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1lume: XXInth: May 12ents of this newsletter are for informational purposes only

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www.reconnectenergy.com

Dear Readers,

Mays trading session was momentous for theREC markets and for us we traded the very

first solar RECs this month. This was another

important milestone in our journey, the first

of which trading of the very first RECs in India

in March 2011.

To reflect the important of the first solar REC

trading, we have included an interview with

Mr. Vikalp Mundra, Managing Director of

M&B Switchgear Ltd (M&B). M&B traded the

first RECs for its solar PV installation in MP.

Mr. Mundra and M&B are trailblazers in thesector, and solar developers and investors will

find his experience of setting up the first Solar

PV plant under REC very valuable. We have

come across several issues and questions that

most solar developers have to deal with, and

we found that Mr. Mundras experience can

be instructive.

Prices increased on IEX to Rs 2402 (up 9%)

while they declined marginally on PXIL to Rs

2,150 (down 2%). The important part was the

spurt in demand to over 365,000 this washigher than in March 2012 (323,000). High

demand this early in the compliance period is

a very encouraging sign for the market.

As always, happy reading and we look for-

ward to hearing feedback from you.

-Team REConnect

REConnect Energy SolutionsREC, Energy Efficiency, Electricity Portfolio Management

Solar RECs: Straight from the heart of an Indian Entrepreneur

From Managements Desk

Regulatory News REC Trade Report REC Project Statistics Green News About REConnectIndex Interview on Solar REC

eam REConnect :Tell us about yourself and your companys back-

round.

Mr.Vikalp Mundra :Im Vikalp Mundra, age 40 yrs, joined business in

994 after compelting BE (Elect) & completed MMS (Finance) in 1996.

MBSL being the company is promoted by Mr. Shyam Sunder Mundra, Mr.

ikalp Mundra and Mr. Anurag Mundra. Originally Mr. Shyam Sunder

Mundra started manufacturing of transformers in the year 1976 in a pro-

rietorship concern M AND B Switchgears. Later the same was con-

erted into a partnership, Private Limited & now, MBSL had become NSE/

SE Listed Public Entity.

oday MBSL which ,is an ISO 9001:2008 & ISO 14001:2004 certified company, is engaged in

wo different business areas viz... Transformer Manufacturing and Solar Power Generation. As

or the Transformer /business/Industry/ Activity, MBSL has an existing capacity up to 25 MVA

t 132 KV class, Automatic Voltage Controllers. MBSL has an installed capacity to manufacture

more than 5000 transformers of different capacities & class and is selling its products to vari-

us state electricity boards, public sector undertakings, and private sector companies engaged

n Generation and Distribution Electricity and other Industrial undertakings engaged in Steel,

ower, Textile, Coal & Mine, Infrastructure, Engineering & Automobile Sectors etc.

With its 2MWpGeneration Plant at District Rajgarh (Madhya Pradesh) MBSL has achieved fol-

owing two milestones:

. First Solar Power Plant in India under REC Mechanism.

. First MW level grid connected Solar Power Plant in MP.

MBSL is now moving ahead with setting up a 20 MWp solar power generation plant in the

icinity of its existing site of Power Plant

eam REConnect :How did you come across the idea of investing in solar power?

Mr.Vikalp Mundra : There were three reasons for us investing into Solar Power.

. With National Solar Mission 2010 a new business opportunity is opened up in field of So-

lar Power Generation in India, we find it a natural forward integration in this field as our

existing business of Transformer is a product of Distribution of Energy. So from Distribu-

tion to Generation is a natural progression.

. This is a very scalable business in which there is no restriction of growth & practically nocompetition in initial years.

. In holistic view, it is returning back something back to nature & making mother earth

happy.

REConnect traded the first ever Solar RECs

M & B Switchgear, which operates a 2 MW Solar power plant in Madhya Pradesh was issued

he first ever Solar RECs . Their Solar RECs were traded for first time in Mays trading session.

Mr. Vikalp Mundra,Managing Director of M&B Switchgear Ltd (M&B). has a very rich experi-

nce in the Solar space. REConnects team had a small chat with Mr. Mundra regarding solar

ower in India.


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Team REConnect : Any specific reasons behind opting for REC

mechanism especially in a scenario where there were very few

projects were considering REC route?

Mr.Vikalp Mundra : We saw a great opportunity in REC mecha-

nism, it is a perfect business model where risk is rewarded favoura-

bly & we can generate decent returns to all stake holders. With the

First sale of REC @ Rs. 13, it has been proved that revenue return

is almost Double the traditional PPA route. It is a business of de-

mand & supply like in any other businesses.

Further, this REC mechanism is beautifully drafted & I can say it is

one among the best conceived, documented & implemented

mechanism in the history of Indian Power Industry after Electricity

Act 2003, which is mother of all such initiative.

