The Hindu Business Line : KPTCL to raise Rs 900 cr to fund transmission upgradation this fiscal

After unbundling into separate distribution and transmission companies KPTCL's risk rating has undergone a change. Most financiers now seetransmission companies as low risk borrowers. This was because of the consistent cash flow stream of transmission companies.

Bangalore , Dec. 16

THE Karnataka Power Transmission Corporation Ltd (KPTCL) is raising Rs 900 crore during the current fiscal from a clutch of financial institutions for funding its transmission upgradation.

Speaking to Business Line KPTCL's Managing Director, Mr Bharath Lal Meena, said the institutions including the Power Finance Corporation and the Rural Electrification Corporation have offered funds with 7-year maturities at rates between 8 and 8.5 per cent. For the next year, 2006-07, the utility plans to borrow Rs 2,000 crore.

Unlike in the past, the borrowings would not carry any State Government guarantee, he said. Instead the funds would be provided only with physical asset cover. Financiers normally insist on a physical asset cover of 150 per cent over the loan. The coverage is provided by mortgaging some of the assets of the transmission company with FIs.

Besides, he said, after unbundling into separate distribution and transmission companies KPTCL's risk rating has undergone a change. Most financiers now see transmission companies as low risk borrowers. This was because of the consistent cash flow stream of transmission companies.

Besides, Mr Meena said, "We have secured our revenue streams from the five distribution companies." Securing the revenue streams from the DiSComs was done by giving a charge on revenues to the transmission company, KPTCL.

KPTCL currently charges 19 paise per unit as transmission charge to the DiSComs. Based on these charges the net profit for the current year is estimated at around Rs 100 crore. This would make KPTCL the first State electricity utility to make corporate tax payments. In fact for the current year, the utility has made a tax provision of Rs 8.37 crore.

These profits are based on a 12 per cent return on equity on the same lines as the Centrally owned Power Grid Corporation of India Ltd.

To sustain the high capital expenditure, the utility has sought higher tariffs based on a return on equity (ROE) of 14 per cent. In fact even in the last expected revenue charge, the KPTCL had sought 14 per cent ROE, though the Karnataka Electricity Regulatory Commission disallowed it. The higher charges were sought for meeting the Tenth Plan capital expenditure of Rs 8,000 crore.

"All these funds would have to be generated through internal and extra budgetary resources," Mr Meena said. Therefore some increase in transmission tariffs would be required, he added.