The Hindu : Exploring opportunities in transmission

Online edition of India's National Newspaper
Tuesday, Jun 10, 2003

Business

Business

Exploring opportunities in transmission

By Our Staff Correspondent

MUMBAI JUNE 9. BSES, the Reliance-owned power utility company, has been renamed as Reliance Energy Ltd. The change in name will reflect the ownership of the Reliance group, consequent upon the change in control and will provide the company to leverage the brand equity of the Reliance name, said Anil Ambani, chairman, BSES. He was speaking at the company's 74th annual general meeting here today. Reliance has a 58 per cent controlling stake in BSES.

At the AGM, the shareholders approved the appointment of Mr. Ambani as Chairman and Managing Director, and Satish Seth as executive vice-chairman.

The company's strategy was focused on integration, `From Well head to wall socket', said Mr. Ambani adding that the growth strategy was based on generation, transmission, distribution and trading of power and also bundling of services.

In order to pursue opportunities in the transmission sector, "We intend to set up a separate company, Reliance Energy Transmission. This will contribute to enhanced reliability in the supply of power to our networks and across the country, balancing deficits and surpluses in different regions," said Mr. Ambani.

In generation of power, the company would examine new growth opportunities in both conventional and non-conventional energy. "We distribute over 15 billion units, or over 5000 MW of power a year. As against this, our own generation capacity is only 885 MW. Our future generation strategy will be directed towards fulfilling our own needs for power in different parts of the country to serve our customers better. As far as feedstock for power generation is concerned, it is clearly gas," Mr. Ambani said.

Speaking on power sector reforms, Mr. Ambani said, the recently enacted Electricity Act 2003 aims at liberalising the power sector and "is the single important piece of legislation for the power sector in India, and perhaps even for Indian industry in general, repealing three Acts, one of them dating back to 1910".

Elaborating further, he said, "The Act will accelerate the process of privatisation of State electricity boards (SEBs) in the country. Their transmission and distribution (T&D) losses have mounted from 21 per cent in 1992-93 to as high as 45 per cent for some SEBs, as per latest estimates. The losses of the SEBs are estimated at a staggering Rs. 30,000 crores annually with accumulated losses having crossed Rs. 300,000 crores. The stringent anti-theft provisions in the new Act have the potential to reduce these abnormally high T&D losses, that have completely destroyed the finances of not just the SEBs but of several State governments as well".

On the opportunities arising from the new Electricity Act, Mr. Ambani said, "The new Act gives us the freedom to trade power, both in physical terms and through derivatives. We intend to set up a separate company, Reliance Energy Trading for this purpose".

Further, he said, "The act provides us the flexibility to increase our participation in the business of distribution of power and to serve customers through various options — by obtaining the benefit of open access on existing assets, by creation of new distribution networks and by participation in the privatisation of the undertakings of SEBs as we have done in Delhi and Orissa".

During the year, the company had issued foreign currency convertible bonds (FCCBs) aggregating $120 million, nearly Rs. 600 crores as a low cost financing alternative to rupee borrowings at less than 2 per cent per annum. When the FCCBs are converted into equity shares, the net worth of the company will go up by Rs. 600 crores. Only last week, the company concluded the largest ever international syndicated loan by an Indian private sector utility, of $100 million, nearly Rs. 500 crores. This loan has been raised at a historically low interest rate of below 2.5 per cent per annum.

The company has resolved several key issues. First, the 165 MW BSES Kerala Power Station, which was not operating for over a year, has resumed operations and is now running at 85 per cent capacity. The 220 MW BSES Andhra Power power station has secured partial firm linkage of natural gas and is operating at 55 per cent capacity utilisation. The Andhra Pradesh Electricity Regulatory Commission has approved the power purchase agreement. Efforts are under way to source natural gas which is required to operate the plant at rated capacity and financial closure of the project is expected to be achieved shortly.

"Third, BSES Rajdhani Power and BSES Yamuna Power, our electricity distribution companies in Delhi, have taken steps for modernisations and upgradation of the existing distribution infrastructure in Delhi to improve the reliability of power supply, and to enhance levels of service for our two million customers. The two companies are implementing over 600 schemes at an outlay of Rs. 250 crores," said Mr. Ambani.

Fourth, the company's three electricity distribution companies in Orissa are pursuing various options to improve their performance. "Discussions are in progress with the Orissa Government and other authorities to arrive at a comprehensive restructuring proposal, in order to make the Orissa operations viable and sustainable," said Mr. Ambani.

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