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The Federation of Universities

Reliance Energy

On June 18, 2005, the Rs.1,000 billion Reliance Group began a new era, as Kokilaben Ambani,

wife of Late Dhirubhai Ambani (Dhirubhai) – the founder of Reliance Group – announced that the

dispute relating to the division of Rs. Reliance Group had been amicably settled. As per the

settlement, the elder son Mukesh Ambani would have the ‘responsibility’ for Reliance Industries

Limited (RIL) and Indian Petro Chemicals Corporation Limited (IPCL), while the younger son

Anil Ambani would lake charge of Reliance Energy, Reliance Infocomm, and Reliance Capital.

With this announcement, the long lasted dispute between the brothers Mukesh and Anil came to a

close. Anil Ambani in a press conference on June 18th also announced the name of his group as

‘Anil Dhirubhai Ambani Enterprises’ that would control the three companies and unveiled

Rs.800,000 million plan in power generation.

The Reliance Energy and its group has a consolidated revenue of Rs.95,000 million

(US 2.2 billion) and ranks among the top 20 private sector listed companies in terms of all major

financial parameters, such as assets, sales, profits and market capitalization. In December 2005,

the company started its new power projects of 560 mw capacity at Dhirubhai Ambani Energy City

(DAEC) at Dadri in Gaziabad district of Uttar Pradesh which would eventually boast as the

world’s largest combined cycle power project. During the year 2004-05, Reliance Energy received

several prestigious awards and recognition for its quality of operations, safety and environment

standards. The company has vision to become the most admired and most trusted integrated utility

companies in the world by providing quality products and services at competitive costs thereby

maximizing the value for all stakeholders.

Energy Sector in India

Government of India has shown consistent effort in trying to minimize the demand-supply gap in

energy by its efforts to expand electric power generation capacity. Although more than 80 percent of

the population in India has access to electricity, the electricity shortage as percent of requirement

continues to be in the range of 7 to 8 percent since 2001 (Refer Annexure I). As of December 2005,

the total installed Indian power generating capacity was 114,164 MW (Refer Annexure II).

Government’s vision of “Power for All by 2012” has targeted an increase in the generation

capacity to 212,000 MW by 2012. Apart from these, Government has also planned to increase the

inter-regional transmission capacity from 9,000 MW to 30,000 MW and reduce Aggregate Technical

and Commercial (AT&C) losses to 13% (43-53% currently). The government expects that by 2012,

peak energy shortage will be reduced to zero from current level of 11% and average energy shortage

to zero from current level of 7%.

Government initiative along with general economic growth since liberalization in 1990 had

attracted both private and foreign players in the market. The share of private players in energy

sector increased to 11% in 2005 which is targeted to 16.5% by 2012 under “Power for All by

2012” Plan. Foreign Direct Investment (FDI) in power sector is also allowed upto 100% under

automatic route. From January 2002 to May 2005, the FDI inflow in this sector amounted to

Rs.35,590.6 million.1

1 The Hindu Business Line Saturday, Aug 06, 2005.


Major Facts

During 1990 to 2001, policy liberalization in the sector encouraged national and multi-national companies to set-up their own project, formally called as Independent Power Producer (IPP) projects. Although a large number of private and foreign players entered post liberalization, various big projects got delayed or even failed either due to regulatory problems or due to inadequate funding. The financial condition of State Electricity Boards (SEBs) which were involved in power transmission and distribution was very poor. The reason behind poor financial were several. In India, electricity is provided at subsidised rate in most of the states and mainly to agricultural sector. Further the transmission loss in India is very high due to poor infrastructure of distribution facilities. Further theft of electricity cannot be ignored, which is one of the crucial problems. All the above reasons led to increase in the electricity cost mainly of the independent power producer or power distribution agency mainly SEBs.

After 2002, the power generation capacity in India increased mainly due to investment by

domestic players or International financial Institution like Asian Development Bank (ADB).

Exhibit 1: Reforms: Major Milestones

Year Milestone

1991 IPP Process

1996 Orissa Reform Act

1998 Central Electricity Regulatory Commissions Act

1999 RCs in Many States, Distribution Privatization in Orissa

2003 Electricity Act

2005 National Electricity Policy 2005.

Source: ICFAI Research Center.

In 2003, the central government passed ‘The Electricity Bill 2003’ with the objective of reducing the transmission and distribution costs and to encourage private players in transmission and distribution and also allow setting up of captive power plants without any restriction. Under the new policy there was no compulsion on Independent Power Producers (IPPs) to enter into power purchase agreements, which was earlier mandatory. This improved the participation of private players in the market.

In February 2005, the government announced a new National Electricity Policy, 2005, aiming to meet peak energy shortages in particular and energy shortages in general, completely by 2012, besides improving the quality and reliability of power.

Further, in July 2005, India and USA signed an agreement in which USA would cooperate in the field of nuclear power generation in India. If the proposed agreement is ratified in the US senate, it could encourage nuclear power generation in India in the near future.

Apart from policy reforms, economic development had also boosted the power sector. However, the major problem that still continues for most of the power players is the shortage in fuel availability. Shortage of fuel availability had affected various projects implementation period and various projects got delayed in recent past.

Project Financing

High liquidity in the economy and willingness of banks and financial institutions to finance

feasible projects are some of the positive developments in the power sector. After the power sector

reforms were initiated in 2003, financing process for a power project had been liberalized to

certain extent. Lenders such as banks and financial institutions liberalized the various norms in

project financing. The escrow account facility2 also helped the power producer to reduce defaults.

However on escrow account, the central and state government has stopped giving guarantee. This

facility continued to be a sense of safety for loan providers.

2 Under escrow facility SEB has to open an escrow account which can be used by IPP in case of default.


Normally power project is financed by 70% of equity and 30% of debt. After clearing bank loans,

power producers, could start the project by contributing some portion of equity. The boost in

capital market and increased number of private equity financiers is a positive sign in this area.

