Yes, wtg suppliers will pressurize margins of crane suppliers. We need to
ask few questions - 1). What is the contribution of crane costs to overall
project costs? If this is low, squeezing them will not impact their
profitability much 2). Is there sufficient supply of cranes in market for
the huge projects that will come up under SECI bid? If not, crane suppliers
will have higher bargaining power
Happy to understand different views to understand this better
The cost to erect one MW plant is around 5 cr. If someone is setting up a 250 MW plant, the total cost is 1250 cr. The total crane hire charges could be around 5-15 cr i.e. 0.5%-1.5% of the total cost.
Very useful data. If, you can share the source of data. Boarders will be able to work on numbers to better the understanding of all.
I am sharing the Ambit report, just to show that IPPS are still making good Incremental rate of Return despite low auction prices in SECI auctions…this should lay to rest doubts regarding IPPs going into losses or the margins of WTG makers getting squeezed to nothing.Ambit_Utilities (POSITIVE)_India Wind Power - Staging a comeback!_15Mar2018.pdf (170.4 KB)
Not only are the IPPs making good IRR / ROE, they are expecting to be rewarded by the market when they come out with their IPOs in FY19.
The calculation here is flawed as it takes PLF @30% while wtg now have 40% plf in TN and Gujrat. Further PPA is for 25 years and not 20 years as assumed by ICRA.
Finally ICRA assumes 7 crore per mw price, if that assumption is correct then WTG makers will have windfall gains and we need not worry at all. We are not investing in IPPs but in WTG and sanghvi only
We have no basis to support or reject ICRA value. We have no data on cost per megawatt of windfarm and break-up of cost components.
Do we have a pure play WTG?
I did a small calculation of IRR for 250 MW @ 2.65/unit in SECI-1 for Inox.
For PLF @ 40%
Cost @5 crore/mw IRR = 18.3%
Cost @7 crore/mw IRR = 12.5%
For PLF @ 30%
Cost @5 crore/mw IRR = 13.3%
Cost @7 crore/mw IRR = 8.7%
Therefore cost of project, interest rate & PLF are critical to the success of project.
Thank you for sharing your views and reports. Few observations :
In a financial model for calculating IRR, any revenue post 20 years hardly impacts the IRR. Even after 15 years, the impact is not much (not more than 1-2%)
Project cost works out to 6.5-7 cr/ MW. Confirmed from industry sources.
4000 MW has been auctioned by SECI so far. Sites are in Gujarat and TN with estimated PLF of around 35%
I have closely seen the solar asset creation play by IPPs and it is not going to be very different for wind. It is all about deploying large amounts of capital, create a large capacity and sell it to pension funds directly or through listing for long term , steady and predictable revenues/ returns.
So, IRRs tend to be low. I am definitely not discussing investing in IPP. But the way it worked in solar, was it led to very very low margins for EPC players. I do not expect it to be different in wind. So, I will not invest in a WTG supplier.
Height is > 110 mtrs. I am keen to understand who are competitors of Sanghvi that may have cranes > 110 mtrs and their size, presence, etc. Given the specific requirement of 110 mtrs + cranes and 4 GW + of capacity to be built in next 24 months, Sanghvi may even be able to charges higher margins (instead of pressure on margins )
Yes i am even upbeat on above statement as most of the latest capex was in this category.
Prashant
We have a data source now
In 2016 cost per megawatt was more than 6.5 crore. So we will need some confirming if we are saying it has come down to 4 crore/megawatt in 2018.
Sanghvi has 90% of the cranes in the category of more than 100 tonnes. And Sanghvi has 70% market share in this category. So even if there are any competitors, they cant make much of impact i believe.
Most other players in heavy lift cranes are regional unlisted players https://www.jnklifters.com/,/www.steelcarriers.in are some ,they operate in specific areas.
I would request you to reconfirm the above figure with your industry sources. If this figure is approximately correct, then we can expect a steep rerating of WTG makers - Inox wind and Suzlon. Its an outright good news for investors in Suzlon and Inox wind…everybody is now fearing that the per mega watt cost of WTg may have come down to around 5 crores…but 6.5-7 crores per mw is a fabulous figure
Hope this helps
Yes it helps build my conviction in wind energy as a turnaround sector
A very interesting tweet
Market participants will finally wake up to the change in fundamentals of sanghvi when the stock is at a much higher levels…
Technically sanghvi was a good buy @170/175…it’s still a good buy …
Those conversant with the ichimoku cloud system would recognize a chikou span breakout in Sanghvi movers…
The stock has also moved above the long term downtrend line and stock is quite bullish on short and medium term.
Disclose…invested and hence have a bullish bias
Hi, by looking at the Sanghvi Movers chart (few days old chart), it seems Inverted Head & Shoulder pattern completed and break out is already happened around 1 week of April 2018. From here I expect the stock to be in bullish trend.
Disclosure: I have invested in this stock.
Board Meeting on 25th May 2018.
My post in Suzlon thread, which I think is relevant to this discussion. For views of members here: Is Suzlon a turnaround story after FY16