REC mechanism is bundled with great amount of transparency &

almost paperless working.

Team REConnect : What are your future plans in energy sector or

more specifically in solar sector?

Mr.Vikalp Mundra : We are going ahead with our next phase of 20MWp in REC Mechanism.

Team REConnect : How do you see the progress of renewable

energy market and its future in our country?

Mr.Vikalp Mundra : Solar energy is vital to India, we started late,

but I have firm belief like in Mobile telephony; India had evolved

leaving behind its baggage of late starter, the same will be re-

peated in Solar. It is written on the wall that the next decade

would be decade of Solar Power in India.

The first leg of putting up MW level plants already geared up its

pace, but even the bigger revolution would be roof top. For this

regulation like net-metering should come up fast.


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lume: XXInth: May 12ents of this newsletter are for informational purposes only

our banking industry is not showing its enthusiasm

towards REC mechanism, may be for some reasons.

But, there are certain banks which respect the

entrepreneurship & evaluate risk-reward ratio.

Team REConnect : How did you manage the funding part and

what kind of difficulties you have faced?

Mr.Vikalp Mundra : Im sorry to say that in-general our banking

industry is not showing its enthusiasm towards REC mechanism,

may be for some reasons.

But, there are certain banks which respect the entrepreneurship &

evaluate risk-reward ratio. We could able to get funding for our

existing 2 MWp plant from one of the nationalised bank. Our sin-

cere gratitude to them.

It is difficult but Banks are now realising and coming ahead in

favour of REC Mechanism funding.

We are in advance stages of financial closer of our next phase of 20

MWp.

Team REConnect :Do you see market structure in REC mechanism

need to be changed to make project financing easier? If so, what

are your views?

Mr.Vikalp Mundra : Firstly, the RPO should be with quarterly com-

pliance. Then a vintage value should be added with the REC

mechanism and if the REC mechanism can be put under Securitisa-

tion Act in some way or other it will make it more comfortable for

financial institutions.

Team REConnect :What is your message for the upcoming inves-

tors/project developers in the solar REC market?

Mr.Vikalp Mundra : We whole heartedly welcome to all such in-

vestors & urge them to see the IRR which can be generated in this

route of business, which is slightly risky but rewards are worth

taking this risk.


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Regulatory News


Revision of Electricity Tariff in Karnataka for the year 2012-13

Karnataka Electricity Regulatory Commission (KERC) has ordered revision of electricity tariff for all the Electricity Supply Companies in the

State for the Financial Year 2012-13 and will come into effect for the electricity consumed from the first meter reading date falling on or

after 30th April 2012.

The average tariff increase approved by the KERC amounts to 13 paise per unit and varies across different categories of consumers.The

existing tariff for Commercial and Industrial consumers across the State has been increased by 20 paise per unit.

A new HT tariff category namely HT5 is introduced for consumers availing temporary supply with a demand of 67HP or more.

Cross Subsidy Surcharge:

Cross subsidy Surcharge has been reintroduced for consumers availing Open Access. The cross subsidy payable for the year 2012-13 by

different category of consumers is provided in the table below:

The reason quoted forimposing cross subsidy charges in place by the commission is due to the prevailing situation of power availability

during the relevant years.The point to be noted is that Since 2009 Tariff Order, the cross subsidy charges was Zero in order to encourage

open access and to incentivise the State consumers (especially industrial and commercial consumers) to purchase power from outside the

State at reasonable rates.

In our view, we see this has a discouraging development for open access consumers of the State (especially Industrial & Commercial).

Fuel Cost Adjustment Charge

KERC has proposed to introduce fuel cost adjustment mechanism in order to incorporate any increase / decrease in fuel cost from time to

time. The Commission had sought data of fuel variation costs from ESCOMs. After due analysis of the same, the Commission will issue a

separate Order in the matter which will be effective from the current year.

Time of Day Tariff

The Commission has decided to make Time of Day Tariff compulsory for HT2(a) and HT2(b) consumers with a contract demand of 500 KVA

and above with effect from 1st September 2012.

Green Tariff

Green Tariff introduced in the previous tariff order for HT Industries & HT Commercial Consumers at their option, to promote purchase of

energy from Renewable Sources and toreduce carbon footprint is continued. Consumers opting for green tariff have to Pay Re. 1.00/unitover and above the normal tariff.

Encouraging Solar Energy Generation

The Commission has decided not to charge any wheeling charge on transmission / wheeling of solar energy.


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Solar RECs were traded for the very first time in India in the May trading session. REConnect sold Solar RECs issued to M&B Switchgear

Ltd (a company that operates a 2MW solar plant in MP). The market clearing prices on both exchanges was Rs.13,000. The total demand

of Solar RECs was 1642, whereas the supply was only 249. With 17.16 MW capacity already accredited under the REC mechanism, and

more in the pipeline, we expect Solar REC trading to be a regular feature going forward.