Global Energy Sector

The global demand for electricity in the year 2002 was 21,400 billion kilowatt-hours, whereas

consumption of electricity for the same year was 14,275 billion kilowatt-hours. According to the

International Energy Outlook 2005 (IEO 2005) the demand is projected to grow at 2.6 percent in

the next two decades and during the projected period (2002 to 2015), it is expected that

consumption will nearly double to the consumption in 2002 (Refer Annexure III). The report

reveals that more than 50 percent (59%) of the projected demand is expected to arise from

emerging economy.

To meet the growing demand for electricity extensive expansion of installed generating

capacity is required. As per the Energy Information Administration (EIA) it is expected that

the world capacity of electricity will grow annually at the rate of 2.2 percent over the period

2002-2025 (Refer Annexure IV).

Reliance Energy

COMPANY BACKGROUND

The company was incorporated in 1929 as ‘Bombay Suburban Electric Supply Limited’ with an

objective to fulfill the demand for electricity in the suburbs of Mumbai. In 1992, the company

diversified its business and changed its name to “BSES Limited”. In 1993, the Company installed

a 220 KV transmission line between the power station at Dahanu and receiving station at Versova.

In the same year, it issued 288,51,760 – 15% fully convertible debentures of Rs.60 each on Rights

basis and 252,69,900 – 15% fully convertible debentures of Rs.70 each.

In order to avail enormous opportunities in the power sector in construction, erection and other

project management activities, it entered into an MOU with National Thermal Power Corporation

Ltd. (NTPC) in 1994. It also diversified its business into telecommunication and incorporated

BSES Telecom Ltd. as a subsidiary company.

During 1995, the company incorporated another subsidiary company ‘BSES Infrastructure

Finance Ltd.,’ to meet its financial needs. Later, it successfully co-promoted Jeedimetla Power

Co. Ltd., jointly with local power consuming companies to set-up a 40 MW power plant at

Hyderabad and also initiated awarded two naphtha based short gestation projects of 40 MW

each to Kerala.

In 1996, it incorporated BSES Kerala Power Pvt. Ltd., as a subsidiary company to establish a

naphtha/gas based combined cycle power station with an installed capacity of footnote of GDR 495

MW at Palghat. In the same year, it issued Global Depository Receipts (GDR) aggregating to US

$125 million. By the year 1997, it became the largest private sector power generator with a turnover

of Rs.15,720 million.

In its 1999, the company entered into a joint venture with National Grid, a UK-based power

transmission for Orissa distribution venture and other distribution ventures. It also formed a joint

venture with the AP state government for setting up a 200 MW power plant at Samalkot.

In the year 2000, Reliance Industries acquired 26.6% stake in the company and in 2003, the

company became a part of the Reliance Group, with Mr. Anil D Ambani, Vice Chairman and

Managing Director of Reliance Industries Ltd., unanimously being appointed by the Board as

Chairman of BSES. Soon after, the company changed its name to “Reliance Energy”. Reliance

Industries Ltd., has 45 percent stake in REL, other persons acting in concert have nearly 6 percent,

Banks, FIs and Insurance companies have around 16 percent stake and FIIs have 6 percent. Mr.

Anil Ambani is the chairman and managing director of the organization.


In the Year 2005, the company had 16 associates (refer Annexure V) and emerged as the country’s

leading integrated power company with total installed capacity, of 892.59 MW and has a wide

network of distribution and generation of power in Maharastra, Andhra Pardesh, Goa, Karnataka

and Kerala. The power generation plant of the company is located at Dahanu near Mumbai, Kochi,

Kerala, Samalkot in Andhra Pradesh and Jogimatti in the district of Chitradurga in Karnataka with

consumption base of more than 250 million consumers nationwide.

Demerger of Reliance Group

After the demise of Dhirubhai Amabani, the founder of Reliance group, Reliance Industries Ltd.,

was in the center of a controversy due to ownership tussle between the two brothers, Anil and

Mukesh Ambani. The difference in the views of the two brothers stemmed mainly out of two

accounts, first, indirect control of Mukesh Ambani on Reliance Industries Ltd., through a

consortium of investment companies, which control, 34% of the equity in RIL, and second, larger

share of equity capital of Reliance Infocomm were in the name of Mukesh Ambani though its

investment was funded mostly by Reliance Industries Limited (RIL). RIL Investment in Reliance

Infocomm was through three routes – convertible preference shares, direct investment in equity

and indirect investment through Reliance Communication Infrastructure Ltd. (RCIL). Total equity

stake of RIL in Infocomm was 37%, whereas Mukesh Ambani and its associates had invested only

Rs.24,000 million but their stake in Infocomm was 67 directly (27% directly and 36% indirectly

through RCIL). Anil Ambani was not happy with such investment; he also complained that RIL’s

board was not properly informed about the magnitude of investment and return. In short the

companies involved in the entire deal was Reliance Industries, Reliance Infocomm and Reliance

Communications Infrastructure Ltd.

In the mean time, Mukesh also announced that the supply date of gas to Reliance Energy, is being

postponed to 2008, as against the committed period of 2006; this statement worsened the situation

and eventually on November 19, 2004 Mukesh Ambani came out with a statement in public

confirming differences with his brother, Anil Ambani.

Corporate Governance

Although the whole dispute was between two brothers, it affected other stakeholders too, which

raised the corporate governance issue in Reliance industries. The pattern of shareholdings and

crossholdings among members of the Ambani family, various investment companies and

subsidiaries of the group were at the center of attention for 53% shareholders comprising public,

financial institutions, foreign investors, etc. Various analysts felt at that time that Reliance

industries should clarify the entire issue (specially the reason for huge investment in Reliance

Infocomm) to its shareholders.

Finally on 6th June 2005, Kokilaben announced the division of Reliance group. The new group

was named as Reliance-Anil Dhirubhai Ambani Group (Reliance-ADAG) of companies. The

four new companies which came under the group were Reliance Communication Ventures,

Reliance Energy Ventures, Reliance Capital Ventures and Reliance Natural Resources (earlier

known as Global Fuel Management). Reliance Capital Ventures holds around 29 percent in

Reliance Capital and Reliance Energy Ventures would hold around 45 percent of Reliance

Energy. The existing shareholders of four companies received shares in four new companies as

given in exhibit 2.

