Reliance to invest Rs 20,000 crores in power

Mumbai: Reliance Industries has said that its energy subsidiaries will invest around Rs 20,000 crores over the next five years in projects for generation, transmission and power trading.

As a first step, BSES Ltd, the power arm of RIL on Sunday approved a preferential issue of three crore equity shares aggregating Rs. 2,000 crores to generate large-scale resources for its growth plans. The preferential offer, subject to necessary approvals from shareholders, would be made at Rs. 640. per share to majority shareholders of the Reliance group and other institutional stockholders, BSES chairman and managing director Anil Ambani told reporters after the board meeting.

He said that the Reliance group would subscribe to over 2 crores equity shares of the company aggregating Rs. 1,400 crores while the major institutional shareholders including LIC and GIC have agreed to pick up one crore shares for Rs. 600 crores. "The board also approved the issuance of additional amount of Rs. 1000 crores through equity shares and/or equity shares with differential voting rights and/or an international convertible bond offering," Mr Ambani said.

With the proposed offer, BSES would rank among the top three private sector companies in India in terms of net worth which would increase from Rs. 3,500 crores to Rs.6,500 crore. The preferential offer price which was arrived at as per the Securities and Exchange Board of India (SEBI). norms represents a 38 per cent premium to the 26-week average price and an approximately two per cent discount to the closing price of Rs. 655 per share on February 20, 2004.

Mr Ambani said: "the preferential offer creates a robust platform for BSES, which would be formally named as Reliance Energy Ltd in the coming week, to further accelerate growth momentum, enhance leadership position in the power sector and to substantially enhance overall shareholder value." The preferential offer would result in Reliance group's share holding in the BSES increasing to levels of around 53 per cent from the present 49.5 per cent.

Reliance has also confirmed its willingness to subscribe to the additional Rs. 1,000 crores to the extent permitted under the provisions of SEBI take-over code following which its stake would raise to 56.5 per cent.

The proposed investment of Reliance in BSES is eight percent of the former's cash flows of Rs.30,000 crores to be generated in the next three years.

BSES would get assured feed stock off-take of about 25 percent of production from the Reliance's KG -D6 Dhirubhai gas fields at competitive prices, he said, adding the present RIL's investments in BSES are now valued at over Rs. 5,200 crores.

Referring to the Rs.20,000 crores capital investment, he said, it would be used in projects for generation (Rs. 10,000 crores), transmission (Rs. 4,000 crores) and distribution and trading of power (Rs. 6,000 crores) and added that proceeds from the proposed offer would be used to part finance these mega investment plans.

The UP -based 3,500 crores gas-based power plant for which the foundation stone was laid on Sunday, would be implemented by a new company Reliance Energy Pvt Ltd with BSES having 51 per cent stake and balance 49 per cent held by the Reliance group.