re pref offer presentation to press 22 feb04

Reliance Energy Ltd. Creating Growth Momentum

Background

Reliance Energy is India’s leading

private sector utility company

Serving over 25 million consumers in substantial

areas of Mumbai, Delhi, Goa and Orissa

Background

Reliance Energy is India’s leading

private sector utility company

Powering 2 out of 3 homes in

Mumbai, and 1 out of 2 in Delhi

Background

Reliance Energy is India’s leading

private sector utility company

7,500 Schools

3,000 Hospitals

250 Theatres

5 Airports

130 Railway Stations

Background

Reliance Energy is India’s leading

private sector utility company

Industrial, commercial and

residential urban consumers

Background

Distributing over 5,000 MW of

power – the largest in India

Reliance Energy is India’s leading

private sector utility company

Background

Reliance Energy is India’s leading

private sector utility company

Power generation capacity of

nearly 950 MW in Maharashtra,

Goa,

Andhra Pradesh, Kerala

and Karnataka

Background

India’s most valuable power

company, with market

capitalisation of over Rs. 10,000

crore Reliance Energy currently ranks among India’s

top 25 listed private sector companies on all major

financial parameters

Background

Annual revenues over Rs 6,400

crore

Reliance Energy currently ranks among India’s

top 25 listed private sector companies on all major

financial parameters

Background

Annual cash profits over Rs 600

crore

Reliance Energy currently ranks among India’s

top 25 listed private sector companies on all major

financial parameters

Background

Annual net profits over Rs 350

crore

Reliance Energy currently ranks among India’s

top 25 listed private sector companies on all major

financial parameters

Background

Debt free at the net level

Reliance Energy currently ranks among India’s

top 25 listed private sector companies on all major

financial parameters

Background

Top end credit ratings - rated

‘AAA’ by CRISIL/ ICRA/ FITCH

Reliance Energy currently ranks among India’s

top 25 listed private sector companies on all major

financial parameters

Report Card 2003-04

Report Card 2003-04

Tariff Revision petition filed after 7 years –

to achieve stipulated Return on Equity

Report Card 2003-04

Approval to import power into Mumbai,

through open access on existing

transmission lines –

lower tariffs expected

Report Card 2003-04

Resolution of 5 years old standby charges

dispute in Mumbai expected shortly from

MERC –

end to uncertainties

Report Card 2003-04

Encroachment of customer base in Mumbai

stopped by MERC

Report Card 2003-04

Wage Agreements signed covering 4,500

employees and 1,200 officers –

pending since April 2002

Report Card 2003-04

Cumulative financial provisions of over

Rs. 350 crores made to strengthen Balance

Sheet

Report Card 2003-04

100% equity in Andhra and Goa projects

acquired, and operations merged with RE

Report Card 2003-04

Andhra 220 MW power plant’s PLF raised to

85%, through increased gas allocation

Report Card 2003-04

Kerala power plant restarted after a 1 year

shutdown - project’s financial viability

restored

Report Card 2003-04

Completed first phase of VRS in Delhi

distribution companies – reducing workforce

by nearly

4,500 persons in 7 days

Report Card 2003-04

Exited from non-core activities of Coal

Washery, coal-based Maithon power

generation project, broadband telecom

Report Card 2003-04

Transformed into India’s most valuable power

company

Market capitalisation increased more than 200%

in a year to over Rs. 10,000 crore

Best performing utility stock in the year 2004,

outperforming Sensex by 29%

Among the top 10 performers in Sensex stocks in

2003, outperforming Sensex by 57%

Creating Growth Momentum

Power Environment

Dominated by state owned

undertakings

Poor existing infrastructure

Unreliable quality of power

Unsustainable levels of technical and

commercial losses

High tariffs

Low standards of customer care

Huge opportunity for

private sector to create

world class power

infrastructure in India

Synergies for Reliance

Leveraging Reliance group’s core

competencies:

