Speaking at a press conference to announce the Reliance Power IPO, Anil Ambani said that 11 projects will be developed by nine subsidiaries, reports CNBC-TV18. He added that they have around 28,000 MW projects in hand. According to Ambani, the rate of return on transmission is 12%, generation 14% and distribution, 16%.
Ambani said they will unveil their wind power plans soon and that they are ready to foray into nuclear power too. He added that they are in talks with Indonesian companies for coal supply. Ambani also said that they are not looking to transfer the existing 1000 MW REL project to Reliance Power.
The issue is likely to list by the first week of February, Ambani said adding that they will have SPVs for all the projects and that Reliance Power will be the parent. He added that there will be no pre IPO announcement despite increased demand.
According to Ambani, REL will pursue projects in infrastructure and transmission and will also have distribution arms. He added that they will start project construction only after a full financial closure. According to Ambani, they are looking to tie-up with global majors for equipment deliveries. He added that the equipment manufacturing JV may not be housed under REL or Reliance Power.
Excerpts from the press conference:
Q: 40% of your power generation capacities will gas based. What is the scenario on the gas supply agreement because the entire project would be dependent on gas? Are you looking at alternate gas arrangements?
Ambani: We firmly believe that India will be gas long with all the discoveries and all the finds that have been announced by various operators. In the medium to long-term, India will be a gas long market and a number of companies have approached us to supply gas because they will be looking for creditworthy customers. We believe that Reliance Power is one amongst them. I will not comment on the ongoing negotiations with Reliance Industries because the matter is under discussion. I am quite hopeful that a win-win solutions would emerge from those discussions.
Q: Given your DRHP between 2011 to 2016, your projects will be completed. What kind of a revenue visibility do you have because of which your investors can expect the dividend and good profits on your balance sheet?
Ambani: I think clearly our direction is to move towards an accelerated schedule of execution and dividends is only one way for investors to get rhythms. At the end of the day, our surveys and the results in the capital markets very clearly indicate that capital appreciation is what investors are really looking for.
Q: You will be generating around 28,200 mw of power over 8-9 years. It requires financing of over Rs 1,00,000-1,20,000 crore. What are the key challenges which you might be facing, in terms of financing, because it is a huge financing and power projects in India are faced with lot of execution risk?
A: I personally believe that India has come a very long way. In the 90s, everybody thought that the Indian industry would not survive as the tariffs went down and Indian industry started integrating with the global economy.
In 2008, the last issue on the minds of Indian entrepreneurs is availability of financial resources. We have more offers on the table for long-term loans, both from foreign banks and Indian banks and from export credit agencies, than we can ever consume.
So, when we put in the financial capital, in terms of risk capital or equity on the table, most of these projects are either financed at 70:30 debt equity ratio or 75:25, depending on the project. Some may even become 80:20. I think there is a huge amount of appetite in debt markets on global basis to fund these projects.
Q: By when do we see the financial for the remaining 12 projects?
A: I think that each project works on a particular schedule and as per their plans. I believe that we launch into construction for each and every project, based on full financial closure. We will not go into a project on open-ended basis and we are very strong promoters for Reliance Power. We have access to the equity market.
We always have the ability to cushion ourselves, in terms of equity. Even this Rs 11,000-11,500 crore, I am just using a middle number, is a step in putting the risk capital on the table. The risk capital has to be put in first, followed by the debt capital. Dept capital is much more secured capital and it is easily available.
Q: When the case in the Bombay High Court came up, RNRL versus Reliance Industries, your council made it a point that unless direction is given to Reliance Industries to supply gas and unless Reliance Industries commits to supply the gas, bankers may have apprehensions in funding these gas projects. That is why it was very critical for the court to maintain status quo. How important is that court direction and court ruling for you to tie up financing?
A: I am not here to comment on the court’s direction, I have said this earlier and I will repeat it again that financing is equally important for people, who are developing gas fields or people who are building pipelines, building power projects or transmission networks.
Each one has a different financial challenge, going forward. I would not under-rate the importance of financing. At the same time, I would say that based on our track record and our credit ratings, we have access to very large amounts of capital.
It will be really dependent on the level of risk that we want to take as entrepreneurs. It will have to be in proportion to the rates of return that you can make, because for the risk you take, you must get an appropriate level of reward.
I am not here to comment on specifics of our discussion with Reliance Industries. Nor am I here to comment specifically on submissions in the court or what the court ruling is, because most of these matters are subjudice. But I am just giving you a directional view and I am sure that somebody is going to play this step in the court in the future.
Q: Does that imply that you are ready to commit a lot of your personal wealth in these projects if needed?
A: All the wealth that you are referring to is all paper wealth. So, if paper wealth succeeds in building a very large project, we will do that.
Q: Mr Chelsani, in his presentation, said that the marketcap of this group is over Rs 3,00,000 crore. How conscious are you of that? Post-Reliance Power listing, are you keen that the ADAG group becomes the highest marketcap group in the country and do you expect that?
