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Reliance Energy Ltd. Creating Growth Momentum. Background. Serving over 25 million consumers in substantial areas of Mumbai, Delhi, Goa and Orissa. Reliance Energy is India’s leading private sector utility company. Background.

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slide1

Reliance Energy Ltd.

Creating Growth Momentum

background
Background

Serving over 25 million consumers in substantial

areas of Mumbai, Delhi, Goa and Orissa

Reliance Energy is

India’s leading

private sector utility

company

background1
Background

Powering 2 out of 3 homes in Mumbai, and 1 out of 2 in Delhi

Reliance Energy is

India’s leading

private sector utility

company

background2
Background
  • 7,500 Schools
  • 3,000 Hospitals
  • 250 Theatres
  • 5 Airports
  • 130 Railway Stations

Reliance Energy is

India’s leading

private sector utility

company

background3
Background

Industrial, commercial and residential urban consumers

Reliance Energy is

India’s leading

private sector utility

company

background4
Background

Distributing over 5,000 MW of power – the largest in India

Reliance Energy is

India’s leading

private sector utility

company

background5
Background

Power generation capacity of nearly 950 MW in Maharashtra, Goa,

Andhra Pradesh, Kerala

and Karnataka

Reliance Energy is

India’s leading

private sector utility

company

background6
Background

India’s most valuable power company, with market capitalisation of over Rs. 10,000 crore

Reliance Energy currently

ranks among India’s

top 25 listed private sector

companies on all major

financial parameters

background7
Background

Annual revenues over Rs 6,400 crore

Reliance Energy currently

ranks among India’s

top 25 listed private sector

companies on all major

financial parameters

background8
Background

Annual cash profits over Rs 600 crore

Reliance Energy currently

ranks among India’s

top 25 listed private sector

companies on all major

financial parameters

background9
Background

Annual net profits over Rs 350 crore

Reliance Energy currently

ranks among India’s

top 25 listed private sector

companies on all major

financial parameters

background10
Background

Debt free at the net level

Reliance Energy currently

ranks among India’s

top 25 listed private sector

companies on all major

financial parameters

background11
Background

Top end credit ratings - rated ‘AAA’ by CRISIL/ ICRA/ FITCH

Reliance Energy currently

ranks among India’s

top 25 listed private sector

companies on all major

financial parameters

report card 2003 04
Report Card 2003-04

Tariff Revision petition filed after 7 years –

to achieve stipulated Return on Equity

report card 2003 041
Report Card 2003-04

Approval to import power into Mumbai, through open access on existing transmission lines –

lower tariffs expected

report card 2003 042
Report Card 2003-04

Resolution of 5 years old standby charges dispute in Mumbai expected shortly from MERC –

end to uncertainties

report card 2003 043
Report Card 2003-04

Encroachment of customer base in Mumbai stopped by MERC

report card 2003 044
Report Card 2003-04

Wage Agreements signed covering 4,500 employees and 1,200 officers –

pending since April 2002

report card 2003 045
Report Card 2003-04

Cumulative financial provisions of over

Rs. 350 crores made to strengthen Balance Sheet

report card 2003 046
Report Card 2003-04

100% equity in Andhra and Goa projects acquired, and operations merged with RE

report card 2003 047
Report Card 2003-04

Andhra 220 MW power plant’s PLF raised to 85%, through increased gas allocation

report card 2003 048
Report Card 2003-04

Kerala power plant restarted after a 1 year shutdown - project’s financial viability restored

report card 2003 049
Report Card 2003-04

Completed first phase of VRS in Delhi distribution companies – reducing workforce by nearly

4,500 persons in 7 days

report card 2003 0410
Report Card 2003-04

Exited from non-core activities of Coal Washery, coal-based Maithon power generation project, broadband telecom

report card 2003 0411
Report Card 2003-04
  • Transformed into India’s most valuable power company
  • Market capitalisation increased more than 200% in a year to over Rs. 10,000 crore
  • Best performing utility stock in the year 2004, outperforming Sensex by 29%
  • Among the top 10 performers in Sensex stocks in 2003, outperforming Sensex by 57%
power environment
Power Environment
  • Dominated by state owned undertakings
  • Poor existing infrastructure
  • Unreliable quality of power
  • Unsustainable levels of technical and

commercial losses

  • High tariffs
  • Low standards of customer care

Huge opportunity for

private sector to create

world class power

infrastructure in India

synergies for reliance
Synergies for Reliance
  • Leveraging Reliance group’s core competencies:

