val report_lal mahal

8/6/2019 Val Report_Lal Mahal

1/89

VALIDATION REPORT SHRI LAL MAHAL LIMITED

VALIDATION OF THE 7.5 MW WIND ENERGY PROJECT BY LAL MAHAL

LIMITED IN THE STATE OF GUJARAT


2/89

BUREAU VERITAS CERTIFICATION

VALIDATION REPORT

Date of first issue: Organizational unit:

07/03/2010 Bureau Veritas CertificationHolding SAS

Client: Client ref.:

Shri Lal Mahal Limited Mr S.K. ValechaSummary:

Bureau Veritas Certification has made the validation of the 7.5 MW wind energy project by Lal Mahal Limited inthe State of Gujarat project of Shri Lal Mahal Limited located in Village Arikhana, Village Ambaliyara andVillage Jungi of Kutch District of Gujarat state in India on the basis of UNFCCC criteria for the CDM, as well ascriteria given to provide for consistent project operations, monitoring and reporting. UNFCCC criteria refer toArticle 12 of the Kyoto Protocol, the CDM rules and modalities and the subsequent decisions by the CDMExecutive Board, as well as the host country criteria.

The validation scope is defined as an independent and objective review of the project design document, theprojects baseline study, monitoring plan and other relevant documents, and consisted of the following threephases: i) desk review of the project design and the baseline and monitoring plan; ii) follow-up interviews withproject stakeholders; iii) resolution of outstanding issues and the issuance of the final validation report andopinion. The overall validation, from Contract Review to Validation Report & Opinion, was conducted usingBureau Veritas Certification internal procedures.

The first output of the validation process is a list of Clarification and Corrective Actions Requests (CL andCAR), presented in Appendix A. Taking into account this output, the project proponent revised its projectdesign document.

In summary, it is Bureau Veritas Certifications opinion that the project correctly applies the baseline andmonitoring methodology AMS ID, version 13 and meets the relevant UNFCCC requirements for the CDM andthe relevant host country criteria.

Report No.: Subject Group:INDIA-VAL/207.49/2010 CDM Indexing termsProject title:

7.5 MW wind energy project by Lal MahalLi it d i th St t f G j t j t


3/89


Report No: INDIA-val/207.49/2010 rev. 01

VALIDATION REPORT

Abbreviations change / add to the list as necessary

CAR Corrective Action RequestCDM Clean Development MechanismCER Certified Emission ReductionsCL Clarification RequestCO 2 Carbon DioxideDOE Designated Operational EntityGHG Green House Gas(es)I InterviewIETA International Emissions Trading AssociationMoV Means of VerificationNGO Non Government OrganizationPCF Prototype Carbon FundPDD Project Design DocumentUNFCCC United Nations Framework Convention for Climate ChangeVVM Validation and Verification Manual


4/89



VALIDATION REPORT

TABLE OF CONTENTS

Pageno.

1 INTRODUCTION 5

1.1 Objectives 51.2 Scope 51.3 Validation Team 6

2 METHODOLOGY 62.1 Review of Documents 72.2 Follow-up Interviews 72.3 Resolution of Clarificati on and Corrective Action

Requests8

3 VALIDATION CONCLUSIONS 93.1 Approval (49-50) 93.2 Participation (54) 93.3 Project design document (57) and Pro jec t de sc rip tion

(64)10

3.4 Baseline and monitoring methodology3.4.1 Baseline and monitoring methodology 123.4.2 Project boundary (79) 133.4.3 Baseline identification (86-87) 143.4.4 Algorithms and/or formulae used to determine emission

reductions (91-92)15

3.5 Additionality of a project activity (95) 163.5.1 Prior consideration of the clean development mechanism

(102)17

3.5.2 Identification of alternatives (105) 183.5.3 Investment analysis (112) 183.5.4 Barrier analysis (116) 223.5.5 Common practice analysis (119) 223 6 Monitoring plan (122) 22


5/89



VALIDATION REPORT

1 INTRODUCTION

The Shri Lal Mahal Ltd has commissioned Bureau Veritas Certification tovalidate its CDM project 7.5 MW wind energy project by Lal Mahal Limitedin the State of Gujarat (hereafter called the project) at Vil lage Arikhana,

Village Ambaliyara and Village Jungi of Kutch District of Gujarat state inIndia.

This report summarizes the findings of the validation of the project,performed on the basis of UNFCCC criteria, as well as criteria given toprovide for consistent project operations, monitoring and reporting.

1.1 Objective

The validation serves as project design verification and is a requirementof all projects. The validation is an independent third party assessment of the project design. In particular, the project 's baseline, the monitoringplan (MP), and the projects compliance with relevant UNFCCC and hostcountry criteria are validated in order to confirm that the project design,as documented, is sound and reasonable, and meets the statedrequirements and identified criteria. Validation is a requirement for allCDM projects and is seen as necessary to provide assurance tostakeholders of the quality of the project and its intended generation of certified emission reductions (CERs).

UNFCCC criteria refer to Article 12 of the Kyoto Protocol, the CDM rulesand modalities and the subsequent decisions by the CDM ExecutiveBoard, as well as the host country criteria.

1 2 Scope


6/89



VALIDATION REPORT

1.3 Validation team

The validation team consists of the following personnel:

R.S.Premkumar

Bureau Veritas Certification, Team Leader, Lead Verifier ClimateChange

Naresh Badhwar

Bureau Veritas Certification, Team Member, Lead Verifier- ClimateChange

H.B.Muralidhar

Bureau Veritas Certification, Internal Technical Reviewer

2 METHODOLOGY

The overall validation, from Contract Review to Validation Report &Opinion, was conducted using Bureau Veritas Certification internalprocedures.

In order to ensure transparency, a validation protocol was customized for the project, according to the version 1.1 of the Clean DevelopmentMechanism Validation and Verification Manual, issued by the ExecutiveBoard at its 51 meeting. The protocol shows, in a transparent manner,criteria (requirements), means of validation and the results from validating


7/89



VALIDATION REPORT

2.1 Review of Documents

The Project Design Document (PDD) submitted by M/s Shri Lal Mahal Ltd and additional background documents related to the project design andbaseline, i .e. country Law, Guidelines for Completing the Project Design

Document (CDM-PDD), Approved methodology, Kyoto Protocol,Clarifications on Validation Requirements to be Checked by a DesignatedOperational Entity were reviewed.

To address Bureau Veritas Certification corrective action and clarificationrequests Shri Lal Mahal Ltd revised the PDD and resubmitted it in27/01/2010.

The validation findings presented in this report relate to the project asdescribed in the PDD version 6 (Ref 1).

2.2 Follow-up Interviews

On 6 t h and 7 t h Jan 2009 Bureau Veritas Certification performed interviewswith project stakeholders to confirm selected information and to resolveissues identified in the document review. Representatives of the ProjectParticipant (M/s Shri Lal Mahal Limited ) and the consultants (M/sPricewaterhouse Coopers) were interviewed. The main topics of theinterviews are summarized in Table 1.

Table 1 Interview topics

Interviewed organization Interview topics


8/89



VALIDATION REPORT

Consultants) Monitoring Plan

GHG Calculation

Environmental Impacts

WTG Supplier (M/sSuzlon)

Monitoring Plan

Metering System at site

Local stakeholders Views and concerns about the projectactivi ty

Confirmation of the Local stakeholder consultation conducted by the ProjectParticipant.

2.3 Resolution of Clarification and Corrective ActionRequests

The objective of this phase of the validation is to raise the requests for corrective actions and clarification and any other outstanding issues thatneeded to be clarified for Bureau Veritas Certification positive conclusionon the project design.

Corrective Action Requests (CAR) is issued, where:

(a) The project participants have made mistakes that will influence theability of the project activity to achieve real, measurable additionalemission reductions;

(b) The CDM requirements have not been met;

(c) There is a risk that emission reductions cannot be monitored or


9/89



VALIDATION REPORT

3 VALIDATION CONCLUSIONS

In the following sections, the conclusions of the validation are stated.

The findings from the desk review of the original project designdocuments and the findings from interviews during the follow up visit aredescribed in the Validation Protocol in Appendix A.

The Clarification and Corrective Action Requests are stated, where

applicable, in the following sections and are further documented in theValidation Protocol in Appendix A. The validation of the Project resulted in36 Corrective Action Requests and 14 Clarification Requests.

