RIL to invest $20 bn in power foray

As per media reports, Mukesh Ambani-led Reliance Industries Ltd (RIL) may invest anywhere between $15 to $20 billion (Rs70,000- Rs90,000 crore) over the next 10 years towards its big-bang foray into the power sector, which, besides power generation, would also include transmission projects.

The funding for RIL’s power business will be through a mix of debt and equity and a new company may be floated in the next two years to undertake execution of power projects.

Since construction of a new power project takes up to five years, RIL, besides bidding for ultra mega power projects (UMPPs), may preferably look at inorganic growth (by acquisition of power plants) to establish its presence in the sector.

RIL may look at acquiring some hydel and thermal power projects besides bidding for coal based UMPPs of 4,000 mega watt (MW) capacity each.

UMPPs at Chhattisgarh, Orissa and Tamil Nadu — each of which would cost Rs16,000 crore —  is already on the investment radar of RIL.

“Setting up a power project does not need any licence but takes at least a year or two for preparatory work and another 3-4 years for its execution,” said a power ministry official.

RIL will bid for transmission projects as the space has been offered for participation by the private sector.

Given the scarcity of coal in the country, sources said RIL is also considering acquisition of coal mines in Australia, Mozambique, Indonesia and South Africa. RIL already has a memorandum of understanding (MoU) with a local company in Australia for mining uranium.

Even brother Anil — who has big plans to develop 33,000MW  power generation capacity with an estimated investment of over Rs1 lakh crore — had acquired the Rosa power project in 2006.

RIL’s entry in the power sector was termed as a “game changing development” by its chairman and managing director, Mukesh Ambani at the company’s AGM on Friday (June 18, 2010).

Reliance Power has commissioned 600MW capacity at Rosa and plans to add another 600MW in the next phase.

In addition, Anil’s Reliance Power has so far bagged three out of the four ultra mega power projects (coal based) announced so far by the government. No developer at a given point of time can undertake execution of more than three UMPPs.

RIL closed at Rs1,065.25, up by 0.95%, with a volume of 4.99 lakh shares on the BSE.