Singapore's Sembcorp to take 65% in Nagarjuna's power biz

In the 'mother of all deals', the city-state's power giant to pay $250 million for stake

Singaporean power giant Sembcorp Industries is close to sealing a deal with Hyderabad-based Nagarjuna Construction Company (NCC) to pick up a 65 per cent in the latter's power business. The deal, pegged at $250 million (about Rs 1,525 crore) and expected to be signed this week, will be one of the biggest in the sector.

“It is the mother of all deals,” said a person involved with the transaction.

NCC, which entered the power-generation sector in 2007, has been working on setting up a 1,320-Mw coal power plant at Krishnapatnam in Andhra Pradesh, which has a total project cost of Rs 7,000 crore.

While it will get 70 per cent of its coal requirement from domestic sources, the rest will have to be imported. Mahanadi Coalfields, a subsidiary of Coal India, will supply coal to this project.

Recently, French energy major GDF Suez agreed to invest as much as $400 million (about Rs 2,440 crore) in Meenakshi Energy for a 74 per cent stake. It owns a 700-Mw power plant in the same area where NCC’s power plant is located. In 2010, there were private equity deals in the power businesses of GMR and GVK.

NCC owns a 55 per cent stake in the project, while the rest is owned by Gayatri Projects, another Hyderabad-based company. Gayatri bought this stake in 2011 and is expected to remain invested in the project. The project is expected to be commissioned early next year, and its power has already been tied-up in long-term power purchase agreements.

NCC has a turnover of about Rs 7,000 crore and an order book of Rs 20,247 crore. Apart from civil construction work of power projects, NCC’s EPC (engineering, procurement and construction) portfolio covers buildings and roads, electricals, urban infrastructure, railways and mining projects.

NCC did not respond to queries on the deal.

With this deal, Sembcorp will not only expand its asset portfolio in India, but also extend its power asset base near Kakinada in Andhra Pradesh. The Singaporean firm already has a 49 per cent stake in another under-construction thermal power plant in Krishnapatnam, which has become a power hub. It owns the plant with Gayatri Projects as its majority owner.

Sembcorp, which is backed by Temasek, the private investment arm of the Singapore government, has an installed capacity of about 10,000 Mw across the world. The company owns and operates water and energy utilities in West Asia, China and the UK, apart from Singapore and India.