Carbon Credit Story

8/7/2019 Carbon Credit Story

1/19ITS ALL ABOUT MONEY, HONEY!

nalystayesh Jainayesh Jainayesh Jainayesh Jainayesh Jain 5675 44785675 44785675 44785675 44785675 4478

[email protected])

ealing

ndeepa Arorandeepa Arorandeepa Arorandeepa Arorandeepa Arora 98201 9238798201 9238798201 9238798201 9238798201 92387

en Pen Pen Pen Pen Patelatelatelatelatel 98204 4392098204 4392098204 4392098204 4392098204 43920

July 2005

Carbon Credits

ndia Infoline Research can be also accessed on Bloomberg (Code IILL), Thomson First Call and ISI Emerging markets.

Emitting Gains


2/19

July 18, 2005 2

Carbon Credits: Emitting Gains

Company CERS Gross Value Net of tax Incremental EPS FY05 EPS

(in Mn) (Rs Mn) (Rs Mn) (Rs) (Rs)

SRF 3.830 823 552 8.42 9.13

GFL 3.000 645 432 37.32 47.00

BCML 0.200 43 29 0.12 6.16

UML 0.012 3 2 0.02 11.00

NSML 0.022 5 3 0.19 19.48

KPTL 0.031 7 5 0.42 26.45

TNPL 0.037 8 5 0.08 5.47

With the global temperatures rising on back of the greenhouse effect, the United Nations

Framework Convention on Climate Change (UNFCCC) announced the Kyoto

Protocol to bring down the emissions of the greenhouse gases. Of the three options

(Joint Implementation, Clean Development Mechanism and Emissions Trading) available

to the parties required to reduce the emissions, India qualifies to be the host country

for CDM projects.

The major segments benefiting from this activity in India are likely to be manufacturers

of HFC and CFC, sugar companies, wind energy, etc. However, the impact on the

earnings are likely to be substantial only for the HFC and CFC manufacturers as thenumber of credits awarded are much more than awarded to other players (1 ton of

HFC 23 = 11,700 tons of CO2).

To study the impact of carbon trading on Indian companies, we have selected a

spectrum of stocks which comprises of SRF Ltd (SRF), Gujarat Fluorochemicals Ltd

(GFL), Balrampur Chini Mills Ltd (BCML), Usha Martin Ltd (UML), Nahar Spinning

Mills Ltd (NSML), Kalpataru Power Transmissions Ltd (KPTL) and Tamil Nadu

Newsprints and Paper Ltd (TNPL).

The primary beneficiaries are SRF and GFL with assured addition to their EPS ofRs8.4 and Rs37.3 respectively for 10 years begining from 2008. With robust demand

existing for CERs in the industry, the prices might move upwards as well. However,

the stock prices of both the companies have surged astoundingly and seem to have

discounted much higher prices of CERs than the current prices. Any further view on

these stocks would be taken after closely monitoring prices of CER.

Other than SRF and GFL, sugar companies will have marginal benefits, while other

companies are likely to have miniscule benefits. So we do not advise buying into any

other stocks on back of the carbon-trading story.

Table: Incremental EPS on CER rate of US$5 per CER

Company specific projects and sensitivity on incremental EPS to various CER rates (US$5-US$25)

have been mentioned inside.


3/19

July 18, 2005 3


Chart 1: Change in global temperature

from long term mean

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1950

1953

1956

1959

1962

1965

1968

1971

1974

1977

1980

1983

1986

1989

1992

1995

1998

2001

2004

DegreesCelsius

Source: EPA and India Infoline Research

Chart 2: Break-up of Global Primary

Energy Consumption in 2004

What is Greenhouse effect?

