Reliance Energy: Losing sheen

Q3 operating margins were affected by high power costs.

The operating margins of Reliance Energy took a hit in the third quarter due to the surging costs of electrical energy purchased from external sources.

As a result, the company's core operating profit declined 3.4 per cent y-o-y to Rs 74.1 crore and total operational income fell 1.4 per cent to Rs 1505.49 crore.

Its operating profit margin declined 10 basis points y-o-y to 4.9 per cent in Q3 FY08.

The company sold 2,337 million units of electricity in the third quarter compared with 2,221 million units a year earlier. However, its purchase of electricity from external sources surged 8.3 per cent y-o-y to 1,203 million units in the December quarter.

No doubt, the company's realisations grew at an estimated 20 per cent y-o-y to Rs 5.33 per unit in the December quarter. But it had to grapple with the cost of its electrical energy purchases, which rose 42.2 per cent y-o-y to Rs 648.2 crore in the last quarter.

A small cushion for operating margins was provided by the cost of materials and sub-contract charges for its EPC and contracts division, which declined 58.6 per cent y-o-y to Rs 233.1 crore.

Reliance Energy will hold 45 per cent stake in Reliance Power's post-issue capital. Reliance Power will use the money raised to fund six projects totalling 7060 mw and estimated to cost Rs 31,789 crore.