Reliance may get 74% in Himachal venture

The state-owned Power Grid Corporation Ltd is close to accepting an offer by Reliance Energy Ltd. to acquire 74 per cent stake in a joint venture power transmission project in Himachal Pradesh, a senior Power Grid official said Monday. Power Grid's board of directors is likely to officially give its consent to the proposal at its next meeting.

"We have are close to forging a deal with Reliance Energy for the joint venture transmission project," the official told Crisil MarketWire.

"The board of Power Grid is expected to take up the matter at its next meeting, following which the Reliance board is expected to give a go-ahead for the project," the official added.

In early 2004, Power Grid had invited bids for laying the transmission network to carry power through the competitive bidding route.

The successful bidder was given the choice to opt for either 51 per cent or 74 per cent stake in the venture. Reliance Energy, India's second largest power producer, had emerged as the lowest bidder ahead of Essar Power.

The six-billion-rupee project will facilitate evacuation of power from Koldam and Parbati hydel power projects in Himachal Pradesh to other parts of the country. Koldam and Parbati projects have a capacity of 800 megawatts each.

The Himachal Pradesh project will be funded on a 70:30 debt-to-equity ratio. This means that Rs 180 crore would come in through equity, while the rest would be funded via debt.

Reliance Energy would acquire 74 per cent of the Rs 180 crore of equity, with the remaining 26 per cent being held by Power Grid.

The two parties are expected to sign the joint venture pact by mid-2005, the Power Grid official said. The project is expected to be complete by 2007.

While the Koldam project is being executed by National Thermal Power Corporation Ltd, Parbati project is being developed by National Hydroelectric Power Corporation.

If the project comes through, this would be the second such venture involving a public and private company in the transmission sector. Tata Power Co. Ltd.'s transmission joint venture with Power Grid, called Power Links, was the first such project to take off about two years ago.