The sun heats up the earth by sending solar

rays towards us. Some of these rays dont getthrough our atmosphere. Those that do,

warm up the earth. When the earth warms up

it radiates its own rays of heat infrared

rays. Greenhouse gases absorb those, whichdont escape past the atmosphere. These

greenhouse gases warm the earth so it is at

the temperature we experience now. Without

this process the earth would be some 30o C

cooler and life on our planet would be very

different. However, we are producing too

many greenhouse gases, which mean they

are absorbing more heat and warming theearth too much this is called global

warming. One of the main greenhouse gases

is carbon dioxide, which can be created from

chopping down and burning of trees. Thefuel used in cars and machinery also creates

carbon dioxide, as do coal and natural gas.

Therefore, if we reduce the use of fuel and

reduce deforestation, the amount of

greenhouse gas around earth should also be

reduced. Scientists say it is already too late

to prevent global warming and thereforeclimate change, but by reducing greenhouse

gases we could still limit the impact. Even achange in temperature of under 1 o C is

enough to cause changes in rainfall and sealevels.

Effects of global warming

Seawaters could rise almost a meter in this century, and will continue to move up.

Some coastal regions already see seasonal flooding, and the situation is expected

to worsen as water levels rise.

Coral reefs are under pressure from changes in water level and temperature. As

most carbon goes into sea, plankton could suffer, and that would affect specieshigher up the food chain.

In certain regions, each degree rise in the surface temperature brings a further

drop in crop yields.

Why is the world talking about carbon credit?

With the increase in Greenhouse Gas (GHG) emissions in the atmosphere, the global

temperatures have been on a constant rise (See Chart 1). In last 65 years the amount

of anthropogenic (made or induced by humans) carbon dioxide has risen from 280

parts per million (ppm) to 380 ppm. With the current energy mix (See Chart 2) favoring

the use of fossil fuels, the level is expected to increase at a rapid pace. This has led to

a global phenomenon called the Greenhouse Effect.

Source: BP Statistical Review 2005

Oi l

37 %

Natural

Ga s

24 %

Coal

27 %

Nuclear

Energy

6%

Hydro

Electricity

6%


4/19

July 18, 2005 4


According to a press release from the United Nations Environment

Programme:

The Kyoto Protocol is a legally binding agreement under which industrialized

nations will reduce their collective emissions of greenhouse gases by 5.2%

compared to the year 1990 (but note that, compared to the emission levels that

would be expected by 2010 without the Protocol, this target represents a 29%

cut). The goal is to lower overall emissions from six greenhouse gases carbon

dioxide, methane, nitrous oxide, sulfur hexafluoride, HFCs and PFCs

calculated at an average over the five-year period of 2008-12. National targets

range from 8% reductions for European Union and some others to 7% for the

US, 6% for Japan, 0% for Russia, and permitted increases of 8% for Australia

and 10% for Iceland.

The protocol also reaffirms the principle that developed countries have to pay and

supply technology to other countries for climate related studies and projects.

The protocol provides three mechanisms to the developed nations to meetthe emission targets.

1) Joint Implementation (JI): The Kyoto Protocol provides for developed countries

to implement projects that reduce emissions, or remove carbon from the atmosphere

in other developed countries in lieu of Emission Reduction Units (ERUs). These ERUs

can be used to meet the emission reduction targets. A JI project might involve, for

example, replacing a coal-fired power plant with a more efficient combined heat and

power plant. JI projects must have approval of all the parties involved, and must lead

to emissions reductions or removal that are additional to any that would have occurred

without the project. Projects from the year 2000 that meet the JI requirements may belisted as JI projects. However, ERUs may only be issued in relation to periods from

2008 onwards.

What is Kyoto Protocol?

Some species are already moving towards cooler regions and some are not mak-

ing it. Global warming may not yet be the factor, but it will almost certainly take its

toll on species.

In the past periods of climate change has converted whole sections of Africa into

deserts. In extreme scenarios, areas that are currently fertile could become barren

and dry.

Consequently, The United Nations Organization (UNO) felt an immediate need to

decrease the emissions of GHG. As a result, under The United Nations Framework

Convention on Climate Change (UNFCCC) the Kyoto Protocol was released.


