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Spotlight | September 2013

Power Grid increases capex limit

Power Grid Corporation of India, the country's central transmission utility, has planned to raise the capital expenditure limit to about Rs 110,000 crore for the 12th Five Year Plan (2012-2017) to strengthen the transmission network and to avoid power blackout situation, which occurred last year due to northern grid collapse. The state-run company would go to capital market or seek other routes to raise fund for planned expenditure, according to top officials of the company.

'We are constantly expanding our reach and undertaking new projects. Earlier, we had estimated a capex of Rs 100,000 crore for the 12th Plan, but with the kind of projects that we are pursuing, we realised that we would need more funds,' said RN Nayak, Chairman and Managing Director, in his recent visit to Mumbai.

The transmission major will invest about Rs 2,220 crore by the end of the current fiscal, which is 11 per cent higher than the earlier estimation of Rs 2,000 crore, Nayak added. PowerGrid has so far raised about Rs 8,000 crore of debt in the current fiscal. The company is also doubling its transmission capacity and investing in systems to avoid the kind of outage that stranded the normal activities in 22 states on 30 July and 31 July last year.

Fundraising plan
The Board of Power Grid has approved Follow on Public Offer (FPO) of 15 per cent of existing paid-up share capital comprising fresh issue of 694.4 million shares for augmenting resources of the company to fund its investment programme, subject to necessary approval from the government.

At the current market price, it will be able to raise more than Rs 6,200 crore. The company has been highlighting that it can manage dilution by tweaking debt-equity ratio beyond 70:30 normative ratio. It had also maintained that it does not need dilution for 12th Plan capex up to Rs 100,000 crore. However with the plan for raising capex limit, it would in need for dilution that will be driven by capital requirement of new initiatives. 'We might go for fundraising options as per our fund requirement,' said RT Agarwal, Director Finance. Asked whether the company is planning to raise funds from overseas, Agarwal replied, 'That is always an option. We will evaluate the opportunities and if we feel the domestic option is cheaper, we will go for it. The company's debt-equity ratio stands at 73:27 and we want to reduce the debt component.'

The board has approved dilution as the company has revised its capex guidance for 12th Plan to Rs 110,000 crore as against Rs 10,000 earlier. It has recently won few projects on tariff-based bidding (under competitive bidding), green corridor projects worth Rs 8,500 crore from Odisha and Bihar and capex requirement for SVCs. It also highlighted that if the company would have continued to work with adverse debt-equity ratio of 75:25, it would have limited company's ability to take new projects, which would have hurt its future growth.

'We believe FPO might be a near-term overhang on the company, but once FPO is over, it will start concentrating on the fundamentals and strong execution of power grid,' said Kunal Sheth, Senior Research Analyst at Prabhudas Lilladher. PowerGrid has raised Rs 3,720 crore in FPO in November 2010 and has paid dividend of about Rs 3,100 crore in FY11-13.

Higher profit
PowerGrid has posted a net profit of Rs 1,040 crore for the first quarter of FY2013-14 (April-June), an increase of 20 per cent as against Rs 870 crore reported during the corresponding quarter last year. The total income for first quarter rose to Rs 3,634 crore, up by 22 per cent from Rs 2,980 crore in the corresponding year.

At present, PowerGrid is operating more than 101,000 ckm of transmission lines along with 169 substations and transformation capacity of about 168,000 MVA. During the first quarter, inter-regional power transmission capacity of 2,100MW has been added thereby enhancing the total inter-regional power transmission capacity of the national grid to about 31,850MW. The average availability during the quarter was maintained at 99.9 per cent. The company plans to expand the network to 140,000 ckm by March 2017, said Nayak. PowerGrid is developing 11 high capacity transmission corridors to haul electricity from generation projects spread across more than eight states. In addition to this, it will be required for undertaking projects assigned by the government, green energy corridors, intra-state projects and transnational interconnections.

Project Plan
PowerGrid has been promptly increasing the transmission network strength in the country to meet the requirement of evacuation of power from the generation units. IS Jha, Director Projects, Power Grid Corporation of India, briefs about various developments made by the company and also about the proposed green corridor.

PowerGrid is currently working on a green corridor project. Can you please more elaborate on this?
It's an ambitious plan for the country with an investment of over Rs 43,000 crore. We are currently working on the initial plan of the project and expect that work would commence in 12th Five Year Plan. The idea is to erect and use grid network, especially for the renewable resources. It is required because you know the supply of power from renewable resources like wind and solar keeps on fluctuating. The grid will be synchronised with the main grid, which can use the power as per the requirement.

How is the company working on integrating green energy?
Integration renewable energy resources with conventional sources is a top priority worldwide and special attention is being given in our country. CERC has provided a framework for trading in green certificates (renewable energy certificates or RECs). National Load Despatch Centre, NLDC of POSOCO has been designated as the central agency for this purpose. Cumulatively, RECs worth about Rs 774 crore has been traded till June 2013.

What is the size of PowerGrid's transmission networks ready for operation?
As on July 1, 2013, the company owns and operates transmission network of about 101,800 ckm of transmission lines and 170 numbers of EHVAC and HVDC substations having transformation capacity of more than 169,500 MVA with an availability of its transmission network more than 99 per cent. The company wheels about 50 per cent of total power generated in the country. We are also taking adequate measures for strengthening the inter-state and inter-regional links for enhancing the capacity of national grid. At present, national grid with inter-regional power transfer capacity of about 31,850 MW has been established.

Can you highlight the development plans for high capacity transmission corridors in India?
Being the nodal agency for grant of Long Term Access (LTA) to provide producers, PowerGrid has undertaken development of high capacity transmission corridors for evacuation of large quantum of power from various Independent Power Producers (IPPs) mainly coming up in resource rich states like Odisha, Jharkhand, Sikkim, Madhya Pradesh, Chattisgarh, Tamil Nadu, Andhra Pradesh, etc. This power is required to be transmitted to load centres located across the states and regions. Accordingly, implementation of 11 high capacity power transmission corridors (HCPTCs) has been planned by the company in consultation with CEA, IPPs and beneficiaries. CERC has already granted regulatory approval for 11 HCPTCs at an estimated cost of Rs 75,000 crore. Implementation of these corridors is being taken up in a phased manner matching with progress of generation projects. This shall go a long way in integrated development of transmission system in the country.

Take us through your plans for constructing higher transmission voltages.
PowerGrid has the experience of constructing 765kV UHVAC and +-500kV HVDC transmission system. The company is now working on next higher transmission voltages of +-800kV HVDC and 1,200kV UHVAC system to achieve efficient utilisation of RoW and increased power transfer capability for transfer of bulk power over long distances. The company is currently establishing two +-800kV, 6,000 MW HVDC bi-pole lines: one from the northeastern region to the northern region and the other from the western region to the northern region. The 1200 Kv (The world's highest voltage) UHVAC technology is being developed by the company with the participation from indigenous manufacturers of equipment, and towards this direction, the 1200 kV test lines are charged at 1200 kV National Test Station Bina, Madhya Pradesh, and field tests are under progress.

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