Adani may buy RInfra's Mumbai power business

Firms enter exclusive talks; if deal goes through, Adani will enter distribution

Anil Ambani-led Reliance Infrastructure (RInfra) has entered into exclusive talks with Adani Transmission for selling its Mumbai power business.

“The company has entered into a period of exclusivity until January 15, 2018 in relation to discussions for the proposed sale of its integrated business of generation, transmission and distribution of power for Mumbai city to Adani Transmission,” said Mumbai-based Reliance Infrastructure in a BSE filing.

In their respective exchange filings, both companies specified that the proposed transaction is subject to confirmatory diligence, definitive documentation, and customary approvals. If the deal materialises, Adani will be making an entry into the power distribution business.

Following the news, shares of Adani Transmission hit the upper circuit of 10 per cent on the BSE. The scrip closed at Rs 193.25, up 10 per cent, while RInfra closed marginally up at Rs 477.65.  

Reliance Infrastructure plans to utilise the proceeds of the proposed transaction entirely to reduce its debt, and strengthen its financial position to tap growth opportunities in defence and engineering procurement construction (EPC) for the infrastructure sector. With this, Adani Transmission seems to be looking to grow via the inorganic route.

Reliance Infrastructure’s power business caters to 3 million customers with its 1,800 Mw (megawatt) of distribution along with generation facilities. The distribution franchise is nine decades old with the licence valid till August 2036. According to reports, Greenko, backed by Singapore’s GIC and the Abu Dhabi Investment Authority, Torrent and Prem Watsa’s Fairfax Group were also in discussion for RInfra’s Mumbai power business.

Following the privatisation of Delhi’s power sector and the unbundling of the Delhi Vidyut Board in July 2002, RInfra-owned BSES Yamuna Power and BSES Rajdhani Power acquired two licensing circles in the city. The Mumbai power deal would be the second one between Reliance Infrastructure and Adani Transmission. It closed another deal on Monday, selling its Western Region System Strengthening Scheme (WRSSS) power transmission assets to the Gautam Adani company for Rs 1,000 crore.

Reliance Infrastructure’s WRSSS B and C projects are located in Maharashtra, Gujarat, Madhya Pradesh, and Karnataka. All key approvals from the Competition Commission of India, Central Electricity Regulatory Commission, and lenders have been obtained, and the transaction is expected to be closed shortly, Reliance Infrastructure had said in its release.

Last year, it completed acquisition of the GMR Energy transmission assets, which it had bought in July. The company said it completed acquisition of 74 per cent shares of Maru Transmission Service Company and 49 per cent shares of Aravali Transmission Service Company. While payment has been made for 100 per cent stake in both the companies, the remaining stake in both the companies will be transferred to Adani Transmission in a manner consistent with the Transmission Service Agreement. 

Gujarat-based Adani Transmission currently has around 5,000 km of transmission network and is also into operation and maintainance business.