5/19

July 18, 2005 5


Methodology for CDM projects

2) Clean Development Mechanism (CDM) Projects:The CDM provides for

developed countries to implement project activities that reduce emissions in developing

countries in return for certified emission reductions (CERs). The CERs generated by

such project activities can be used by developed countries to help meet their emission

targets under the Protocol. The protocol also stresses that such project activities are

to assist the developing country host parties in achieving sustainable development. A

CDM project activity might involve, for example, a rural electrification project using

solar panels or the installation of more energy efficient boilers. The protocol refrains

developed countries from using CERs generated out of nuclear facilities to meet the

targets.

3) Emissions Trading:The Kyoto Protocol provides that developed countries can

acquire units from other developing parties and use them towards meeting their emissions

target. This enables developed countries to make use of low cost opportunities to

reduce emissions. Only developed countries in specified in Annexure I to the Kyoto

Protocol with emission limitation and reduction commitments inscribed in Annex B to

the Protocol may participate in such trading. Such countries must therefore be prepared

to transfer units when they do not require them for compliance with their own emission

targets.

Where does India qualify?

India being a developing country is not included in the Annexure I of the protocol.

Hence, India cannot qualify for JI and emission trading mechanisms. It qualifies to be

a host country for the CDM projects.

CDM ProjectPromoter

Project Identification

Project Construction

Project Operation

Generation ofcarbon credits

Verification/Certification by DOE

UNFCCC / EBIssues CERsCER

Buyer ofCER

Buyer pays ProjectProponent

Documentation(PCN &PDD)

FindingBuyer

FindingBuyer

PDD Validation byDOE

Registration withUNFCCC

Endorsementby DNA

PCN: Project Concept Note PDD: Project Design Documentation DOE: Designated Operational EntityDNA: Designated National Authority of host country CER: Certified Emission Reduction


6/19

July 18, 2005 6


CER Trading

A transaction in CER trading involves buying of GHG emissions credits by entities

(companies, Governments, etc.) from companies or Governments involved in projects

related to carbon emission reduction in developing countries. The idea is to make

developed countries pay for their wild ways with emissions while at the same time

rewarding countries with good behavior in this regard. For example, a company in

India can prove it that it has prevented emission of x-tons of carbon, it can sell this

much amount of points or carbon credits to a company in say, the US which has been

emitting carbon. This allows industries in developed countries to offset their emissions

of carbon dioxide by investing in reforestation and clean energy projects in developingcountries such as large-scale tree plantations as a lucrative alternative to reducing

emissions. Planting 100,000 hectares of new forest can remove 1mn ton of carbon per

year from the atmosphere.

Country US$/ton of carbon

Japan 400

USA 200

India 25

Benefits likely to be derived from CDM Projects

Developed countries will be able to meet their targets of reducing emissions at

much lower cost.

Source: E&Y Report on CDM Project Development dated February 7, 2005

Table: Cost of emission reduction

Developing countries will be able to access the latest technology. Further, the partiesinvolved in carbon credit sale would be able to put in additional investments into

their routine business through the carbon credit earnings.

Overall it will lead to reduction of GHG emissions.

Company A

Emits and required tosequester 100 tons ofCO2 but does only 80

tons

Company B

A project in developingcountry, which

sequesters 20 tons ofCO2

Company A Company B

20 tons of Carbon credit

Cash payment


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July 18, 2005 7


CDM Applicability

The industries, which can qualify for the CDM projects, are as follows:

Renewable energy

Wind power

Solar energy

Biomass power

Hydel power

Geothermal

Tydel Power

Fuel switching from fossil fuel to green fuel like biomass, rice husk, etc.

