Power-related shares zoom on hopes of financial restructuring of discoms

Power-related shares have zoomed in today's trades on hopes that the government would soon announce financial restructuring of power distribution companies.

Though the scheme would specify some mandatory conditions on state governments, including annual revision of power tariff, conversion of loans to equity and ushering private participation in distribution, the Centre would do its bit by putting in place a transitional finance mechanism. This would be available to states in accordance with an accelerated reduction in aggregated technical and commercial losses.

It is estimated to see an outgo of Rs 1,500 crore annually for every one per cent loss reduction nationally.

The transitional finance from the Centre would provide liquidity support through a grant equal to the value of the additional energy saved through loss reduction.

To avail of the scheme, a state government will have to fulfill certain mandatory conditions such as payment of pending bills and notification of tariff order for 2012-13 prior to availing of the scheme. State governments are also required to permit fuel cost adjustment in tariff to adjust power procurement cost. The financial restructuring plans would have to be approved by state regulators.

Indiabulls Power, Reliance Infra, Kalpataru Power, Lanco Infratech, JSW Energy, KEC International, GVK Power, GMR Infra, BHEL, Reliance Power and L&T were up 3-9% each.