As power generating companies waver on capacity addition, transmission company Powergrid Corporation remains confident about using up Rs 55,000 crore of budgeted expenditure for the current Eleventh Plan.
The company has used 46% of the allocated fund in the first three years of the Plan. The balance is likely to be used up in due course as the company gears up to expedite transmission projects to evacuate power from Plan-end generation projects. Several generation projects have got bunched up for commissioning towards end of the Plan period, owing to delays in awarding execution contracts. This will lead to an accelerated growth in Powergrid?s asset base in the next two years.
The Union power ministry has envisaged adding 78,700 MW generation capacity under the Eleventh Plan programme. Against that, only 22,000 MW capacity has been added. That means only 25% of the investment targeted in power generation during the Plan fructified, as against 46% by the central transmission utility (CTU).
Powergrid has to commission its transmission lines to match with the generation schedules of power plants. Under normal circumstances, its capital expenditure is unlikely to outpace the investment flow in power generation. But this time, the CTU beat the power generation sector in the usage of capital outlay because a big chunk of its investment went into strengthening the capacity of its existing transmission network.
The company is also expected to benefit from Central Electricity Regulatory Commission?s (CERC) revised tariff norms, which provide for 1.5% higher return on equity. The revised tariff guidelines became applicable from April last year. That helped Powergrid earn an additional revenue of Rs 800 crore from its operations in 2009-10.
Powergrid plans to invest about Rs 30,000 crore over next two years. It has cash reserves of Rs 4,000 crore. That company, which is looking at a debt-to-equity ratio of 70:30 for financing the projects, plans to raise fund from the equity market as well.
The company?s asset base has increased from Rs 24,888 crore in 2005-06 to Rs 43,202 crore in 2009-10. The company expects to further increase its asset base to Rs 52,109 crore in the current financial year. Powergrid?s asset growth has decelerated from 13.63% in 2005-06, 17.82% in 2006-07 and 25.39% in 2007-08 to 13.79% in 2008-09 and 7% in 2009-10.
The company plans to make capital expenditure of Rs 12,900 crore in the current fiscal, which is 21% higher than the previous year.
Powergrid plans to come out with follow-on public offer (FPO) towards October-end. While the company would issue 10% fresh equity shares, the central government would sell 10% equity in the company. Considering an issue price of Rs 100 a share, Rs 4,208 crore each would be mobilised from the fresh issue of equity and the sale of government stake. Post-issue, the government?s holding in Powergrid will come down to 69% from the present level of 86.36%.