participants
• Mr. Ajit Joshi
Assistant Vice President, Enercon Financial Consultancy
• Mr. P. Gunaranjan
Manager-Insurance Business, BASIX
Moderator
• Mr. Valter Stoiani
Regional Head – Insurance and Weather Derivatives, Asia
ABN AMRO Bank, Hong Kong
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Enercon
Ajit Joshi
Wind Power in India
Wind Energy Potential
Eight principal states have commercially
feasible wind potential
Mapped Potential - 45,000 MW as per
estimate done in 1998. As per the industry
estimate the potential is more than 75,000
MW.
Installed capacity as on March 2006 –
5,339.43 MW
Government of India through Ministry of
New and Renewable Energy Sources has
proposed capacity installation of 10,000-
12,000 MW of renewable energy sources by
Financial Year 2012
President of India wants to see a installed
capacity of 25,000 MW from renewable
energy sources by 2020
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Wind Power in India
Growth of 57%
6,000
5,000
4,000
MW
3,000
2,000
1,000
-
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Installed (FY) 169 67 56 143 173 287 241 615 1,111 1,744
Cummulative 902 968 1,024 1,167 1,340 1,627 1,869 2,484 3,595 5,339
Investments made into Wind Energy Projects are allowed depreciation on a fast track basis
– current allowable rate is 80 percent of the project cost
Wind Power Projects are eligible for a 100% tax holiday under Section 80IA of Indian
Income Tax Act for a period of 10 continuous years during the first 15 years of operation
post commissioning..
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Wind Power in India – Regulatory framework
Drives and monitors the growth of non-conventional energy sources with policies and
programs
The power sale in India has been dominated to the State Electricity Boards (SEB) wherein
the tariff is determined for a period between 10 to 20 years upfront.
The Electricity Act 2003 attempts at changing this situation to a more competitive
environment by delicencing power generation and competition in distribution.
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Objective for such a product
• On a levellised cost basis over the total project life, the cost of the wind power is far more
competitive. For a larger growth of the sector large wind energy power projects need to
be developed.
• The average size of the project is anywhere from 25 MW upwards. Such large size
projects can not be done based on the balance sheet funding but require the standalone
project funding.
• For such a stand alone project finance following three risk need to be mitigated
Wind risk
Technology risk
Offtakers payment risk
• One of the ways to mitigate the wind risk is through the wind insurance/derivative product.
Such a product will also act as a credit enhancement to the prospective lender which will
indirectly reduce the cost of funding.
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What wind energy producer expects
• An insurance or derivative product to mitigate the risk of the variation in the wind speed.
The product should only take in to account the variation in the wind speed and should
ignore the other factors which contribute the generation of the final output.
• The viability of the project fully depends on the accuracy with which the actual wind
speeds match with the estimated wind speeds. Since the tariffs of any wind energy
project are predetermined for a period of 10 years and above, the variation in the wind
speeds directly effect the revenue generation.
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What wind energy producer expects
• The back bone of such a insurance policy is the historical data of the wind energy project.
Even though the wind energy is in infant stage, the wind data is maintained by the Indian
Metrological Department. (IMD) However certain bottlenecks which will be noticed are as
follows
The data from IMD may not be available in terms of exact location.
The data is measured at a very low height which may not be representative.
Today developer does its own wind assessment for a minimum two years before
putting up the project. This analysis is on the exact location and the hub height of
the wind turbine. This data is also verified by the external agency before putting up
the project. The data is continued to be collected even after the commissioning of
the project.
With this the average data available with the company will be around 5 to 6 years.
• Based on the above the insurance industry is requested to look at the authenticity of the
wind data instead of availability in terms of number of years.
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ITC context setting and wish list
Shailesh Naik
ITC – Rural economy – Weather Correlation
ITC – IBD division - is one of India's largest exporters of agricultural products
– Division’s supply Chain initiative – ITC e Choupal has transformed rural economy
in MP , UP , Rajasthan and Maharashtra
– Better rates for farmers – Advance information on rates - lower waiting time –
electronic weighing
– Access to better quality & door step delivery of FMCG , Non FMCG , consumer
durables, agri inputs and financial products and services
– Revenue Model of ITC echoupal and its stake holders – Farmers , Sanchalak , ITC
and Network companies is dependent on high traffic of transactions through e
choupal
– Health of Rural economy determines the traffic of transactions both on
procurement and sales
– Health of rural economy is highly dependent upon agriculture which is in turn
dependent on weather variables
– Thus Weather shocks will impact ITC in
– Procurement – Affect supply chain dynamics of ITC – Processed food division
– Product & services Sales – on account lower disposable incomes .
– Weather Insurance sale would cover more than a 100000 farmers this year and
next year we expect WI to cover over a quarter million farmers.
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ITC’s wish list : India Specific
Improve Customer service- Insurance companies
– Increase commitment to post sales service - Regular Data Availability - Inform farmers why
claim is not being settled or being settled
Sensitivity to Consumers
– A pool to protect farmers in case crop failure is across the region and weather risk fail to map /
solve the same
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BASIX
P. Gunaranjan
How does weather risk affect BASIX?
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BASIX’s wishlist
WHAT DO YOU WISH THE WEATHER MARKET COULD OFFER IN INDIA THAT IT
DOES NOT AT THE MOMENT?
– Need to reduce basis risk through
1. Deepening the network of weather stations to make the weather data more
relevant to farms that are scattered over a wide geography
– Improved design of the product to increase the correlation of the indices to crop
requirements
– (yet simple enough for the easy comprehension of the majority of farmers,
who are illiterate)
– (in the absence of this, there are undue expectations from farmers on the
risks that a weather insurance contract can cover)
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Bios
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Bios
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Bios
Mr. P. Gunaranjan
Manager-Insurance Business, BASIX
– Responsible for Development and implementation of Insurance services at BASIX, which
now includes the following product lines: Life, Health, Weather, Livestock and Micro-
enterprise Insurance
Education Qualification
– MBA +Masters in Physics
Years of experience
– 5years at BASIX (started with work in field operations at BASIX and then moved to the
insurance wing of BASIX)
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