Exhibit 2: Swap Ratio

Name of Company No. of Shares for Every 100 shares of RIL Held

Reliance Communication Ventures 100

Reliance Energy Ventures 7.5

Reliance Capital Ventures 5.0

Reliance Natural Resources 100

Source: www.rel.com


Mukesh Ambani, on 8th February 2006, informed the stock exchanges also that it has handed over

the control of the four demerged companies Reliance Energy Ventures Ltd, Reliance Capital

Ventures, Reliance Natural Resources and Reliance Communication Ventures Ltd., to Anil

Dhirubhai Ambani Group. The four companies were listed on the stock exchange on different

dates in February and March (Reliance Capital Ventures – February 13; Reliance Energy Ventures

– February 20; Reliance Natural Resources Ltd., – February 27; and Reliance Communication

Ventures – March 6).

Amalgamation

In a press release dated January 3rd 2006, the company announced the amalgamation of the

Reliance Energy Ventures Limited (REVL) with the Company. Reliance Energy Ventures Limited

was originally incorporated on July 3, 2000, as Reliance Terra Networks Private Limited under the

Companies Act, 1956. On July 25, 2005 the company changed its status from private limited to

public limited after the Ambani family settlement in June ’05. After the settlement, RIL transferred

its 44% holding in Reliance Energy to Reliance Energy Ventures. As it did not make business sense

for REVL as an operating company, the Anil Ambani group merged to consolidate their operations.

According to proposed amalgamation scheme, shareholders of Reliance Energy Ventures Limited

(after the allotment of shares pursuant to the demerger of RIL) will receive (seven and half) equity

shares of the face value of Rs.10 each of the Company, for every 100 (one hundred) equity shares

of the face value of Rs.10 each. After the amalgamation, shares of Reliance Industry Limited held

by REVL will be canceled. Excluding the impact on conversion of Foreign Currency Convertible

Bonds issued by the Company, the fully diluted equity capital of REL will remain at

approximately Rs.2,280 million.

Product and Services

The company has four business segments – Generation, Transmission, Distribution and EPC

Division (Engineering, Procurement and Construction Division).

In the FY 2004-05, the generation division of the company had a capacity of about 940 MW which

came from five projects namely Dahanu TPS, 7.59 MW Wind Farm Project, BSES Kerala Ltd,

BSES Andhra Power Ltd., and Goa Power Station. The company has 779 transmission towers.

The transformation department of the company is responsible for the transmission of power from

Dahanu to Mumbai. The department was operating through a 2×220 KV transmission system,

which is highly modernized. It has also planned, constructed and commissioned two modern 200

KV receiving stations having a capacity of 300 MVA each at Ghodbunder, and Versova. It has

also commissioned a 400 MVA station at Aarey for receiving power from the Dahanu plant.

Distribution

Distribution factor is the key to efficient and reliable power supply. Generation division of the

company has seven years of experience in designing, engineering, erection, installation and

commissioning of power projects based on coal, lignite, combined cycle liquid, gas, wind as well

as in co-generation projects. The company has achieved higher level of efficiency in power

distribution which had reduced distribution losses to 13.4%, lowest in the country. Some of its

prestigious works includes 210 MW Gas Based Combined Cycle Power Plant for BSES Andhra

Power Limited at Samalkot, 24 MW Bagasse fired Power Plant of Godavari Sugar Mills in North

Karnataka and the 20MW project of Suryachakra Power Corporation Limited at Andaman. The

company has also been working with Nuclear Power Corporation of India for development of

electrical system.


EPC Division

The Engineering, Procurement and Construction division (EPC) of the company undertakes

mainly turnkey projects for setting up power related projects. Some of the turnkey projects are the

contract of Rs.2,020 million from Nuclear Power Corporation of India for electrical system

package on turnkey basis for units 3 and 4 at Kaiga (Karnataka) and units 5 and 6 at RAPP in

Rajasthan. It has also booked an order worth Rs.3,230 million for Design, Supply, Erection

Testing and Commissioning of the balance of plant for the 2 × 210 MW expansion of units 3 and 4

at Parichha for Uttar Pradesh.

Expansion Plans

The company has signed an MOU with the government of Maharashtra to set-up a 4,000 MW gas

based cycle power plant in Maharashtra. The project will be exempted from stamp duty and

registration charge. The government has also offered a waiver on octroi on the machinery required

for the project.

The company has proposed to develop 5600MW combined cycle power plant near the Dhirubhai

Ambani Energy City (DAEC) at Dadri in Gaziabad district of Uttar Pradesh. The company has

already acquired the required land and statutory clearances including environmental clearance

from the Ministry of Environment and Forests. The objective of the proposed project is to

address the demand supply gap in the northern region state like Uttar Pradesh, Delhi, Haryana,

Punjab and Rajasthan. The major source of finance for the Dadri project is proposed Special

Purpose Vehicle (SPV). For the Dadri project also government has offered concession benefits

like zero import duty on project imports, a 10-year tax holiday moreover concessional sales tax

and entry tax, and land concessions. This project would drastically improve Company’s earrings

in the coming years.

The company is also planning a Group Captive Power Plant (GCPP) at the Butibori and another at

Patalganga (New Mumbai) industrial areas. The gas-based 175 mw plant at Patalganga will cost

Rs.5,500 million while coal-based 130 mw GCPP that will be set-up at Butibori will have an

investment of Rs.5,850 million. The company has already signed an MOU with Maryland/Israel

Development Center (MIDC) and the latter has also reserved 150 acres of land at Butibori for the

plant while 61 acres have been kept aside at Patalganga for the proposed projects.