Energy efficiency measures related to

Boiler

Pumps

Turbines

Installation of various speed drives

Efficient cooling systems

Back pressure turbines, etc

Cogeneration in industries having both steam and power

requirements

In waste management

Capturing of landfill methane emission to generate power

Utilization of waste and waste water emissions for generation of energy for

captive use of power generation

In transport

Fuel switch from gasoline and diesel to natural gas

Modal shift from air to train, road to train at macro level

Replacement of shipment of certain raw materials through road to pipelines


8/19

July 18, 2005 8


Charts: Technology share of emission reduction projects in 2003-04 and 2005 (Jan-April)

Source: IETA

Examples of global companies that have taken initiatives to reduce

emissions

American Electric Poweris investing in renewable energy projects in Chile,

exploring ways to burn coal more cleanly, and testing methods to sequester carbon.

Florida Power and Lightinvested in 42 wind facilities and energy efficiency,

eliminating the need to build 10 power plants.

General Electricpurchased Enrons wind business and a solar energy company;

doing research on earth-friendly hydrogen and lower emission jet engines and

locomotives.

General Motorsis in the process of developing hydrogen-powered cars that dont

emit CO2.

Toyota, the world leader in hybrid gas-electric cars that deliver superior fuelefficiency.

The Market for Carbon Trading

Data on carbon trading is available since 1998 and according to the statistics available

the total volume of carbon credits traded have increased from close to 18mn tons of

CO2 equivalent in 1998 to around 107mn tons of CO2 equivalent in 2004. In the

current year the volumes have already reached levels of 43mn tons of CO2 equivalent.

Landfill gas

capture

16%

Hydro

9%

Wind

8%

HFC

23%

N2O

3%

Others

8%

Forestry

4%

Animal

Waste

12%

Energy

Efficiency

3%

Biomass

14%

Landfill gas

capture

10%

Hydro

12%

Wind

7%

HFC

25%

N2O

4%

Others

7%

Biomass

11%

Energy

Efficiency

2%

Animal

Waste

18%

Forestry

4%


9/19

July 18, 2005 9


Charts: Carbon trading volumes in CO2 equivalent and in US$mn

0

20

40

60

80

100

120

1998

1999

2000

2001

2002

2003

2004

2005

0

100

200

300

400

500

600

1998

1999

2000

2001

2002

2003

2004

2005

US$mn

Known Estimated

Source: IETA (International Emission Trading Association)

Out of the total volumes traded in 2005 so far, more than 92% was on account of

compliance with the Kyoto Protocol and only close to 7% was on voluntary basis.

Breakup of buyers in the carbon trading market

The buying side of the market is primarily dominated by European countries and Japan

with 60% and 21% share in the market respectively. More than two-thirds of the

purchases made from Europe were by private firms, against only one-third by the

Governments of Netherlands, Denmark, Sweden and Austria.

Source: IETA

Major sellers in the market

The sellers side is dominated by Asia whose share has increased from 43% in 2003-

04 to 45% for Jan to April 2005. These aggregate figures, however, are strongly

influenced by the dynamics of HFC23 (1 ton of HFC 23 = 11700 tons of CO2)

destruction projects, which are few in number but very large in volume, and are primarily

located in Asia.

Charts: Break-up of buyers of carbon credits in 2003-04 and 2005 (Jan-April)

UK

6%

Netherland

s

22%

Japan

29%

Other EU

30%

USA

3%

Canada

6%Australia

1%

New

Zealand

3%Japan

21%

Other EU

32% Netherland

s

16%

UK

12%

New

Zealand

7%

Australia

3%

Canada

5%

USA

4%


10/19

July 18, 2005 10


Charts: Break-up of sellers of carbon credits in 2003-04 and 2005 (Jan-April)

Source: IETA

Observed Prices

During the period January to April 2005 the prices of CERs have ranged from US$3.00

per ton of CO2 equivalent to US$7.15 per ton equivalent. These prices are substantially

higher than those observed in the period between January 2003 to December 2004.

The weighted average prices have increased by 21% for CERs over the period.

