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| VRL looking to exit its wind power business |
| Ravi Menon / Bangalore Nov 07, 2009, 00:18 IST |
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Logistics and transport major VRL Logistics Ltd (VRL) is looking at exiting its 42.5 Mw wind power venture at Mundargi in Gadag district of Karnataka, because of delayed receivables from the sale of power as well as its high operational costs. The Hubli-based company had forayed into the wind energy business in 2007 by setting up the venture for Rs 250 crore.
VRL Logistics Ltd chairman and managing director Vijay Sankeshwar told Business Standard that the company has been looking at selling its wind power venture to recoup losses incurred by delayed receivables on sale of wind power to the Hubli Electricity Supply Company (Hescom) with whom VRL has six power purchase agreements (PPAs) in place.
Current valuations for the wind farm fall in the range of $40 million - 45 million (Rs 188 crore - Rs 212 crore), market sources added. Over the past year, VRL had been looking at demerging its wind power business to focus on its core activity of goods and passenger transport. “Wind energy is not our core business. Our venture has not turned out to be lucrative because payments for power sales have been consistently delayed. The conditions outlined in our power purchase agreements (PPA) with the state power utilities are clearly being violated. If we find the right buyer and the right price we will monetise this venture,” Sankeshwar said.
He pointed out that the rate per unit of Rs 3.40 paisa for the venture was not a good price compared with the cost of running the project. “Moreover, we have seen abnormal delays in receiving our payments in violation of the PPA agreement entered into with Hescom. We are yet to receive Rs 12 crore in payments from Hescom for July, August and September this year despite repeated reminders,” Sankeshwar said.
Envisioned as a grid-connected renewable energy project, the wind farm was commissioned in 2007 to mark VRL’s foray into wind power. The farm has approvals to increase power generation capacity upto 100 Mw whenever required. Suzlon Energy, which supplied the turbines and other equipment for the farm, has been in charge of operation and maintenance of the plant’s 34 wind mills.
VRL’s investments in wind mills constitute 33 per cent of its total assets. The company has raised term loans of Rs 331.29 crore for the wind farm as of September 30, 2009. It also forayed into the air charter business last year. The Sankeshwar family owns 100 per cent equity in the company.
Earlier, in 2007, Sankeshwar had exited his media businesses — Kannada daily Vijaya Karnataka and Vijaya Times, an English daily — after selling them to Bennett Coleman and Company Ltd for an estimated Rs 300 crore.
VRL posted revenues of Rs 355.32 crore as of September 30, 2009. About 79 per cent of VRL’s revenues are contributed by the goods transportation segment and 17 per cent by the passenger segment. Within the goods transportation segment, the high-margin parcel and express cargo business comprises about 86 per cent of revenues.
Vehicle loans for the transport businesses as of September 30, 2009 were at Rs 331.29 crore. The company’s working capital as of September 30, 2009 was Rs 49.24 crore.
The company operates from 45 hubs in India and had an aggregate of 2,777 vehicles as on September 30, 2008, making it the largest fleet owner among Indian road transportation companies at that point of time.
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