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Wednesday, October 04, 2006

REC mulls initial public offering

In order to access funds for its lending plans, Rural Electrification Corporation, REC is working towards an initial public offer, IPO and is awaiting the Cabinet approval to tap the market, reports The Hindu Business Line.

Its IPO plans have received positive response from the Power Ministry and the Cabinet approval would mean it could tap the market within the next six months, according to the chairman and managing director of REC, A K Lakhina.

Lakhina, who was in Hyderabad to sign up with four Rural Electric Cooperative Societies, said REC had become an important element of the country's power expansion drive and now requires to access public funds to meet this requirement.

REC has equity of Rs 700 crore (Rs 7 billion) and expects to add about Rs 150 crore (Rs 1.50 billion) to this. "Over the years, we have made strategic investments into several power projects and REC expects to leverage the potential of these investments. These investments in power projects include gas-based units of Konaseema and Lanco power," he said.

REC has also committed investment of about Rs 1,500 crore (Rs 15 billion) each in two more coal-based plants in Andhra Pradesh, the 500-MW Vijayawada Thermal Power Station expansion and the proposed 500-MW Bhoopalapally power plant both of AP Genco.

`To surpass target'

Referring to the corporation's plans, Lakhina said, "REC has sanction of Rs 18,000 crore (Rs 180 billion) and has targeted Rs 9,000 crore (Rs 90 billion) in disbursements. We are confident that we will surpass this target and envisage a growth rate of about 30% this year."

The Eleventh Plan envisages capacity addition of about 60,000 MW and for a non-banking financial company such as REC, it provides for immense scope to play a strategic role in helping power utilities in their quest to set up new plants and to meet their expansion plans, he said.

Referring to the ambitious Rajiv Gandhi Grameen Vidyutikaran Yojana, which seeks to electrify the uncovered areas of the country, Lakhina said that the project had initially envisaged an outlay of Rs 16,000 crore (Rs 160 billion). But given the magnitude of the task and the scope of the work, this amount is likely to go up to Rs 20,000 crore (Rs 200 billion) to Rs 22,000 crore (Rs 220 billion).

While complimenting Andhra Pradesh Government for initiating reforms in the power sector and unbundling the utilities, Lakhina said, "There is still a long way to go for several states. Unless they account for the power supplied, it would be difficult to infuse fresh funds for expansion".

REC signed up with four Rural Electric Cooperative Societies, agreeing to provide additional funding. One way to ensure that these rural societies get competitive is to diversify and get into generation through biomass projects. To bring in efficiency, the REC CMD Lakhina suggested franchisee route for management and collection of dues from local consumers.


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