The number between brackets at the end of each section correspond tothe VVM paragraph

3.1 Approval (49-50)

India is the only party involved in the project activity at this stage and isthe host party. Project participants M/s Shri Lal Mahal Limited haveobtained approval from DNA of India. Project participants provided copyof this letter (Letter No: 4/25/2008-CCC dated 8th Dec 2008) to thevalidation team. The validation team confirmed the authenticity of theapproval from the website of DNA of India * . The website confirmsapproval by DNA under project ID no. 1143_08. The letter of approvalclearly states that India has ratified the Kyoto Protocol and the approvalis for voluntary participation in CDM project activity. The DNA approvalmentions the project title as mentioned in PDD. Also, the letter of


10/89



VALIDATION REPORT

The earlier name of the project partcipant was M/s Shivnath Rai Harnarain(India) Limited and on 23/01/2008 the name was change to M/s Lal MahalLimited. Copy of fresh certificate of incorporation consequent upon

change of name by Registrar of Companies, Government of India hasbeen provided. The name of the company was again changed to M/s ShriLal Mahal Limited on 04/03/2009. Copy of fresh certificate of incorporation consequent upon change of name by Registrar of Companies, Government of India has been provided.

At the time of applying for host country approval, the name of the

company was M/s Lal Mahal Limited and the name on the host countryapproval (Letter No: 4/25/2008-CCC dated 8 t h Dec 2008) was mentionedas M/s Lal Mahal limited. After the change in the name of company, theproject participant applied for change of name in Host Country Approvaland obtained the same with the changed company name. (HCA Ref no:4/25/2008-CCC dated 29/03/2010). The revised host country approvalwas provided by project participant (Ref 35).Thus the participation isapproved by DNA and is accepted. The participati on for projectparticipant has been approved by a Party of the Kyoto Protocol. Thevalidation team confirmed the authenticity of the approval from thewebsite of DNA of India. The website confirms approval by DNA under project ID no. 1143_08. The letter of approval clearly states that India hasratified the Kyoto Protocol and the approval is for voluntary participationin CDM project activity. Also, the letter of approval mentions that projectcontributes to sustainable development.

The project was webhosted on the UNFCCC for global stakeholderscomments as per CDM requirements. The project was webhosted from04 t h Nov 2008 to 03 t h Dec 2008. No comments were received.


11/89


12/89



VALIDATION REPORT

coordinates were not mentioned in earlier version of PDD and CAR 2 wasraised. CAR 2 was closed when corrections were made in revised PDD. Inthe earlier version of PDD, it was mentioned that project lies in Gujaratwhich falls under western grid. This definition of grid is not as per latestversion of CEA database and CAR 3 was raised. In the revised version of PDD, grid was changed to NEWNE grid and hence CAR 3 was closed.

In order to validate completeness and accuracy of project description, asite visit was conducted by the validation team on 6 t h and 7 t h Jan 2009 inKutch district of Gujarat and the documents regarding commissioning of wind mills (Ref 15, Ref 32), PPA (Ref 18, Ref 33) and other documentswere reviewed. Based on site visits and document review, the validation

team hereby confirms that the project description in PDD (Ref 1) isaccurate and complete in all respects.

3.4 Baseline and monitoring methodology

3.4.1 Baseline and monitoring methodology

This 7.5 MW wind energy project by Lal Mahal Limited in the State of Gujarat uses the approved methodology AMS ID ver 13 (Ref 54).

Assessment of applicability conditions of the methodology is as follows:

1. Grid connect ivity wa s verified through t he PPA ( Ref 18, Ref 33) , andphysical connection to the grid at sites.

2. The pr oject activity involves wind mills alone a nd th erefore is arenewable energy project

3. There is neit her non-renewable component added, n or co-firi ng is there


13/89



VALIDATION REPORT

All the applicability conditions were not addressed in the earlier version of PDD and CAR 8 was raised. CAR 8 was closed after all the applicabilityconditions were addressed in revised PDD. The validation team thereforeagrees that the project activity meets all the applicability conditions andall other stipulations of the selected approved methodology AMS ID ver 13(Ref 54).

The validation team hereby confirms that the selected baseline andmonitoring methodology AMS ID ver 13 is previously approved by theCDM Executive Board, and is applicable to the project activity, which,complies with all the applicability conditions therein.

As stated above, the project capacity is 7.5 MW which is less than limit of 15 MW as specified in General Guidance to SSC CDM methodologies. Asexplained in section 3.6 below, data storage will be stored electronicallyfor a period of two years from the crediting period as stated in generalguidance to SSC CDM methodologies.The small scale methodology AMSID ver 13 is applied in conjunction with General Guidance to SSC CDMmethodologies (Ref 62).

The project activity is not a de-bundled component of a large scale projectactivity as there is no registered or application to register a small scaleproject activity with the project participant in the same project categoryand technology measure within previous two years whose projectboundary is within 1 km of the proposed small scale activity at the closestpoint, as committed in the PDD.

3.4.2 Project boundary (79)

The spatial extent of the project boundary is assessed through the


14/89



VALIDATION REPORT

transfer of equipment from or to the project activity and thus there is noleakage accountable to the project activity.

The project boundary was not correctly described in earlier version of PDD and CAR 9 and CAR 10 was raised. Grid definitions were not as per latest version of CEA database. The project boundary was subsequentlychanged in revised PDD and CAR 9 and CAR 10 were closed.

Site visit was made on 6 t h and 7 t h Jan 2009 to verify the project details asmentioned in PDD. The project design is sound and the geographical(Village Arikhana, Taluka Abdasa, Village Ambaliyara Taluka Bhachau

and Village Jungi of Kutch District of Gujarat state in India) and temporal(20 years) boundaries of the project are clearly defined. Life of the projectactivity equipment is 20 years. The commissioning certificates for thewind mills were reviewed and the details in PDD are as per commissioningcert if icates.

Based on the above assessment, the validation team hereby confirms that

the identified boundary is justified for the project activity.

3.4.3 Baseline identification (86-87)

As per AMS ID, ver 13, the baseline for wind energy generating systemsis the electricity produced by the generating unit multiplied by an emissioncoefficient (measured in KgCO2e/KWh) calculated in a transparent andconservative manner as either of the following.

(a) A combined margin (CM) consisting of the combination of operating


15/89



VALIDATION REPORT

Project participant has used the official published data on operating andbuild margin emission factors. The version of the data used is asavailable on the date of validation. This data is published by CentralElectricity Authority, CEA who is the sole authority for the publication of

such data in India. This data is based on the emission factor tool. Projectparticipant has applied weight factors for the OM and BM [75% & 25%respectively] as specified in the tool to arrive at the emission factor for the combined margin. Accordingly, the combined margin emission factorsare 0.9058 for NEWNE Grid This is the revised value in response to [CAR11].

Validation team agrees to this emission factor since it is based on theofficial background data published by CEA. The validation team further notes that the emission factors are not provided by DNA but by thecompetent authority.

It is noted that the selected baseline scenario is in line with the selectedapproved methodology. Validation team therefore confirms that theselected baseline scenario reasonably represents what would happen inthe absence of the project activity.

3.4.4 Algorithms and/or formulae used to determine emissionreductions (91-92)

Project participant has used the algorithm and formulae in line with theEmission Factor tool (Ref 56). The detailed algorithm and formulae usedare provided in section B.6.1 and B6.3 of the PDD.


16/89



VALIDATION REPORT

activity. With reference to this methodology, project does not lead to anyleakage.

Validation team assessed the calculations of estimated CERs as providedby project participant in a spreadsheet (Ref 50). The assumptions in thisspreadsheet were validated as follows -

Parameter,Value

Source of information

Validation justification

ProjectCapacity, MW7.5

POs & PPA The project is per the documentsverified and seen at site.

Number of machines, 5 inGujarat

POs,commissioningcert if icate

The number of machines are asper the documents provided andseen at site.

PLF, 27.58% for Gujarat

As per proposalsubmitted to Bank

PLF is as per EB 48, Annex 11 asproposal submitted to Bank for applying for loan. Refer section3.5.3 of this report.