- World scale and world class plants

- Infrastructure development

- Project management and execution

- Financial engineering

Feedstock integration with Reliance’s

upstream gas business

Leveraging of customer base for

Reliance’s other businesses

A natural fit in Reliance’s overall business portfolio

Vision statement

• To be among the most admired and most trusted integrated

utility companies in the world

• To establish leadership in the power sector in the country,

across generation, transmission, trading and distribution

• To deliver reliable and quality power to millions of customers at

competitive costs

• To set international standards of customer care – creating

superior value for all stakeholders

• To set new benchmarks in standards of corporate performance

and governance, through the pursuit of operational and financial

excellence, responsible citizenship and profitable growth

Generation Strategy

• “From Well Head to Wall Socket”

• Environment friendly fuels – gas the preferred feedstock

• Adequate capacity to meet captive requirements of

5,000 MW, covering:

- Base Load

- Trading

• Offtake primarily by own customer base

• Location in proximity to customers

• Economies of scale, capital productivity,

lowest operating costs

Generation of power at the most competitive

unit costs globally

World’s Largest Gas based Power Project

• Setting up the world’s largest gas based mega power project with initial capacity of over 3,500 MW capacity – scale benefits

• Initial investment outlay of over Rs 10,000 crore (US$ 2.2 billion) – single largest investment across any sector in Uttar Pradesh

To benefit millions of consumers in the power deficit regions of Delhi,

UP and other parts of Northern India

World’s Largest Gas based Power Project

• End-to-end integration in the energy value chain - gas sourced from Reliance’s Dhirubhai gas fields in KG basin – integration benefits

• Commissioning in phases from mid – 2006 through mid 2007

• Project will be a strategic national asset and will help realise Hon’ble Prime Minister’s vision of “Power for all by 2012”

Project to supply clean-green power based on

environment friendly natural gas at competitive costs

Dadri

• 40 kms from Delhi

• HBJ gas pipeline is

15 kms away

• Main Ganga Canal

is just 2-3 kms away

• Power Grid’s Dadri

substation to help in

evacuation of power

Location Map

Distribution Strategy

• Expansion of the customer base,

with a national footprint

• Acquisition of existing networks

in major cities and towns,

through the privatisation process

• Open access on distribution

systems, as individual States

deregulate

Providing a world class experience

to millions of customers

Distribution Strategy

• Setting up new networks where

economically feasible

• World class systems,

automation, quality and

reliability of power, competitive

pricing, highest standards of

customer care

Providing a world class experience

to millions of customers

Existing Areas

Increased automation and

strengthening of distribution

systems in Mumbai to bring

down losses to around 10%

Significant potential for enhancing returns

in Mumbai, Delhi and Orissa

Existing Areas

Comprehensive revamp of Delhi

infrastructure, to reduce losses

from the existing levels of 55%

Significant potential for enhancing returns

in Mumbai, Delhi and Orissa

Existing Areas

Recapitalise the Orissa

distribution companies, and turn

around their operations, subject

to suitable restructuring by

Govt. of Orissa Significant potential for enhancing returns

in Mumbai, Delhi and Orissa

New Areas Applications filed for building new

networks in various cities:

- Bhandup, Vashi, Pune, Nasik,

Nagpur, Aurangabad

- BEST area in Mumbai

NDMC area in New Delhi

- 12 areas under franchise in

Gujarat

- Other cities and states in the

future

Participation in privatisation

of distribution

assets of SEBs

as opportunities arise

Growth Opportunities - Trading

Trading in Power

Trading in power – Physical

(merchant/ own generated)

Creating exchanges for

trading in power – financial

and derivative productsEnhancement of

returns from generation and transmission

Mega Investment Plans

Capital Investments

Amount (Rs Crore)

