If things fall in place, Gammon Infrastructure Projects Ltd (GIPL) will soon have a new project and thus a new wholly-owned subsidiary too. GIPL has claimed to be the lowest bidder for National Highways Authority of India (NHAI) project connecting Patna to Muzaffarpur.

“We are the lowest bidders for the project and are awaiting a notification of intent (NOI) from NHAI,” said Parvez Umrigar, managing director, GIPL.

The project is on an annuity model connecting Patna to Muzaffarpur, to be built on a BOT basis. GIPL has a total committed capital expenditure of Rs10,000 crore across various sectors and Rs2,000 crore in the road sector alone.

GIPL creates a new subsidiary or special purpose vehicle for every new project it wins. At present, the company has some 16 projects, out of which it holds majority stake in 13 projects.

- Amritha Pillay [email protected]

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Investor Interest

Osian Art Fund disappoints investors with just 5% returns

20 October 2009

Osian Art Fund, which was announced as the world’s first art fund in 2006 promising great returns, made a quiet exit in August 2009, disappointing its investors with returns as low as 5% per annum for the past three years.

Osian's-Connoisseurs of Art Private Ltd, a leading archive and auction house, had announced the art fund in July 2006. The art fund was a close-ended scheme for a period of thirty- six months. Though the Fund was expected to initiate more art funds all over the world, it exited with low returns in August 2009.

The 5% annual returns return translates into Rs115 on Rs100 invested in art through the Fund in 2006. In contrast, the BSE Sensex was above 10,000 when the art fund was launched and it’s flirting with 17,000 today, a rally of 70%.

“In retrospect the fund entered at the peak of the art market and is exiting at the bottom of the market. This was not good timing. However, it is easy to say this now on hindsight, no one expected poor performance in 2006,” said a company official from Osian.

The art fund matured in August 2009, and the company is in process of distributing the return to its investors. The purchase price per unit was Rs100 and the minimum investment was supposed to be Rs10 lakh. The project was started to create an asset class for Indian cultural artefacts over a period of thirty- six months
- Amritha Pillay

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Investor Interest

Tilting at windmills

20 October 2009

The total windmill capacity in India is now 9,000MW (3,594 MW in 2005) and around Rs30,000 crore has been invested in various windmill projects across the country.

Every reputed industrial group—even those who have nothing to do with the power sector— wants a piece of the windmill pie. According to the Centre for Wind Energy Technology (C-WET), India has a wind farm potential of 48,000 MW. This will require an investment of Rs3,00,000 crore.

But here’s the catch. The investment is nothing other than a depreciation machine with hardly any productivity. If the total potential of 48,000MW is realised, this will generate 48-75 billion KWh of electricity whereas if this amount is spent on thermal plants worth 75,000 MW, they will generate 525 billion KWh of electricity.

For instance, Tata Power put up its 80 MW wind power project in a windy area in 2008-09; it produced 1.6 million KWh for each MW of the windmill project. At its Trombay power house—where Tata Power has its 1,580MW thermal power project—it produced 9,845 million units accounting for 6.2 million KWh per MW. However, Tata’s windmill project was set up in a windy area. The situation is worse in other places where wind blades hardly move and generate negligible power.

A comparison of thermal power plants and windmill projects throws up some surprising figures. Thermal plants generate around 6-7 million KWh per MW of capacity despite their low efficiency of 36% as power is generated from coal to steam to turbine generator. Against this, windmills have no loss of efficiency in the process of converting wind to electricity as wind blades are directly attached with the rotor and generator. Despite this they get only one million KWh of electricity per MW.

Only plus point with windmills is that they have no raw material cost. But looking at the huge cost which is 1.5 times higher than thermal plant, why is the government promoting wind mills?

One answer may be thanks to depreciation benefits. The entire cost of a windmill plant can be depreciated in the first year of operation if it is used for more than 180 days other wise 80% cost can be depreciated even if it is used for one day under section 32 of the Income-Tax Act.

- Dhruv Rathi [email protected]