REL - public-private partnerships in power transmission

Anil Ambani promoted Reliance Energy Limited (REL) will soon execute the first public-private partnerships in power transmission sector in the country, the Western Region System Strengthening (WRSS-II) project in Maharashtra and Gujarat and the Parbati Koldam hydro-electric project in Himachal Pradesh. These projects were held up for almost two years due to differences on buyout provisions and transfer clauses between REL and the government.

The projects, worth Rs 3,000 crore, were awarded by the Power Grid Corporation of India (PGCIL) after a competitive bidding process. PGCIL is mandated to create a nationwide power distribution infrastructure.

During the negotiations, PGCIL's objection to take on the liability of buying out the private partner if the projects fall through during the construction or developmental stage, had caused a stalemate. REL has informed the power ministry about its willingness to execute the projects without any 'buyout commitments and transfer clauses', according to company sources.

As a follow up to the REL's move, the ministry of power has written to the public-private partnership appraisal committee, which is looking into the issue, to withdraw the matter. This will pave the way for REL to sign the letter of intent with PGCIL for the WRSS-II project and a shareholders agreement for floating a joint venture for Parbati Koldam. Both the agreements are likely to be signed in a few days.

PGCIL and Reliance Energy Transmission Limited (RETL), a subsidiary of REL, will float a special purpose joint venture called Parbati-Koldam Transmission Company, in which RETL will hold an equity stake of 74 per cent. REL will also float a special purpose vehicle (SPV) for WRSS-II, said sources.

When contacted, an REL spokesperson declined to comment on the developments.

PGCIL had selected REL as its partner in December 2005 for the 1,600 mw Parbati-Koldam project. The National Thermal Power Corporation (NTPC) and National Hydro-electric Power Corporation (NHPC) is setting up power plants of 800 mw each and the Parbati-Koldam Transmission company would transfer electricity through a 300 km line from Parbati Koldam to Ludhiana. The project is worth Rs 800 crore. REL will execute the WRSS-II on a Build Own and Operate (BOO) basis, contrary to the earlier understanding on Build Own Operate and Transfer (BOOT) basis, which was not acceptable to REL. The WRSS-II project was awarded to REL in January 2007, but the letter of intent was not signed due to differences between the two companies.

The Rs 2000-2500 crore system strengthening project covers a length of 1500 kms in Maharashtra, Gujarat and parts of Madhya Pradesh and will handle 4000 mw of power. It is scheduled to be commissioned by March 2010.