Baseline EF,0.9058 for NEWNE Grid

CEA database ver 4

CEA database is an official sourceof data and hence acceptable

PLF was revised in response to CAR 14. PLF is in line with EB 48, Annex11. The estimated annual average of approximately 16,413 tCO2e over the crediting period of emission reduction represents a reasonableestimation using the assumptions given by the project. All theassumptions for this estimate either come from the assumptions used for investment analysis or grid emission factor as taken from CEA website.These are already validated in sections 3.5.3 of this report. The validationteam confirms that the estimates of baseline emissions can be replicatedusing the information provided. It also can be verified using the

d h (R f 50) f l l i f CER Th b li h d l


17/89



VALIDATION REPORT

3.5.1 Prior consideration of the clean development mechanism (102)

As per the agenda note to the Board meeting, the project is implementedin two phases of 3 MW and 4.5 MW. Project participant provided copies of the purchase order (for 3 MW for phase -I) for windmills. Project

participant has issued two purchase orders one for 3 MW and one for 4.5MW. Since for windmills, there cannot be any other real action before thepurchase order, the validation team accepted the corresponding date asthe starting date for the project activity. Accordingly, 11/01/2007, which isthe date of the purchase order (for 3 MW), is accepted as the startingdate of the project activity.

Validation team assessed the serious consideration of CDM from theextract of the meeting of the board of directors, dated 29/12/2006 (Ref 4)and the agenda note to the Board meeting. The validation team physicallychecked the register (Ref 4) of board meeting records and observed thatthe extract provided was verbatim same as that recorded Board minutes inregister. The minutes of the meeting clearly record that CDM revenuesare important for the project to be viable.

Project participant in its Board resolution decided to implement windmillsof 7.5 MW capacity. As per agenda note to the Board meeting, the projectwas to be implemented in two phases of 3 MW and 4.5 MW each. Projectparticipant initially placed purchase order for 3MW (2nos windmills) andappointed a CDM consultant (Senergy Global Pvt Ltd). However, thecontract with the CDM consultant was cancelled. Subsequently, the

project proponent appointed Pricewaterhouse Coopers as their CDMconsultant. The PP then placed purchase order for the remaining 4.5 MW(Phase II - 3 nos wind mills) and then entered into a contract withPricewaterhouse Coopers for developing PDD for 7.5 MW. Thewebhosting of PDD for Global stakeholders comments was carried outfrom 04 t h Nov 2008 to 03 Dec 2008 thus the time gap between the project


18/89



VALIDATION REPORT

with the project activity. Further, continuing and real actions were takenby project participant to secure CDM status in parallel with theimplementation of the project activity. This is in line with Annex 22 of EB49.

The validation team therefore agrees that project participant haseffectively proven that CDM was seriously considered in the decision toproceed with the implementation of the project activity. Based on theabove assessment, the validation team hereby confirms that the proposedCDM project activity complies with the requirements of Annex 22 of EB49.

3.5.2 Identification of alternatives (105)

The approved methodology AMS ID ver 13 prescribes the baseline, henceas per para 104 of VVM manual ver 1.1, no further analysis onidentification of alternatives is required.

As per Attachment A to Appendix B of Simplified modalities andprocedures for small scale CDM project activities, Project participant hasused investment barrier to demonstrate additionality.

3.5.3 Investment analysis (112)

The project participant has demonstrated the additionality of the projectusing the investment analysis, as stated in Attachment A to Appendix Bof Simplified modalities and procedures for small scale CDM project


19/89



VALIDATION REPORT

Parameter,Value

Source of information

Validat ion just i f icat ion

Cost of windmills, INR60.67 millionper MW (INR91 million per 1.5 MWWTG)

Proposal of SuzlonEnergy Ltd for 3 MW

Reflects value applicable at the time of decision making.

Location, Site visit andcommissioningcertificate.

The location is confirmed through site visitand commissioning certificates.

Number of

machines, 5

Purchase orders The num ber of mac hin es are ver ifi ed

from site visit and commissioningcert if icatesPLF, 27.58% Proposal submitted to

financial institution for loan for the 3 MW

The validation team agrees that thisassumption is reasonable since it is basedon proposal submitted to financinginstitution for loan. This is in line with theGuidelines for the reporting and validation of PLFs, EB 48 Annex 11 which stipulates that

Plant load factors shall be defined ex-antebased on The plant load factor provided tobanks and/or equity financiers whileapplying the project activity for projectfinancing. The PLF in the proposal for 4.5MW submitted to bank was lower (26.63%)hence the PLF submitted while applyingfor loan for 3 MW is more conservative.

O&M cost,1.5% with 5%annualescalation

GERC Order dated11th August 2006

GERC order which is publicly available,government document and henceeliminates any ambiguity and it is applicableat the time of decision making.

Tariff, INR GERC Order dated GERC order which is publicly available,


20/89



VALIDATION REPORT

Loan interest,11%

Actual interest taken There has been no recent debt taken by PP.GERC order stipulates loan interest10.25%. The interest taken is conservativeas compared to interest in GERC order.

BaselineEF, 0.9058for NEWNEGrid

CEA database ver 4

CEA database is an official source of data and hence acceptable

The validation team has verified the assumptions as above and observedthat they are correct and based on conservative values that are applicableat the time of investment decision making. The financial expert has

verified the IRR calculations and observed them to be in order. Theproject participant has also considered benefits from accelerateddepreciation [tax shield] and provisions of section 80IA [tax exemption] asper Indian Income Tax Act. The depreciation considered is 100% in firstyear. Accelerated depreciation of 80% is allowed on wind mills. Inaddition, additional 20% depreciation can be taken as per section 32 of ITAct so the project participant has taken 100% in first year. Income tax hasbeen considered at 33.66% as per the Income tax Act. The validationteam hereby confirm that the project participant has applied all thestatutory levies and taxes as per the then valid rules.

The project participant had used Weighted Average Cost of Capital(WACC) as benchmark. Weighted average costs of capital (WACC) areappropriate benchmarks for a project IRR. Weighted average cost of capital (WACC) is calculated as weighted average cost of equity and costof debt. Cost of debt is taken as Prime Lending rate (PLR) published byReserve Bank of India (RBI) at the time of investment. The average RBIPLR is taken as 11.25%. Expected cost of equity in the project typecalculated based on the CAPM (Capital Asset Pricing Model) usingpublicly available financial data. The required rate of return on equity is


21/89



VALIDATION REPORT

difference between the market return and the Government bond rates. Themarket return is arrived at based on the BSE Sensex data. The marketreturn based on BSE Sensex data is 19.43% and the risk premium is12.09%.

The beta value for the project type, as referred in the PDD, was based onBeta values of power generating companies in India and listed on thestock exchange at the time of investment decision. The source of betavalue is Bloomberg data. Average of beta values of 6 companies is takenas 1.29. Since beta is of power generating companies and sourced fromBloomberg data, the same was accepted by the validation team.

The validation team also verified the correctness and authenticity of thedata used for the calculation of WACC and found them to be correct andpublicly available. This is also in line with the guidelines for benchmarkselection stipulated in the Guidance on the Assessment of InvestmentAnalysis, EB 41 Annex 45 and hence the validation team has accepted thesame.

The note on benchmark presented in Appendix 3 of the PDD also givesdetailed justification of appropriateness and conservativeness of thebenchmark and use of values therein. The project IRR works out to be9.19 % and WACC works out to be 12.09%. The project IRR is lower thanthe benchmark.

As per the guidance to assessment of investment analysis, the sensitivityfor all parameters constituting more than 20% of either total project costsor total project revenues have been analysed, subject to reasonablevariation. The project participant has carried out sensitivity analysis for 10% variation in project cost and PLF. The tariff is fixed by Gujarat StateEl t i it R l t C i i f th lif ti f th P j t A ti it


22/89



VALIDATION REPORT

provided and CAR 20 was closed. In the earlier version of PDD, sensitivitywas not carried out for critical parameters and CAR 21 was raised. In therevised version of PDD, sensitivity was carried out on PLF and projectcost and CAR 21 was closed.

The validation team, based on the assessment result by the financialexpert engaged, hereby confirms that the underlying assumptions areappropriate and the financial calculations are correct.

The validation team therefore confirms that the project IRR for the projectactivity without CDM revenue is 9.19% and even with sensitivity analysis,the values does not cross the benchmark and hence it can be consideredthat the project is not viable without CDM revenues. The IRR with CDMcrosses the benchmark (12.11%) and hence the project is viable only withCDM revenues. Thus the project is additional.

