Reliance Power IPO - Crisil gives 4/5

Proposed public issue of 260 million equity shares of face value Rs 10 targeted at an issue size in the range of INR 10.5 to 11.5 billion

CRISIL has assigned a CRISIL IPO Grade '4/5' (pronounced 'four on five') to the proposed initial public offer of Reliance Power Ltd (RPower). This grade indicates that the fundamentals of the issue are above average, in relation to other listed equity securities in India.

The grading assigned reflects CRISIL's view that strong demand for power in India will catalyse regulatory facilitation for private participation in the power sector over the medium to long term. In this scenario, early movers like RPower will benefit from attractive business opportunities that are likely to come about as a result, especially if they achieve high levels of financial capability, as is likely for RPower after its proposed IPO. The grading also reflects the Reliance Anil Dhirubhai Ambani Group's commitment that RPower will be the sole repository of the Group's economic interest in the power generation segment. The grading is tempered by the fact that RPower is planning to put up capacity, on a scale and within a time frame, never achieved in India before and therefore it is likely to face significant implementation challenges. The grading also reflects the fact that power generators in India will have to depend on SEBs for off take over the short-to-medium term and that their return will be subject to the regulatory oversight in case of Two-part tariff based Projects such as Rosa I (600 MW) and Rosa II (300 MW). Also, returns on the projects won through the competitive bidding route may not be substantially higher due to competition.

About the company
Reliance Power Ltd. is a part of the Reliance ADA Group and has been established with the objective to develop, construct and operate power projects both domestically and internationally.

RPower does not have any power plant in operation as of now. The company proposes to install 28,200 Mega watt (MW) generation capacity over the next 8 years. Of the total proposed capacity, six projects totalling 7060-MW (Butibori, Shahapur coal, Sasan, Rosa-I &II and Urthing Sobla) are in various stages of implementation. Commercial operations of the first unit of proposed project, Rosa-I (2*300 MW), is expected by December 2009. All the six identified projects would be executed through wholly-owned subsidiaries of RPower, except Urthing Sobla and Butibori, where RPower would hold 80 percent stake and 74 percent stake, respectively.

Besides, the aforementioned identified projects which are in advanced stages of implementation, RPower also proposes to set up seven more generation projects, which are in developmental stage. These include the gas-fired Dadri (7,480 MW) and Shahapur gas project (2,800 MW); the coal-fired MP Power project (3,960 MW) and Krishnapatnam (4,000 MW); three run-of-the-river hydroelectric projects, Siyom (1,000 MW), Tato II (700 MW) and Kalai II (1,200 MW).