News in brief

Indian PSUs, the torch bearers for new capex cycle

PSUs in India have generated a record $9 bn in free cash flows during FY15. This has come at a time when their net income (PAT) growth has been at a 15-year low—implying that they too have started to focus on cash generation—and, more importantly, that for $9bn of net income, the operating cash flows are at $34 bn—implying that these businesses have been able to shrink their balance sheets by $25 bn and release cash for growth in the past year.
  • The deregulation of oil prices and the consequent release in working capital—particularly for companies in the oil & gas segment—would have driven cash flows for PSUs as a whole, but the rise in operating cash flows, even for companies outside this space, is pretty strong.
  • Central public sector units power utilities in India generally have a high level of operating cash across the years and, through good levels of cash, fund capex. However, Power Grid has cut down its cash requirement for consumables (becoming more efficient, or maybe it is just early days) and, as such, has generated much higher cash flow from operations.
  • Coal India – which supplies primarily to the state and central sector utilities, the receivables remained largely constant.
  • Improvement in the receivables situation for BHEL, where receivables improved by R23 bn during the year. This resulted in cash generated exceeding net income.

Sterlite Grid wins power project

The combined worth of all the transmission projects being offered in the current phase of bidding is about Rs 4,000 crore.

Anil Agarwal-promoted Sterlite Grid grabbed Maheswaram transmission project worth nearly Rs 400 crore under tariff-based competitive bidding, trumping state-owned Power Grid Corporation (PGCIL) and Kalpataru Power Transmission Limited among others.

Maheshwaram transmission project is the smallest of the four projects under bidding. The combined worth of all the projects being offered in the current phase of bidding is about R4,000 crore. State-run non-banking financial company Rural Electrification Corporation (REC) was the bid coordinator for the project. The results for the other three projects are expected to be announced next week by Power Finance Corporation (PFC).

The current tranche of transmission projects is among the R1 lakh crore worth of projects that the government has vowed to bid out this year alone. An industry insider said that the sector would likely see a big chunk of such projects going under the hammer in September.

JSW in talks to buy Monnet Ispat's Odisha power plant

JSW Energy has announced the signing of a non-binding agreement with Monnet Ispat for initiating due diligence for acquisition of majority stake in Monnet Ispat and Energy’s 1,050-Mw power plant in Odisha.

The plant is being developed by group subsidiary Monnet Power Company Ltd. The deal will help Monnet Ispat reduce its debt. Adani Group was also interested in acquiring stake in Monnet power plant, according to media reports.

“We have signed anMoU (memorandum of understanding) and we will carry out detailed due diligence. Any decision to purchase it or not will be taken after completion of the process. We expect it to be completed in 45-60 days. The power plant is under construction and will be completed in 18 months,” said Sanjay Sagar, chief executive of JSW Energy.

JSW’s energy capacity stands at 3,140 Mw. In September 2014, it had signed an MoU with Jaiprakash Power Ventures to acquire 1,891 Mw of power assets. The agreement covered three plants — the 300-Mw Baspa stage-II plant, the 1,091-Mw Karcham Wangtoo plant (both hydro power plants) and the 500-Mw Bina thermal power plant.

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