3.5.4 Barrier analysis (116)

Barriers due to prevailing practice were mentioned in the webhosted PDD.The validation team considered that these barriers are not prohibitive innature and raised CAR 24. Barriers due to prevailing practice wereremoved from PDD and CAR 24 was close d.

3.5.5 Common practice analysis (119)

Common practice analysis has not been used to demonstrateadditionality. As per Attachment A to Appendix B of Simplified modalitiesand procedures for small scale CDM project activities additionality can be


23/89



VALIDATION REPORT

Validation team considers the monitoring plan to be complying with therequirements of the methodology. The reasons are as follows

1. According to the methodology, monitoring shall consist of metering theelectricity generated by the renewable technology. The projectparticipant has included the parameter, EG ne ty , in the monitoring plan.

2. EF g r i d , C M , y . is fixed ex-ante based on CEA database ver 4. This is inline with the EF tool as required by the methodology.

3. Project participant has provided for archiving in electronic and hardform of all the monitored data. This is stated transparently in sectionB.7.2 of the revised PDD.

4. Project participant has provided for keeping the data for 2 years after the end of the last crediting period.

5. The monitori ng plan i ncludes requi rements for meter testi ng andcalibration. The meters used for monthly joint meter recording at substation are tested and calibrated by the authorized agency of the stateelectr ici ty Board.

The state electricity utility, based on this monthly reading, prepares the

certificate of share of electricity and submits the same to the ProjectParticipant. The share certificate indicates the net electricity exported tothe grid by the individual investors. The share certificate is used as thebasis for the calculation of the emission reductions. The cross-checking of the measurement results are done against the payment that is receivedfor the electricity supplied to the grid.

The validation team physically verified the metering system installed at

site and the substation of the project activity. Monitoring plan was notcorrectly described in the PDD and CAR 5 and CAR 6 were raised. Themonitoring plan in earlier version of PDD was not as per the practicefollowed at site and CAR 28 was raised. Monitoring plan was revised anddata uncertainty was addressed. CAR 5 and CAR 6 were then closed.Monitoring plan was revised in line with the practice that is being followed


24/89



VALIDATION REPORT

The validation team also interacted with the O&M service provider, M/s.Suzlon. The agency is experienced in the monitoring system and ismanaging O&M of numerous other wind farm CDM projects. The validationteam therefore is of the opinion that the project participant through theO&M agency is capable of implementing the monitoring plan in the contextof the project activity.

3.7 Sustainable development (125)

In the earlier version of PDD, contribution to sustainable development wasnot described as per four indicators stipulated by Ministry of Environment&Forests and CAR 33 was raised. In the revised version of PDD, theproject participant described contribution to sustainable developed as per four indicators of sustainable development stipulated by Ministry of Environment & Forests and CAR 33 was closed. The validation team is of the opinion that the description is adequate as wind mills do not lead toany kind of air pollution and the project provides employment to localpeople as was confirmed by meeting with stakeholders during site visit.The project supplies electricit y to state grid. According to Indian

regulation, the implementation of the wind mills does not require anenvironmental impact assessment. Hence no public hearing is necessaryfor these projects. In response to [CAR 36], project participant describedregarding adequate disposal of solid and oily waste generated from theproject activity. The host Partys DNA confirmed the contribution of theproject to the sustainable development of the host Party. Please refer tosection 3.1 of this report.

3.8 Local stakeholder consultation (128)

The local stakeholder s consultation meetings were conducted by ProjectParticipant to get their comments and suggestions of the project activity.

B V C


25/89



VALIDATION REPORT

A copy of newspaper advertisement (Ref 45) and the public notice (Ref 44) was provided to the validation team. During the si te visi t of thevalidation team on 6th and 7th Jan 2009, interviews were conducted withlocal stakeholders. The stakeholders appreciated the Project activity . The

project has given employment to local people and the stakeholders viewedthe project as contributing to local environmental benefits and social-economy. There were no negative comments from the stakeholdersregarding the project activity. The stakeholders also confirmed theprocess of invitation as described in the PDD. The validation team herebyconfirms that the process of local stakeholder consultation is observed tobe adequate.

3.9 Environmental impacts (131)

As per the Schedule 1 of the EIA notification dated 14th September 2006(Ref 60) (http://envfor.nic.in/legis/eia/eia-2006.htm), given by the Ministryof Environment and Forests (Government of India) under the Environment(Protection) Act 1986, EIA is not a regulatory requirement in India for wind energy projects. Thus the project activity doesnt require EIA. Theproject activity does not involve any negative environmental impacts, asthe WEGs are installed for generation of power using wind which is aclean source of energy. In response to [CAR 36], project participantdescribed regarding adequate disposal of solid and oily waste generatedfrom the project activi ty.

4 VALIDATION OPINION

Bureau Veritas Certification has performed a validation of the 7.5 MWwind energy project by Shri Lal Mahal Limited in the State of GujaratP j i I di Th lid i f d h b i f UNFCCC



26/89



VALIDATION REPORT

demonstration of the additionality. The PDD provides investment barrier todemonstrate additionality. The internal rate of return of the project (witheven sensitivity on project cost and PLF) is less than the benchmarkchosen and hence it is demonstrated that the project is additional.

By synthetic description of the project, the project is likely to result inreductions of GHG emissions partially. An analysis of investment barrier demonstrates that the proposed project activity is not a likely baselinescenario. Emission reductions attributable to the project are henceadditional to any that would occur in the absence of the project activity.Given that the project is implemented and maintained as designed, theproject is likely to achieve the estimated amount of emission reductions.

The review of the project design documentation (version 6) and thesubsequent follow-up interviews have provided Bureau VeritasCertification with sufficient evidence to determine the fulfillment of statedcriteria. In our opinion, the project correctly applies and meets therelevant UNFCCC requirements for the CDM and the relevant host countrycri teria.

The validation is based on the information made available to us and theengagement conditions detailed in this report.

5 REFERENCES

Category 1 Documents :Documents provided by Shri Lal Mahal Limited that relate directly to theGHG components of the project.



27/89



VALIDATION REPORT

1500 KW rating Wind Turbine Generator (WTG) dated11/01/2007

(Ref 7) Purchase order for supply for 2 nos /sets of transformer andelectrical items, dated 11/01/2007

(Ref 8) Arrangement of power evacuation for 2 nos 1500 KW WTG

dated 11/01/2007(Ref 9) Word order for civil work including foundation and allied works

in respect of windfarm project consisting of 2 nos WTG dated11/01/2007

(Ref 10) Work order for instal lat ion of (with material) of electr ical l ine for power transmission and metering in respect of windfarm projectconsisting of 2 nos WTGs dated 11/01/2007.

(Ref 11) Work order for erection, installation and commissioning of 2 nosWTGs dated 11/01/2007

(Ref 12) Land lease document for 1.5 MW between the ProjectParticipant and M/s Sarjan Realities dated 24/01/2007


(Ref 14) Gujarat Energy Development Agency permission for 3 MW ref no. GEDA/PWF/SGWPL-SH(I)/Abdasa/8064 dated 26/02/2007

(Ref 15) Certificate of commissioning for windmills for 3 MW ref no.GEDA/PWF/SGWPL-SRHIL/Abdasa/2006-07/359 dated16/04/2007.

(Ref 16) Engagement with Senergy Global Pvt Ltd for 3 MW dated

26/02/2007(Ref 17) Termination of contract letter with Senergy Global Pvt Ltd dated

02/05/2007(Ref 18) Power purchase agreement for 3 MW between the state

electr ici ty uti l i ty GUVNL and the Project Part icipant dated



28/89



VALIDATION REPORT

(Ref 23) Power evacuation for 3 nos 1500 KW WTG dated 04/01/2008

(Ref 24) Word order for civil work including foundation and allied worksin respect of windfarm project consisting of 3 nos WTG dated04/01/2008

(Ref 25) Work order for instal lat ion of (with material) of electr ical l ine for power transmission and metering in respect of windfarm projectconsisting of 3 nos WTGs dated 04/01/2008.

(Ref 26) Work order for erection, installation and commissioning of 3nos WTGs dated 04/01/2008

(Ref 27) Engagement with PWC for 7.5 MW dated 20/02/2008(Ref 28) Gujarat Energy Development Agency permission for 4.5 MW ref

no. GEDA/PWF/SGWPL-SRHIL/Jangi/07-08/7429 dated29/03/2008


(Ref 30) Land lease document for 1.5 MW b etween the ProjectParticipant and M/s Sarjan Realities dated 15/03/2008

(Ref 31) Land lease document for 1.5 MW between the ProjectParticipant and M/s Sarjan Realities dated 15/03/2008(Ref 32) Certificate of commissioning for windmills for 4.5 MW ref no.

