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Spotlight | February 2010

Reliance Infrastructure - Ever seeking to expand spectrum

You get the feeling that Reliance Infrastructure (R Infra) always has something up its sleeve. As India’s largest private sector enterprise in power utility, R Infra’s biggest claim to fame in that sector—soon to be overshadowed by its Mumbai Metro project, surely—has been distribution in the nation’s two largest cities. Although Tata was the first generation company in the country, as Mumbai grew, BSES and Reliance came in, and Reliance acquired management control in BSES. The reason for R Infra to be proud of this distribution—despite the fact that it is easier to manage distribution losses in cities than in non-urban areas—is that in the areas of Mumbai with Reliance-distributed power, the loss is only about 10-11 per cent, as opposed to more than 30 per cent on average in Maharashtra’s 69 cities (and, of course, higher across India). The much more recent Delhi experience has been working even better for R Infra, with distribution losses already dramatically down.

Whether the Mumbai model of open access and competition (with Tata Power) will score over Delhi’s consortium model over time would be an interesting phenomenon to watch. As Maharashtra Electricity Regulatory Commission’s (MERC) Chairman VP Raja says, “Any kind of competition is good, because it provides the consumer a choice.” R Infra distributes more than 28 billion units of electricity across 124,300 sq. km. The company’s generation in its plants is 941 MW of electricity, reportedly at a high capacity, from the company-owned power stations located in Maharashtra, Andhra Pradesh, Kerala, Karnataka and Goa. In the power sector, the company is involved in generation, transmission, distribution and trading of electricity and constructing power plants as EPC partners.

In the infrastructure space, the company is focused on roads, urban infrastructure including MRTS, Sealink and Airports, Specialty Real Estate which includes business districts, trade towers, convention centre and SEZs. With an obviously deep interest in a relatively unexplored area, R Infra spun off Reliance Power Transmission (RPTL) as an associate company with the aim to spotlight their transmission business. The company says apart from establishing transmission links for the company’s own capacity addition programme, it will also commercially vie for the network expansion programme envisaged in the National Plan. RPTL has been selected through competitive bidding as the joint venture partner for setting up over 300 km of transmission lines in Himachal Pradesh.

The company is amongst the largest developers of road and highway projects under the build, own, transfer (BOT) scheme.

Click on R Infra’s website, and its “Core Infrastructure” page will, somewhat symbolically, display that it is “Under Construction”, as its projects are. Even the “EPC” page is fairly skimpy, listing only its power projects. What neither of those pages mention is how aggressive the company has been in pushing its EPC efficiencies in roads and, of course, most famously, Mumbai Metro. As a part of the Anil Dhirubhai Ambani Group that has a market capitalisation of $35.1 billion, net worth of $13.6 billion and an operating cash flow of $2.8 billion, R infra has taken advantage of the sheer muscle of the group. Having signed (as a part of a consortium that includes Canada’s SNC Lavalin) the $2.2 billion Phase II contract late in January with the state government, the company says it is confident of achieving the financial closure as early as October 2010. Meanwhile, R Infra driven Phase I may be commissioned 15 months ahead of schedule.

With new interest in roads and even newer interest in airports (R Infra has opted for five out of the six smaller-city (some are mere towns) airports that Maharashtra Airports Development Com­pany (MADC) wants to develop. While the financial viability of these airports is under much speculation in the industry, perhaps R Infra will show the way.

Ongoing and Planned R-Infra Projects
• The largest Indian infrastructure and utility company in the country
• 17 projects are under development with project outlay of Rs 35,500 crore
• 14 projects in infrastructure sector totalling over Rs 31,200 crore
• 9 Roads totalling Rs 7,300 crore
• 3 Metro Rails totalling Rs 16,200 crore
• 2 Real Estate totalling Rs 8,000 crore
• 3 projects in power transmission totalling Rs 4,300 crore, excluding yearly investment in distribution business
• Preferred bidder in a project worth over Rs 5,100 crore (the Western Freeway Sea Link in Mumbai)

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