Techno Electric acquires Simran Wind Project

Techno Electric & Engineering Company, a listed company with Rs 486 crore of revenues in 2008-09, is acquiring Simran Wind Project. Simran is listed in Suzlon Energy 2008-09 Annual Report as a company which is a promoter group entity. Techno Electric is an engineering, procurement and construction company with a focus on the power sector. During the half year ended September 2009, its revenues rose by 11% to Rs 272 crore and its net profit increased by about 60% to Rs 58 crore.

While announcing these results, it announced that it has acquired Super Wind Project, making it a 100% subsidiary. That company too is listed along with Simran as belonging to the promoter group. Suzlon appears to have supplied the equipment for their wind power projects, as it shows sale of goods worth about Rs 270 crore to Super and Rs 450 crore in Simran collectively in 2008-09 and 2007-08.

The consideration for the Simran acquisition has not been disclosed. However, the power capacity of 50MW is quite large. Moreover, this project could be eligible for carbon credits under the Clean Development Mechanism. The company has made an application to the CDM of the UNFCC to be eligible to get CERs since wind power will be substituting thermal power that is polluting in nature. Its application says that it will be investing Rs 145 crore in setting up wind energy generators of about 21MW in Tamil Nadu. Karnataka is the other state in which it operates.

Thus, with 50MW under its belt, the investments by Techno Electric in Simran will be quite substantial. The investment in the company alone will in the range of Rs 350 crore. If its application is accepted by the UNFCC, it will get Certified Emission Reductions, which can be traded for cash. Techno Electro will have a capacity of about 95MW, considering the two acquisitions it has done. Its share price has risen by about 16% in a week’s time.

While wind power projects can be quite lucrative, especially in the longer run, initially Techno Electric’s surpus cash assets will come down. That will affect its other income, which contributes to nearly 40% of its profit before tax. Initially, there may be some slowdown in its profit growth, though the wind power project may yield health returns, assuming they operate at reasonably high load factors.

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