- World scale and world class plants

- Infrastructure development

- Project management and execution

- Financial engineering

  • Feedstock integration with Reliance’s upstream gas business
  • Leveraging of customer base for Reliance’s other businesses

A natural fit in

Reliance’s overall

business portfolio

vision statement
Vision statement
  • To be among the most admired and most trusted integrated utility companies in the world
  • To establish leadership in the power sector in the country, across generation, transmission, trading and distribution
  • To deliver reliable and quality power to millions of customers at competitive costs
  • To set international standards of customer care – creating superior value for all stakeholders
  • To set new benchmarks in standards of corporate performance and governance, through the pursuit of operational and financial excellence, responsible citizenship and profitable growth
generation strategy
Generation Strategy
  • “From Well Head to Wall Socket”
  • Environment friendly fuels – gas the preferred feedstock
  • Adequate capacity to meet captive requirements of 5,000 MW, covering:

- Base Load

- Trading

  • Offtake primarily by own customer base
  • Location in proximity to customers
  • Economies of scale, capital productivity,

lowest operating costs

Generation of power

at the most competitive

unit costs globally

world s largest gas based power project
World’s Largest Gas based Power Project
  • Setting up the world’s largest gas based mega power project with initial capacity of over 3,500 MW capacity – scale benefits
  • Initial investment outlay of over Rs 10,000 crore (US$ 2.2 billion) – single largest investment across any sector in Uttar Pradesh

To benefit millions of

consumers in the power

deficit regions of Delhi,

UP and other parts

of Northern India

world s largest gas based power project1
World’s Largest Gas based Power Project
  • End-to-end integration in the energy value chain - gas sourced from Reliance’s Dhirubhai gas fields in KG basin – integration benefits
  • Commissioning in phases from mid – 2006 through mid 2007
  • Project will be a strategic national asset and will help realise Hon’ble Prime Minister’s vision of “Power for all by 2012”

Project to supply clean-green

power based on

environment friendly natural

gas at competitive costs

location map
Location Map
  • 40 kms from Delhi
  • HBJ gas pipeline is

15 kms away

  • Main Ganga Canal

is just 2-3 kms away

  • Power Grid’s Dadri

substation to help in

evacuation of power

Dadri

distribution strategy
Distribution Strategy
  • Expansion of the customer base, with a national footprint
  • Acquisition of existing networks in major cities and towns, through the privatisation process
  • Open access on distribution systems, as individual States deregulate

Providing a world class

experience

to millions of customers

distribution strategy1
Distribution Strategy
  • Setting up new networks where economically feasible
  • World class systems, automation, quality and reliability of power, competitive pricing, highest standards of customer care

Providing a world class

experience

to millions of customers

existing areas
Existing Areas

Increased automation and strengthening of distribution systems in Mumbai to bring down losses to around 10%

Significant potential for

enhancing returns

in Mumbai, Delhi and Orissa

existing areas1
Existing Areas

Comprehensive revamp of Delhi infrastructure, to reduce losses from the existing levels of 55%

Significant potential for

enhancing returns

in Mumbai, Delhi and Orissa

existing areas2
Existing Areas

Recapitalise the Orissa distribution companies, and turn around their operations, subject to suitable restructuring by Govt. of Orissa

Significant potential for

enhancing returns

in Mumbai, Delhi and Orissa

new areas
New Areas
  • Applications filed for building new networks in various cities:

- Bhandup, Vashi, Pune, Nasik, Nagpur, Aurangabad

- BEST area in Mumbai

NDMC area in New Delhi

- 12 areas under franchise in

Gujarat

- Other cities and states in the

future

Participation in privatisation

of distribution

assets of SEBs

as opportunities arise

growth opportunities trading
Growth Opportunities - Trading
  • Trading in Power
    • Trading in power – Physical (merchant/ own generated)
    • Creating exchanges for trading in power – financial and derivative products

Enhancement of

returns from

generation and

transmission

mega investment plans
Mega Investment Plans
  • Capital Investments

Amount (Rs Crore)

Generation 10,000

Transmission 4,000

Distribution 6,000

Total :20,000

  • UP power project implemented by a new company , Reliance EGen P. Ltd.