Capital Structure

Reliance Energy has a unique blend of capital issue. The company raised capital through various

instruments like Equity, Debenture, Preference Share and Private Placement. The company has

also raised capital in foreign market through issuing Global Depository Receipts (GDRs) and

Foreign Currency Convertible Bonds (FCCBs).

The Company has also accepted fixed deposits from public, but it was discontinued since

December 1998. The ratio of internal and external source of finance has decreased significantly

after 2000, due to huge expansion of the business. The percentage of internal source of finance

(retained earning and depreciation) in 2005 was only 12.63 as against 25.49 in 2003 and 18.47% in

2004. The debt equity ratio of the company was 0.67 as against 0.47 in 2004 and 0.25 in 2003.

In 2002, the company had issued US $120 million 0.5 percent Foreign Currency Convertible Bonds

(FCCBs) due on September 25, 2007. The FCCBs are listed on the Luxembourg Stock Exchange. As

per the issue offering each Bondholder has a right to convert the Bonds at any time after December

25, 2002 into GDRs. Each GDR represented 3 equity shares of a nominal value of Rs.10 each in the

Company.

The company has successfully converted all FCCB by 2005. The group’s holding earlier had come

to 49.5 percent from a peak of 58.2 percent after the full conversion of $120 million (Rs.580 crore)

FCCBs. Reliance Energy shares are traded at Rs.626 as on 19th December 2005.


Exhibit 3: Summary of Outstanding FCCBs

FCCBs (US $)

GDRs Underlying Number of

Shares

Total Issued 120,000,000 78,93,877 2,36,81,633

Less: Converted into GDRs on July 28, 2003 250,000 16,445 49,336

Less: Converted into GDRs on October 07, 2003 250,000 16,445 49,336

Less: Converted into GDRs on November 07, 2003 7,60,10,000 5,000,113 1,50,00,339

Less: Converted into GDRs on February 02, 2004 2,58,42,995 1,700,012 51,00,036

Less: Converted into GDRs on April 26, 2004 50,62,200 333,003 9,99,009

Less: Converted into GDRs on July 07, 2004 10,00,000 65,782 1,97,346

Less: Converted into GDR on August 19, 2005 1,15,84,805 762,077 22,86,230

Source: www.Rel.co.in

After 2002, the major amount of resources were raised in 2004. The company issued and allotted

in March, 2004, 1,72,30,000 equity shares of Rs.10 each at a premium of Rs.630 each, aggregating

Rs.11,027.2 million to institutional investors and a promoter group company, viz. Reliance Power

Ventures Limited (RPVL) on a preferential basis. The Company further issued and allotted

91,95,622 equity shares of Rs.10 each at a premium of Rs.630 each, aggregating Rs.5,885.2

million on 2nd April, 2004, to RPVL. The company also allotted 98,61,228 warrants of Rs.640

each to RPVL on 2nd April, 2004, on a preferential basis. The holder of warrants will be entitled

to apply for and be allotted one equity share of Rs.10 each at a price of Rs.640 (including premium

of Rs.630) against each warrant anytime after the date of allotment but on or before the expiry of

18 months from the date of allotment.

In addition, to the above, the company also issued Zero percent convertible Bonds aggregating

US$178,058,000 and 4 series of secured Non-Convertible Debentures (NCDs) aggregating

Rs.6,250 million during the year. The Zero coupon bond Bonds will mature on 24th March, 2009.

Bondholders have a right to convert their Bonds at anytime after 23rd April, 2004 into Equity

Shares or Global Depositary Receipts (GDRs), each representing 3 equity shares of Rs.10 each in

the Company at a price of Rs.1,006.92 per Equity Share. In the event of conversion of the entire

Bonds, it will result in the issue and allotment of 79,99,984 Equity Shares.

In the financial year 2004-05, the company was enjoying ‘AAA’ credit rating from CRISIL for

long-term debt. FITCH Ratings India has also awarded ‘Ind AAA’ debt rating for the Company,

indicating the highest credit quality. The average interest cost of the company was 3.4 percent

maturity whereas the average maturity of the Company’s long-term debt was about 5 years.

Financing

Buy-Back of Equity Share

Reliance Energy made an offer for buy-back of equity shares as on 9th June 2004, at an offer price

of Rs.350 aggregating Rs.3,500 million. Initially, the Buy-back offer was valid for a period of 90

days upto 17th September, 2004. But the Company has not bought any shares under the offer and

offer date extended till 8th June 2005. Again after June, the company had extended the buy-back

program of its equity shares upto March 17, 2005, but till February 2006 the company has not

bought any shares.


Project Finance

The company had used various alternatives to finance new projects. The company in 2004-05 was

enjoying opportunities to set-up gas, coal, wind and hydro based power generation projects. For

development of 3,740 MW Project at Dhirubhai Ambani Energy City, the company had created a

Special Purpose Vehicle (SPV) Reliance Energy Generation Limited to develop, construct and

operate a 3,740 MW gas based power generation plant.

Financials

The company posted a 30.12 percent rise in net profit of Rs.1,646.4 million for the quarter ended

December 30, 2005 as compared to Rs.1,345.2 million for the corresponding quarter in the

previous fiscal. However the total Income has increased marginally, the income from sales of

electricity has shown a growth of 10%. The income from EPC and Contracts came down to

1,730.07 million from 1907.4 million in 2004 (Refer annexure).

Though the company required huge resources for various projects, it has distributed regular

income to its shareholders in terms of dividends. Reliance Energy has practised to pay dividends

on quarterly basis. During the financial year 2004-2005, the company has paid Quarterly

Dividends of Rs.1.10 (11%) each on Equity Shares for the quarters ended 30th June, 30th

September and 31st December, 2004. In addition to three quarterly dividends aggregating Rs.3.30

per Equity Share paid during the year 2004-05, the Directors recommend a final dividend of

Rs.1.40 (14%) per Equity Share making a total dividend of Rs.4.70 (4.7%) per Equity Share.

Dividend for last five years is summarized below.

