India's Power Grid Corporation to Invest $5.1 Billion on 12 Transmission Infrastructure Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Power Grid Corporation of India Limited (BSE:532898) (PGCIL) (Gurgaon, Haryana), India's state-controlled transmission and distribution utility, has announced its decision to invest $5.1 billion on 12 transmission infrastructure projects in the country. Confirming the capital expenditure plans, S.K. Chaturvedi, the chairman and managing director of PGCIL, said that the company also would construct nine high-capacity transmission corridors. The new transmission projects will add 18,711 circuit-kilometers to the company's existing 75,000 circuit-kilometer network. During 2010-11, PGCIL is expected to add 8,000 circuit-kilometers to its transmission and distribution network.

Sources have indicated that PGCIL will undertake the $5.1 billion investment with a debt-equity ratio of 70:30. As of September 30, 2010, $2.2 billion of this funding has been invested in various projects. During this period, the debt and equity investment was $596.7 million and $1.60 billion, respectively.

In addition to the $5.1 billion capital expenditure funding, the company has invested $5.73 billion on various projects to augment the existing transmission and distribution network, build new connections, and strengthen the infrastructure to link the ultra-mega-power projects and other new power projects being developed by the federal government. Presently, India is building four ultra-mega-power projects with power generating capacities of 4,000 MW each at Sasan in Madhya Pradesh, Tilaiya in Jharkhand, Mundra in Gujarat, and Krishnapatnam in Andhra Pradesh. Chaturvedi also indicated that the company was keen to not only expand transmission and distribution capacity, but improve efficiency of power transmission and reduce electricity distribution losses.

PGCIL, which operates nearly 95% of India's transmission and distribution network, is also the world's third-largest transmission entity. During the 12th Five-Year Plan (2012-17), the company is likely to invest $27 billion on network strengthening and augmentation projects. The company's network, which has system availability of 99.77%, is considered to be one of the most efficiently managed transmission infrastructures in the world. Currently, there are 68 projects in various stages of development with a total investment of $18.25 billion, including the construction of 64 substations. Recently, the company awarded a $32 million contract to power equipment engineering major, ABB Limited (NYSE:ABB) (Zurich, Switzerland), for 765-kilovolt (kV) and 400-kV air-insulated switchgear substations. The substations will be installed at Indore and Gwalior, in Madhya Pradesh.

In a related development, PGCIL opened its follow-on public offer with about 8.42 billion shares. This will include a fresh issue of about 420.88 million shares. ICICI Securities Limited (Mumbai), Goldman Sachs (India) Securities Limited (Mumbai), SBI Capital Markets (Mumbai) and JP Morgan Private India Limited (Mumbai) are the lead arrangers for the public issue. For the quarter ending September 30, 2010, PGCIL's net revenue increased to $501.1 million, in comparison to $405.9 million in the same quarter last year. During this period, the company's net profit also grew by 41.60% to $146.8 million.

The disinvestment in PGCIL, which is one of Navaratna's public sector companies, is part of the Indian government's plan to generate funds for infrastructure development. There are plans to disinvest the government stake in manganese company MOIL Limited (Nagpur, Maharashtra) and also offer follow-on public issue in Oil & Natural Gas Corporation Limited (BSE:500312) (ONGC) (New Delhi), Steel Authority of India Limited (BSE:500113) (SAIL) (New Delhi), Oil India Limited (BSE:533106) (OIL) (Noida, Uttar Pradesh), Hindustan Copper Limited (BSE:513599) (Kolkata, West Bengal) and The Shipping Corporation of India Limited (BSE:523598) (Mumbai).

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