There is no information in the PDD how the project is fulfilling the conditions of Annex 13, EB 62. 

Both the projects seem to be Enercon’s sister concerns. DOE should check the Balance Sheets of both Enercon India the supplier and the two PPs and see how the payment has been accounted. If the cost is shown as sundry debtors or unsecured loans in PPs books (and a mirror entry in Enercon’s Balance Sheet), it only means that the payment has not been made. The company can also convert the payment into deferred payment without any bank guarantee or drawing bills. It is another form of unsecured loan. Such arrangement only means that the company is converting its stocks into projects to claim CDM benefits. Can the projects claim CDM benefits without taking investment risk? These projects should be rejected if there is no bank proof of payment is furnished. 

However, since the PDD mentions bank loan of 70%, the DOE should ask for the sanction letter and loan application letter and see whether the loan has actually been sanctioned. 

How the PDD shows this as a single project? There are two PPs. It should be a bundled project. Number of WECs owned by CEPCO Industries and Enercon (India) Power Development is not disclosed anywhere. The PDD is not transparent. How can such a PDD allowed to be web hosted by DOE?

When MPERC has recommended PLF of 22.5%, on what basis the projects have taken 19.5% PLF. In a recently registered project using Enercon WECs (project No.3350), PLF is given as 22.5%! Does it mean that the efficiency of Enercon WECs have come down or it is being done to make the projects additional? DOE should not accept any PLF less than 22.5%. Third party PLF estimation are the most non-credible document and it is possible to get third party estimation for even 10% PLF. 

 None of the manufacturer’s charge more than 5% escalation. In the case of project 3350, Enercon itself has charged only 5% escalation. Does it mean that Enercon will charge lower escalation rate to outsider and higher escalation rate to its own companies! How strange! 

How can Enercon give an offer its own companies? DOE should ignore these offers and get the appraisal note from the banks and check the cost and all input parameters and should adopt the same input parameters.

For book depreciation the PDD gives reference of Income Tax Act for restricting the depreciation to 90% of value. Does the consultant know the difference between book depreciation and IT depreciation? Moreover, which section of IT Act restricts the depreciation to 90%? 

Strangely, the consultant gives IT depreciation as 15%. Does the consultant know what IT Act is? It is 100% for this project – 80% accelerated depreciation plus 20% initial depreciation. If the project is not claiming accelerated depreciation, then also it is eligible for 35% depreciation and in that case it can claim Generation Based Incentive given by the Govt. at 50 paise per Kwh. The tariff will go up to Rs.4.85/kWh. Consultant wants to avoid accounting this. Further what about REC income? Why it is not accounted? 

Why does the company want working capital? What is the capital blocked to generate power?  Even O&M cost is to its own parent company. This is absolutely unsustainable and DOE should not allow this.

When MPERC has recommended a return of only 16% on equity on what basis the PP is expecting 18.61%? Consultant has not given the estimation of return on equity. This is not transparent and DOE should not have allowed the PP to webhost this project. Moreover, this return is very high compared to default return prescribed by EB. DOE should not allow this return

How is equity IRR considered correct for this project? It is financed 70% by loan. On what basis consultant claims that equity IRR is appropriate for this project activity. This financial indicator is not in line with Additionality Tool. DOE should insist on project IRR and should not accept equity IRR> 

The project’s start date is 28/10/2010. Therefore, it should have started operation before March 2011. Hence, the investment (if at all made by the PPs) will be in the same year as the start of operation. DOE should deduct the investment from the cash generation of the first year in computing IRR. Consultant will not do it because it will increase the IRR and make the project viable without CDM. 

For the given input parameters, the IRR should be more than 11% if tax saving is taken into account and PLF is taken at not less than 22.5%. The IRR of 7.36% indicates that PP has not taken into account the tax saving or has taken PLF at low level. PLF should not be less than 22.5%.  

This project is not additional