Exhibit 4: Dividend History

Valuation

At the market price of the company is valued X multiple. Reliance had found gas in

KG-D6 block in Krishna Godavari basin which constitutes 60% of India’s present total gas

production. For Reliance Energy, it will provide great prospect to scale up power generation

capacities in India. Company had also diversified its power business into wind and hydro-based

power generation projects. Amalgamation of the company with Reliance Energy Ventures

Limited will increase the shareholder base of the company.

Source:


ANNEXURE I

Electricity Demand Supply

Indicator Units Annual Dec-01

Annual Dec-02

Annual Dec-03

Annual Dec-04

Annual Dec-05

Electricity requirement Million kwh 507216 522537 545674 559264 591373

Electricity availability Million kwh 467400 483350 497589 519398 548115

Electricity shortages Million kwh 39816 39187 48085 39866 43258

Electricity shortages as per cent of requirement Percent 7.85 7.5 8.81 7.13 7.31

Source:


ANNEXURE II

Electricity Generation and Utility

Indicator Units Annual Dec-01

Annual Dec-02

Annual Dec-03

Annual Dec-04

Annual Dec-05

Elec. generating capacity of utilities Mw 101626.00 105046.00 107877.00 112683.00 114164.00

Thermal elec. generating capacity of utilities Mw 73613.00 75936.00 78391.00 80457.00 80626.00

Hydro elec. generating capacity of utilities Mw 25153.00 26261.00 26767.00 29507.00 30818.00

Nuclear elec. generating capacity of utilities Mw 2860.00 2720.00 2720.00 2720.00 2720.00

Elec. generation by utilities Million kwh 501204.07 517439.24 532692.96 565101.69 587416.07

Thermal elec. generation by utilities Million kwh 409939.66 421032.00 449289.28 472079.21 486075.48

Hydro elec. generation by utilities Million kwh 74361.92 73125.00 64013.71 75242.48 84495.3

Nuclear elec. generation by utilities Million kwh 16902.49 18909.00 19390.00 17780.00 16845.29

Source:


ANNEXURE III

World Electricity Consumption (2002-05)

Sources: 2002: Energy Information Administration (EIA), International Energy Annual 2002,

DOE/EIA-0219 (2002) (Washington, DC, March 2004), website: www.ela.dce.gov/iea/.

Projections: EIA, System for the Analysis of Global Energy Markets (2005).


ANNEXURE IV

World Electricity Generation Capacity by Region (2002-05)

Sources: 2002: Energy Information Administration (EIA), International Energy Annual 2002,

DOE/EIA-0219 (2002) (Washington, DC, March 2004), website: www.ela.dce.gov/iea/.

Projections: EIA, System for the Analysis of Global Energy Markets (2005).


ANNEXURE V

There are 16 associates of REL, some of them being BSES Kerala Power Ltd., BSES Rajdhani

Power Ltd., BSES Yamuna Power Ltd., Reliance Energy Trading Ltd., Reliance Energy

Transmission Ltd., Reliance Energy Global Pvt. Ltd., Reliance Energy Investment Private Ltd.,

Reliance Energy Generation Ltd., Tamil Nadu Energy Generation Ltd., Tamil Nadu Industries

Captive Power Company Ltd., etc.


ANNEXURE VI

Sources and Uses of Funds Reliance Energy Ltd. Rs. Million (Non-Annualized)

Mar 2000 12 mths

Mar 2001 12 mths

Mar 2002 12 mths

Mar 2003 12 mths

Mar 2004 12 mths

Mar 2005 12 mths

Sources of funds

Internal sources 3929.7 4709.8 3740.4 1576 7032.7 4975.9

Retained profits 2399.4 2315.8 1638.6 –971.4 2068.2 465.4

Depreciation 1530.3 2394 2101.8 2547.4 4964.5 4510.5

External sources 1211.1 –6625.2 –3348.5 3038.4 30582.4 34378.9

Fresh capital (excl. bonus issue) –90.9 –231.8 –621.9 –213.9 15883.7 11863

Share premium reserves 8.1 8.2 8.1 –213.9 15509.4 6079.4

Borrowings –1347.9 –927.5 –338.7 –141.9 14021.9 17122.1

Bank borrowings 887.2 –787.2 1125 –1203.8 –7.1 1235.9

Short-term bank borrowings 887.2 –787.2 1125 –1203.8 –7.1 1235.9

Financial institutional borrowings 6453.3 –6264.4 3761.8 –4380.7 0 0

Debentures/bonds 0 0 1000 5298.2 9402.5 –291.6

Fixed deposits –86.6 –101.4 0 0 0 0

Borrowings from corporate bodies 0 0 0 0 0 0

Group/associate cos. 0 0 0 0 0 0

Other borrowings –8601.8 6225.5 –6225.5 144.4 4626.5 16177.8

Current liabilities & provisions 2649.9 –5465.9 –2387.9 3394.2 676.8 5393.8

Sundry creditors –527.5 2322.6 –2578.7 –360.5 1725.9 2265.5

Deferred tax liabilities 0 0 830.9 1569.6 454.7 31.7

Uses of funds

Gross fixed assets 1870.5 2119.1 811.5 1192.3 10218.7 2701.5

Capital WIP 142.4 28.3 –258.4 –287.4 288.6 1084

Investments 2016.5 100.2 738.8 4190.2 18447 –21085.1

In group/associate cos. 1674.6 340.2 844.1 5101.1 1560.6 –3999.2

Currrent assets 1253.8 –4134.7 –424 318.2 9537.4 57939.2

Inventories 467.1 –7479.6 15.6 98.7 –664.3 2403.8

Debtors 1345 1911.4 –223.4 –2767.6 –1081 4648.6

Cash & bank balance –940.4 84.8 –1476.6 –782.6 8087.8 51851.9

Advances/loans to corporate bodies –449.7 –224.8 –148 1801.1 1110 1447.3

Group/associate cos. 52.2 82.5 –148 0 2038.7 –1803.2

Other receivables 831.8 1573.5 1408.4 1968.6 2084.9 –2412.4

Deferred tax assets 0 0 96.5 483.3 –133.3 –169.1

Total sources/uses of funds 5140.8 –1915.4 1222.8 6184 38069.8 39386.5

Source:


