The PP states that they have considered 80% accelerated depreciation. However the PDD is silent on the tax shielding as a result from accelerated depreciation.
PPs cleverly do not consider the accounting tax offsetting in their companies while calculating the IRR. This is evident from the recently registered projects and those requesting registration.  

The DOE is therefore requested to critically analyze how the accelerated depreciation benefit has been taken into account and confirm the accounting of the cash inflows as a result of the negative tax liability in the initial years. DOE should not be misguided by the financial presented by the PP or consultant which are custom made for CDM purposes and not the actual financial considered at the investment decision.
Note that considering cash inflows results in an increase in the IRR making wind projects a profitable venture.

Please also check the offer from WTG supplier and Purchase Order while validating the PLF. It may be so that the third party report which is made after investment decision making - indicates a lower PLF.
The PLF seems to be very low. Also check the tariff order.


Benchmark: 
No details are provided on the beta estimation. Is the beta levered or unlevered and what is the reason?? How is the beta appropriate for irr chosen?

Stakeholder consultation:
No details provided on which all stakeholders attended the meeting. 

Benchmark:
The benchmark is too high. Even after considering CDM benefits the IRR will not cross the benchmark. Then WHY did the PP go ahead with this non-profitable venture??
This clearly indicates the benchmark is made high just to prove additionality and is not the real benchmark expected by the PP.

Why has the PP considered Reliance Infrastructure Ltd for beta determination when Reliance Infrastructure Ltd. has many other businesses other than pure power generation? How come the risk profile of Reliance Infrastructure Ltd match with the project activity which involves wind electricity generation?

What is the vintage considered for beta determination? Is considering only one year appropriate?
Why tax computations for beta are only considered for one year?? What is the basis for considering a particular vintage for the market returns, beta estimation and risk free returns?

Why the particular index is considered for calculating the market returns? DOE to evaluate whether the PP has made any other investments considering the same index. Only because a particular index results in a higher benchmark??

Project cost seems to be very high. Are the quotations real or fabricated?

Are REC benefits being claimed? How will the DOE ensure that the PP does not claim REC benefits during project operation?

DOE to submit a negative opinion in case the IRR does not cross the benchmark even after considering CDM benefits as it clearly indicates the projects unviability in any case. Why would any one invest in a loss making venture? 

And if the PP can still go ahead with the project - it indicates that the benchmark is fabricated and is not considered by the PP while making the investment decision!! DOE to validate this critically!! How are the investment decisions really made???

DOE to check if the financials correctly apply the 10 year tax holiday - i.e. not liable for taxes for 10 years from the initial 15 years.

It is evident from the PDD that the values are consistent and it is definitely forged and cooked up values to show a non CDM project as a CDM project. What is this? DoE to check the Detailed Project Report and Feasibility Report which is submitted to the other agencies and Banks by Project owner and ensure that the values match with the DPR/FR  submitted to DoE also. After careful study of PDD it is found that DPR/FR is in different versions made and submitted with different purposes to different agencies which is totally unacceptable, illegal and unethical. PP/Consultant may show some undertaking letter from bank manager to DoE stating that both DPR’s are same. These kinds of letters should not be accepted and entertained by DoE. While collecting the DPR/FR from banks and other agencies, all DPR/FR pages should be counter signed by Banks and other agencies so that the real DPR/FR given to other parties by the PP/Consultant is same as the one submitted to DOE. In this particular project there is clear cut evidence that DPR/FR values are changed/ fabricated mischievously and intentionally. This must be probed fully. DOE must take a written undertaking from the PP/Consultant about the list of parties to whom this DPR/FR is submitted and for what purposes. Then DOE should cross check with all the parties and confirm that the same DPR/FR is submitted to all the parties correctly without any changes. DOE must not accept any reports and undertakings from PP/Consultant. DOE must make independent evaluation and use totally different parties without informing the PP or Consultant to cross check the facts. DOE to write to the party who prepared the DPR/FR which is submitted to the banks and other agencies and the same is verified against the one submitted to the DOE by PP/Consultant. This project is a fabricated and fake CDM project and must be rejected by the DOE right away. DOE should not support this kind of projects otherwise CDM EB should suspend this DOE for at least one year. 

1.	The purpose of the proposed project activity is not provided in the section A.2 of the PDD. Please clarify.
2.	How GHG emission is reduced due to the project activity is not demonstrated in the PDD. Please clarify. 
3.	The break up mentioned in the section B.4 doesn’t match with URL at the footnote. Pls. explain. 
4.	The calculation of project IRR is not as per “Guidance on the Assessment of Investment Analysis’ Version 03, EB 51, Annex 58”.
5.	Whether pre-tax or post tax IRR is selected is not demonstrated in the PDD.
6.	The basis of calculation of benchmark is not documented in the section B.5. PLR is not acceptable benchmark for the project. WACC based on Government bonds, risk premiums should be taken.
7.	The service tax rate of 10.3% is not clear. Pls. clarify.
8.	The estimation of project cost based on SBI Capital markets is wrong. Who is SBI capital markets Ltd. There is no basis. Project cost should be based on offer letter or TNERC norms. DOE to check the offer letter, TNERC norms to validate the project cost.
9.	Derating factor, array efficiency of the wind energy system is not depicted in the PDD. Pls. clarify. 
10.	Debt/Equity ratio should be based on recent investment done by the Project proponent. 
11.	Prior consideration of CDM which is important for the determination of additionality is not documented in the section B.5 of the PDD.  