GEDA/PWF/SGWPL-SRHIL/Jangi/07-08/439 dated 15/04/2008(Ref 33) Power purchase agreement for 4.5 MW between the state

electr ici ty uti l i ty, GUVNL and the Project Part icipant dated30/08/2008

(Ref 34) Fax message dated 01/10/2008 from DNA of India regardingmeeting of the National CDM authority

(Ref 35) Host country appro val letter Ref N o: 4/25/2008-CCC da ted08/12/2008. Revised Host Country Approval letter ref No4/25/2008 CCC d t d 29/03/2010



29/89



VALIDATION REPORT

dated 07th December 2007.(Ref 40) Bank loan application for 3.0 MW wind farm project (Phase I)

dated 17th January 2007(Ref 41) Bank loan application for 4.50 MW wind farm project (Phase II)

dated 15th January 2008(Ref 42) Ackno wledg ement from Stat e Bank of Mysor e regar ding PLF

considered for project appraisal for 3 MW Ref no. Nil dated27/08/2009

(Ref 43) Ackno wled gement from State Bank of Pati ala regardi ng PLFconsidered for project appraisal for 4.5 MW Ref no. Nil dated27/08/2009

(Ref 44) Public notices put up in village office for local stakeholder meeting dated 01st & 02nd Ju ly 2008 and 20 & 21st July 2008

(Ref 45) Notice of local stakeholder meeting in the newspaper.(Ref 46) Minutes of the local stakeholder meeting on 23rd July 2008 inthe local language (Gujarati) and also the translated version inEnglish.

(Ref 47) Minutes of the local stakeholder meeting on 23rd July 2008 inthe local language (Gujarati) and also the translated version inEnglish.

(Ref 48) Offer from Suzlon Energy Limited for 3 MW ref no.SEL/ND/MKTG/RS/SRHNIL/15122006 dated 15/12/2006

(Ref 49) Decl arat ion from Char tere d Accou ntan t regar ding no inves tmentmade by project proponent in previous three years

(Ref 50) CER calculation spreadsheet(Ref 51) IRR calculation spreadsheet(Ref 52) IRR Certificate from Sushil Budhia & Associates dated

10/02/2010

Category 2 Documents :

Background documents related to the design and/or methodologies



30/89


VALIDATION REPORT

dated Oct 2008(Ref 58) Guidelines on the assessment of investment analysis ver 3, EB

51 Annex 58(Ref 59) Income Tax Act, Government of India

[http://law.incometaxindia.gov.in/TaxmannDit/DisplayPage/dpage1.aspx]

(Ref 60) EIA Notification (S.O 1533) dated 14 t h September 2006(Ref 61) GERC tariff order of 2006 dated 11/08/2006(Ref 62) General Guidance to SSC CDM Methodologies ver 12.1(Ref 63) Guidelines on assessment of de-bundling for SSC project

activities, ver 2, EB 47, Annex 32.(Ref 64) Non-binding best practice examples to demonstrateadditionality for SSC project activities, EB 35, Annex 34.



31/89


VALIDATION REPORT

Persons interviewed:

List persons interviewed during the validation or persons that contributedwith other information that are not included in the documents listed above.

1 Mr S K Valecha, Shri Lal Mahal Limited2 Mr Rastogi, Shri Lal Mahal Limited

3 Mr Anil Nair, Shri Lal Mahal Limited

4 Mr Naveen Sharma, Shri Lal Mahal Limited

5 Mr Mukesh Kumar, Shri Lal Mahal Limited

6 Mr Neeraj Gupta, Pricewaterhouse Coopers

7 Mr Sourish Dasgupta, Pricewaterhouse Coopers

8 Mr Sharique Ahmed, Pricewaterhouse Coopers

9 Mr Sharad Jain, Suzlon

10 Mr Ankur Bhatt, Suzlon

11 Mr Dharmendra J. Agravat, Suzlon

12 Mr Abel Raja Singh, Suzlon13 Mr Girirajsin h Jadeja, Local Stakeholders

14 Mr Dinesh Mori, Local Stakeholders

15 Mr Kamariya Sandip, Local Stakeholders

16 Mr Solanki Jayanti, Local Stakeholders



32/89


VALIDATION REPORT

6. CURRICULUM VITAE OF TH E DOES VALIDATION TEAMMEMBERS

R.S.Premkumar (Team Leader)Lead auditor in Bureau Veritas Certification for Environment Management System,Quality Management System and Occupational Health and Safety ManagementSystem. Graduate in the field of Environmental Engineering and has more than 12years of Industrial work experience in the field of environmental and occupational safetymanagement systems. He has undergone intensive training on Clean DevelopmentMechanism. He is involved in the Validation/verification for more than 20 CDM projects.

Naresh Badhwar (Team Member) Graduate in Civil Engineering from IIT Bombay and Post graduate from MichiganTechnological University, USA (Major: Environmental Engineering) and MBA (PT),Finance from Faculty of Management Studies, Delhi. He has around 12 years of experience in environmental regulatory organization, consultancy etc. He is involved invalidation of CDM projects.

H B Muralidhar: (Internal Technical Reviewer)Lead auditor in Bureau Veritas Certification for Environment Management System,

Quality Management System and Occupational Health and Safety ManagementSystem. Graduate in Electrical Engineering with 25 years of experience power generation and distribution related fields as well as in management system auditing. Heis the Lead auditor for Environmental Management System, Quality Managementsystem and Occupational Health and Safety Management System. He has undergoneintensive training on Clean Development Mechanism. He is the technical expert &conducted Validation / Verification for more than 50 CDM Projects


33/89



34/89


VALIDATION REPORT

34

CHECKLIST QUESTION Ref. COMMENTS DraftConcl FinalConclf. If there is doubt with respect to (e) above, was verified with

the DNA that the letter of approval is valid for the proposedCDM project activity under validation?

VVM 47 Letter was issued by DNAhence considered authenticand reliable

-OK

OK

g. Is there doubt with respect to the authenticity of the letter of approval?

VVM 48 No, since the letter wasissued by DNA

-OK

OK

h. If yes, was verified with the DNA that the letter of approval isauthentic?

VVM 48 Refer 1.g above -

2. ParticipationPP1 (insert PP1 name) PP2 (insert PP2 name)

a. Have all project participants been listed in a consistentmanner in the project documentation?

VVM 51 Yes, The project participant isLal Mahal Limited. Projectrelated documents are in thename of Shivnath Rai NarainIndia Ltd. The name waschanged to Lal Mahal Ltd asper Fresh certificate of incorporation consequentupon change of name dated

23rd

Jan 2008.

-OK

OK

b. Has the participation of the project participants in the projectactivity been approved by a Party to the Kyoto Protocol?

VVM 51 Yes, participation is approvedby DNA of India which is aparty to Kyoto Protocol

- OK OK

c. Are the project participants listed in tabular form in sectionA.3 of the PDD?

VVM 52 The project participant islisted in tabular form in A3 of PDD.

- OK OK

d. Is the information in section A.3 consistent with the contactdetails provided in annex 1 of the PDD?

VVM 52 Yes, information in A3 andAnnex-I of PDD areconsistent.

- OK OK

e. Has the participation of each of the project participants beenapproved by at least one Party involved, either in a letter of approval or in a separate letter specifically to approveparticipation? (Provide reference of the approval documentfor each of the project participants)

VVM 52 Yes, letter no: 4/25/2008-CCC dated 8 th Dec 2008,MoEF, Govt. of India. Letter received from Projectparticipant.

- OK OK

f. Are any entities other than those approved as projectparticipants included in these sections of the PDD?

VVM 52 There are no other entities other than project participantsincluded in A3 and Annex-I of PDD.