ANNEXURE VII

Profit and Loss Account: Summary

Reliance Energy Ltd. Rs. Million (Non-Annualized)

Mar 2000 12 mths

Mar 2001 12 mths

Mar 2002 12 mths

Mar 2003 12 mths

Mar 2004 12 mths

Mar 2005 12 mths

Income

Sales 22309.3 22973.5 26750.5 37448.8 35165.7 41607.2

Other income 712.5 660 1003.1 731 1200.9 3802.2

Change in stocks 1148.1 4065.5 –1.2 –10732.5 –938.9 –85.5

Non-recurring income 166.9 108.1 459.6 485.3 863.7 712.5

Expenditure

Raw materials, stores, etc. 14643.7 18509.1 14139.3 15648.5 17139 17587.2

Wages & salaries 773.2 952.4 868 763 1656.8 2016.8

Energy (power & fuel) 0 0 0 0 0 0

Indirect taxes (excise, etc.) 84.1 249.1 567.1 542 598.2 1127.8

Advertising & marketing expenses 23.9 24.4 25.5 33.2 91.6 98.4

Distribution expenses 0 0 0 0 0 0

Others 2026 1909.7 5367.9 5397.4 7727.9 13933.6

Less: expenses capitalized 0 0 0 0 0 0

Non-recurring expenses 82 398.4 965.4 795.1 945.9 760.2

Profits/losses

PBDIT 6703.9 5764 6278.8 4753.4 8132 10512.4

Financial charges (incl. lease rent) 942.3 553.5 657.4 763.5 699.3 1348.2

PBDT 5761.6 5210.5 5621.4 3989.9 7432.7 9164.2

Depreciation 1833 1965 2249.7 2598.4 4546.1 4794.5

PBT 3928.6 3245.5 3371.7 1391.5 2886.6 4369.7

Tax provision 900.3 290.4 320.5 172.8 502.8 495

PAT 3028.3 2955.1 3051.2 1218.7 2383.8 3874.7

Appropriation of profits

Dividends 681 685.7 610.6 683.6 795.2 991

Retained earnings 2347.3 2269.4 2440.6 535.1 1588.6 2883.7

Source:


ANNEXURE VIII

Cash Flow: Manufacturing Companies


Mar 2000 12 mths

Mar 2001 12 mths

Mar 2002 12 mths

Mar 2003 12 mths

Mar 2004 12 mths

Mar 2005 12 mths

Net profit before tax & extra ord. items 3968.5 3504.1 3018.3 1526.4 4173.6 5696.4

Add: depreciation 1834.7 1968.1 2250.5 2598.1 3187.2 3464.4

Interest payable 942.4 553.5 657.4 763.5 699.3 1348.2

Gain or loss on forex transactions 0 0 –315.7 –73.8 –18 –278.8

Write offs/amortization 8.1 246.4 8.1 8.1 6.7 0

Profit on sale of investments –27.2 –21.7 –84.4 –51.5 –164.4 –624

Profit on sale of assets 9.8 0 7.9 9.9 44.8 49.4

Interest income 0 0 -88.2 -73.6 -646.6 -2775

Dividend income –581.6 –472.1 –440 –453.9 0 0

Other income/provision adjustments 378.4 0.7 984.6 729.6 1004.3 1286.8

Cash flow before working cap. Changes 6533.1 5779 5998.5 4982.8 8286.9 8167.4

Trade receivables –871 –3012.3 –1599.2 –294.5 –118.3 –5231.3

Inventories 1314.6 9 –22.3 997.4 –210.9 –2489.2

Trade payables –351.5 1292.5 –1592.6 1222.6 –869.2 4336.8

Others 0 0 0 0 0 0

Cash flow from operations 6625.2 4068.2 2784.4 6908.3 7088.5 4783.7

Direct taxes paid –1043.7 –288.8 0 –122 –100.2 –85.8

Dividend tax paid 0 0 0 0 0 0

Cash flow before extra ord. items 5581.5 3779.4 2784.4 6786.3 6988.3 4697.9

Extraordinary items –40 –258.7 356.7 0 –76.2 –489

Cash flow from operating activities 5541.5 3520.7 3141.1 6786.3 6912.1 4208.9

Net cash used in investing activities –3608.9 –1135.2 –2315.2 –5538.7 –24374.1 19856.8

Purchase of fixed assets –2326.8 –1503.4 –1426.3 –934.5 –1617.5 –3051.3

Sale of fixed assets 3.1 6.9 14.7 4.3 46.4 16.5

Acquisition/merger of cos. 0 0 0 0 –2541.7 0

Purchase of investments –2773.1 –890.9 –1264.9 –9586.2 –21510.1 –1272.5

Sale of investments 733.8 808.5 570.7 5269.4 2212.6 23430

Project expenses 0 0 0 0 0 0

Loan to group/subsidiary cos. 0 0 0 0 0 0

Loan to other cos. 101.2 –74.6 –690.3 –735.8 –1575.5 –1896.6

Interest received 0 0 0 0 611.7 2630.7

Dividend received 652.9 518.3 480.9 444.1 0 0

Other investing activities 0 0 0 0 0 0

Net cash used in financing activities –2873 –2300.7 –2302.5 –2030.2 25519.7 27786.4

Proceeds from share issues –100 –240 –630 0 11027.2 11566.1

Proceeds from long-term borrowings 789 0 1042.6 5792.2 18937.2 17663.2

Proceeds from short-term borrowings 13.7 644.9 5592.9 21.3 74.9 129.4

Repayment of long-term borrowings –1659.5 –505.5 –2018.8 –6299.2 –2770.7 –14.2

Repayment of short-term borrowings –340.4 –1005.8 –4968 0 0 0

Share issue expenses 0 0 0 0 0 0

Interest paid –941 –576.4 –685.7 –950.8 –622.5 –1034.7

Dividend paid –634.8 –628.5 –635.5 –589.1 –1162.7 –1001.3

Other financing activities 0 10.6 0 –4.6 36.3 477.9

Net cash flow –940.4 84.8 –1476.6 –782.6 8057.7 51852.1

Opening cash balance 3628.6 2688.2 2773 1296.4 543.9 8601.6

Closing cash balance 2688.2 2773 1296.4 513.8 8601.6 60453.7


ANNEXURE IX

Ratio Analysis

Executive summary: mfg. cos.

