POWER BAILOUT – A RELIEF FOR POWER SECTOR

[Smart Profit]

POWER BAILOUT – A RELIEF FOR POWER SECTOR


With the Government bringing out various reform measures, market is on
a bullish run. One of the major sectors to be advantaged by the
Government’s step is the Power Sector.

Power Sector, which was facing innumerous regulatory issues owing to
populism, corruption, mismanagement, the bailout comes as a rescue to
improve the
entire power sector of India.

The bailout helps the power distributors, mostly state owned, which
has debt of more than 1.8 lakh crore, to finally heave a sigh of
relief.

Following are the few measures taken as a part of bailout:

• State governments will take on half of power distributors' resulting
short-term debt over the next two to five years and convert it into
long-term bonds

• Lenders, which are mostly government-run banks, will recast the rest
into long-term loans and offer a moratorium on repayment of principal

• Under the plan, the federal government will offer monetary
incentives to states to reduce distribution losses and will reimburse
25 per cent of the principal repaid by the states.

• There will be power tariff hike from March 2013 onwards which will
increase the power sector revenue.

This restructuring will benefit the entire power sector value chain as
power generators and traders can expect timely payment from
distribution companies
This would also mean distributors will have more funds to buy power
and can step up supplies to factories and homes, which now resort to
expensive diesel generators and solar panels to plug their energy gaps
This step taken by the Government is a major move towards developing
India.

Power bail out gives an apt opportunity to look out for Power and
related companies as a safe investment.

BUY POWERGRID at CMP 120, RURAL ELECTRIFICATION CORPORATION at CMP
226, NHPC at CMP 21, ALSTOM T & D at CMP 208, ABB at CMP 774, L& T at
CMP 1615



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