Power Grid to raise $3bn from capital market in 3 yrs

The Power Grid Corporation of India (Power Grid) is expected to raise around $3 billion (around Rs 13,500 crore) in the capital markets over the next three years to support government’s national transmission expansion plan, which is estimated to cost Rs 75,000 crore. Besides, the grid has also received loan to the tune of $1 billion (around Rs 4,500 crore) to strengthen five transmission systems in the country from the World Bank. A World Bank’s report on the country’s Power Grid quoted J Sridharan, Director Finance, Powergrid saying that Powergrid’s robust financial position ensures that it will not face difficulties in raising domestic financing – in fact it issued bonds of $750 million (around Rs 3,375 crore) in 2008-09 and intends raising close to another $3 billion in the capital markets over the next three years. This is to support national transmission expansion plan, which is estimated to cost around Rs 75,000 crore, of which Rs 20,000 crore is expected to be brought in by private investors, while the major portion — Rs 55,000 crore — will be mobilised by Powergrid from internal resources and external financing such as the World Bank’s loan, Sridharan was quoted. According to the national transmission plan, the cumulative transmission network of Powergrid is targeted to increase substantially over the 11th Plan (2007-12) allowing Powergrid to transfer 60 per cent of power generated in the country as against 45 per cent today. Meanwhile, World Bank has said that the $1 billion (around Rs 4,500 crore) loan is to strengthen five transmission systems in the northern, western and southern regions of the country. “In response to the global downturn and at the request of the government of India, the loan was extended to Powergrid. This will facilitate the transfer of power from energy surplus regions to towns and villages in under-served regions of the country. It will also increase the integration of national grid, resulting in increased system reliability and a reduction in transmission losses,” according to World Bank. The World Bank will finance 64 per cent of the total project cost on average. All schemes are likely to be completed by 2014-15. The loan will be an IBRD flexible loan with a variable spread, a maturity of 29.5 years and a grace period of 5 years. The World Bank has supported Power Grid since its inception, during which time the company has nearly tripled its transmission network to become one of the world's largest electricity transmission system operators. The Bank’s engagement with Powergrid investment programs with cumulative assistance of $3.1 billion (around Rs 13,950 crore) to date. According to World Bank’s report almost half of Indian households (44 per cent) do not have access to electricity. Average annual per capita consumption of electricity in India was only about 30 per cent of the world’s average in 2007- 2008. Generation capacity is insufficient to meet the existing demand for electricity, and transmission and distribution networks that carry power to consumers are inadequate. As the development of India’s power sector is vital for the country’s sustained and inclusive growth, the government of India has embarked on an ambitious program to provide power to all its people by 2012. It plans to increase generation capacity from the present 147 Gw to 200 Gw, including through mobilisation of private sector investment to the maximum extent possible. Cleaner energy sources – biomass, hydro, solar, wind, and nuclear – are also being developed.