UK-based National Grid Plc is proposing to invest 400-500 million pounds (around Rs 3,000 crore) in the power transmission sector here.
National Grid, one of the largest power transmission utilities in the world, proposes to raise the required funds by issuing convertible bonds in UK.
Apart from financing investment plans, the proceeds from the bond issue will also be used to buy-back equity.
At present, National Grid has a bloated equity base (1388.9 million pounds in 1997), which it would like to decrease. It is proposing to do this by raising money through bonds for buying back equity from shareholders.
National Grid has an existing debt-equity ratio of around 0.58:1, which gives it a fair amount of leverage to mobilise funds for investments in other countries.
National Grid chairman David Jefferies told Business Standard that this move would ensure that the company would have enough money to invest in projects outside UK.
A bloated equity base, according to Jefferies, entails a huge financial burden in terms of annual dividend pay out estimated at 750 million pounds in 1997. Hence, the company preferred the debt route to raise funds, he added.
He said that the company would only look at projects which ensure a basic minimum return and would be linked to the pay-out the company will effect on the debt raised in UK, he added.
Jefferies said that the company was trying to get into a long-term joint venture with Power Grid Corporation to develop projects both in the country and abroad.
The proposal to enter into such a joint venture is being explored by the Union power ministry as well as PowerGrid as it might require amending its articles of association.
National Grid is planning to expand its operations in many states including Karnataka, Madhya Pradesh, Punjab and West Bengal.
The company is also in the race for developing transmission lines for the 4000 mw CEPA power project in Orissa, which would call for an investment of Rs 10,000 crore.