Reliance Energy Ltd. Mar 2000 12 mths

Mar 2001 12 mths

Mar 2002 12 mths

Mar 2003 12 mths

Mar 2004 12 mths

Mar 2005 12 mths

Margins ratios (%)

PBDIT (NNRT) / sales 29.67 26.35 25.36 13.52 23.36 25.38

PBDT (NNRT) / sales 25.45 23.94 22.9 11.48 21.37 22.14

PAT (NNRT) / sales 13.19 14.13 13.3 4.08 7.01 9.43

PBDIT (NNRT) / net sales 29.78 26.64 25.91 13.72 23.76 26.09

PBDT (NNRT) / net sales 25.54 24.21 23.4 11.65 21.74 22.76

PAT (NNRT) / net sales 13.24 14.28 13.58 4.14 7.13 9.69

Returns ratios (%)

PAT (NNRT) / net worth 13.07 13.13 13.54 5.84 7.13 8.37

PAT (NNRT) / total assets 6.41 7.23 8.32 3.43 3.9 4.03

PBIT (NNRT) / capital employed 15.63 13.03 14.11 7.68 7.64 8

PAT (NNRT) / capital employed 9.61 10.34 11.07 4.76 5.13 5.45

Liquidity ratios (times)

Long-term debt / equity 0.295 0.246 0.201 0.252 0.47 0.595

Total debt / equity 0.332 0.27 0.247 0.253 0.47 0.749

Current ratio 1.282 1.526 1.743 1.335 1.866 2.827

Interest cover 5.08 7.39 6.9 3.23 5.25 4.28

Gross working capital cycle (days) 346 269 213 151 100 166

Net working capital cycle (days) 256 166 129 112 50 105

Avg. days of debtors 100 123 117 69 53 61

Avg. days of creditors 90 103 83 38 49 61

Asset utilization ratios (times)

VOP/ total assets 0.51 0.6 0.61 0.59 0.53 0.41

VOP/GFA 0.86 0.92 0.85 0.82 0.89 0.93

Source:


ANNEXURE X

Foreign Exchange Transactions: Manufacturing Companies

Foreign exchange transactions: mfg. cos.


Mar 2000 12 mths

Mar 2001 12 mths

Mar 2002 12 mths

Mar 2003 12 mths

Mar 2004 12 mths

Mar 2005 12 mths

Foreign exchange earnings 1455.1 295.8 6.2 6 6.4 11.3

Export of goods (FOB) 0 0 0 0 6.4 11.3

Services rendered 0 294.5 0 0 0 0

Dividend received 0 0 0 0 0 0

Interest received 5 0.2 0.1 5.6 0 0

Other forex earnings 1450.1 1.1 6.1 0.4 0 0

Foreign exchange spendings 3059.7 2904.4 1150.5 750.1 917.9 1882.1

Raw materials (CIF) 1389 2370.4 380.5 431.4 444 893.6

Stores & spares (CIF) 415.9 0.1 7.5 6.9 35.3 13.5

Finished goods (CIF) 0 0 0 0 0 0

Capital goods (CIF) 0 0 0 0 22.5 298

Royalties and tech. know-how fees 0 0 0 0 0 0

Interest remittances 585.9 373.2 314.1 221.5 118 147.8

Dividends 73.7 80.8 0 59.3 20.2 57.1

Travel 0 0 0 0 0 0

Others 595.2 79.9 448.4 31 277.9 472.1

Net foreign exchange earned -1604.6 -2608.6 -1144.3 -744.1 -911.5 -1870.8

Sales (net of internal transfers) 22309.3 22973.5 26750.5 37448.8 35165.7 41607.2

Raw material purchases 7609.2 8455.5 4721.5 4195.1 7032.2 7698.9

Purchase of fixed assets 2326.8 1503.4 1426.3 934.5 1617.5 3051.3

Exports as % of sales 6.52 1.29 0.02 0.02 0.02 0.03

Raw material import as % of raw material

Purchases 18.25 28.03 8.06 10.28 6.31 11.61

Imported capital goods as % of purchase of

Fixed assets 0 0 0 0 1.39 9.77

Growth (%)

Sales 21.93 2.98 16.44 39.99 -6.1 18.32

Exports 4670.82 -79.67 -97.9 -3.23 6.67 76.56

Raw materials purchases 79.32 17.55 -48.47 -6.02 79.51 41.75

Imported raw materials and stores 16.62 31.34 -83.63 12.96 9.35 89.26

Source:


ANNEXURE XI

Shareholding Information

Reliance Energy Ltd.

Jun 2005 Sep 2005 Dec 2005

Category No.of shares % of total shares

No.of shares % of total shares

No.of shares % of total shares

Promoters holding 10,28,08,735 52.64 10,29,19,963 50.97 10,29,19,963 50.97

Indian promoters# 10,28,08,735 52.64 10,29,19,963 50.97 10,29,19,963 50.97

Private Holding 10,28,08,735 52.64 10,29,19,963 50.97 10,29,19,963 50.97

Govt. holding 0 0 0 0 0 0

Central govt. 0 0 0 0 0 0

State govt. 0 0 0 0 0 0

Govt. Other 0 0 0 0 0 0

Foreign promoters/collaborators 0 0 0 0 0 0

Non-promoters holding 9,25,14,064 47.36 9,89,84,288 49.03 9,89,84,288 49.03

Institutional investors 7,47,30,520 38.26 7,92,18,810 39.24 7,97,65,884 39.51

Mutual funds and UTI 17,56,776 0.9 21,65,873 1.07 30,11,506 1.49

Banks, FI’s, Insurance Cos. 3,99,72,098 20.46 3,97,40,253 19.68 3,99,63,046 19.79

