PGCIL to retain predominant position in power transmission

New Delhi, Jan 14 (UNI) Power Grid Corporation (PGCIL) will maintain its predominant position as the central transmission utility although the government has thrown the space open for the country's power houses like Tata Power, Reliance Energy and RPG Transmission.

The power majors, also including GMR Energy, L&T, Essar Power and the Torrent Group, are in fray to grab a pie of the power transmission sector, as the government this week launched the tariff-based competitive bidding process for 14 large transmission projects entailing an investment of Rs 20,000 crore.

''PGCIL is likely to maintain its predominant position with its wide existing network and dedicated links for evacuating power from major generating stations,'' an industry source said.

The highly captive intensive nature of the business would also remain a strong entry barrier, the source added.

During the Tenth and Eleventh Plan periods, PGCIL proposes to significantly increase its transmission capacities with a total capital outlay of Rs 55,000 crore.

''PGCIL is gearing up to meet Rs 55,000 crore investment requirement for evacuation of power from the new generating stations, strengthening of the transmission system and inter-regional capacity increase,'' Power Minister Sushilkumar Shinde said on thursday while seeking private participation in the transmission space.

With the revision in the tariff structure for the period 2004-09, which includes a reduction in return on equity from 16 per cent to 14 per cent and abolition of the develoment surcharge, the company's dependence on debt financing for project funding will increase, resulting in an increase in gearing, the source added.

The company's debt cover is unlikely to be impaired given the low level of business risks, cost-plus tariff structure, superior operational efficiency and the facility of advance against depreciation.

During FY06, Power Grid posted a 28 per cent increase in its net profit at Rs 1,009 crore as compared to Rs 786 crore in FY06.

Its operating margins rose 24 per cent to Rs 3,198 crore in the year as compared to Rs 2,572 crore an year ago.

The ratio of net cash accruals to total debt (NCA/TD), however, continues to remain on the lower side because of large debt stock locked up in projects which are under execution and thus yet to generate any returns.

Credit rating agency ICRA has affirmed high credit quality ratings to the company's Rs 7,133 crore long-term bond programme, Rs 2,510 crore bonds programme for 2006-07 and Rs 650 crore short-term debt programme.

The ratings factor in PGCIL's strategic role in India's power sector, which is likely to continue despite the sector having been opened for private partcipation, ICRA said.

UNI