"We plan to develop the smart-grid market in a big way," said a senior PGCIL executive, requesting anonymity. "We will be very successful as everybody else is doing it in a piecemeal way. We also plan to enter the product development space for towers and conductors."
India plans to deploy smart grids that will help utilities detect, isolate and correct problems, as well as provide power consumption choices to users based on parameters such as price at any time.
PGCIL's rationale to diversify its business stems from the fact that the Indian power transmission market is regulated. PGCIL gets a guaranteed rate of return on equity of 15.5% in the Indian market.
Also, a planned separation of power management functions will leave it with only the task of setting up transmission links in India. Power System Operation Corp. Ltd, a unit of PGCIL, is now entrusted with power management functions and may eventually be separated from its parent.
The transmission utility that operates 86,000 circuit km of transmission lines, wheeling half of the power generated in India, plans to float separate special purpose vehicles for each of these businesses.
"Till now, we used to order for them from outside. Why not use the in-house talent," said another PGCIL executive, who also didn't want to be identified.
Mint on 12 October reported about PGCIL's plan to enter the power transmission business in Bangladesh and Sri Lanka by setting up joint ventures with local partners. PGCIL is scouting for overseas acquisition opportunities and had earlier planned to bid for a 5-10% stake in Portugal's Redes Energéticas Nacionais SGPS SA.
"Of the Rs.100,000 crore capital expenditure lined up for the 12th Plan, Rs.70,000 crore will be the debt component," said the first PGCIL executive. "The debt will be raised through bonds, multilateral agencies and external commercial borrowings."
Of the funding already tied up by PGCIL, Rs.14,054 crore is through foreign loans. PGCIL wants to secure loans from lenders such as the Asian Development Bank and the World Bank because of the low rate of interest they charge and the long repayment tenure they offer. ADB loans typically have a 25-year tenure and a five-year moratorium. World Bank loans are for 30 years and come with a four-year moratorium.
For PGCIL, 30% of capital expenditure in any Plan period comes from internal accruals and the balance from loans. Of the loan amount, around 40% is borrowed from the domestic market and the rest from international lenders.
The government is spending Rs.1.4 trillion to build the national power transmission grid that will increase the country's inter-regional transmission capacity to 32,000 megawatts (MW) by 2012 from 23,800MW now. Of this, Rs.75,000 crore is needed for regional and national grids.
Five regional load despatch centres and one national load despatch centre manage power transfer between regions and form the backbone of India's transmission network.
PGCIL posted a net profit of Rs.2,697 crore on a revenue of Rs.9,100 crore in fiscal 2011.