Power Grid – helping India through power transmission

Rs.100000 crore capital expenditure in the 12^th Plan

S.K. Chaturvedi is the Chairman and Managing Director of Power Grid Corporation. The company is confident that it will attain its investment target of Rs.55000 crore in the XI Plan ending on 31.03.12. During the XII Plan starting from 01.04.12, the company is planning to invest Rs.100000 crore. The plan is aimed at significant transmission network expansion. During the current financial year, Power Grid Corporation will be spending Rs.17700 crore for various projects it is executing. On completion of these projects, the transmission line will be increased by another 8400 ckm (circuit km). This means a capacity addition of 18000 mVA. Last financial year (2010-11) saw the company investing Rs.37400 crore in power projects.

Tapping funds is not difficult

12^th Plan has targeted a power generation capacity of 100000 MW. How will Power Grid Corporation get funds to finance the projects in the 12^th Plan involving an investment of a whopping Rs.100000 crore? The company will get Rs.2000 crore through FPO route. It is planning to tap External Commercial Borrowing (ECB) route. It can also avail funds from multilateral credit agencies like the World Bank, Asian Development Bank etc. It can also tap funds through issue of bonds.

Testing new technology

12^th Plan visualises a vast network expansion involving 52000 ckm of transmission lines involving a transmission capacity of 136000 mVA and setting up of 70 sub stations. The share of Power Grid Corporation in evacuation of power in India is around 52% now. This share will go up at the end of the 12^th Plan. For the first time in the history of India, the company has developed a 1200 kVA system. A test station has been put up in Bina in the Western region. The intention of Power Grid Corporation is to use this line to evacuate ultra voltage power from North East to Northern part of India. This is a public-private partnership. More than 30 vendors including companies like BHEL are involved in the project. The technology has been indigenously developed by Power Grid Corporation. Indian power sector will be very much benefitted by this technology. The technology will assist in optimisation of the transmission cost and in operation maintenance.

Stepping up and stepping down voltage for efficient power transmission

Power transmission is a very complicated process. Power is generated in the power plants through different ways. For example, in India, thermal power plants generate a very large portion of the total power generated. These plants use coal as the basic input. Hydro electric power stations generate power based on running water falling on turbines. Nuclear power plants use atomic energy for power generation. There are also wind power stations, solar power stations and tidal power stations. The last three are renewable sources of energy and are in great demand. But wherever power is generated and through whatever means, the power generated has to be transmitted to the control grid at high voltage. Here step-up transformers are used. These step-up transformers boost up the voltage of the transmission from 6600 V at the time of generation to about 100000 V in order to reduce power loss. The control grid supplies this power to the consumers like houses and factories at reduced voltage of around 220 V (domestic use) and higher voltage for factories. This process is achieved by using step-down transformers, which bring down the high voltage of 100000 V to a low of 220 V.

Collaboration with Aveva T&D

Aveva T&D India Ltd has signed a Memorandum of Understanding with Power Grid Corporation to provide ultra high voltage technology for the company’s coming 1200 kVA AC national test station at Bina in Madhya Pradesh. Areva T&D India is also engaged in transmission business. It is a part of Alstom Grid. Power Grid Corporation will use the technology for commercial purposes only after testing it at Bina. Areva T&D has production facilities at Hosur and Padappai (near Chennai) in Tamil Nadu. They produce 1200 kV-capacitor-voltage transformers, disconnectors and digital current transformers. These items will be supplied to Power Grid Corporation at its Bina facility for testing. Rathin Basu is the Managing Director of Areva T&D.

Credit from Asian Development Bank

Asian Development Bank will be extending $750 million credit for the national power transmission improvement project of Power Grid Corporation. The loan will finance the bulk transmission of 3000 MW from independent power producers in Chhattisgarh State to other parts of North India including the national capital New Delhi. A 800 kV High Voltage Direct Current (HVDC) technology will be used for the transmission. This involves setting up of a 1300 km inter-regional link. The total project cost is estimated at $2.25 billion. The funding will involve a $500 million sovereign guaranteed loan and $250 million non-sovereign corporate loan, which will not involve any credit support from the government. This is the first time that Power Grid Corporation is availing such a foreign commercial term loan without the support of the government and on its own strength. The term of repayment is upto 15 years.

Demand for electricity increasing fast

India’s demand for electricity is increasing very fast. In 2010, the demand-supply gap is estimated at around 12%. Generating capacity has increased sizeably over the years. But transmission capacity has not kept pace with it. Here lies the vital role for Power Grid Corporation to solve the power crisis in India. The company has to spend Rs.20000 crore a year during the 12^th Plan in order to reach its set target of $1.02 trillion capital expenditure. It plans to award equipment orders worth Rs.15000 – Rs.18000 crore a year during the period. The projects involve projects spilled over from the previous Plan, UMPPs, HPCTC lines and strengthening of the system. All these will translate a CAGR of 16% in the 12^th Plan for the company.

Helping Tata Power

Power Grid Corporation has plans to set up a stop gap evacuation facility for the first 800 MW unit of 4000 MW Tata Power Ultra Mega Power Project (UMPP) in Mundra. It is waiting for forest clearance as part of the project passes through the Wild Ass Sanctuary in Kutch in Gujarat. Till the time it gets final regulatory approval, Power Grid Corporation is planning to utilise part of an existing line (Mundra-Limbidi and Bachau sub-station) to evacuate power.

Chinese collaboration to tone up efficiency

Power Grid Corporation awarded a contract to the Chinese telecom equipment maker ZTE Corporation to help the company reduce its costs. This is the maiden foray of the Chinese company into the enterprise solutions space in India. As part of the contract, ZTE will deploy devices and equipment that will enhance the network coverage and service quality of Power Grid Corporation. But the financial details of the agreement have not been disclosed by both the parties. Power Grid Corporation hopes that this agreement will enhance its share in power transmission by 15%. ZTE will bring from China modern devices like DWDMs (385 in number), SDHs (1025 in number) and PTNs (number not known). Indian enterprise solution market is worth $3 billion now and is poised to grow to $8 billion by 2014. ZTE is a leader in providing telecom technology. To what extent, its expertise will help Power Grid Corporation, which is in a non-telecom business remains to be seen. But of course, there are similarities in transmission of telecom and power. Synergy will play a crucial role here. Moreover Power Grid Corporation has experience of establishing telecom network across India.

No competition in the field

One advantage Power Grid Corporation enjoys is that there are no rivals or competitors to it. It is the solo player in the power transmission industry. Another advantage it enjoys is that there is no dip in demand for its products as demand for power is increasing day by day. If it runs its business efficiently, then returns will follow suit. It is in such an enviable position. It has very low operational risk. It is the largest power transmission company in India. It has also a consultancy division. It has established a vibrant telecom network of 21000 km across India. Since 2008, Power Grid Corporation has spent Rs.32600 crore on capital expenditure. Another advantage the company enjoys is its high operating margin of above 90%. The only expenditure for the company is the employee cost and maintenance expenses. It has debt equity ratio of around 2.8. This is in tune with the industry standard. It has a 100% market share in inter-state transmission business and 50% market share in intra-state transmission business. A new company cannot easily enter into competition as huge capital and experience are required to start the business. This creates a barrier for competition, which goes to the advantage of the company.