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TEC … should we also add the H

Jun 15, 2000

That would make it TECH. The once sleepy power utility seems to have been shaken up by a bolt of lightening. TEC is focusing on becoming a more aggressive player in the power sector and is expanding its business profile to an integrated infrastructure service provider. It has announced strong results for FY00. TEC has just announced the much awaited merger between Tata Power Company, The Andhra Power Supply Company and Tata Hydro-electric Power Supply Company. The merger ratio is 4 shares in Tata Power for every five shares in Tata Hydro and Andhra Valley. The merger has been largely possible due to the reduction in stamp duty rates. Stamp duty charges for the merger are expected to be Rs 600 m. The power utility has given a brief insight into its future course of business and has indicated firm plans for investing in strategic and high growth businesses.

In power, the company has developed a two pronged strategy. It plans for growth in the existing licensed areas through repowering, (converting to combined cycle) this will increase efficiency of existing plants by 7%. TEC’s operations are primarily restricted to the island city of Bombay; it plans to change this status by having a national presence. It has set up a 80 MW (megawatt) power plant in Belgaum, Karnataka, which is to go onstream by December ’00. TEC has formed a JV with China Light & Power (CLP) for the Mangalore Power project, which was abandoned by Cogentrix. The same JV is expected to set up a power plant at Pipavav, this though, is still on the drawing board.

The primary feedstock of a power company is fuel. LNG is the fuel of the future and new projects are expected to be LNG fired. In light of this, TEC is integrating backwards into fuel procurement and distribution. It is tying up with TotalFina of France for setting up a 6 MTPA LNG terminal at Trombay. Part of the fuel will be used for internal consumption, for the rest TEC is tying up with GAIL for pipeline distribution. This initiative should have a duel impact of driving revenue growth and reducing raw material costs.

TEC also wants a piece of the communications pie, it is setting up a 1,200 KM fibre optic cable of which 400 KM is already wired, it plans to expand nationwide in 3 – 5 years, set up its own gateways and create a broadband backbone on which data, audio and visual content can be transferred.

These projects will cost Rs 35 bn. TEC with these initiatives, plans to become a leading player in the power sector and has set its eyes on being an infrastructure service producer. Beat the street, before TEC is valued at 100 times earnings.

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