Electricity generation and profitability depends on climatic conditions, particularly wind conditions, which can vary dramatically across the seasons and between locations of the wind farms — the company has a limited history of operating and developing such farms

Chennai-based renewable energy power plants developer Orient Green Power Company Ltd (OGPCL) is hitting the market to raise Rs900 crore through a 100% book building issue. The issue size is 19.14 crore shares of the face value of Rs10 each. The shares are being offered in the price band of Rs47 to Rs55 per share. The shares are priced 4.7 times of face value on the lower side and 5.5 times on the higher side.

The IPO is set to open on 21 September 2010 and will close on 24 September 2010. The shares of the company will be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The issue has an IPO grading of 4/5 (CRISIL), indicating that the fundamentals of the IPO are 'above average' relative to other listed equity securities in India.

However, the grade is constrained by the poor financial health of state electricity boards, the company's main customers.
OGPCL proposes to use Rs60.75 crore from the net proceeds of the IPO to finance the construction and development of four biomass projects in Narasingpur (10MW), Amritsar (10 MW), Vellore (7.5MW), and Patiala (10MW). Besides, it will fund its subsidiary OGP Rajasthan and BWFPL for the construction and development of a biomass and a wind project at a cost of Rs530.20 crore and will fund its subsidiaries BWFPL, PSR Green and SNEL for repayment of loans taken from IndusInd Bank, and to prepay its existing debt availed from Yes Bank at Rs148.19 crore. 

The company generates renewable energy based power focused on developing, owning and operating a diversified portfolio of renewable energy power plants. It sells power from its wind energy projects to private power consumers seeking to supplement state power supplies for captive purposes pursuant to short-term poser purchase agreements (PPAs) in states where such sales are permitted. As of 31 July 2010, its total portfolio of operating projects included 213.03MW of aggregate installed capacity, which comprised 172.53MW of wind energy projects and 40.5MW of biomass projects. Its portfolio of committed and development projects included approximately 836.5MW of prospective capacity, which included an estimated 643MW of wind energy projects, 178.5MW of biomass projects and a 15MW small hydroelectric project.

OGPCL develops wind farms and is currently expanding its presence in Tamil Nadu and developing projects in other locations in India like Gujarat and Maharashtra and internationally, including in Sri Lanka, Croatia, the Czech Republic and Hungary.

The company is promoted by Shriram EPC Ltd (SEPC), Shriram EPC (Singapore) Pte Ltd (SEPC Singapore), and Orient Green Power Pte Ltd (OGPP), Singapore. OGPP and SEPC currently hold 94.74% and 0.14%, respectively, of Orient's share capital. SEPC Singapore is a wholly-owned subsidiary of SEPC and holds 37.70% of the equity share capital of OGPP.

The company reported a net loss of Rs12.24 crore for the year ended 31 March 2010 on a total income of Rs63.21 crore. It had a negative cash flow of Rs4.82 crore in the year ended 31 March 2009. Biomass energy production accounted for 69.23% of its revenue during the year ended 31 March 2010.

There are 32 litigations pertaining to civil, tax, criminal, court summons pending against the company's promoter firm Shriram EPC Ltd.

Electricity generation and profitability depends on climatic conditions, particularly wind conditions, which can vary dramatically across the seasons and between locations of the wind farms.  The company has a limited history of operating and developing wind farms and biomass power plants.

The book-running managers to the issue are Axis Bank Ltd, Goldman Sachs (India) Securities Pt Ltd, JM Financial Consultants Pvt Ltd and UBS Securities India Private Ltd.  — Moneylife Digital Team