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Road Projects to Garner Rs 1000 Cr Income in FY13:REL Infra

  • Power sector has been one of the biggest underperformers in the market in last three years. Commenting on the sector, Lalit Jalan, CEO and whole time director at Reliance Infra says, "Land and fuel had been the key issues for power generating companies. On the distribution front, timely payments and default on the same by Stat Electricity Boards is hampering the overall industry."The road portfolio of the company comprises of 10 projects. "In FY13 all these 10 road projects will be revenue operational for the full year." he added. Reliance Infra is open to buy road assets which are under stress.

  • Q: What are the couple of things that the government and administration need to set right especially in the power sector to get things going?

  • A: I think the issues of land and fuel are primary from a generation stand point because without it, which generating plants cannot come up. On the payment side, the distribution utilities issues need to be addressed on a war footing which government had put a Shunglu committee and they have come out with very strong recommendations. There is the order by the appellate tribunal of electricity in November which forces all the regulators to give cost effective tariffs, going forward not to create regulatory assets to be able to remove regulators who do not perform and so on and so forth. So, we have to move away from politics in tariff setting to cost effective tariff so that consumers pay what is due from them and the generators get paid out.

  • Q: Power as a sector has not done very badly with 14% jump in the month of November itself. How long do you think the power sector can continue with this robust output before poor execution capabilities will catch up?

  • A: In the current year, we should not see a problem as robust growth of 14% was achieved from projects which were started 3-4 years back. Also projects which were started would face completion only once there is availability of fuel. If there are gas based projects which is fully ready to be operational but gas is not available will not give any output. The electricity growth for the current year would be healthy, but unless these existing problems are resolved the growth going forward will become a challenge.

  • Q: Almost a dozen of your road projects will be revenue generating by the end of FY13. So, could you give us an idea of what the revenues you are likely to end this year with and more importantly in FY13 when they come on stream?

  • A: This is our fifth road project which will become operational this year. This is a 90km road project in Tamil Nadu. It is a National Highway road which connects 2 of the major highway systems- the NH7 and the NH45 and as of midnight today, it has become revenue operational. Current year, we expect total revenue from our road business to be in the tune of Rs 350 crore and in FY13, the topline for road projects will be in excess of Rs 1000 crore. In FY13 all these 10 road projects will be revenue operational for the full year.

  • Q: There are a bunch of stressed road contractors looking to sell their BOT projects and the buzz in the market is that perhaps you are a ready buyer. Should we expect some inorganic moves you soon?

  • A: Inorganic expansion is a part of our strategy. There are ample of road assets which are under stress and we have received offers for various road projects across India. Our project teams are evaluating these projects and if we find these road projects to be in line with our strategy in terms of returns, we would definitely consider investing in those road projects.

  • Q: Any announcement is likely in this quarter itself?

  • A: I do not want to give any guidance on this. But we are actively considering options which are available to us. We are doubtful if something would happen in this quarter.

  • Q: Can you tell us how the EPC order book itself is looking like?

  • A: My EPC order book as of end of September was Rs 26,000 crore. This includes some external projects, certain projects of Reliance Infrastructure and projects of Reliance Power. So, this book is strong at Rs 26,000 crore. The total number of projects that we have in the BOT (Build Own Transfer), the ownership space is 25 projects totaling to Rs 40,000 crore. As more and more of these projects become operational, we still end up owning Rs 40,000 crore except that they will move from projects to operations.

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