Non-solar RECs

Aggregate prices and volume increased from previous month, despite significantly higher participation by sellers (275000 RECs were bid

for sale in May 2012, 107% over April 2012). This may have been a function of higher than expected prices in April.

Demand jumped significantly too total demand was for over 365,000 RECs, up 38% from last month. The more important point here is

that demand this month was higher than in March 2012, which was the end of the compliance period. For demand to be this high in the

second month of the new compliance period is an important sign for the market.

Prices rose at IEX the market clearing price was Rs. 2,402/REC (increase of 9% over April 2012) ,whereas at PXIL prices declined margin-

ally to Rs. 2,150 /REC (reduction of 2%). Last month, prices were Rs. 2201/REC at both the exchanges.

Overall, robust demand and high prices are a good sign for renewable generators.


Review of REC Trading-May 2012



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Status of projects in REC Mechanism


Accredited Capacity : 2951.893 MW


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Status of projects in REC Mechanism


Registered Capacity : 2663.308 MW


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Solar RECs traded at Power Exchanges for first time

olar RECs were traded for the very first time in India in the May trading session .The market clearing prices on both ex-

hanges was Rs.13,000. The certificates belonged to Indore-based M&B Switchgear (a company that operates a 2MW solar

plant in Madhya Pradesh)

http://www.thehindubusinessline.com/industry-and-economy/article3475896.ece?homepage=true

Decline in solar module prices to slow down: CRISIL

CRISIL believes that the pace of reduction in capital costs of solar PV projects is expected to moderate in 2012 resulting in

pressure on profitability of players who have bid aggressively below Rs. 9 per unit under batch 2 of JNNSM. Almost half the

bids under JNSSM have been below Rs 9 per unit and about a fourth of the bids below Rs 8.5 per unit, making these invest-ments highly risky.

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/decline-in-solar-module-prices-to-slow-down-

risil/articleshow/13897939.cms

Suzlon launches environment app for Apple iOS and Android

The Minister for New and Renewable Energy, Farooq Abdullah, launched the 'Suzlon Earth - an Environment Diary' a digital

pplication for Apple iOS and Android platform on the occasion of World Environment Day.

http://economictimes.indiatimes.com/tech/software/suzlon-launches-environment-app-for-apple-ios-and-android/

articleshow/13895366.cms

IFC launches off-grid lighting programmeFC, a member of the World Bank Group, has launched a programme aimed at providing off-grid lighting to two million people

ving in rural India. The company said that this will be achieved over the next three years.

http://www.thehindubusinessline.com/companies/article3489694.ece

India's Low-carbon technology market likely to be worth $135 billion by 2020

Billions of dollars worth of investment in clean technology and green energy are eyeing India, where the market for low-

arbon technology is expected to expand to $135 billion by 2020, according to industry experts, making the country one of

he most lucrative destination for companies in the domain.

http://timesofindia.indiatimes.com/business/india-business/Indias-Low-carbon-technology-market-likely-to-be-worth-135-

billion-by-2020/articleshow/13835316.cms

Power trading prices up 20-25%

With the mercury rising this month, short-term power prices have seen an increase of 20-25 per cent, with the highest price

t which power was traded touching Rs 5 per unit. The average for power trading was Rs 3.5-4 per unit whereas last year the

verage rates were 2.9 per unit in the same period.

http://business-standard.com/india/news/power-trading-prices20-25/475744/

Delhi Metro to tap solar power

Delhi's new age transport system is going green, with the Delhi Metro Rail Corporation planning to tap solar power in some of

ts facilities. The initiative announced to coincide with the World Environment Day, will help generate renewable energy and

educe DMRC's dependence on non-renewable sources of power.

http://www.thehindu.com/news/cities/Delhi/article3492671.ece

Green News


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Status of RPOs across various states in India - As on April 24 , 2012


State Status of Regulation 201213 RPOObligation RPO on CPP? RPO on OAUsers? Penalty ?

Andhra Pradesh Final 4.75 % + 0.25 % Yes Yes Not Specified

Assam Final 4.05 % + 0.15 % Yes Yes Yes (RECmax)

Bihar Final 3.25 % + 0..75 % Yes Yes Yes (RECmax)

Chhattisgarh Final 5.25 % + 0.50 % Yes Yes Yes (RECmax)

Delhi Draft 3.25 %+ 0.15 % Yes Yes Yes (RECmax)

Gujarat Final 6.00 % + 1.00 % Yet to be notified Yes Yes (RECmax)

Haryana Final 1.50 % + 0.50 % Yes Yes Yes (RECmax)

Himachal Pradesh Final 10.00 % + 0.25 % Yes Yes Yes (RECmax)

J&K Final 4.75 %+0.25 % Yes Yes Yes (RECmax)

