Power Grid plans capital expenditure of Rs1.2 lakh crore; looks at leasing out transmission towers to telecom companies
Moneylife Digital Team 08 November 2010

It expects to generate Rs40 billion from its planned follow-on public offer; admits that a few of its urban projects have been held up due to resistance from locals

Power Grid Corporation of India Ltd, the government-run entity which controls nearly 95% of India's inter-state and inter-regional electrical transmission systems, plans a follow-on public offering (FPO) of 841,768,246 shares at a price band Rs85 (lower)-Rs90 (higher) per share. However, the scrip fell 3.85% to touch Rs98.35 on the Bombay Stock Exchange, and is now at the point that it was three years back.

Retail investors and eligible employees will get 5% discount on the issue price on allotment. The bid period will close for qualified institutional buyers on 11th November, while for the other bidders the closure will be on 12th November. The minimum bid lot has been fixed at 65 equity shares, said the company.

The company is expecting to raise Rs40 billion from the FPO which it plans to use to fund nine transmission corridors. The total project cost for these corridors is pegged at Rs586 billion.

The company also has capex plans of Rs1.2 lakh crore under the XII Five Year Plan (ending March 2017), according to SK Chaturvedi, chairman and managing director, Power Grid.

However, a few of the company's projects in urban areas have been delayed due to local resistance against setting up electrical transmission towers.

"Power Grid is facing some problems in setting up towers in urban areas from local people," admitted Mr Chaturvedi. "But the central and state governments are tackling the issue amicably."

On the delays in projects along the western corridor, Mr Chaturvedi said, "In the western corridor, the projects were delayed due to two reasons- construction of sub-stations and construction of lines. However, our part of construction of the sub-stations was going smoothly, while (the) clients were behind schedule, so the projects got delayed."

For the XI Five Year Plan, the company's capex was Rs550 billion, of which Power Grid has spent Rs250 billion so far and Rs300 billion will be spent over the next two years, said Mr Chaturvedi.

Divestment secretary Sumit Bose, who was also present at the Mumbai conference for declaring Power Grid's FPO details, chalked out the Centre's divestment programmes for various public sector undertakings (PSUs).

"For the calendar year, we will bring (out) FPOs of Shipping Corporation of India and Hindustan Copper Limited and an IPO for Manganese Ore India Ltd-while for the next calendar year, Indian Oil Corporation Limited and SAIL will be on the cards," said Mr Bose.

The company is looking at boosting its profits by leasing its electricity transmission towers to telecom companies for setting up their networks.

"We have invited bids from telecom companies for setting up their networks on our towers and 15th November is the last date for the bidding," said IS Jha, director (Projects), Power Grid. However, he declined to comment on the amount that the company plans to generate from these bids.
 
In September 2007, the company's initial public offering raised Rs29.8 billion.

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