The Hindu : BSES to be renamed Reliance Energy

Online edition of India's National Newspaper
Monday, Feb 23, 2004

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BSES to be renamed Reliance Energy

By Ramnath Subbu

MUMBAI, FEB. 22. BSES Ltd., the power utility company acquired by the Reliance Group about a year ago, will be renamed Reliance Energy Ltd. from next week.

Addressing the media here today, Anil Ambani, chairman and managing director of Reliance Energy, said that the Board of Directors of the BSES today approved a preferential offer of equity shares and/or equity related securities to the Reliance Group and major institutional shareholders in order to strengthen the company's financial position and to generate large-scale resources for accelerating its future growth plans.

The approval of members will be sought through postal ballot.

The offer, which is subject to shareholder approval, will be made at Rs. 640 per share, a price arrived at in accordance with applicable Securities and Exchange Board of India (SEBI) guidelines. This preferential offer represents a 38 per cent premium to the 26-week average price and a two per cent discount to the closing price of Rs. 655 per share on February 20.

The Reliance Group will subscribe to over two crore equity shares, aggregating Rs. 1,400 crores. Also, major institutional shareholders such as the LIC and the GIC have agreed in principle to subscribe to nearly one crore shares aggregating over Rs. 600 crores.

Mr. Ambani said: "The preferential offer creates a robust platform for Reliance Energy to further accelerate its growth momentum, enhance its leadership position in the power sector and to substantially enhance overall shareholder value."

The Reliance Group's shareholding in Reliance Energy would have stood reduced to around 49.5 per cent from a peak of 58.2 per cent upon full conversion of the $120 million Foreign Currency Convertible Bonds issued in October 2002. However, the offer will result in the Reliance Group's shareholding in the REL increasing to around 53 per cent levels.

The REL Board also approved issuance of an additional Rs. 1,000 crores through equity shares and/or equity shares with differential voting rights and/or an international convertible bond offering.

The company proposes to issue these shares with no voting rights and with an entitlement to dividend at a rate that is five per cent higher than the rate declared on the ordinary equity shares. The non-voting shares will constitute just below 10 per cent of the total.Reliance will subscribe to the additional Rs. 1,000 crores to the extent permitted under the SEBI takeover code. Reliance's shareholding in the REL will go up to about 56.5 per cent in the event the additional Rs. 1,000 crores is taken up by the group; which would still be lower than the peak 58.2 per cent.

In the one year since the acquisition of the BSES, Mr. Ambani said, "the plant load factor of the Andhra gas project has gone up from less than 50 per cent to above 85 per cent, the Kerala project which was shut down has been restarted and its financial viability restored. Also, the first phase of the VRS for Delhi distribution was completed with employee strength reduced from 11,500 to 7,000. We also exited from non-core areas such as coal washing, broadband and the Maithon power project."

The proceeds of the proposed offering will be used by the REL to finance its projects in generation, transmission, distribution and trading of power. "We need to build 5000 MW of power for base load purposes and trading and therefore, the REL is setting up the world's largest grassroots gas based mega power project in western Uttar Pradesh and the gas feedstock will be sourced from Reliance's Dhirubhai fields in KG-D6 basin off Andhra coast," Mr. Ambani said. The gross value of sales from KG-D6 would be around Rs. 50,000 crores over 20 years.

The project is being implemented by a new company — Reliance EGen Pvt. Ltd. — with REL as the lead equity sponsor. The project will have an initial capacity of 3,500 MW and the initial investment outlay is over Rs. 10,000 crores. Mr. Ambani said the financial closure of Reliance EGen would be achieved in the next six months.

In distribution, the REL's two power distribution companies in Delhi have an outlay of around Rs. 3,500 crores as capital expenditure for systems development to meet load growth. The REL will also be investing in automation and systems improvement in its Mumbai distribution area to further bring down loss levels to global standards "from 13 per cent to 10 per cent in the next 24 months," Mr. Ambani said. The REL has applied for licences for building new networks in various cities such as Bhandup, Vashi, Pune, Nasik, Nagpur, Aurangabad, the BEST area in Mumbai, the NDMC area in Delhi and 12 areas under franchise in Gujarat. The aggregate capital investment by the REL and affiliates over the next five years in projects for generation, transmission, distribution and trading of power is estimated at about Rs. 20,000 crores. Of this, Rs. 10,000 crores would be in generation, Rs. 4,000 crores in transmission and Rs. 6,000 crores in distribution.

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