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Reliance Energy Ltd. Creating Growth Momentum

Reliance Energy Ltd. Creating Growth Momentum. Background. Serving over 25 million consumers in substantial areas of Mumbai, Delhi, Goa and Orissa. Reliance Energy is India’s leading private sector utility company. Background.

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Reliance Energy Ltd. Creating Growth Momentum

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  1. Reliance Energy Ltd. Creating Growth Momentum

  2. Background Serving over 25 million consumers in substantial areas of Mumbai, Delhi, Goa and Orissa Reliance Energy is India’s leading private sector utility company

  3. Background Powering 2 out of 3 homes in Mumbai, and 1 out of 2 in Delhi Reliance Energy is India’s leading private sector utility company

  4. Background • 7,500 Schools • 3,000 Hospitals • 250 Theatres • 5 Airports • 130 Railway Stations Reliance Energy is India’s leading private sector utility company

  5. Background Industrial, commercial and residential urban consumers Reliance Energy is India’s leading private sector utility company

  6. Background Distributing over 5,000 MW of power – the largest in India Reliance Energy is India’s leading private sector utility company

  7. Background Power generation capacity of nearly 950 MW in Maharashtra, Goa, Andhra Pradesh, Kerala and Karnataka Reliance Energy is India’s leading private sector utility company

  8. Background India’s most valuable power company, with market capitalisation of over Rs. 10,000 crore Reliance Energy currently ranks among India’s top 25 listed private sector companies on all major financial parameters

  9. Background Annual revenues over Rs 6,400 crore Reliance Energy currently ranks among India’s top 25 listed private sector companies on all major financial parameters

  10. Background Annual cash profits over Rs 600 crore Reliance Energy currently ranks among India’s top 25 listed private sector companies on all major financial parameters

  11. Background Annual net profits over Rs 350 crore Reliance Energy currently ranks among India’s top 25 listed private sector companies on all major financial parameters

  12. Background Debt free at the net level Reliance Energy currently ranks among India’s top 25 listed private sector companies on all major financial parameters

  13. Background Top end credit ratings - rated ‘AAA’ by CRISIL/ ICRA/ FITCH Reliance Energy currently ranks among India’s top 25 listed private sector companies on all major financial parameters

  14. Report Card 2003-04

  15. Report Card 2003-04 Tariff Revision petition filed after 7 years – to achieve stipulated Return on Equity

  16. Report Card 2003-04 Approval to import power into Mumbai, through open access on existing transmission lines – lower tariffs expected

  17. Report Card 2003-04 Resolution of 5 years old standby charges dispute in Mumbai expected shortly from MERC – end to uncertainties

  18. Report Card 2003-04 Encroachment of customer base in Mumbai stopped by MERC

  19. Report Card 2003-04 Wage Agreements signed covering 4,500 employees and 1,200 officers – pending since April 2002

  20. Report Card 2003-04 Cumulative financial provisions of over Rs. 350 crores made to strengthen Balance Sheet

  21. Report Card 2003-04 100% equity in Andhra and Goa projects acquired, and operations merged with RE

  22. Report Card 2003-04 Andhra 220 MW power plant’s PLF raised to 85%, through increased gas allocation

  23. Report Card 2003-04 Kerala power plant restarted after a 1 year shutdown - project’s financial viability restored

  24. Report Card 2003-04 Completed first phase of VRS in Delhi distribution companies – reducing workforce by nearly 4,500 persons in 7 days

  25. Report Card 2003-04 Exited from non-core activities of Coal Washery, coal-based Maithon power generation project, broadband telecom

  26. Report Card 2003-04 • Transformed into India’s most valuable power company • Market capitalisation increased more than 200% in a year to over Rs. 10,000 crore • Best performing utility stock in the year 2004, outperforming Sensex by 29% • Among the top 10 performers in Sensex stocks in 2003, outperforming Sensex by 57%

  27. Creating Growth Momentum

  28. Power Environment • Dominated by state owned undertakings • Poor existing infrastructure • Unreliable quality of power • Unsustainable levels of technical and commercial losses • High tariffs • Low standards of customer care Huge opportunity for private sector to create world class power infrastructure in India

  29. Synergies for Reliance • Leveraging Reliance group’s core competencies: - World scale and world class plants - Infrastructure development - Project management and execution - Financial engineering • Feedstock integration with Reliance’s upstream gas business • Leveraging of customer base for Reliance’s other businesses A natural fit in Reliance’s overall business portfolio

  30. Vision statement • To be among the most admired and most trusted integrated utility companies in the world • To establish leadership in the power sector in the country, across generation, transmission, trading and distribution • To deliver reliable and quality power to millions of customers at competitive costs • To set international standards of customer care – creating superior value for all stakeholders • To set new benchmarks in standards of corporate performance and governance, through the pursuit of operational and financial excellence, responsible citizenship and profitable growth

