There is 'Wind' in this sail.

India: With a population of more than a billion, is a country to reckon with. A country with a majority of population, below 30 years of age, is deemed to be one of the hottest markets in the world for any company, which thinks 'profit & growth'. A huge educated workforce earning a good living, with the one of the top priorities being a self-owned house, it is not surprising that the country is witnessing the rapid growth in real estate. Other contribution to this sector comes from commercial spaces being developed for this new force, which demands better life style and is ready to pay for it. But even with these developments in the pipeline, wouldnt it be a little unnerving to know that the capital's electricity grid is on the brink of collapse. And this is not just the case with Delhi, it is a matter of concern for most of the states in the country. There is a shortfall which is going to exist and rather grow, as the demand growth far outstrips the growth in supply. So what does this translate to for an individual like me, who is planning to invest into a 2 bedroom flat in the capital? A house but no guarantee of power or water. One may suggest using a genset, but the economics of the genset are of no match when compared to the power of 'wind'. See for yourself, how individuals like you and me can gain from this idea, if implemented.

The logic is simple: I may not, as an individual retail investor, be able to purchase a share which costs Rs. 10,000, but may be 10 retail investors like me can get together in a mutual fund and purchase one share by investing 1000 each.

Similarly, even when I know that investment in wind energy is a lucrative option, it is far beyond my means to invest a couple of crores in setting up a wind mill. So why dont we have a mutual fund, which invests only in wind farms! The following are the economics and the associated benefits:

A 1 MW windmill typically cost somewhere between 4-5 Crores. No I am not asking you, for 4-5 crores, what I am, is just 1 Lac rupees. Assuming that 500 individuals invest a lac each to form a corpus of 5 crores which is then invested into windfarms. They have essentially secured their electricity needs for 20 years, which is the normal lifetime of a windmill !

INVESTMENT CHART:

S.No	Investment Element	Upfront Investment (INR)
1	Wind Research	5,00,000
2	Land Acquisition	10,00,000
3	Turbine Cost	40,000,000
4	Installation Cost	1,500,000
5	Sub-station Cost	20,00,000
	Grand Total	Rs. 41,500,000

Contribution by 500 individuals, of Rs. 83,000 each.

* The costs are assumed close to acutals.

This corpus invested in a windfarm can be expected to produce 1 MW of power as given below:

S.No	Particular	Value	Units
1	Rated Power	1000	KW
2	Year hours (Total time per year)	8760	Hours
3	Wind Factor	65%
4	Avg output of rated power in %	66%
5	Time operated Year Hours	3758.04
6
7	Total Energy Generated / Year	3758040	KWH
8
9	Total Power Generated / Month	313170	KWH
10
11	Average Number of Households Supplied with Power	696

The assumptions are:

1. Site gives 60-70% wind factor

2. Site gives 60-70% wind time

3. Average Energy consumption per household ~ 400-500 KWH

So how much power is this investment producing and whats the net benefit to me ?

Take a look at these numbers:

S.No	Particulars	Amount	Units
1	Units Produced / Year	3758040	KWH
2	Average Price Per Unit	2.75	INR
3	Value of Power produced /year	10334610	INR
4	Maintainance	830000	INR
6	Net Profit(pre tax & depreciation)	9504610	INR
7	Net Profit Per Member (pre-tax & depreciation)	19009.22	INR

Although Tax implications have not been considered, these pre-tax & pre-deprecitation, numbers look exciting indeed. And add to this, the benefit of depreciation which is almost 80% on the investment, which turns the fund towards a net loss, but saves tax. This way the fund is under net loss for around 4-5 years, but is producing cash profit of almost Rs. 19000 per member every year. In 4-5 years, the initial capital is recoevered and for the next 15 years, the mill produces energy for all to consume, while returning energy worth, close to Rs. 15000 every year on the investment.

Sounds nice, doesnt it ? So when can we see a mutual fund like this in the market? Any takers for this idea ?

Kaushal Vyas
(kaushal.vyas@gmail.com)

Disclaimer: The ideas expressed in the article are solely of the author, and not of the organization the author is emplyed by. The numbers presented above are also based on certain assumptions, leading to certain inaccuracies in the count. The purpose of this article is only to toy with the idea of a mutual fund for retail investors, which invests only in wind energy, thereby securing the energy needs of such investors over the future. The article does not, in any ways, aim to demonstrate ways in which certain government policies can be exploited to the benefit of investors, niether is the author associated with any mutual fund organization or wind energy equipment manufacturer)