Rest of

Asia

17%

India

26%

Brazil

12%

Rest of

Latin

America

23%

Transition

Economies

9%

OECD

10%

Africa

3% Rest of Asia

14%

India

31%

Brazil

13%

Africa

0%

OECD

14%

Transition

Economies

6%

Rest of

Latin

America

22%


11/19

July 18, 2005 11


SRF Ltd

Company Background

SRF Ltd, a US$250mn industrial group manufactures Industrial Synthetics,

Fluorochemicals, Industrial Fabrics, Packaging Films and Pharma Chemicals. Com-

mencing operations in 1974, SRF today operates from eight plant locations in India

and abroad and has attained market leadership position in many of the products it

manufactures. SRFs relentless focus on TQM techniques has resulted in the company

winning the prestigious Deming Application Prize in 2004 (the first nylon tire cord

company outside Japan to be awarded this prize).

Project details

SRF operates a swing plant at Rajasthan, India since 1989 that produces HFC 22,

CFC 11 and CFC 12 alternately on campaign basis. HFC 23 is generated as a co-

product (waste stream) during the manufacturing process of HFC 22. The main ob-

jective of the CDM project is to reduce the GHG emission through destruction of

HFC 23 gases, in a proposed thermal oxidation system and would be implemented

within the existing premises of SRF. Since there are no regulations restricting the emis-

sion of HFC 23 in India, SRF has been releasing this gas into the atmosphere before

identification of this project as a CDM project under the Kyoto Protocol. Since April

2004, SRF has been storing HFC 23 waste gas. Thus, with the implementation and

operation of the thermal oxidation system, the project will reduce GHG emission (in

equivalent CO2 equivalent terms) that otherwise would have continued to occur in

absence of the projet.

Although HFC 23 has low toxicity, it has been identified as a GHG under the Kyoto

Protocol with global warming potential of 11,700 (1 ton of HFC 23 = 11,700 tons of

CO2).

Impact on EPS

Carbon credits (in mn) 3.83 3.83 3.83 3.83 3.83

CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43

Gross Value Rs Mn 823 1,647 2,470 3,294 4,117

Tax @ 33% 272 543 815 1,087 1,359

Post tax value Rs Mn 552 1,103 1,655 2,207 2,759

Incremental EPS 8.4 16.8 25.2 33.7 42.1

FY05 EPS 9.1 9.1 9.1 9.1 9.1

areholding patternareholding patternareholding patternareholding patternareholding pattern

are price chartare price chartare price chartare price chartare price chart

MP Rs283

week high/low Rs306/20

ce value Rs10

E code 503806

E code SRF

omberg code SRF@IN

uters code SRFL.BO

areholderareholderareholderareholderareholder (%)holding(%)holding(%)holding(%)holding(%)holdingmoters 33.3titutional Investors 1.7ian Public 51.2

hers 13.8


12/19

July 18, 2005 12


Company background

Gujarat Fluorochemicals (GFL) was jointly promoted by Industrial Oxygen Company

along with its subsidiary and the Gujarat Industrial Investment Corporation (GIIC), in

1987. The company manufactures Chloro-fluorocarbon refrigerant gases and

anhydrous hydrofluoric acid, at its plant in Gujarat and is the largest player in the

industry. The company also has diversified into the entertainment industry by setting up

a wholly-owned subsidiary INOX Leisure Ltd which is setting up a chain of world-

class multiplex cinema theatres.

Project Details

GFL operates a HCFC 22 plant in Ranjitnagar, Dist. Panchmahals, Gujarat, India

since 1989. The plant uses Chloroform (CHCl3), Fluorspar (CaF2) and Sulphuric

Acid as the main feedstock and produces HCFC 22 in a swing plant operation with

by-product HFC 23, which is being vented to atmosphere (the swing plant makes R

11 & R 12 on campaign basis with R 22). GFL wishes to take up thermal oxidation of

HFC 23, the by-product of HCFC 22, as a CDM project on voluntary basis. Under

this project activity, GFL shall additionally install, operate and maintain a HFC23

collection and thermal oxidation system to decompose HFC23 into its products of

combustion. The thermal oxidation system in combination with the existing HCFC

plant will enable GFL to avoid HFC23 emissions (GHG emissions), which would in

the absence of the project activity have been vented to the atmosphere. The installation

of thermal oxidation facility would not only make GFL contribute to society by restricting

release of GHG but would give economic and technical benefits to the country by

providing direct and in-direct employment and transfer of thermal oxidation technology

to the country and thus contributing to sustainable development.