  31. Generation Strategy • “From Well Head to Wall Socket” • Environment friendly fuels – gas the preferred feedstock • Adequate capacity to meet captive requirements of 5,000 MW, covering: - Base Load - Trading • Offtake primarily by own customer base • Location in proximity to customers • Economies of scale, capital productivity, lowest operating costs Generation of power at the most competitive unit costs globally

  32. World’s Largest Gas based Power Project • Setting up the world’s largest gas based mega power project with initial capacity of over 3,500 MW capacity – scale benefits • Initial investment outlay of over Rs 10,000 crore (US$ 2.2 billion) – single largest investment across any sector in Uttar Pradesh To benefit millions of consumers in the power deficit regions of Delhi, UP and other parts of Northern India

  33. World’s Largest Gas based Power Project • End-to-end integration in the energy value chain - gas sourced from Reliance’s Dhirubhai gas fields in KG basin – integration benefits • Commissioning in phases from mid – 2006 through mid 2007 • Project will be a strategic national asset and will help realise Hon’ble Prime Minister’s vision of “Power for all by 2012” Project to supply clean-green power based on environment friendly natural gas at competitive costs

  34. Location Map • 40 kms from Delhi • HBJ gas pipeline is 15 kms away • Main Ganga Canal is just 2-3 kms away • Power Grid’s Dadri substation to help in evacuation of power Dadri

  35. Distribution Strategy • Expansion of the customer base, with a national footprint • Acquisition of existing networks in major cities and towns, through the privatisation process • Open access on distribution systems, as individual States deregulate Providing a world class experience to millions of customers

  36. Distribution Strategy • Setting up new networks where economically feasible • World class systems, automation, quality and reliability of power, competitive pricing, highest standards of customer care Providing a world class experience to millions of customers

  37. Existing Areas Increased automation and strengthening of distribution systems in Mumbai to bring down losses to around 10% Significant potential for enhancing returns in Mumbai, Delhi and Orissa

  38. Existing Areas Comprehensive revamp of Delhi infrastructure, to reduce losses from the existing levels of 55% Significant potential for enhancing returns in Mumbai, Delhi and Orissa

  39. Existing Areas Recapitalise the Orissa distribution companies, and turn around their operations, subject to suitable restructuring by Govt. of Orissa Significant potential for enhancing returns in Mumbai, Delhi and Orissa

  40. New Areas • Applications filed for building new networks in various cities: - Bhandup, Vashi, Pune, Nasik, Nagpur, Aurangabad - BEST area in Mumbai NDMC area in New Delhi - 12 areas under franchise in Gujarat - Other cities and states in the future Participation in privatisation of distribution assets of SEBs as opportunities arise

  41. Growth Opportunities - Trading • Trading in Power • Trading in power – Physical (merchant/ own generated) • Creating exchanges for trading in power – financial and derivative products Enhancement of returns from generation and transmission

  42. Mega Investment Plans • Capital Investments Amount (Rs Crore) Generation 10,000 Transmission 4,000 Distribution 6,000 Total :20,000 • UP power project implemented by a new company , Reliance EGen P. Ltd. Investment of upto Rs. 20,000 crores in the next 5 years

  43. Financial Engineering

  44. Shareholding Pattern Present Reliance Group 49.5% FIs / Banks / MFs 21.0% FIIs / GDRs 21.3% Others 8.2% Total: 100.0% Reliance’s stake reduced from 58.2% to 49.5%

  45. Preferential Offer • Equity shares and/or equity related securities • Offer price of Rs. 640 per share, determined in accordance with SEBI Preferential Allotment guidelines Priced nearly 3 times Reliance’s open offer price

  46. Preferential Offer • Offer price at 38% premium to 26 week average price • 2% discount to last traded market price Postal ballot for all shareholders on preferential offer and various other resolutions though not required in law

  47. Strong Vote of Confidence • Reliance to subscribe to over 2 crore equity shares, aggregating nearly Rs. 1,400 crores • Institutional shareholders, like LIC and GIC, agree in principle to subscribe to nearly 1 crore shares, aggregating over Rs. 600 crores Endorsement of growth prospects and positive signal to markets

  48. Financial Flexibility • Enabling approvals to offer additional amount of Rs. 1,000 crores through: - equity shares; and/or - equity shares with differential voting rights; and/or - international convertible bond offering Reliance has confirmed its willingness to subscribe additional Rs. 1000 crores

  49. Proposed Reliance Stake Present Proposed Reliance Group 49.5% 56.5% FIs / Banks / MFs 21.0% 21.0% FIIs / GDRs 21.3% 16.5% Others 8.2% 6.0% Reliance stake still 2% below peak levels of over 58%

  50. Reduction in Free Float Present Proposed Reliance Group 49.5% 56.5% FIs / Banks / MFs 21.0% 21.0% FIIs / GDRs 21.3% 16.5% Others 8.2% 6.0% Reduction in free float from over 50% to 43%

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