This is not a CDM project. This is  a cooked up, fabricated and fake CDM project. The start dates are not correct. DOE to check with the equipment supplier and get a written confirmation of the purchase orders. Same way to check for “notice to proceed” and work contracts. No real and continuous action. 

There can not be more  months gap between the proven mile stones of action? Has the PP discussed this CDM project issue in the relevant board meetings? If yes, where are the certified evidences? The validation process must stop immediately for this project. What kind of due diligence the DOE has conducted before taking up this validation? Its shame on DOE! This DOE should be suspended for this kind of activities. Why to sign this kind of projects and then get sold to some bad CDM consultants and investors? Is this a proper DOE business? 

It is the responsibility of DOE to conduct proper due diligence and contract review before signing any contract. Now DOE to explain what it has done this project case. Why a DOE should work this kind of cooked up and fake CDM projects. How many genuine projects this consultant has done till to date? This consultant is responsible for corrupting and spoiling the whole CDM business in India. Why this consultant is not working like any other consultant in the market? Why he is web hosting only projects which were rejected, with drawn, forged (documents changed and forged) and fully problematic projects? 

The point to be noted is that the wind projects are mainly installed considering CDM revenues and offsetting of tax liability of the company as a result of accelerated depreciation of 80%.

PPs cleverly do not consider the accounting tax offsetting in their companies while calculating the IRR. This is evident from the recently registered projects and those requesting registration.

The DOE is therefore requested to critically analyze how the accelerated depreciation benefit has been taken into account and confirm the accounting of the cash inflows as a result of the negative tax liability in the initial years. DOE should not be misguided by the financial presented by the PP or consultant which are custom made for CDM purposes and not the actual financial considered at the investment decision.

The point to be noted is that the wind projects are mainly installed considering CDM revenues and offsetting of tax liability of the company as a result of accelerated depreciation of 80%.

PPs cleverly do not consider the accounting tax offsetting in their companies while calculating the IRR. This is evident from the recently registered projects and those requesting registration.

The DOE is therefore requested to critically analyze how the accelerated depreciation benefit has been taken into account and confirm the accounting of the cash inflows as a result of the negative tax liability in the initial years. DOE should not be misguided by the financial presented by the PP or consultant which are custom made for CDM purposes and not the actual financial considered at the investment decision.

It looks like from the PDD the start date of the project is tampered for sure. This must be verified and let the truth come out. The culprits of forgery and malpractices must be brought to book. Why DOE has taken up such a bad project? Is there any pressure on DOE or some cake offered to DOE? They DOE must terminate this project immediately. DOE to check the offer letters originals and get the same verified in writing from the OEM’s and submitted parties. Where is the OEM supplier agreement original? DOE to check for the same. Is it prepared later with date and amounts changed to suit the project workings? For sure yes. This is not acceptable. 
DOE to check all purchase orders originals with the receiver of purchase orders i.e. the supplier of equipment. This PO confirmation to the DOE must be in writing from a board level person of the equipment supplier to avoid any malpractices and forgery. Then DOE to check for the invoices dates, payment amounts and date of payments made with all original documents and reconfirm with the parties involved and the banks for the accuracy of amounts, dates and parties involved. Same analysis and due diligence work to be repeated for “Notice to Proceed” as written in the case of Purchase order as above. DOE to check all “Notice to Proceed” originals with the receiver of “Notice to Proceed” i.e. the supplier of equipment or Engineering Procurement & Construction Contractor. This “Notice to proceed” and EPC contract confirmation to the DOE must be in writing from a board level person of the equipment supplier and EPC contractor to avoid any malpractices and forgery. Then DOE to check for the invoices dates, payment amounts and date of payments made with all original documents and reconfirm with the parties involved and the banks for the accuracy of amounts, dates and parties involved.
 DOE to check OEM supplier agreements, EPC contractor agreements, “Notice to proceed” letters, and Invoices raised. I’m sure DOE will catch the malpractices happened in this project. All the parties involved in this matter must be brought to justice. DOE must not support this kind of forgeries and malpractices. DOE cannot afford to close their eyes to this kind of malpractices. 

