GPEC wind power

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	26321
Company name	Gujarat Paguthan Energy Corporation Private Limited
Country	India
Sector	Utilities
Environmental category	B
Department	Infrastructure
Status	Pending Signing

Date SPI disclosed	July 23, 2008
Projected board date	October 2, 2008
Date revised SPI disclosed	August 22, 2008
Previous Events	Approved: October 19, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

Project Update:

IFC’s investment was initially proposed only for the Samana wind power project. Accordingly, IFC had on July 23, 2008, disclosed through IFC’s disclosure website a Summary of Proposed Investment (SPI) and an Environment and Social Review Summary (ESRS) for the Samana wind power project. Subsequently, the scope of IFC’s proposed investment was enlarged to include, in addition to the Samana wind power project, also the Saundatti wind power project. This SPI has been updated to reflect the inclusion of Saundatti wind power project in the scope IFC’s proposed investment.

Gujarat Paguthan Energy Corporation (GPEC), an Independent Power Project (IPP) in the state of Gujarat, currently has a single generation asset, a 655 MW combined cycle power plant in Paguthan running on gas and naphtha. GPEC has been operating the existing power plant as an IPP for almost ten years, selling the entire output to the state power utility GUVNL under a long term Power Purchase Agreement. GPEC is planning generation capacity addition both from thermal and renewable sources and is currently executing about 50.4 MW of wind project under Samana Phase I. Further GPEC, through a 100% subsidiary “Wind Subsidiary”, is executing Samana Phase II of 50.4 MW and Saundatti (82.4 MW) wind farm in Karnataka with more in the pipeline. GPEC has approached IFC for a $20 million loan to part finance Phase I of Samana wind project in Gujarat and a $20 million loan to part finance Samana Phase II and Saundatti wind farms under its Wind Subsidiary. GPEC may require additional loans from IFC up to $60 million to finance other wind projects.

Anticipated development impact of the project

The project will:

- increase the production of renewable energy thereby contributing to the international and Indian clean energy agenda;
- contribute to reducing power shortages in India (peaking shortage about 14%, energy shortage about 10%) which have adversely impacted economic activity and socio-economic development;
- support diversification of India’s energy generation portfolio and offer a hedge against increases in both electricity and fossil fuel prices;
- support a reputed pure developer in developing wind farms in environmentally and socially sustainable manner as demonstration to other infrastructure developers; and
- create jobs and linkages to the local economy, since the equipment to be installed in the wind parks is produced locally and has significant domestic content.

IFC's expected development contribution

GPEC has a corporate focus on generating power responsibly and in an environmentally friendly manner. GPEC is pushing for a major expansion in renewable energy projects to diversify its energy generation portfolio and needs support of financial institutions with a clean energy focus. IFC’s involvement with GPEC as a long term partner is expected to help attract long term finance at fixed interest rates in local currency which is needed to make renewable energy projects more robust and sustain flow of resources into this sector.

IFC’s involvement is expected to contribute towards GPEC’s social and environmental standards and have a demonstration impact on other developers in the clean energy area.

Environmental and social issues - Category B

This is a category B project according to IFC’s environmental and social review procedure because a limited number of specific social and environmental impacts may result, which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The following potential environment, health and safety and social aspects of the project were analyzed:

- environment and social assessment, and management systems;
- labor and working conditions including management of employee occupational health and safety;
- pollution prevention and abatement (including management of resources; management of emissions, noise, discharges, hazardous materials, hazardous and other wastes);
- community health safety and security;
- biodiversity conservation and sustainable natural resource management; and
- cultural heritage, both during construction and operation.

A summary discussion on the social and environmental aspects of relevance to the project including the company’s plans to address these impacts has been provided in the Environmental and Social Review Summary (ESRS) prepared by IFC and publicly disclosed on IFC’s website. Further, the company will locally disclose social and environmental assessment documents at the locations mentioned below.

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