Reliance Power plans IPO to fire Sasan

Reliance Power (RPL), a wholly-owned subsidiary of Anil Ambani's Reliance Energy (REL), is planning to raise Rs 8,000-10,000 crore through an initial public offer. This will be the Anil Dhirubhai Ambani Group's first fund collection from the primary market since the demerger of the group in June 2005. This is expected to be the largest issue in recent times, after DLF and ICICI Bank. Sources close to the development said the company, which bagged the Sasan ultra mega power project, was expected to file the red herring prospectus with the market regulator, Sebi, within a week. "The company has begun discussions with nine merchant bankers for this issue. The list includes Kotak Mahindra Capital, JM Financial, J P Morgan, HSBC and Enam," a source said, adding that the company would appoint a separate banker to sell the issue in the overseas market. When contacted, an REL spokesperson said: "The company does not want to comment on market speculation." Sources said Reliance Power would utilise the fund to finance its existing projects as well as expansion. It bagged the 4,000 Mw Sasan project after its previous owner was disqualified on technical grounds. The issue of Reliance Power will enhance the valuation of REL, the holding company. The news of the possibility of a public issue of Reliance Power today pushed up the REL stock. The share price of REL rose 7.9 per cent to close at Rs 1, 205.50 on the BSE. The coal-based Sasan project is supposed to be completed in five years. It will require 15 million tonnes of coal annually. Sasan will supply power to seven States -- Madhya Pradesh, Uttar Pradesh, Delhi, Rajasthan, Haryana, Punjab and Uttarakhand. REL plans to add 15,000 MW capacity of power by 2012 with an investment of Rs 60,600 crore, Anil Ambani, chairman, REL had said at REL's annual general meeting (AGM) in July, this year.

REL is also executing coal based power projects like the 1200 MW project at Rosa in Uttar Pradesh, 2800 MW first phase of the Shahapur project and to expand its Dahanu Power plant by adding another 1200 MW.

Financial closure of these projects might not be an issue for REL since the company has cash reserves of about Rs 11,000 crore, sources had said.

REL had floated a special purpose vehicle Sasan Power to execute the project and it was merged with RPL, a five year old company which executed about 268 MW of powe