It looks like from the PDD the start date of the project is tampered for sure. This must be verified and let the truth come out. The culprits of forgery and malpractices must be brought to book. Why DOE has taken up such a bad project? Is there any pressure on DOE or some cake offered to DOE? They DOE must terminate this project immediately. DOE to check the offer letters originals and get the same verified in writing from the OEM’s and submitted parties. Where is the OEM supplier agreement original? DOE to check for the same. Is it prepared later with date and amounts changed to suit the project workings? For sure yes. This is not acceptable. 
DOE to check all purchase orders originals with the receiver of purchase orders i.e. the supplier of equipment. This PO confirmation to the DOE must be in writing from a board level person of the equipment supplier to avoid any malpractices and forgery. Then DOE to check for the invoices dates, payment amounts and date of payments made with all original documents and reconfirm with the parties involved and the banks for the accuracy of amounts, dates and parties involved. Same analysis and due diligence work to be repeated for “Notice to Proceed” as written in the case of Purchase order as above. DOE to check all “Notice to Proceed” originals with the receiver of “Notice to Proceed” i.e. the supplier of equipment or Engineering Procurement & Construction Contractor. This “Notice to proceed” and EPC contract confirmation to the DOE must be in writing from a board level person of the equipment supplier and EPC contractor to avoid any malpractices and forgery. Then DOE to check for the invoices dates, payment amounts and date of payments made with all original documents and reconfirm with the parties involved and the banks for the accuracy of amounts, dates and parties involved.
 DOE to check OEM supplier agreements, EPC contractor agreements, “Notice to proceed” letters, and Invoices raised. I’m sure DOE will catch the malpractices happened in this project. All the parties involved in this matter must be brought to justice. DOE must not support this kind of forgeries and malpractices. DOE cannot afford to close their eyes to this kind of malpractices. 

It looks like from the PDD the start date of the project is tampered for sure. This must be verified and let the truth come out. The culprits of forgery and malpractices must be brought to book. Why DOE has taken up such a bad project? Is there any pressure on DOE or some cake offered to DOE? They DOE must terminate this project immediately. DOE to check the offer letters originals and get the same verified in writing from the OEM’s and submitted parties. Where is the OEM supplier agreement original? DOE to check for the same. Is it prepared later with date and amounts changed to suit the project workings? For sure yes. This is not acceptable. 
DOE to check all purchase orders originals with the receiver of purchase orders i.e. the supplier of equipment. This PO confirmation to the DOE must be in writing from a board level person of the equipment supplier to avoid any malpractices and forgery. Then DOE to check for the invoices dates, payment amounts and date of payments made with all original documents and reconfirm with the parties involved and the banks for the accuracy of amounts, dates and parties involved. Same analysis and due diligence work to be repeated for “Notice to Proceed” as written in the case of Purchase order as above. DOE to check all “Notice to Proceed” originals with the receiver of “Notice to Proceed” i.e. the supplier of equipment or Engineering Procurement & Construction Contractor. This “Notice to proceed” and EPC contract confirmation to the DOE must be in writing from a board level person of the equipment supplier and EPC contractor to avoid any malpractices and forgery. Then DOE to check for the invoices dates, payment amounts and date of payments made with all original documents and reconfirm with the parties involved and the banks for the accuracy of amounts, dates and parties involved.
 DOE to check OEM supplier agreements, EPC contractor agreements, “Notice to proceed” letters, and Invoices raised. I’m sure DOE will catch the malpractices happened in this project. All the parties involved in this matter must be brought to justice. DOE must not support this kind of forgeries and malpractices. DOE cannot afford to close their eyes to this kind of malpractices. 

Dear Sir,

I make following comments on the project

1.	The benchmark of 13.95% means a post-tax return of 30.3% on equity. TNERC has recommended a pre tax return of 19.85% on equity and EB has recommended 11.75% vide Annex 13, EB 61. Therefore, the return of >030% assumed in WACC calculation is very high. If the PP claims that this return is required to set up the project, then it does not conform to guidance 13 of Annex 58, EB 51. WACC has to be much lower – lower than 9% in this case. Then the project will become non-additional. 

2.	Since when Tamil Nadu windmills started giving PLF of as low as 21.5%? Annex 11, EB 48 is one the most abused guidelines by PP and DOE alike. It is very easy to get the PLF report for any PLF. Nowhere the PLF is stated to be as low as 21.5% in TNERC’s last order (see last few pages of the order). PP invariably gives lower PLF, as the project will not be attracted by Annex 67, EB 48, becasue PLF is not within control of PP. DOE should not accept any PLF less than 27.15%.  

3.	The cost is reported to be based on offer letters. How much did the Project developer actually pay? In India one can get quotation for any price. Hence, quotation is not correct though guidance 6 will be cited as the reason. DOE should read the entire VVM before citing guidance 6. In CDM projects, PP gets higher quotes to make the project additional. DOE is required to use its knowledge and intelligence. PP should be asked to take purchase order cost and not offer letter cost. 

4.	Tariff used for computation of saving takes into account only non-peak hour tariff. During the peak hour, the tariff is much higher. Windmills replace power consumed during both peak and non-peak hours. This is ignored. The electricity duty payable has also been ignored to make the project additional. The tariff has to be more than Rs.4/kWh. Get the latest power bill and take into account all variable cost as power tariff. Given tariff is incorrect.

This project activity is non-additional.  However, DOE will allow the PP to modify all the input parameters, to make the project  additional!! EB is requested to take care of such changes between the web hosted and final versions

Yours sincerely
Karthikeyan