PE investors not to exercise put option in GMR Power

This move comes as a relief for under-stress GMR Infrastructure

A clutch of private equity (PE) investors, which have infused as much as $300 million (Rs 1,800 crore today) into GMR Power, the holding company for all power projects of the publicly-held GMR Infrastructure, have decided against exercising the put option.

A put option gives the holder the right to sell securities at a specified price within a limited period. When an option is exercised by the holder, the shareholder will be obligated to buy or sell the shares at the predetermined price.

This move comes as a relief for the under-stress GMR Infra, which has been looking at various options to reduce its gearing and is trying to shed some assets. If the PE investors had exercised the put option, GMR would have have to buy back from them, further straining their balance sheet, at a time when the company is looking to infuse as much as Rs 1,700 crore through the equity route to fuel its power projects. During early 2010, Temasek, IDFC Private Equity, Argonaut Ventures and Ascent Capital had committed close to $300 million into GMR Power.

The power vertical, which contributes around 25 per cent of total group revenues of close to Rs 10,000 crore, has been facing intense problems over the past many quarters at a couple of its operational plants as gas was not available.

As part of its roll-out plans, GMR has been aggressive on kickstarting its thermal power projects with a cumulative capacity of 3,000 Mw across three projects. The fresh equity of Rs 1,700 crore will be infused into three projects — GMR Kamalanga Energy, Emco and Chhattisgarh--and transmission projects. The company will infuse Rs 440 crore into Kamalanga, Rs 130 crore into Emco and Rs 830 crore into Chhattisgarh projects, while Rs 15-20 crore will be spent on transmission projects this year.

The move by PE investors not to push for the put option is also in sync with GMR’s move to look at a Rs 1,500 crore public offer plan, which is now picking up pace.

The company, which posted a net profit by the end of FY13, after a series of bad quarters over the past two years, primarily by exiting its 70 per cent stake in a power project in Singapore, has said it will infuse equity for into power projects.
GMR POWER HIGHLIGHTS

• Generation assets in operation: 836 Mw, 6 assets
• Generation assets - Partially operational: 650 Mw out of 2,000 Mw, 2 assets
• Coal mines: Reserves of 1609 mn tons, 3 assets
• Generation assets under construction: 2,318 Mw, 3 projects
• Generation assets (Hydro) under development: 1,960 Mw, 4 projects
• Transmission lines in Rajasthan under construction: 350 km, 2 projects
• Generation asset (coal based) under development: 1,320 Mw, 1 project