OK OK

g. Has the approval of participation issued from the relevant VVM 53 Not applicable - - -


35/89


36/89


37/89


38/89


39/89


40/89


41/89


42/89


43/89


44/89



45/89


VALIDATION REPORT

45

CHECKLIST QUESTION Ref. COMMENTSDraftConcl FinalConcl

resolution was signed in the register but initials on the pagewere made after it was pointed out. Proposed Board agendanote has been provided for the meeting of Board of Directorson 29 th Dec 2006. The project participant submitted the Boardminutes before site visit and the agenda note to the validationteam after the site visit. The following are not clear

1) The Board agenda states that project will be implemented in

two phases whereas there is no mention of phasing of projectin Board resolution.2) Debt equity ratio in agenda is given as 70: 30 whereas inBoard resolution debt equity ratio is given as 85:15. During thediscussions with Mr S.K. Valecha, Director, Lal Mahal Limited,it was informed that when Banks were approached, theyagreed to give higher loans as a result debt equity ratiochanged. The bank application for loan is to be provided.3) Single IRR is given in agenda for Board meeting whereasthere is no mention of IRR in Board resolution. Two IRRs are

given in PDD (separate for each phase). It was informed by Mr S.K. Valecha that initially it was thought that entire project willbe at one location and later on as project was implemented attwo locations so there are two IRRs as different PLF is there attwo locations. However, more detailed justification is required.

ii. reliable evidence from project participants that mustindicate that continuing and real actions were taken tosecure CDM status for the project in parallel with itsimplementation, including, inter alia:

VVM 100 During site visit the revised chronology of events wassubmitted and in the revised chronology, it is not clear on thefollowing:

1. First consultant who was appointed was SenergyGlobal Private Limited. The contract was later on cancelled. Itwas informed by Mr S.K. Valecha, Director that the contractwas cancelled as they could not take up the work due to highwork load and higher price. It is not clear why Senergy Globalwas selected initially if prices were higher. Justification is notaccepted by the validation team.2. It needs to be clarified as to when was the stakeholder

consultation for the first set of 3 MW as the PDD was

CAR 17 OK


R N INDIA l/207 49/2010 01


46/89


VALIDATION REPORT

46


submitted to project participant by PWC earlier to thesecond phase. Provide proof

3. It needs to be clarified whether application was made for the host country approval for first phase submitted andwhat happened to that?

4. The chronology does not contain the commissioningdates for the wind mills

5. Having decided clearly to go ahead with 7.5 MW at thefirst instance itself, it is not clear why the project is splitin to two phases and the DOE is not appointed evenafter the PDD was submitted to the project participantby the consultant on 14 th August 2007 itself for the firstphase. As such the serious consideration of CDM isnot established.

a. contract with consultants for CDM/PDD/methodology services?

VVM 100 It is mentioned in PDD that proposal was received fromPricewaterhouse Coopers on 4 th May 2007 for 3 MW.However, as per the documents submitted, the proposal fromPricewaterhouse Coopers dated 4 th May 2007 is for 7.5 MW.Please explain as how proposal for 7.5 MW was received on4 th May 2007.

CAR 18 OK

b. Emission Reduction Purchase Agreements or other documentation related to the sale of the potentialCERs (including correspondence with multilateralfinancial institutions or carbon funds)?

VVM 100 There is no document on emission reduction purchaseagreement or any other documentation related to sale of potential CERs.

CL 6OK

c. evidence of agreements or negotiations with a DOEfor validation services?

VVM 100 Validation contract with DOE is on 12 th Sept 2008. OK OK

d. submission of a new methodology to the CDMExecutive Board?

VVM 100 Not applicable - -

e. publication in newspaper, interview with DNA,earlier correspondence on the project with the DNAor the UNFCCC secretariat?

VVM 100 No evidence is there of these activities. - -

b. Identification of alternativesa. Does the approved methodology that is selected by the

proposed CDM project activity prescribe the baselineVVM 103 Yes, AMS-ID prescribes baseline as kWh produced by the

renewable generating unit multiplied by an emission coefficientOK OK


Report No: INDIA val/207 49/2010 rev 01


47/89


VALIDATION REPORT

47


scenario and hence no further analysis is required?b. If no, does the PDD identify credible alternatives to the

project activity in order to determine the most realisticbaseline scenario?


c. Does the list of alternatives given in the PDD ensure that: VVM 104 Refer 6.b.a above - -i. the list of alternatives includes as one of the options

that the project activity is undertaken without beingregistered as a proposed CDM project activity?

VVM 104 Refer 6.b.a above - -

ii. the list contains all plausible alternatives that theDOE, on the basis of its local and sectoralknowledge, considers to be viable means of supplying the outputs or services that are to besupplied by the proposed CDM project activity?


iii. the alternatives comply with all applicable andenforced legislation?


c. Investment analysisa. Has investment analysis been used to demonstrate

the additionality of the proposed CDM projectactivity?

VVM 106 Yes, investment analysis has been used to demonstrate

additionality.

OK OK

b. If yes, does the PDD provide evidence that theproposed CDM project activity would not be:

VVM 106

i. the most economically or financially attractivealternative?

VVM 106 No alternatives are there as the methodology prescribesbaseline.

OK OK

ii. economically or financially feasible, without therevenue from the sale of certified emission reductions(CERs)?

VVM 106 IRR has been computed and it has been shown to be belowbenchmark.

OK OK

c. Was this shown by one of the following

approaches?

VVM 107

i. Demonstrate that the proposed CDM project activitywould produce no financial or economic benefitsother than CDM-related income. Document the costsassociated with the proposed CDM project activityand the alternatives identified and demonstrate thatthere is at least one alternative which is less costlythan the proposed CDM project activity.

VVM 107 There are income other than CDM related income and noalternatives are there as methodology prescribes baseline.

OK OK


Report No: INDIA val/207 49/2010 rev 01


48/89


VALIDATION REPORT

48

CHECKLIST QUESTION Ref. COMMENTSDraftConcl

FinalConcl

ii. The proposed CDM project activity is lesseconomically or financially attractive than at least oneother credible and realistic alternative.

VVM 107 No alternatives are there as methodology prescribes baseline. OK OK

iii. The financial returns of the proposed CDM projectactivity would be insufficient to justify the requiredinvestment.

VVM 107 IRR has been computed and it has been shown to be belowbenchmark.

OK OK

d. Are the input values applicable at the time of decision making.

VVM 108 The assumptions made as reflected in the IRR are based onpurchase orders which are post decision making date. Hence

it is not acceptable.

CAR 19 OK

e. Was a thorough assessment of all parameters andassumptions used in calculating the relevantfinancial indicator, and determine the accuracy andsuitability of these parameters using the availableevidence and expertise in relevant accountingpractices conducted?

VVM 109 Agenda for Board meeting gives a single IRR but two IRRs aregiven in PDD (separate for each phase). It was informed by Mr S.K. Valecha, Director that initially it was thought that entireproject will be at one location and later on as project wasimplemented at two locations, there are two IRRs as differentPLF is there at two locations. However, more detailed

justification is required.Investment analysis is not based on assumptions relevant atthe time of decision making.

Equity IRR and project IRR are used interchangeably. It needsto be clarifies whether project IRR is computed or equity IRR iscomputed.

It needs to be clarified as how there are two different PLFs inthe same region.

As per the O&M agreement, O&M is free for the first two yearsfrom commissioning date. It needs to be clarified whether this

is considered in analysisIt is not clear why no insurance charges are taken in Phase Iwhereas insurance charges are taken in Phase-II.

For many of the references GERC order is quoted. However the date of the order is not transparent. Copy of order is to beprovided .

CAR 20 OK


49/89


50/89




51/89

p

VALIDATION REPORT

51


FinalConcl

activities?n. If yes: VVM 111

i. has the FSR been the basis of the decision toproceed with the investment in the project, i.e. thatthe period of time between the finalization of the FSRand the investment decision is sufficiently short for the DOE to confirm that it is unlikely in the context of the underlying project activity that the input values

would have materially changed?

VVM 111 Feasibility report is not treferred. However details may beprovided as per 6.c.m above

CL 7 OK

ii. Are the values used in the PDD and associatedannexes fully consistent with the FSR?

VVM 111 Refer 6.c.m above - -

iii. If not, was the appropriateness of the valuesvalidated?

VVM 111 Refer 6.c.m above - -

iv. On the basis of its specific local and sectoralexpertise, is confirmation provided, by cross-checkingor other appropriate manner, that the input valuesfrom the FSR are valid and applicable at the time of the investment decision?

VVM 111 Refer 6.c.m aboveHowever it is seen that the assumptions made are not relevantat the time of decision making (Refer 6.c.d above)

- -

d. Barrier analysisa. Has barrier analysis been used to demonstrated

the additionality of the proposed CDM projectactivity?

