New Projects Com­ing on Line to Boost Power Grid

Co en­ti­tled to 15.5% RoE de­ployed in com­mis­sioned projects, which means higher profit

The Economic Times - - Smart -

ET In­tel­li­gence Group: Com­mis­sion­ing of a few big ticket projects this quar­ter is likely to im­prove the earn­ings vis­i­bil­ity of In­dia’s largest power trans­mis­sion firm Power Grid Cor­po­ra­tion (PGC).

An in­crease in the cap­i­tal­i­sa­tion — with as­sets which were un­der ex­pan­sion be­gin­ning to con­trib­ute to prof­its — boils down to higher profit through as­sured re­turns (that is linked to eq­uity con­tri­bu­tion to­wards to­tal as­sets).

PGC is en­ti­tled to 15.5% re­turn on eq­uity de­ployed in all nom­i­nated com­mis­sioned projects. This is called reg­u­lated eq­uity. Higher reg­u­lated eq­uity trans­lates into higher earn­ings for the next year.

In its re­cent an­a­lyst meet, se­nior of­fi­cials said that PGC was targeting cap­i­tal­i­sa­tion of ₹ 1.46 lakh crore (in­clud­ing ₹ 28,000 crore in FY17) over the next four years. Sim­i­larly, its cap­i­tal ex­pen­di­ture is ex­pected to be ₹ 1 lakh crore in the next four years.

Due to a high cap­i­tal­i­sa­tion sched­ule, the com­pany has high cer­tainty of over 16% an­nu­alised earn­ings growth be­tween FY16 and FY20. Due (Fig in bn) to a high cap­i­tal­i­sa­tion, net profit grew 20% to ₹ 1,930 crore in the De­cem­ber quar­ter as rev­enues from trans­mis­sion busi­ness rose 21.6%. The com­pany has given a guid­ance of ₹ 22,500 crore and ₹ 28,000 crore of capex and cap­i­tal­i­sa­tion, re­spec­tively, till March. In the first nine months of FY17, it has cap­i­talised as­sets worth ₹ 16,000 crore. This means nearly ₹ 12,000 crore of as­sets will be cap­i­talised in Q4. The com­pany may meet its guid­ance as phase 1 of the ₹ 6,500-crore Champa- Ku­ruk­shetra High Volt­age Di­rect Line is likely to com­mis­sion in February 2017 and phase 2 of North East-Agra Line will start op­er­a­tions in Q4 of FY17.

Since April 2016, PGC has com­mis­sioned projects worth ₹ 20,700 crore and in­curred capex of ₹ 17,900 crore — main­tain­ing cap­i­tal­i­sa­tion to capex ra­tio of more than one.

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