Generation 10,000Transmission 4,000Distribution 6,000

Total : 20,000

UP power project implemented by a new

company , Reliance EGen P. Ltd. Investment of uptoRs. 20,000 crores

in the next 5 years

Financial Engineering

Shareholding Pattern

Present

Reliance Group 49.5%

FIs / Banks / MFs 21.0%

FIIs / GDRs 21.3%

Others 8.2%

Total: 100.0%Reliance’s stake reduced

from 58.2% to 49.5%

Preferential Offer

Equity shares and/or equity

related securities

Offer price of Rs. 640 per share,

determined in accordance with

SEBI Preferential Allotment

guidelines

Priced nearly 3 times Reliance’s open offer price

Preferential Offer

Offer price at 38% premium to

26 week average price

2% discount to last traded market

pricePostal ballot for all

shareholders on

preferential offer and

various other resolutions

though not required in law

Strong Vote of Confidence

Reliance to subscribe to over 2 crore

equity shares, aggregating nearly

Rs. 1,400 crores

Institutional shareholders, like LIC

and GIC, agree in principle to

subscribe to nearly 1 crore shares,

aggregating over Rs. 600 crores

Endorsement of growth prospects

and positive signal to markets

Financial Flexibility

Enabling approvals to offer additional

amount of Rs. 1,000 crores through:

- equity shares; and/or

- equity shares with differential

voting

rights; and/or

- international convertible bond

offering

Reliance has confirmed its willingness to

subscribe additional Rs. 1000 crores

Proposed Reliance Stake

Present Proposed

Reliance Group 49.5% 56.5%

FIs / Banks / MFs 21.0% 21.0%

FIIs / GDRs 21.3% 16.5%

Others 8.2% 6.0% Reliance stake still 2% below peak levels of

over 58%

Reduction in Free Float

Present Proposed

Reliance Group 49.5% 56.5%

FIs / Banks / MFs 21.0% 21.0%

FIIs / GDRs 21.3% 16.5%

Others 8.2% 6.0%Reduction in free float from over 50% to 43%

Value creation for Reliance Energy shareholders

Impact on Net Worth

Reliance Energy to rank among

India’s top 3 private sector

companies

Net Worth to rise by Rs. 3,000

crores, from Rs. 3,500 crores to Rs.

6,500 crores

Third only to Reliance Industries

andICICI Bank

Impact on Book Value

A 43% increase in Book Value per

share from Rs. 217 to Rs. 312

Price to book ratio will decline to 2

Impact on Leveraging ability

Increased ability to leverage

Balance Sheet, while maintaining

top end AAA ratings

Increase in borrowing ability by Rs. 3,000 crores

to Rs. 6,500 crores

Impact on Profitability

Increase in capital base by Rs.

3000 crores - potential accretion

to earnings

Increase in EPS leading to

substantial enhancement of

overall shareholder value

To rank among

India’s top 10

private sector companies

Value creation for Reliance Industries shareholders

Mark to Market gains

Reliance’s investments in Reliance

Energy now valued at over Rs 5,200

crores

Average cost of Reliance’s shareholding

in RE will still be only Rs. 350 per share,

against market price of Rs. 650 per share

Capital gains of nearly

Rs 3,500 crores

Participation in power sector growth

Enhancement of leadership position

in the power sector for Reliance

Group

Benefits of sustained long term

growth in the entire sector

Positive impact onRIL’s financial ratios

through consolidation

Gas Off-take

Assured feedstock off-take for

about 25% of production from

RIL’s KG - D6 Dhirubhai gas field

Long term contracts at

competitive prices

Share of gas in power generationto increase from 10 % to global

average of 30 %

Deployment of Cash flows

Proposed investments only 8 % of

Reliance group’s cash flows of over

Rs. 30,000 crores in the next 3

years….

….and less than 5 % of value of RIL’s

future gas sales contracts of over Rs.

50,000 crores to the UP gas based

power project

Opportunity for Reliance to deploy its strong

cash flowsfor attractive returns

Win Win Win…

Win for Customers

Quality , Reliable power

Competitive prices

World class customer care

Win for the Power sector

Mega investments

Technology upgradation

Accelerated loss reduction

Win for the Country

World class power infrastructure

Enhanced competitiveness

Fiscal deficit reduction

Win for Reliance Group

Leadership in power sector

Exponential growth

Enhanced profitability