VVM 113 Barriers due to prevailing practice have been used. OK OK

b. If yes, does the PDD demonstrate that theproposed CDM project activity faces barriers that:

VVM 113

i. prevent the implementation of this type of proposedCMD project activity?

VVM 113 The barriers discussed under prevailing practice are notacceptable as they are not prohibitive. The justification is notthere for considering it as a barrier.

CAR 24 OK

ii. do not prevent the implementation of at least one of the alternatives?

VVM 113 There are no alternatives as methodology prescribes baseline. OK OK

c. Are there any issues that have a clear direct impacton the financial returns of the project activity, other than: risk related barriers, for example risk of technical failure, that could have negative effectson the financial performance; or barriers related to

VVM 114 No such issues are mentioned in PDD, that have impact onfinancial returns of the project.

OK OK


52/89




53/89

VALIDATION REPORT

53


FinalConcl

used by the project participants to demonstrateadditionality?

c. Was it assessed whether the geograpphical scope(e.g. defined region) of the common practiceanalysis is appropriate for the assessment of common practice related to the project activitystechnology or industry type? (For certaintechnologis the relevatn region for assessment will

be local and for others it may betransnational/global.

VVM 118 Refer 6.e.b above - -

d. Was a region other than the entire host countrychosen?


e. If yes, was the explanation why this region is moreappropriate assessed?


f. Using official sources and local and industryexpertise, was it determined to what extent similar and operational projects (e.g., using similar technology or practice), other than CDM project

activities, have been undertaken in the definedregion?


g. Are similar and operational projects, other thanCDM project activities, already widely observedand commonly carried out in the defined region?


h. If yes, was it assessed whether there are essentialdistinctions between the proposed CDM projectactivity and the other similar activities?


7. Monitoring methodology and monitoring plana. Does the PDD include a monitoring plan? VVM 120 Monitoring plan is given in section B7.2 of PDD. OK OKb. Is this monitoring plan based on the approved

monitoring methodology applied to the proposedCDM project activity?

VVM 120 Monitoring plan is based on AMS-ID OK OK

c. Were the list of parameters required by the theselected methodology identified?

VVM 121 In section B7.2, metering the electricity generated by therenewable technology is identified as required by AMS-ID.

OK OK

d. Does the monitoring plan contains all necessaryparameters?

VVM 121 Measurement of electricity imported and exported is to becarried out whereas the PDD mentions only net electricity

CAR 26 OK




54/89

VALIDATION REPORT

54


FinalConcl

supplied to the grid will be monitored.e. Are the parameters clearly described? VVM 121 Frequency of monitoring is to be mentioned. Separate

measurement of electricity import and export is to be carriedout.

The PDD does not mention anything about data achieving anddata storage.

CAR 27 OK

f. Does the means of monitoring described in the plan

comply with the requirements of the methodology?

VVM 121 No, the monitoring methodology is not in line with AMS I.D. In

B7.1 of PDD, it mentions that net electricity exported will bemeasured whereas methodology calls for metering theelectricity generated by renewable technology

The monitoring plan described in the PDD is not in line withwhat is actually done at site.

CAR 28 OK

g. Is the application of the monitoring methodologytransparent

1-3 DR No, the application of the monitoring methodology is nottransparent since it does not include information on imports byproject activity. Measurement of electricity imported andexported is to be carried out. Moreover the monitoring plan

described is not in line with the actual ground situation.

CAR 27 OK

h. Are the monitoring arrangements described in themonitoring plan feasible within the project design?

VVM 121 The monitoring methodology relies on metered data and henceit is feasible.

OK OK

i. Are the data double-checked against commercial data? 1-3 DR There is no double-checking of data mentioned in PDD. CL 8 OK

j. Does project management planning includes1. Are procedures identified for training of monitoring

personnel1- 3 DR

I

There is no mention of any training in PDD since operation andmaintenance contract is with Suzlon Wind farm ServicesLimited

OK OK

2. Are procedures identified for calibration of monitoring equipment 1- 3 DR I

It is mentioned that calibration will be carried out as detailed inPPA. There is no QA/QC plan in PDD. CAR 29 OK

3. Are procedures identified for maintenance of monitoring equipment and installations

1- 3 DR

I

There is no mention of maintenance of meters CAR 30 OK

4. Are procedures identified for monitoring, 1- 3 DR More details are required on procedural aspects especially CAR 31 OK


55/89




56/89

VALIDATION REPORT

56


FinalConcl

l. Are the following means of implementation of themonitoring plan sufficient to ensure that the emissionreductions achieved by/resulting from the proposed CDMproject activity can be reported ex post and verified:

VVM 121

i. data management procedures? VVM 121 The project management authority, roles and responsibilitiesare given in the PDD but the same needs to be given in moredetail.

CL 13 OK

ii. quality assurance procedures? VVM 121 As per PDD, calibration will be done as per PPA. There is no

QA/QC plan in PDD

CAR 29 OK

iii. quality control procedures? VVM 121 As per PDD, calibration will be done as per PPA. There is noQA/QC plan in PDD

CAR 29 OK

8. Sustainable development a. Does the CDM project activity assists Parties not

included in Annex I to the Convention in achievingsustainable development?

VVM 123 PDD under section A.2 does not detail how the project activitywill lead to well being of each of the sustainability criteria asdefined by the host country. The claim in the PDD that Gujaratstate is deficit in power needs to be justified and supported byevidence.

CAR 33 OK

b. Does the letter of approval by the DNA of the hostParty confirm the contribution of the proposed CDM projectactivity to the sustainable development of the host Party?

VVM 124 DNA approval states that project contributes to sustainabledevelopment in India.

OK OK

c. Will the project create other environmental or socialbenefits than GHG emission reductions

1-3 DR Refer 8.a above. The claim in the PDD that Gujarat state isdeficit in power needs to be justified and supported byevidence.

CAR 33 OK

9. Crediting period

a. Are the projects starting date and operational lifetime clearlydefined?

1-3 DR Project participant has considered the date 11/01/2007(Purchase order date) as the start date of the project activity.The operational life of the project activity is considered as 20years.

OK OK

b. Is the crediting period clearly defined (seven years with twopossible renewals or 10 years with no renewal)?

1-3 DR Renewable crediting period is chosen but renewable period isnot mentioned.

However since lifetime mentioned is only 20 years, this will beless than the crediting period, which means that the projectmay not survive for the whole of the renewable crediting

CAR 34 OK


57/89




58/89

VALIDATION REPORT

58


FinalConcl

any comments received and described this process in thePDD?

stakeholders. Summary of comments and responses given areprovided in Appendix-2 of PDD

11. Environmental impactsa. Have the project participants submitted

documentation on the analysis of the environmental impactsof the project activity?

VVM 129 As per PDD, environmental impacts are insignificant. However,documentation on disposal of hazardous oil waste generatedneeds to be provided.

CAR 36 OK

b. Have the project participants undertaken ananalysis of environmental impacts?

VVM 130 In section D.2 of PDD it is stated that The environmentalimpacts from the proposed CDM project activity are notconsidered significant. However the PDD is not transparenton the disposal of hazardous oil waste generated.

CAR 36 OK

c. Does the host Party require an environmentalimpact assessment?

VVM 130 Indian legislation does not require environmental impactassessment for windmill projects

OK OK

d. If yes, have the project participants undertaken anenvironmental impact assessment?



59/89




60/89

VALIDATION REPORT

60

CHECKLIST QUESTION Ref. COMMENTS

Draft

ConclFinalConcl

project boundary is within 1 km of the proposed boudary of the proposed small-scale activity at the closest point?

g. Is the assessment of the environmental impacts of the proposed CDM project activity required by the hostParty?

VVM 134 Indian legislation does not require environmental impactassessment for windmill projects.

OK OK

h. Is the project additional? VVM 135 Refer to 6 in Table 1 above - -


61/89


62/89


63/89


64/89


65/89


66/89


67/89


68/89


69/89


70/89



VALIDATION REPORT


71/89

71

Draft report clarifications and corrective action requests

by validation team

Ref. to

checklistquestionin table 1and 2

Summary of project owner response Validation team conclusion

7.5 MW is completed.The complete chronology of events is incorporated in the revisedPDD in section B.5.Reply 2:There was no stakeholder consultation meeting after the submissionof 1 st draft of the PDD for 3 MW.

