Gridco may issue Rs 700 cr bond to bridge revenue gap

The state-owned power trader Gridco has plans to raise funds by issuing bonds as a measure to check its swelling debt burden and to meet other expenses amid bankers’ refusal to lend it money.

Senior officials of Gridco are already in discussion with several rating agencies such as SME Rating Agency (SMERA) and Fitch, to fetch best possible rating for the bond, which may be issued for a period of seven year. The power trader intends to raise about Rs 700 crore through the bond, close to the amount of its anticipated revenue deficit in 2012-13.

“The bankers are reluctant to lend us money. Meanwhile, Gridco is unable to arrange required revenue to finance its expenses due to high power cost and huge unpaid bills pending against the power discoms (distributing companies). So we are opting for bond route to raise funds from the open market,” said a senior government official on condition of anonymity.

Many state-run banks have stopped giving fresh loans to cash-strapped power utilities after a Union finance ministry directive last year asking the public sector banks not to increase their exposure to power utilities, including distribution companies, unless they curb losses and raise power tariffs. In its projections for 2012-13, Gridco has pegged its earnings at Rs 6,250.06 crore, including the collection from four discoms, while its expenditure towards power procurement cost, loan repayment and other expenses is estimated at Rs 6,950.64 crore, leaving a yawning gap of Rs 700.58 crore.

The Odisha Electricity Regulatory Commission (OERC), while approving the annual revenue requirement plan of the power trader, has said that Gridco has to manage the deficit on its own.

Experts opined that Gridco may have to wait for some time to issue the bond, as prevailing interest rates could be costlier for the power supplier.

After the Reserve Bank of India (RBI) kept the key rates unchanged in its mid-quarter policy review in Monday , the benchmark 10-year bond yield rose 9 basis points to 8.43 percent, while the new 10-year bond yield rose about 7 basis points.

While no other state-run power trader is currently in race to issue bonds, the Union power ministry has proposed that discoms can issue bonds to power traders. In 2010, the RBI had permitted trading in power bonds, issued by various states to energy PSUs, maturing in 2014 and 2015.

These power bonds were issued by different states to PSUs in terms of the tripartite agreements among 27 states, the Union Power Ministry and RBI under one time settlement scheme for clearance of dues of electricity boards with effect from April 1, 2010.