Power utilities to raise funds as bond yields rise
Power utilities – from discoms to transmission companies – are scouting for resources in an otherwise cautious market weighed down by rising bond yields. Power Grid Corporation of India has decided to raise Rs 1,000 crore for 15 years from the bond market, while state-run distribution companies, or discoms, are borrowing funds from specialised financiers to meet the rising power cost, according to people in the investment banking circle.
Transmission major Power Grid will invite bids from investors on Thursday for the issue, which will carry a greenshoe option of Rs 300 crore. The bonds will have a staggered redemption at the end of fifth, 10th and 15th year, market players said.
In parallel, demand from discoms seems to have encouraged Rural Electrification Corporation and Power Finance Corporation to raise short-term resources last week despite hardening of yields. REC has, however, ruled out any immediate long-term fund-raising plan.
“The embargo on raising fresh funds from banks has been removed after about seven states agreed to adopt the financial restructuring package. Utilities from these states have again started to raise funds from the market to meet their working capital requirement. In fact, these states now have larger fund requirements because the cost of power has gone up and they require more funds to buy power,” said Ashok Khurana, director general, Association of Power Producers.