Reliance Power Fund raising plan

Reliance Power gained 2.85% to Rs 372.15 at 10:47 IST on BSE on reports the Reserve Bank of India has approved the company’s proposal to raise about Rs 8,000 crore or $2 billion for its Sasan ultra mega power project.

The company’s current equity is Rs 2259.82 crore. Face value per share is Rs 10.

This could be one of the first mega External Commercial Borrowing (ECB) clearances to have come through after restrictions were imposed on ECBs. Normally, a company can borrow only up to $500 million for a single project through the automatic route, a move Reserve Bank of India (RBI) had taken to restrict flow of foreign capital that was having an impact on the rupee and inflation. The restrictions were particularly with regard to projects where the money was brought in instead of being spend on project imports. However reports added that the finance ministry has asked the RBI to treat the Sasan project as a special case considering its role in the country’s infrastructure.

Reliance Power would bring the ECB amount either through China or Korea as the company wants to source equipment through these countries. Sasan Power, a wholly-owned subsidiary of Reliance Power, would start placing equipment supply and engineering, procurement and construction orders for the project once the funding is in place by the May 2008. Sasan Ultra Mega Power Project (UMPP) is the country’s largest domestic coal-based power project at a single location in Madhya Pradesh. The project has the lowest levelised tariff of Rs 1.196 per unit.

In a meeting held on 25 February 2008, Reliance Power's board of directors approved 3:5 (3 bonus shares for every 5 shares held) bonus issue to all shareholders, excluding the promoter group comprising of Reliance Energy and the Anil Dhirubhai Ambani Group (ADAG).

In a related development, Anil Ambani, Chairman, Reliance ADAG simultaneously announced a voluntary contribution of 2.6% of his shareholding in Reliance Power to Reliance Energy, to prevent Reliance Energy from any dilution of its existing 45% stake in Reliance Power, as a result of the bonus issue.

Following bonus issue and personal stake transfer by Anil Ambani, the cost of acquisition of Reliance Power stock will come down by 40% for retail shareholders to Rs 269 per share from issue price of Rs 430 per share. In the same way, for other investors the acquisition cost will be reduced by 37% to Rs 281, from issue price of Rs 450.

Following this bonus issue, Anil Ambani's stake will come down to 40% from the present 45%. Reliance Energy's shareholding remains unchanged at 45% while public shareholding will increase by 5% to 15%.

Reliance Power is developing 13 power generation projects with a capacity of 28,200 megawatt (MW).