FIIs 3,30,01,646 16.9 3,73,12,684 18.48 3,67,91,332 18.22

Others 1,77,83,544 9.1 1,97,65,478 9.79 1,92,18,404 9.52

Private corporate bodies 24,65,624 1.26 16,76,697 0.83 14,32,815 0.71

Indian public 1,18,65,998 6.08 1,22,33,277 6.06 1,20,23,856 5.96

NRIs/OCBs 4,23,080 0.22 4,42,729 0.22 4,36,392 0.22

Any other 30,28,842 1.55 54,12,775 2.68 53,25,341 2.64

Total equity holding 19,53,22,799 100 20,19,04,251 100 20,19,04,251 100

#This includes shareholding of

Persons acting in concert

Source:


ANNEXURE XII

Growth Indicator

Reliance Energy Ltd., Percent (Non-Annualized)

Mar 2000 12 mths

Mar 2001 12 mths

Mar 2002 12 mths

Mar 2003 12 mths

Mar 2004 12 mths

Mar 2005 12 mths

Gross sales (excl. internal transfers) 21.93 2.98 16.44 39.99 –6.1 18.32

Net sales (excl. internal transfers) 21.99 2.25 15.22 40.95 –6.34 17.1

Raw materials, stores, etc. 42.74 26.4 –23.61 10.67 9.52 2.62

Wages & salaries 22.91 23.18 –8.86 –12.1 117.14 21.73

Advertising & marketing expenses 3.02 2.09 4.51 30.2 175.9 7.42

Distribution expenses Error Error Error Error Error Error

Energy (power & fuel) Error Error Error Error Error Error

Interest –17.8 –41.26 18.77 16.14 –8.41 92.79

Depreciation 6.95 7.2 14.49 15.5 74.96 5.46

Tax 12.5 –67.78 10.34 –46.09 65.86 –10.94

PBDIT (NNRT) 5.3 –8.53 12.06 –25.37 62.23 28.56

PBDT (NNRT) 10.45 –3.1 11.39 –29.83 74.78 22.58

PBIT (NNRT) 4.68 –14.56 10.9 –45.65 48.82 57.18

PBT (NNRT) 12.2 –8.01 9.66 –56.12 74.5 48.79

PAT (NNRT) 12.11 10.26 9.6 –57.03 61.33 59.06

Total exports 4670.82 –79.67 –97.9 –3.23 6.67 76.56

Total imports 25.74 –5.08 –60.39 –34.8 22.37 105.04

Imported raw material 16.62 31.34 –83.63 12.96 9.35 89.26

Gross fixed assets (excl. reval. & WIP) 6.57 7.46 3.55 4.75 30.4 3.8

Net fixed assets (excl. reval. & WIP) 1 –1.52 –5.24 –5.72 28.2 –12.82

Current assets 6.66 –17.28 –1.16 –8.62 46.69 191.68

Inventories 5.16 –78.59 0.77 4.81 –30.87 161.59

Sundry debtors 24.56 28.02 –2.56 –32.52 –18.83 99.73

Total assets 5.75 –9.74 0.78 7.7 73.18 43.32

Source:


ANNEXURE XIII

Inventory/Working Capital Cycle

(Non-Annualized) Inventory management (times)

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths

Raw materials turnover NA NA 18.9 9.59 14 9.71

Debtors turnover 3.63 2.95 3.1 5.26 6.76 5.96

Creditors turnover 4.02 3.53 4.35 9.52 7.31 5.94

Inventories / gross working capital (%) 39.37 10.19 10.39 11.92 5.62 5.04

Inventories / net working capital (%) 179.08 29.57 24.38 47.52 12.1 7.79

Working capital cycle

Holding period (no. of days)

Raw materials & spares 86 56 88 81 46 105

Production 159 89 7 0 0 0

Finished goods 0 0 0 0 0 0

Debtors 100 123 117 69 53 61

Gross working capital cycle 346 269 213 151 100 166

Credit availed from creditors 90 103 83 38 49 61

Net working capital cycle 256 166 129 112 50 105

Gross working capital req. (Rs. Crore) 1633.97 1350.41 1282.99 1412.83 855.29 1699.52

Net working capital req. (Rs. Crore) 1205.98 832.67 778.06 1054.86 429.05 1073.7

Source:


ANNEXURE XIV

Trend in Production

Reliance Energy Ltd.

Product/s manufactured/traded

March

2001

March

2002

March

2003

March

2004

March

2005

Cable Head Terminations 158 Units 306 Units 290 Units 233 Units 252 Units

Energy 3621

Million

units

3847

Million

units

3965

Million

units

6027

Million

units

5953

Million

units

Hire of Meters 0 0 0 0 0

Income from Lease Rentals 0 0 0 0 0

Modules 17692

Units

8291

Units

9099

Units

9399

Units

7495

Units

Stress Cones 4302

Units

1764

Units

916

Units

3474

Units

584

Units

Terminations and Joints 1264

Units

924

Units

776

Units

2056

Units

165

Units

Value of Contracts Billed and

Service Charges 0 0 0 0 0

Wind Mill Energy 0 0 0

Source:


Reference:

1. http://news.bbc.co.uk/1/hi/business/4074078.stm

2. http://economictimes.indiatimes.com/articleshow/msid-1420528,curpg-2.cms

3. http://economictimes.indiatimes.com/articleshow/1405670.cms

4. http://www.thehindubusinessline.com/2005/01/04/stories/2005010402800100.htm

5. http://www.domain-.com/companies/companies_a/ada_enterprises/20060210_gain.htm

6. “The Ownership Saga at Reliance Industries Ltd., and the Corporate Governance Practices of

the Company”, ICFAI Journal of Corporate Governance, October 2005.

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