Although HFC 23 has low toxicity, it has been identified as a GHG under the Kyoto

Protocol with global warming potential of 11,700 (1 ton of HFC 23 = 11,700 tons ofCO2).

Impact on EPS

Gujarat Fluorochemicals Ltd

Carbon credits (in mn) 3 3 3 3 3

CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43

Gross Value Rs Mn 645 1,290 1,935 2,580 3,225

Tax @ 33% 213 426 639 851 1,064

Post tax value Rs Mn 432 864 1,296 1,729 2,161

Incremental EPS 37.3 74.6 112.0 149.3 186.6FY05 EPS 47.0 47.0 47.0 47.0 47.0



MP Rs1330

2-week high/low Rs1358/130

ace value Rs10

SE code 500173

SE code GUJFLUORO

oomberg code GFCL@IN

euters code GFLR.BO

hareholderhareholderhareholderhareholderhareholder (%)holding(%)holding(%)holding(%)holding(%)holdingomoters 68.2stitutional Investors 0.1dian Public 19.7

thers 12.1


13/19

July 18, 2005 13


Balrampur Chini Mills

Company background

Balrampur Chini Mills Ltd. is one of the largest sugar manufacturing companies in

India. The allied business of the company also consists of manufacturing and marketing

of Alcohol, Organic Manure and generation of power. The company has four sugar

factories located in Eastern Uttar Pradesh (India) having an aggregate sugarcane

crushing capacity of 29,000 tones crushed per day. The company has an installed

capacity of 160 KLPD for alcohol manufacturing and 47.8 MW of power generation.

Project DetailsBalrampurs two co-generation plants -at Balrampur and Haidergarh - possess a

combined capacity 39.8 MW. These plants have not only serviced the companys

complete power requirement at these two units, but have also saved the differential

cost that it would have had to pay for commercial purchase. These plants have also

generated a steady income of Rs576mn in FY05. In doing so, they have addressed

also the parameters of the Kyoto Protocol.

In the process of sugar production, cane is crushed to extract the juice. This juice is

then further processed to white or raw sugar. In the process of crushing the by-product

bagasse is produced, a fibrous material. The combustion of bagasse, as biomass, will

permit the electricity generated from the project to qualify as renewable.

Impact on EPS


CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43

Gross Value Rs Mn 43 86 129 172 215

Tax @ 33% 14 28 43 57 71

Post tax value Rs Mn 29 58 86 115 144

Incremental EPS 0.1 0.2 0.4 0.5 0.6FY05 EPS 6.2 6.2 6.2 6.2 6.2

hareholding patternhareholding patternhareholding patternhareholding patternhareholding pattern

hare price charthare price charthare price charthare price charthare price chart

MP Rs74.6

2-week high/low Rs76.25/28.5

ace value Rs1

SE code 500038

SE code BALARAMCHIN

oomberg code BRCM@IN

euters code BACH.BO

hareholderhareholderhareholderhareholderhareholder (%)holding(%)holding(%)holding(%)holding(%)holdingomoters 34.2stitutional Investors 19.6dian Public 17.0thers 29.2


14/19

July 18, 2005 14


Company background

Usha Martin Ltd (UML), the flagship company of Kolkata based Jhawar group, was

erstwhile known as Usha Beltron Ltd (UBL). UBL was promoted in 1986 by Usha

Martin Industries Ltd (UMIL) along with Bihar State Electronics Development Cor-

poration in collaboration with AEG Cable of Germany for manufacturing Jelly Filled

Telecom Cables (JFTC). UMIL, manufacturer of specialty steel and wire & wire

ropes, war merged with UBL on 1st October 1997. The name of UBL was changed

to UML wef May 1, 2003. At present, the group has three principal manufacturing

divisions namely steel, wire & wire ropes and cables.

