Huaneng is frontrunner for GMR's InterGen stake

China’s power major could pip Tata with $1.5-billion bid

Chinese utility Huaneng Power emerged the highest bidder for the purchase of 50 per cent stake in InterGen, which was put on the block by GMR. Investment banking sources say Huaneng — one of the largest power companies in China — is known to have put in a bid for as much as $1.5 billion.

Huaneng earlier outbid GMR for the purchase of Singapore power utility Tuas Power by paying $3 billion. The Chinese government-owned power company has an installed capacity of around 40,000 Mw and is listed on the Shanghai Stock Exchange.

The power generation assets of Netherlands-registered InterGen had two other bidders: Tata Power and a consortium of private equity funds, whose bids were much lower than that offered by Huaneng.
 

PLUG OUT

• Tata Power and consortium of PE funds have made bids
  
• GMR bought InterGen stake in Oct 2008 for $1.1 billion
  
• Firm borrowed $837 mn to acquire 50% in InterGen
  
• Sale to help GMR invest in greenfield projects in India

GMR CFO A Subba Rao said potential buyers are carrying out due diligence, but refused to comment on the bid by Huaneng. However, the company said it plans to conclude the stake sale by March 2011, as announced its second-quarter results on Wednesday. An e-mail sent to Huaneng received no response.

Bangalore-based infrastructure major GMR acquired its stake in InterGen in October 2008 for $1.1 billion.

Ontario Teachers’ Pension Plan owns the remaining 50 per cent in the company, which has power plants in the UK, Netherlands, Mexico, Australia and the Philippines, with a generation capacity of 8,088 Mw. The company is planning to expand this by another 4,000 Mw.

GMR has been making high interest payouts for the $837-million borrowed to acquire the InterGen stake. In August, the company refinanced as much as $737 million. It converted short-term loans due for repayment later this year to long-term debt to be paid after five years. The company is also known to have converted $100 million in debt into equity.

A top GMR official said that the company had received a proposal from a bank in April for its InterGen stake. It hopes that sale of these assets at a profit could help to deleverage the balance sheet. At the same time, the company hopes to invest some of the proceeds in power projects within India.