A: I will wait for the breaking news on CNBC.
Ambani said they will unveil their wind power plans soon and that they are ready to foray into nuclear power too. He added that they are in talks with Indonesian companies for coal supply. Ambani also said that they are not looking to transfer the existing 1000 MW REL project to Reliance Power.
The issue is likely to list by the first week of February, Ambani said adding that they will have SPVs for all the projects and that Reliance Power will be the parent. He added that there will be no pre IPO announcement despite increased demand.
According to Ambani, REL will pursue projects in infrastructure and transmission and will also have distribution arms. He added that they will start project construction only after a full financial closure. According to Ambani, they are looking to tie-up with global majors for equipment deliveries. He added that the equipment manufacturing JV may not be housed under REL or Reliance Power.
Excerpts from the press conference:
Q: 40% of your power generation capacities will gas based. What is the scenario on the gas supply agreement because the entire project would be dependent on gas? Are you looking at alternate gas arrangements?
Ambani: We firmly believe that India will be gas long with all the discoveries and all the finds that have been announced by various operators. In the medium to long-term, India will be a gas long market and a number of companies have approached us to supply gas because they will be looking for creditworthy customers. We believe that Reliance Power is one amongst them. I will not comment on the ongoing negotiations with Reliance Industries because the matter is under discussion. I am quite hopeful that a win-win solutions would emerge from those discussions.
Q: Given your DRHP between 2011 to 2016, your projects will be completed. What kind of a revenue visibility do you have because of which your investors can expect the dividend and good profits on your balance sheet?
Ambani: I think clearly our direction is to move towards an accelerated schedule of execution and dividends is only one way for investors to get rhythms. At the end of the day, our surveys and the results in the capital markets very clearly indicate that capital appreciation is what investors are really looking for.
Q: You will be generating around 28,200 mw of power over 8-9 years. It requires financing of over Rs 1,00,000-1,20,000 crore. What are the key challenges which you might be facing, in terms of financing, because it is a huge financing and power projects in India are faced with lot of execution risk?
A: I personally believe that India has come a very long way. In the 90s, everybody thought that the Indian industry would not survive as the tariffs went down and Indian industry started integrating with the global economy.
In 2008, the last issue on the minds of Indian entrepreneurs is availability of financial resources. We have more offers on the table for long-term loans, both from foreign banks and Indian banks and from export credit agencies, than we can ever consume.
So, when we put in the financial capital, in terms of risk capital or equity on the table, most of these projects are either financed at 70:30 debt equity ratio or 75:25, depending on the project. Some may even become 80:20. I think there is a huge amount of appetite in debt markets on global basis to fund these projects.
Q: By when do we see the financial for the remaining 12 projects?
A: I think that each project works on a particular schedule and as per their plans. I believe that we launch into construction for each and every project, based on full financial closure. We will not go into a project on open-ended basis and we are very strong promoters for Reliance Power. We have access to the equity market.
We always have the ability to cushion ourselves, in terms of equity. Even this Rs 11,000-11,500 crore, I am just using a middle number, is a step in putting the risk capital on the table. The risk capital has to be put in first, followed by the debt capital. Dept capital is much more secured capital and it is easily available.
Q: When the case in the Bombay High Court came up, RNRL versus Reliance Industries, your council made it a point that unless direction is given to Reliance Industries to supply gas and unless Reliance Industries commits to supply the gas, bankers may have apprehensions in funding these gas projects. That is why it was very critical for the court to maintain status quo. How important is that court direction and court ruling for you to tie up financing?
A: I am not here to comment on the court’s direction, I have said this earlier and I will repeat it again that financing is equally important for people, who are developing gas fields or people who are building pipelines, building power projects or transmission networks.
Each one has a different financial challenge, going forward. I would not under-rate the importance of financing. At the same time, I would say that based on our track record and our credit ratings, we have access to very large amounts of capital.
It will be really dependent on the level of risk that we want to take as entrepreneurs. It will have to be in proportion to the rates of return that you can make, because for the risk you take, you must get an appropriate level of reward.
I am not here to comment on specifics of our discussion with Reliance Industries. Nor am I here to comment specifically on submissions in the court or what the court ruling is, because most of these matters are subjudice. But I am just giving you a directional view and I am sure that somebody is going to play this step in the court in the future.
Q: Does that imply that you are ready to commit a lot of your personal wealth in these projects if needed?
A: All the wealth that you are referring to is all paper wealth. So, if paper wealth succeeds in building a very large project, we will do that.
Q: Mr Chelsani, in his presentation, said that the marketcap of this group is over Rs 3,00,000 crore. How conscious are you of that? Post-Reliance Power listing, are you keen that the ADAG group becomes the highest marketcap group in the country and do you expect that?
A: I will wait for the breaking news on CNBC.
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