In light of EB-49, Annex 22 the chronology has been revised. Thetypological error in dates is corrected. Further, we will like to submitto the DoE that the gap between the start date and the webhosting of the PDD for public stakeholder comments is less than two yearswhich shows real and continuing action as per Annex 22 of EB 49.

Reply 3:Evidence for timely action towards CDM process is provided in thePDD.

The commissioning dates have been included in the PDD (sectionA.2 and A.4.1.4)

The transmission of the letter is done via mail.The description of the documents is added to the revised PDDversion 03.

Power Purchase Agreement Stakeholder Intimation letters Stakeholder Minutes of Meeting

Evidence for timely action towards CDM process is provided in thePDD.

It is success fee assignment and hence no upfront payment isrequired.

15 th June 2007. Please provide copy of contract for 7.5 MW with PWC.

Please provide copies of PPA andsupplemental PPA for both phases.

All issues are not addressed for e.g. whether stakeholder meeting was held for first phaseetc


72/89



VALIDATION REPORT


73/89

73


by validation team

Ref. to



engaging PwC for the entire 7.5 MW capacity but the projectproponent insisted that they are willing to engage PwC for first phaseat this point time. Therefore revised proposal of 3 MW was provided.The copy has being provided

parallel to implementation. Thus, there hasbeen real action to secure CDM status inparallel to the implementation of the projectactivity as per EB 49, Annex 22. Hence theCAR is closed.

CAR 19

The assumptions made as reflected in the IRR arebased on purchase orders which are post decisionmaking date. Hence it is not acceptable.

Table 16.c.d

The financial analysis submitted was based on the assumptionsavailable to the PP at the time of start date of the project activity. Inaccordance with the guidance issued in EB-41 on demonstration andassessment of investment analysis, input values used in allinvestment analysis should be valid and applicable at the time of theinvestment decision taken by the project participant. Therefore wehave revised the values in the financial model that were available tothe PP at the time of decision making. (Suzlon Offer has beenprovided to the validator)

The PLF estimated in the purchase order is at WTG controller andhence to arrive at the net export to the grid, the following correctionfactors shall be.

Machine Availability Grid Availability Line Loss and Transformation Loss from WTG controller to

meter at the sub-stationThe PLF in Suzlon offer is given at WTG controller which doesntinclude line loss, machine and grid availability. However, tariff isprovided for the net electricity exported to the grid that is measuredat the substation. However for conservativeness we have appliedPLF of 29.68% from Suzlon offer without adjusting it against lineloss, machine and grid availability.

Reply 2:The assumptions in the revised calculations have been taken fromthe GERC order which is applicable at the time of decision making.

Effective PLF calculations in financialanalysis are not clear.

Please clarify whether additional 20%


74/89


75/89



VALIDATION REPORT

Draft report clarifications and corrective action requests Ref to Summary of project owner response Validation team conclusion


76/89

76


by validation team

Ref. to



applied from the long term bond rate published by RBI. The tax rateis revised to 33.66% and risk free rate is applied consistently in therevised calculations.For estimating beta we have included all the companies that arelisted have data for the period in consideration and are into power generation business. Neyveli lignite is also listed on the exchange

and have made investments into the power generation. Therefore wehave considered it appropriate to include Neyveli Lignite in the list of companies used for estimating beta.

Reply 3:

Five year weekly beta values are considered (2002-2007) for establishing WACC.

The detailed WACC sheet has been provided

The IRR calculations performed in Board Agenda formed at debteqity ratio of 70:30 whereas final approval was taken at the leverageof 85:15. Therefore IRR in the PDD (9.11%) is different from boardagenda note (8.81%).

The sensitivity analysis has been carried for all critical parameters asstated in the PDD (section B.5)

WACC calculations have been revised. Taxrate of 33.66% has been taken. Five year weekly beta has been taken. The validationteam also verified the correctness andauthenticity of the data used for thecalculation of WACC and found them to becorrect and publicly available. Hence theCAR is closed.

CAR 21

Sensitivity analysis is not carried out for the criticalparameters as required under the guidelines for financial analysis.

Table 16.c.i

The investment in wind power project shall be tested based on threeparameters:

Capital Cost Tariff Plant Load Factor

The additionality for the project activity is demonstrated at the time of investment decision making.The variation of +/-10% is considered as reasonable variation in

IRR at max PLF observed is not detailed insensitivity analysis, however it is stated that

it has been carried out.

Normally when two parameters are critical,sensitivity analysis is carried out consideringa matrix.


77/89


78/89


79/89


80/89


81/89



VALIDATION REPORT

Draft report clarifications and corrective action requests Ref. to Summary of project owner response Validation team conclusion


82/89

82

by validation team checklistquestionin table 1and 2

record.Reply 2:The monitoring plan and the documents that are prepared anddocumented at the site are included in section B.7.2 of the revisedPDD.

prepared and documented at site are ismentioned in B7.2 of revised PDD. Hencethe CAR is closed.

CAR 32

No procedures are identified for day to day recordhandling

Table 17.j.5 Suzlon is O&M contractor for the wind power project developed at

Lal Mahal. Suzlons operation and maintenance procedures are ISO9000 certified. The CMS system maintains the daily data from eachof the wind mills that can be archived in soft format. This data will bemaintained for a period of 2 years beyond the crediting period.Reply 2:The data will be maintained in hard and soft format and same shallbe provided to the DoE during verification process. The information

for data archiving is included in the PDD in section B.7.2.

As per meth, it should be maintained in hardand soft. Include these in PDD.

Data archiving details are mentioned in B7.2of revised PDD. Hence the CAR is closed.

CAR 33

PDD under section A.2 does not detail how the projectactivity will lead to well being of each of thesustainability criteria as defined by the host country.The claim in the PDD that Gujarat state is deficit inpower needs to be justified and supported byevidence.

Table 18.a The Host country has defined four criteria for sustainable

development: Environmental Aspect Social Aspect Economic Aspect Technological Aspect

The brief description of all four aspects is incorporated in the revisedPDD.

The frequency profile of the state of Gujarat is below normative [50Hertz] (source: http://www.wrldc.com/monthly_report.aspx ) for mostof the time as is evident from the data from the WRLDC. It cantherefore be stated that Gujarat state is deficit in power.

Reply 2:

To include the justification in the PDD.

Details regarding contribution to sustainabledevelopment considering four indicators arementioned in revised PDD. Hence the CARis closed.


83/89


84/89


85/89


86/89


87/89



VALIDATION REPORT

Draft report clarifications and corrective action requestsby validation team

Ref. tochecklist



88/89

88

questionin table 1and 2

of electricity. The PP reviews the machine availability from thegeneration report and initiates the forward corrective action requestto Suzlon in case the performance is not as per agreed O&M terms.The detail for role and responsibility of the concerned officials hasbeen incorporated in the PDD.

Reply 2:Included in section B.7.2

PDD. Hence the CL is closed.

CL 13

The project management authority, roles andresponsibilities are given in the PDD but the sameneeds to be given in more detail.

Table 17.l.1

Monitoring, Recording, Reporting and Data Archiving areresponsibility of the site manager and support staff of Suzlon. TheCMS data is archived and maintained for records. Suzlonrelationship manger reviews, checks the performance of themachines on availability. The daily generation report is send to thePP by Suzlon relationship manager. The daily generation reportcontains data on grid availability, machine availability and generationof electricity. The PP reviews the machine availability from thegeneration report and initiates the forward corrective action requestto Suzlon in case the performance is not as per agreed O&M terms.The detail for role and responsibility of the concerned officials hasbeen incorporated in the PDD.

Reply 2:Included in section B.7.2

Details needs to be included in PDD

The details on roles and responsibilities havebeen added in B7.2 of revised PDD. Hencethe CL is closed.

CL 14It is mentioned that local stakeholders were contactedthough public notice. But it is not transparent of themedium used.

Table 110.c The Public notice was published in local newspaper to invite people

for stakeholder consultation. The copy of the advertisement shall beprovided to DoE.Reply 2:The copy of the advertisement has been provided to DoE. The localstakeholder who made the comments are listed in the minutes of meeting attached as appendix 2 of the PDD.

The identity of the local stakeholders thatmade the comments and the comments arenot included in Section E.2 of the PDD.

Stakeholders that have made commentshave been added in PDD. Copy of advertisement has been provided. Hence theCL is closed.



VALIDATION REPORT


89/89

89