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Analyst Meet / AGM - Analyst Meet

Short term power supply will be an issue for next 6 months between South and West grid

Power Grid Corporation

13-Feb-2015, 09:15
The company held its Analyst Meet on 12^th February 2015 and was addressed by Mr. Nayak CMD

Key Highlights

Power Grid presently owns and operates transmission network of about 113600 ckm of transmission lines and 189 no of EHVAC & HVDC substations having transformation capacity of more than 220000 MVA with an availability of its transmission network more than 99% and it wheels about 50% of total power generated in the country.

Management expects award of around Rs 11-12000 crore worth of total 9 projects within the T&D space in next couple of months.

The company capitalized about Rs 7194 crore and incurred a capex of about Rs 4882 crore during the Q3 FY'15. For first 9 months, the company capitalized Rs 16776 crore and incurred a capex of about Rs 15576 crore. Going forward, the capitalization to capex ratio will improve further.

There was about Rs 70 crore worth of EO expense in first 9 months of FY'15 as compared to Nil. About Rs 30 crore related to prior period.

There is a mismatch of power generation and power transmission in South India. Some around 8000-10000 MW of generation capacity was expected from South India due to 2 UMPP projects and some other gas based projects. South was supposed to be power surplus and accordingly, the grid was constructed to take power from South to West. However no such capacities came on stream. Further, due to recent inter grid failure accidents. Southern Grid, about 2% of the installed capacity is kept as buffer as Reliable Margin and hence short term power flow is a problem. Around 2000 MW of short term power, due to such issues is not flowing. With some small capacities coming up and expectation that the grid will reduce the margin from 2%, management expects the problem to be resolved in about 6 months. So till then there will be some volume issues on short term power supply from South to West.

Going forward around 6000 MW of new capacity will be added in between South West Corridor in next 3 years.

Management expects strong consultancy revenue to continue. During 9 months, the consultancy revenue was lower as there was about Rs 279 crore of sale of products in this segment during 9 months ended Dec'13 as compared to Nil for 9 months ended Dec'14. Core consultancy business outlook remains optimistic.

Management expects about Rs 22450 crore of capital outlay during FY'15 as compared to Rs 22324 crore in FY'14. About Rs 22500 crore each is expected in FY'16 and in FY'17. Till Jan'15, about Rs 13300 crore worth of projects have been awarded.

Management expects entire funds of FPO raised in Dec'13 of about Rs 5321 crore to be utilized by March 2015.

Interest costs was higher by about 25% YoY, as loans related to the projects being capitalized were at rates of around 9.36% vis a vis average rate of interest of around 9.06%. Going forward, interest costs will come down as new loans were taken at rates of around 8.68% and lower.

Going forward it will be safe to assume around 15% ROE on the projects which are capitalized. Even with competitive bidding, the company is able to maintain this kind of ROE. Recently it won about Rs 2000 crore of order in such a competitive bidding.