In an interview with CNBC-TV18, IS Jha, Director - Projects and Additional Charge CMD, Power Grid Corporation of India, talked about the company's business performance and the outlook going forward.
Below is the transcript of IS Jha’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.
Sonia: In FY16, the company commissioned transmission projects worth almost Rs 32,000 crore. That was a growth of almost 50 percent year-on-year (Y-o-Y). Can you give us a sense of what the commissioning could be over the next two years, that is FY17 and FY18?
A: In next two years also, we have a very good target. Like in FY17, we are adding more than 13 number of transmission lines and 20 number of service stations. They are very important lines. Our commissioning should exceed Rs 30,000 crore. We are extending some of the very important corridors -- to the southern, northern, western and north-eastern region. These are very prestigious projects. That's how we are sure that we will be able to achieve more than this Rs 30,000 crore benchmark.
Latha: We want to hang on to every word you are saying because you commissioning one grid, one line is going to make a big difference to a whole region like the southern region was benefitted by your commissioning line last year. Can you tell us what were the key lines that you commissioned in the last six months? You spoke about these 13 new lines that you will be commissioning this year and you mentioned the regions. Can you tell us exactly from which region to which region these lines are?
A: In the last two years, we extended transmission lines to southern region as it was facing a problem. Our capacity has increased: we saw almost 71 percent growth and we are targeting to increase it again to 19,000 megawatt by FY19 or FY20.
But in this year itself, we are going to commission two important corridors for southern region. One is from Odisha -- land will come from coal hub Angul -- to Srikakulam to Vemagiri. Vemagiri is in Andhra Pradesh or Telangana. That is a very important corridor.
One more corridor we are commissioning from the Chhattisgarh area is Raipur to Wardha. Then there is Wardha to Nizamabad, Nizamabad to Hyderabad. These important corridors will come up in the next two years. The capacity will go up by 80 percent. That is a boon for the southern region.
Even for the northern region, we are doing some important projects. One is the Champa-Kurukshetra high-voltage, direct current (HVDC). It will enhance the capacity by 1,500 megawatt by the month of August and additional 1,500 megawatt by the end of this year.
Latha: This 1,500 megawatt is which region?
A: Champa is in Chhattisgarh and Kurukshetra is in Haryana. One more line we are making for northern region is Jabalpur-Orai-Aligarh. These two corridors will further increase the capacity for northern region. Today, only northern and southern regions need support from other regions, such as surplus regions like Odisha and Chhatisgarh. Both corridors are getting extended. This will increase the capacity of the transmission lines. It will increase the marketability like cheap power will go to different areas. And that is why it will change the shape of the grid.
Sonia: So, if you can tell us over the next 3-4 years, what is the total capex that the company has outlined because in FY16, you had a capex of Rs 22,000 crore, but what do you expect over the next 3-4 years?
A: Presently, we have order book of about Rs 1,40,000 crore. Out of this, most of the projects are on track. Rs 40,000 crore has already been spent. Then, next 3-4 years, we have to spend Rs 1,00,000 crore. That is why our capex will go from Rs 20,000 crore to Rs 23,000 crore in this year. Maybe next year, it will be higher.
Latha: I wanted to speak about one line which you are looking at fast-tracking. I understand that the Raigarh-Pugalur-Trissur line, that is about Rs 14,700 crore line, can you tell us whether orders have been given because I remember BHEL-ABB emerged as the lowest bidder. Has that been given out, the order? And as well, what is the timeline of this project?
A: This is also a very important corridor. Raigarh is in Chhattisgarh and will carry 6,000 megawatt to Pugalur in Tamil Nadu. From Pugalur, there are a number of alternating current (AC) lines going to the deep below Tamil Nadu. And one more HVDC is going from Pugalur to Kerala. That is 2,000 megawatt VAC, that is new technology. And the major part in this project is HVDC terminal Raigarh-Pugalur, BHEL-ABB has come as L1. We have already issued the notice of assessment (NOA) and agreement will be signed soon and it will start the project. Latha: How much of the Rs 14,700 crore will be spent on this HDVC projects in Raigarh and in Pugalur? A: The Raigarh-Pugalur project cost is Rs 6,000 crore, which is being awarded to them and it will be the total cost. Sonia: Can you tell us whether the government has any plans to divest any stake in the company? It currently owns about 58 percent odd. That is a key question that investors have on their mind. Anything in this year that we can expect? A: I do not think so. We do need money. We are seeing that this year also, our capitalised and commissioning is much more than the capex. Within two years, we will have sufficient internal resources to fund our requirement. That is why, I do not think as far as the requirement is concerned. Otherwise, if there is any plan [for stake sale], I do not know. But today, there is no discussion regarding this.
Latha: Actually, yes, even if they divest, the money is not going to come to you, it will go to the government. Your money is only what you capitalised. What is that money because you spoke about so many lines, Jabalpur-Aligarh, Champa-Kurukshetra line and then you spoke about the Odisha lines going down south to Vemagiri. You spoke about the Raipur line going to Hyderabad. And then of course, this forthcoming line from Raigarh to Trissur as well. What is you revenue increase going to be because all these, I guess are regulated returns, 16 percent regulated returns? A: Yes, most of the projects -- 80-90 percent of the order book -- is cost-plus. In cost-plus, our return on equity (ROE) is 15.5 percent. If we commission the project in time, we get additional 0.5 percent. In addition to that, we get availability incentive. It comes to around 16-17 percent. Naturally, whatever growth rate we have seen in the last 2-3 years, even last 2-3 quarters, it will likely continue.
Latha: So your income rises at least 20-22 percent? A: I expect so. Sonia: Will you have a commensurate increase in your margins as well? You are already sitting at almost 89 percent margins which is very strong even compared to what you have done in the past. Is there an expectation of an improvement in margins going ahead?
A: Actually, we are maintaining the margin because if you commission the project, there is some expenditure. This 80-89 percent margin is the highest in the world and we cannot increase further because you will have to maintain the quality, we have to maintain the availability, because these are very important lines. That is why this is the benchmark. We are trying to keep the 85-88 percent.
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