Jharkhand Final 3.00 % + 1.00 % Yes (>5MW) Yes Yes (RECmax)

Karnataka Final 10 % + 0.25 %(BESCOM,MESCOM,CHESCO

M), 7 % + 0.25 % for othersYes (>5MW)

5% RPOYes (>5MW)

5% RPO

Yes (RECmax)

Kerala Final 3.35 %+0.25 % Yes Yes Yes (RECmax)

Madhya Pradesh Final 3.40 % + 0.60 % Yes Yes Yes (RECmax)

Arunachal Pradesh Draft 4.1 % +0.1 % Yes Yes Yes (RECmax)

Maharashtra Final 7.75 % + 0.25 % Yes Yes Yes (RECmax)

Meghalaya Final 0.60 % + 0.40 % Yes Yes Yes (RECmax)

Orissa Final 5.35 % + 0.15 % Yes(>5MW) Yes Yes (RECmax)

Punjab Final 2.83 %+0.07 % Yes Yes Yes (RECmax)

Rajasthan Final 7.10 % + JNNSM Yes Yes Yes (RECmax)

Tamil Nadu Final 8.95 % + 0.05 % Yes Yes Yes (RECmax)

Tripura Final 0.90 % + 0.10 % Yes (>5MW) Yes Yes (RECmax)

Uttrakhand Final 4.5 % + 0.025 % Yes Yes Yes (RECmax)

Uttar Pradesh Final 5.00 %+ 1.00 % Yes Yes Yes (RECmax)

West Bengal Final 4 % + NA NA NA REC not recognized

JERC for Goa and

UTs

Final 2.60 % + 0.40 % Yes Yes Yes (RECmax)

JERC for Manipurand Mizoram

Final 4.75 % + 0.25% (Man)6.75% + 0.25% (Miz)

Yes Yes Yes (RECmax)

Nagaland Final 7.75 % + 0.25% Yes Yes Yes (RECmax)


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Dear Readers,

Our previous newsletters are available at our website www.reconnectenergy.com and can be downloaded from :ttp://www.reconnectenergy.com/rec/index.php/newsletters-on-rec-mechanism.htmlhe summary of our previous newsletters we have published is available below.

Volume X: June 2011Analysis on proposed Floor & Forbearance Prices for control period 2012-2015

Volume XI: July 2011

Applicability of REC/RPO on Co-Generation Power Plants

Volume XII: August 2011REC & RPO: The Dilemma of Double Accounting of Green Tags

Volume XIII: September 2011Metering Issues in CPPs and Co-Gen: From REC Perspective

Volume XIV: October 2011Introduction to Renewable Regulatory Fund

Volume XV: November 2011Renewable Purchase Obligation A Demand - Supply Analysis

Volume XVI: December 2011Analysis of Draft RPO of Andhra Pradesh + REC Market Update

Volume XVII: January 2012Voluntary Market for RECs

Volume XVIII: February 2012Off Grid Projects and REC: A new socio-development tool?

Volume XIX: March 2012Applicability of RPO on Co-Generation Projects (An Update)

Volume XX: April 2012Analysis of the Energy Savings Certificate Markets

Past Newsletters

Feedback:

We wholeheartedly thank you for providing your valuable feed-back on our last newsletter. Your feedback on the

newsletter keeps us motivated and would certainly help us to improve the quality of it. Kindly keep writing to us.

We are eager hear your views.

Best Regards, Team - REConnect


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Services Provided by REConnect


Detailed Services in REC Space

Services for RE Generators

Services for Obligated Entities (Distribution Companies / Open Access Consumers / Captive Consumers)


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REConnect is a venture focused on the Renewable Energy Certificates,

Energy Efficiency and Electricity Portfolio Management.

REConnects team has extensive experience in the environmental markets

both in India and internationally:

Worked in the international carbon markets for several years and has

expertise in the consulting and trading of emissions reductions

Extensive knowledge about various Renewable Energy Certificate and

Energy Efficiency Certificate markets in USA, Europe and Australia etc.

Worked with Indian Energy Exchange (IEX), Indias leading power ex-

change, and have extensive knowledge and experience of power

markets

Alumnus of Columbia University, an Ivy League University in USA, and

IIT Bombay

Highly experienced core team worked with organizations like

J P Morgan, Indian Energy Exchange, Asia Carbonand Gensol.

Contact REConnect

New DelhiVibhav Nuwal

[email protected]

+91 88006 79988

Bangalore

Vishal [email protected]

+91 96202 21101

Suresh Kumar (for RPO)

[email protected]

+91 99727 24727

MumbaiRamkumar K

[email protected]

+91 99303 59992

ChennaiRajesh Vaidyula

[email protected]

+91 99404 78306

Pune

Mohit [email protected]

+91 96650 42397

About REConnect


lume: XXIth M 12

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reconnect newsletter xxi

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