Project Details

The purpose of the project is to utilize the excess Blast Furnace Gas (BFG) as the heat

source in the reheating furnace and reduce furnace oil consumption. The project activ-

ity is essentially conservation of Furnace oil, thereby contributing to the fuel economy

as well as reduction of CO2 emission.

In the pre-project scenario, the major portion of the BFG from the mini blast furnace

is utilized in the Mini Blast Pre-heater and captive power plant for power generation.

The excess BFG is flared. In the project scenario this excess BFG is redirected intothe reheating furnace to utilize the heat of combustion of the excess BFG earlier lost to

atmosphere, and reduce equivalent quantity of furnace oil combustion and its associ-

ated CO2 emissions.

Impact on EPS

Usha Martin


CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43


Tax @ 33% 1 2 2 3 4Post tax value Rs Mn 2 3 5 7 8

Incremental EPS 0.0 0.0 0.1 0.1 0.1

FY05 EPS 11.0 11.0 11.0 11.0 11.0



MP Rs81.3

-week high/low Rs116.7/46.05

ce value Rs5

E code 517146

E code USHAMART

omberg code USM@IN

uters code USBL.BO

areholderareholderareholderareholderareholder (%)holding(%)holding(%)holding(%)holding(%)holdingomoters 43.3titutional Investors 8.4

dian Public 16.0

hers 32.3


15/19

July 18, 2005 15


Nahar Spinning Mills Ltd

Company background

The company is into manufacturing of hosiery garments, cotton and synthetic blended

yarn. Keeping in view the emerging opportunities arising out of the quota free global

trade wef January 1 2005, the Management has decided to invest Rs1,125mn in the

capacity expansion. The company shall be putting up a Ultra Modern Spinning and

Knitting cum Dyeing Plant with a capacity of 25,000 spindles at village Lalru, Patiala.

Project Details

The purpose of the project is to utilize rice husk available in the region for effectivegeneration of electricity for in-house consumption. The project activity is the part of

cogeneration activity involving generation of electricity and steam for captive

consumption. The project activity will indirectly help in reducing the power deficit in

the state of Punjab and conserve natural resources such as coal. The major equipments

for the project comprise of a new 3.5MW condensing cum extraction turbine and will

replace the three existing low-pressure boilers with a new boiler of 30 tons per hour

(TPH) steam generation capacity at 67 atomosphere2 (atm) pressure.

The total power requirement of the spinning mill was being met by the Punjab State

Electricity Board Grid and total process steam requirement of around 21.5TPH at 8

atm is being met by existing three low pressure Atmospheric Fluidized Bed Combustion

boilers, which are fed with rice husk.

Impact on EPS


CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43


Tax @ 33% 2 3 5 6 8


Equity 17 17 17 17 17


FY05 EPS 19.5 19.5 19.5 19.5 19.5



hareholderhareholderhareholderhareholderhareholder (%)holding(%)holding(%)holding(%)holding(%)holdingromoters 57.6stitutional Investors 4.5dian Public 30.1

Others 7.8

MP Rs264.3

-week high/low Rs287/135.5

ce value Rs10

E code 500296

SE code NAHARSPG

oomberg code NSM@IN

uters code NHRS.BO


16/19

July 18, 2005 16


Kalpataru Power Transmission Ltd

Company background

Kalpataru Power Transmission Limited is one of the leading companies in the field of

Turnkey projects for EHV Transmission Lines up to and including 800 KV in India

and Overseas. As an EPC contractor, the scope of its work includes design, testing,

fabrication, galvanizing of towers and construction activities from survey, civil works/

foundation, erection to stringing and commissioning of EHV lines, besides procurement

of items such as conductors, insulators, hardware accessories etc. It also participates

in Substation projects on a partnership basis. Kalpataru Power has one of the largest

and modern Fabrication Plant with an annual installed capacity of 54,000 MTs and is

equipped with modern machineries (including 5 CNC machines) and automated

temperature controlled Galvanising Bath, besides its own state-of-the-art Testing Station

and R & D Centre. It was the first company in 1994 in the Indian transmission industry

to be ISO 9001 certified.

