In an interview with Business Standard, REC
CMD PV Ramesh
explained the growth strategy and company's plan to ride the transformation wave in the power sector.
What is REC's growth strategy?
We are working closely with the state governments, utilities to see how to support them on a consistent basis. REC
has signed agreement with Andhra Pradesh government for loan worth Rs 61,000 crore, Karnataka for Rs 45,000 crore and we will very soon sign similar deal with Jharkhand government for loan of Rs 30,000 crore. We have finalised agreements with Bihar and Maharahtra for loan in excess of Rs 25,000 crore. We are looking at the five-year horizon.
The renewable energy (RE) is a big driver with the government's plan to add 175 GW in next five years. We would like to ride the wave in partnership with others. Besides, there is a big opportunity in the evacuation of power, the green corridor, storage technology. We want to be there.
There are 25,000-30000 MW of antiquated thermal power projects which need to be refurbished, modernised. We are talking with couple of states including Maharashtra for providing loans for the same. The demand for power should pick up. If demand grows, distribution sector is modernised, national transmission grid becomes fully operational, will see a major transformation. We will position ourselves to ride that transformation wave. We will be the premier power sector
financing and development enterprise by end of 2020. We will be knowledge partners to states, power utilities.
We are nodal agency for UDAY
(Ujwal Discom Assurance Yojana) and also for the Deendayal Upadhyaya Gram Jyoti Yojana. We can drive this process and leverage our strategic position. We are working with all the discoms, states, power departments to exercise strategic influence in transfering knowledge, good practices, best examples from one discom to another. We are setting up a website and already set up an app which brings greater transparency that will facilitate actually distributor wise monitoring of performance.
What are REC's plan to mobilise funds?
As per the proposed National Electricity Plan about Rs 10 lakh crore are required for the generation and distribution during 2017-22. REC
pitches to be one of the major players and accordingly we will revise upwards our borrowing programme. We will continue to raise funds and one of the options is Green Bonds to mop up half a billion dollar.
This apart, REC
will for the first time go in for Social Impact bonds which have not yet been tapped by Indian players so far. Funds in Canada and Nordic countries raise these bonds for investments especially in projects having direct social impact. REC
believes that the rural electrification, household electrification will have transformational impact in villages. We are very keen to tap Social Impact bonds and have initiated the process. We want to do it as early as possible as we can raise at cheaper rate and then lower the interest rates.
The Social Impact bonds by nature are small say $100 million to $150 million. It is not the question of size but what is important is to register ourselves in the international markets and arena.
For the 2016-17, RBI had granted permission to raise ECB worth $1 billion of which $330 million tied up while the balance $670 million is still available that can be raised by June 2017.
Besides, we are hopeful to get RBI's approval for ECB worth $1 billion to be raised during 2017-18.
Is REC in the current volatile economic condition confident to meet its lending and borrowing targets?
We have revised our borrowing target as we are expecting a greater outflow by end of 2016-17. By the end of third quarter REC's disbursements stood at Rs 37,000 crore and it could go up to Rs 55,000 crore against the original disbursements target of Rs 45,000 crore for current financial year. We are looking at volumes and with larger volumes we will be able to marginally reduce the lending rates and still remain profitable in medium term.
As far as 2017-18 is concerned, we will be very ambitious and continue to expand and focus on rural and household electrification, discom modernisation.
How much hit REC has taken after the launch of UDAY?
In the UDAY
the total debt accumulated by all discoms is Rs 4.31 lakh crore of which Rs 3 lakh crore was to be taken over by states. REC's exposure is Rs 78,000 crore and we have got back Rs 31,137 crore. This was a pre-payment but we have foregone only the penalty. We are supposed to get another Rs 13,000 crore from Telangana and Tamil Nadu who came on board a month ago and we are expecting either in March or in April. When that money comes we have enough liabilities, debt servicing, enough projects to lend that would not affect our bottom line. UDAY
is an opportunity for REC
to invest in modernization. UDAY
repayment has not impacted our margins it remains at the healthy level of 4.5%.
Further, there is a general misconception that REC
is buying the discom bonds from the governments, we are not subscribing. We are not in the business of buying but in the business of selling, investing, lending. Whatever money which has received under UDAY
have since been profitably employed in the business operations of the company.