The Rs 1,000 crore (Rs 10 billion) Hyderabad based Lanco Group, is drawing up plans to enter the power distribution and trading sector.

Lanco will in the course of the next two weeks apply formally to the CERC (Central Electricity Regulatory Commission) for a licence to start power trading.

"The Lanco group is interested in getting into the power distribution sector and is waiting for bids for the various zones to be announced. Once tenders are called inviting bidders, the group will definitely enter it," a source told Business Standard.

Lanco Electric Utility Ltd, one of the subsidiaries of the group will apply for the power trading licence at its next hearing.

It is understood that the company is already in talks with potential customers and has already written letters of interest to them.

"Lanco expects the licence to come through in the next couple of months and then start active trading by the third quarter of this fiscal," the source said.

The norms stipulate that a company granted a licence to get into power trading must start operations within a year of getting it.

Lanco has drawn out plans to trade close to 100 mw of power in the first full year of operations and has over a course of the next five years set itself a target of about 1,000 mw of power trading.

According to analysts margins in power trading are in the region of about 5 paise per unit.

"The company will invest close to Rs 25 crore (Rs 250 million) in the next five years in this business, while in the first year it will invest close to Rs 1.5 crore (Rs 15 million)," the source said, adding that the company will also apply for 'open access' for trading purposes.

Lanco, which has drawn out investment plans of about Rs 3,500 crore (Rs 35 billion) in the power generation sector over the next five years is in talks with foreign strategic investors and financial investors for stakes in future power projects that the company is slated to start.

The group which has a Rs 2,000 crore (Rs 20 billion) asset base, has interests in power generation, engineering & construction, information technology and manufacturing, is slated to generate 750 mw of power in the next five years.

The company has set itself a target of generating 250 mw of power from hydel projects and about 500 mw of power from thermal projects. The company has achieved financial closure for its 250 mw coal-based project, Lanco Amarkantak at Chhattisgarh, which is slated to be comissioned by 2007.

Lanco is understood to be in talks with financial institutions and strategic investors from US, Middle East and Asia for financial participation in future projects.