Project Details

The project involves implementation of a bio-mass based power generation plant using

direct combustion boiler technology. The installed capacity of the plant is 7.8MW. the

fuel used is primarily mustard crop residue, which is abundantly available in the vicinity

of the site. The electricity generated will be sold primarily to the state grid with the

balance sold to third parties (large industrial customers). The generated electricity will

replace a mixture of coal and gas based power generation.

Impact on EPSCarbon credits (in mn) 0.031 0.031 0.031 0.031 0.031

CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43


Tax @ 33% 2 4 7 9 11

Post tax value Rs Mn 5 9 14 18 23Incremental EPS 0.4 0.8 1.2 1.7 2.1

FY05 EPS 26.5 26.5 26.5 26.5 26.5




thers 13.1

MP Rs506

-week high/low Rs567/79

ce value Rs10

E code 522287

SE code KALPATPOWR

oomberg code KPP@IN

uters code KAPT.BO


17/19

July 18, 2005 17


Company background

Tamil Nadu Newsprint and Papers, promoted by the Government of Tamil Nadu

(35% stake), manufactures writing and printing (W&P) and newsprint paper using

bagasse (byproduct of the sugar industry) as the primary raw material. The company

has the largest and the most modern plant in India at a single location with a capacity

to produce 230,000tpa of uncoated paper. The plant has the flexibility to shift between

newspaper and W&P to suit the market. The company is the largest producer of

bagasse based paper in the world.

Project Details

The project activity involves installation of a closed anaerobic system that will produce

and collect consistently high quality methane-rich biogas from bagasse wash

wastewater (BWW) generated at the TNPL bagasse based pulp and paper mill. The

BWW is diverted from TNPLs existing wastewater treatment system, open lagoon

under anaerobic conditions, into a closed anaerobic digester. The project activity

also includes system for utilization of the collected biogas as a fuel in a lime kiln, which

has been using the furnace oil (fossil fuel). By extracting and capturing biogas in a

closed digester, the project will reduce the CH4 emission that would hive otherwise

been emitted to the atmosphere from the existing open lagoons. In addition, the use of

the collected biogas as a fuel in the lime kiln will displace fossil fuel and its associated

GHG emissions.

Impact on EPS

Tamil Nadu Newsprint and Papers Ltd


CER Rate (US$) 5 10 15 20 25

Rs/US$ Rate 43 43 43 43 43


Tax @ 33% 3 5 8 11 13



FY05 EPS 5.5 5.5 5.5 5.5 5.5




thers 10.3

MP Rs85

-week high/low Rs88.80/45

ce value Rs10

E code 531426

E code TNPL

omberg code TNPP@IN

uters code TNNP.BO


18/19

July 18, 2005 18


Appendix

List of listed companies in various stages of UNFCC approval after receiving host

country approval

Company Per annum CERs

Torrent Power AEC 1,193,980

Jindal Vijay Nagar Steel (2 Projects) 805,484

Essar Power 404,237

Suzlon (Public issue round the corner) 373,300

Indian Aluminium 226,738Shree Cement (2 Projects) 129,410

Jai Balaji Sponge (2 Projects) 87,640

Triveni Engineering 78,030

Renuka Sugars 67,290

Dhampur Sugar 56,011

Gujarat Ambuja 42,945

Tata Sponge Iron 41,039

Rajshree Sugars 29,110

Indo Gulf Fertilizers 24,525

Deepak Spinners 17,424

Indian Rayon 5,600

Source: UNFCCC and www.envfor.nic.in


19/19

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