India's Power Grid Corporation to Invest $22 Billion on Transmission Network Expansion

---

Researched by Industrial Info Resources (Sugar Land, Texas)--The Power Grid Corporation of India Limited (BSE:532898) (PGCIL) (New Delhi), India's largest inter-state power transmission utility, has announced that it may invest over $22 billion on transmission projects to double the size of its network. This will help PGCIL keep up with the power utility companies that are constructing new plants to boost the country's installed power generation capacity.

PGCIL had earmarked an investment of nearly $11 billion as part of the 11th Five-Year Plan (2007-12) for transmitting 55,000 megawatts (MW) of electricity generated by private and state-owned power companies. During the 12th Five-Year Plan (2012-17), PGCIL will make an additional investment of $12.8 billion to develop nine transmission corridors along the proposed coal-fired plants in the states of Jharkhand, Chhattisgarh, Orissa, Andhra Pradesh and coastal Tamil Nadu.

According to Director of Projects I.S. Jha, the state-owned organization plans to expand its transmission network by adding 80,000 circuit kilometers of lines over the next seven years. Of this, about 7,500 circuit kilometers of lines will be added during the current fiscal year ending March 2011, at a cost of $2.8 billion. With a current network length of about 77,000 circuit kilometers, PGCIL transmits about 45% of the total power generated in the country. However, the existing transmission capacity is inadequate to meet the proposed addition in power generation by the state-owned NTPC Limited (BSE: 532555) (New Delhi) and other private power producers.

PGCIL normally finances projects in a debt-equity ratio of 70:30, a widely followed norm in the power industry. The company plans to fund equity partly through internal accruals and partly through a follow-on public offer by issuing fresh equity in the stock market. The public issue for $775 million is expected to come out this year. PGCIL will raise debt through a bonds issue and loans from financial institutions such as World Bank (Washington, D.C.) and the Asian Development Bank (ADB) (Manila, Philippines). PGCIL already has signed agreements for $1 billion each from the World Bank and ADB.

PGCIL, in addition to expanding its transmission and distribution network, is also upgrading from 400-kilovolt (kV) to 765-kV and 800-kV transformers to ensure there is no power loss. Several contracting companies are benefitting from PGCIL's growth plan. KEC International Limited (BSE:532714) (Mumbai), Jyoti Structures Limited (BSE:513250) (Mumbai) and Kalpataru Power Transmission Limited (BSE:522287) (Mumbai), leading players in the towers segment, accounted for 21% share of the projects awarded by PGCIL in fiscal 2009-10. Crompton Greaves Limited (BSE:500093) (Mumbai) secured orders worth $220 million for erecting transformers, substations and reactors in the last fiscal year.

In April 2010, PGCIL awarded a $21 million turnkey contract to BGR Energy Systems Limited (BSE:532930) (Chennai, Tamil Nadu) to replace microwave links with fiber-optic cabling in the northern grid.

PGCIL, a Navratna public sector enterprise, is also actively erecting transmission lines connecting India with neighboring nations such as Bhutan, Bangladesh, Sri Lanka and Nepal. This will facilitate the import of power in the future. PGCIL plans to import electricity from Bhutan and in that regard, the PGCIL board, April 2010, approved an investment of about $972 million to strengthen the existing transmission network between Bhutan and the western and northern regions of India. PGCIL is also setting up a 400-kV overhead power transmission between Bheramara, Kushtia, in Bangladesh, and Baharampur in the Indian state of West Bengal.

As of March 2010, India has an installed power-generation capacity of 159,398 MW. To meet the growing demand for electricity, the country plans to add 78,000 MW of power generating capacity by March 2012 as part of the 11th Five-Year Plan, and 100,000 MW during the 12th Five-Year Plan.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. IIR's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.