India's Power Grid Corporation Envisages Investment of $11.5 Billion by End of 2012

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Researched by Industrial Info Resources (Sugar Land, Texas)--By the end of the 11th Five-Year Plan (2007-12), India's state-controlled energy utility, Power Grid Corporation Limited (BSE:532898) (PGCIL) (New Delhi), will invest about $11.5 billion to strengthen its transmission network and augment the capacity of grids. Confirming the decision, Sushil Kumar Shinde, India's Minister of Power, indicated that PGCIL, which manages one of the strongest-performing transmission networks in the world, has succeeded in maintaining grid capacity at 99% availability. While 40% of the funding will come from internal accruals, about 30% and 40% will be from loans from international banks and domestic financial agencies, respectively. About 35% of the funding will be utilized for strengthening the transmission network. The remainder will be spent on improving grid linkages to power plants in the country.

Earlier this month, the board of directors of PGCIL approved an augmentation of 220/132 kilovolts (kV) at Rae Bareilly in Uttar Pradesh, with an investment of $2.25 million. The company also proposes to spend about $36.4 million on a supplementary transmission system at the Vallur thermal power station in Tamil Nadu; about $3.3 million on a split-bus and reconfiguration project at a 400-kV substation at Raipur in Chhattisgarh; and about $356 million on strengthening and augmenting the northern grid.

In March, much to the relief of independent power producers, PGCIL announced that it had identified nine transmission corridors that would add 24,000 circuit-kilometers and connect 50,000 MW to the national grid. The transmission corridors project, which will be developed in phases, will provide customers easy access to power from power plants developed by private producers. The first phase will cover Chhattisgarh, Tamil Nadu and Orissa.

In the next eight years, in addition to the proposed $11.5 billion investment, PGCIL will spend another $17.3 billion to enhance the transmission network in the country. PGCIL is expected to apply for loans to Indian banks, the World Bank (Washington, D.C.) and the Asian Development Bank (Manila, Philippines). According to S.K. Chaturvedi, the chairman and managing director of PGCIL, the company is committed to increasing transmission capacity to successfully meet the growing electricity demand. By 2012, PGCIL, which also has signed agreements with 38 private power producers, is targeting the augmentation of inter-grid capacity to 32,000 MW.

PGCIL operates 132 substations and 77,000 circuit-kilometers of transmission network, and has a capacity of 89,000 mega-volt amperes. In 2009-10, PGCIL's turnover was $1.6 billion, and net profit was $435.7 million. During this period, the company's asset base was about $9.2 billion. In a related development, the Indian government has approved the Follow-on Public Offer (FPO) proposed by PGCIL. The FPO, which will constitute about 20% of its current paid-up capital, is likely to be out in October. According to experts, the FPO is estimated to yield about $1.8 billion, which will be utilized for the company's expansion program. The issue will consist of 10% disinvestment of the government's stake and 10% fresh equity. In 2007, PGCIL issued its first public offer consisting of 5% disinvestment of government stake and 10% fresh equity.

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