Jan. 3 (Bloomberg) -- JSW Energy Ltd. plans to raise as much as $1 billion to build generators, driving a record year for initial share sales by Indian power producers, two people familiar with the offer said.

The company, based in Mumbai, will seek regulatory approval this month and complete the sale by the end of March, the people said, requesting anonymity before an announcement. Arun Bhatt, a company spokesman, declined to comment.

Prime Minister Manmohan Singh wants to double investment in power over the five years to 2012 because shortages cause blackouts in most of India, curbing economic growth. Singh's spending plan may lure investors to JSW Energy and Reliance Power Ltd., controlled by billionaire Anil Ambani's Reliance Energy Ltd., which is planning its own share sale.

``There is excitement surrounding this sector and these issues will attract a lot of investors,'' said Sandip Sabharwal, chief investment officer at J.M. Financial Mutual Fund in Mumbai, which oversees the equivalent of $2.86 billion in assets.

JSW Energy is setting up a 1,000 megawatt lignite-based power plant in Barmer in the western state of Rajasthan and a 1,200 megawatt coal-based plant in the state of Maharashtra, according to its Web site. The company also plans to set up generators in West Bengal, Jharkhand and Andhra Pradesh.

JM Financial Consultants Pvt. and Kotak Mahindra Capital Co. are among banks that will arrange the sale, the people said.

Reliance, Sterlite

JSW Energy's offer will raise planned fund raisings by power producers in India to $6 billion, according to people familiar with the plans. Reliance Power may raise as much as $3 billion in the nation's biggest initial public offering and Sterlite Industries (India) Ltd. intends to sell a stake worth as much as $2 billion in its energy unit to build power plants.

Indian companies in all sectors raised a record $8.5 billion in IPOs last year, as the biggest rise in India's Sensitive Index in four years spurred companies to raise funds, according to data compiled by Bloomberg.

Power Grid Corp., India's main transmission company, sold shares last year to fund a more than doubling of the nation's network to 77,690 miles, long enough to circle the earth three times. The stock has almost tripled since the initial sale. The government plans to spend 6.17 trillion rupees by 2012 to boost generation and upgrade transmission and distribution networks.

Sterlite sold $1.75 billion of stock in the U.S. in June to fund a 2,400-megawatt power plant in the eastern state of Orissa, where the group is building a 500,000-ton aluminum smelter to meet rising global demand for metals. The stock rose 90 percent in 2007, its third annual gain.

Shares Surge

Reliance Energy quadrupled in value last year, making it the best-performing stock on India's benchmark index, as the government plans to invest $200 billion in electricity generation and distribution in seven years to sustain record economic growth.

India's government has set a target to add 78,577 megawatts generation capacity in the five-year development plan ending March 2012, from 132,330 megawatts at the end of March 2007, according to the Central Electricity Authority's Web site. Transmission capacity is targeted to expand to 37,700 megawatts in the five years from 14,100 megawatts now, it said.

The finance ministry estimates a power shortage is responsible for cutting gross domestic production by a tenth.

JSW, part of the $8 billion O.P. Jindal group, has interests in mining, steel, power and oxygen.

To contact the reporter on this story: Debarati Roy in Mumbai at droy5@bloomberg.net

Last Updated: January 2, 2008 23:19 EST