BSES reviews RIL power projects takeover

Mumbai: The power company BSES Ltd is reviewing its plans to take over Reliance Industries Ltd's (RIL) power projects as the company is facing huge accumulated losses on account of its power distribution subsidiaries.

RIL, which holds around 37-per cent stake in the Mumbai-based utility, had offered all its power projects to BSES to spearhead its future power initiatives. BSES had also appointed SBI Capital Markets to carry out a feasibility study on RIL power projects.

Subsequently, it had decided to take over just one company, Reliance Salgaokar Power Company, which runs a 40-mw power plant in Goa. BSES had envisaged adding another 9,000 mw over the next decade as per its current business plan. But due to the heavy losses it suffered in its distribution business in Orissa, these plans are unlikely to fructify immediately.

Senior BSES officials say currently the company is not in a position to go for any big investments. "We do not have any immediate plans for acquisitions."

For the financial year ended 31 March 2002 the net profits of the company dropped by around 69 per cent. The fall in the profits is mainly due to the losses (over Rs 900 crore) recorded by the power distribution subsidiaries in Orissa.

RIL had offered its 3,960-mw Hirma, 500-mw Jamnagar, 2,000-mw Jayamkondam, 447-mw Patalganga and 375-mw Ghogha projects to BSES. Theses projects are fully or partly owned by RIL and most of them are in various stages of implementation.

In January 2002, RIL managing director Anil Ambani had announced that BSES would pursue all their power projects. "We are negotiating with BSES to sell some other power projects to BSES as well, and BSES will drive our power business," he had said.

The BSES officials say there is no further development on the RIL proposal, except on the Goa project, a takeover of which is under implementation. But RIL has continued to own and operate all its four captive power projects that are currently running.

These projects are Hazira (250 mw), Patalganga (85 mw) and Naroda (45 mw). RIL, which runs the operation and maintenance functions for these captive projects, had not offered these to BSES.

Reliance Utilities and Power Ltd, which owns and operates the Jamnagar plant, has hit the market to raise $160 million by offloading 15-per cent stake to foreign investors. The company is planning a capacity addition at Jamnagar plant.

As on 31 March 2002, the Reliance group companies held 37 per cent in the power projects, while financial institutions and insurance companies (UTI, LIC, IDBI, GIC and its subsidiaries) cumulatively held 36.63 per cent. Banks and mutual funds held another 1 per cent. The floating stock remains at 13.62 per cent while GDR-holders have 7.45 per cent.