Investment of upto

Rs. 20,000 crores

in the

next 5 years

shareholding pattern
Shareholding Pattern

Present

Reliance Group 49.5%

FIs / Banks / MFs 21.0%

FIIs / GDRs 21.3%

Others 8.2%

Total: 100.0%

Reliance’s stake reduced

from 58.2% to 49.5%

preferential offer
Preferential Offer
  • Equity shares and/or equity related securities
  • Offer price of Rs. 640 per share, determined in accordance with SEBI Preferential Allotment guidelines

Priced nearly 3 times

Reliance’s open offer price

preferential offer1
Preferential Offer
  • Offer price at 38% premium to

26 week average price

  • 2% discount to last traded market price

Postal ballot for all

shareholders on

preferential offer and

various other resolutions

though not required in law

strong vote of confidence
Strong Vote of Confidence
  • Reliance to subscribe to over 2 crore equity shares, aggregating nearly Rs. 1,400 crores
  • Institutional shareholders, like LIC and GIC, agree in principle to subscribe to nearly 1 crore shares, aggregating over Rs. 600 crores

Endorsement of

growth prospects

and

positive signal to markets

financial flexibility
Financial Flexibility
  • Enabling approvals to offer additional amount of Rs. 1,000 crores through:

- equity shares; and/or

- equity shares with differential voting

rights; and/or

- international convertible bond

offering

Reliance has confirmed

its willingness to

subscribe additional

Rs. 1000 crores

proposed reliance stake
Proposed Reliance Stake

Present Proposed

Reliance Group 49.5% 56.5%

FIs / Banks / MFs 21.0% 21.0%

FIIs / GDRs 21.3% 16.5%

Others 8.2% 6.0%

Reliance stake still

2% below peak levels of

over 58%

reduction in free float
Reduction in Free Float

Present Proposed

Reliance Group 49.5% 56.5%

FIs / Banks / MFs 21.0% 21.0%

FIIs / GDRs 21.3% 16.5%

Others 8.2% 6.0%

Reduction in free float

from over 50% to 43%

slide51

Value creation for

Reliance Energy shareholders

impact on net worth
Impact on Net Worth
  • Reliance Energy to rank among India’s top 3 private sector companies
  • Net Worth to rise by Rs. 3,000 crores, from Rs. 3,500 crores to Rs. 6,500 crores

Third only to

Reliance Industries

and

ICICI Bank

impact on book value
Impact on Book Value

A 43% increase in Book Value per share from Rs. 217 to Rs. 312

Price to book ratio

will decline to 2

impact on leveraging ability
Impact on Leveraging ability

Increased ability to leverage Balance Sheet, while maintaining top end AAA ratings

Increase in borrowing

ability by Rs. 3,000 crores

to Rs. 6,500 crores

impact on profitability
Impact on Profitability
  • Increase in capital base by Rs. 3000 crores - potential accretion to earnings
  • Increase in EPS leading to substantial enhancement of overall shareholder value

To rank among

India’s top 10

private sector companies

slide56

Value creation for

Reliance Industries shareholders

mark to market gains
Mark to Market gains
  • Reliance’s investments in Reliance Energy now valued at over Rs 5,200 crores
  • Average cost of Reliance’s shareholding in RE will still be only Rs. 350 per share, against market price of Rs. 650 per share

Capital gains of nearly

Rs 3,500 crores

participation in power sector growth
Participation in power sector growth
  • Enhancement of leadership position in the power sector for Reliance Group
  • Benefits of sustained long term growth in the entire sector

Positive impact on

RIL’s financial ratios

through consolidation

gas off take
Gas Off-take
  • Assured feedstock off-take for about 25% of production from RIL’s KG - D6 Dhirubhai gas field
  • Long term contracts at competitive prices

Share of gas in

power generation

to increase from

10 % to global

average of 30 %

deployment of cash flows
Deployment of Cash flows
  • Proposed investments only 8 % of Reliance group’s cash flows of over

Rs. 30,000 crores in the next 3 years….

  • ….and less than 5 % of value of RIL’s future gas sales contracts of over Rs. 50,000 crores to the UP gas based power project

Opportunity for Reliance

to deploy its strong

cash flows

for attractive returns

win for customers
Win for Customers

Quality , Reliable power

Competitive prices

World class customer care

win for the power sector
Win for the Power sector

Mega investments

Technology upgradation

Accelerated loss reduction

win for the country
Win for the Country

World class power

infrastructure

Enhanced competitiveness

Fiscal deficit reduction

win for reliance group
Win for Reliance Group

Leadership in power sector

Exponential growth

Enhanced profitability

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