GMR exits Singapore power unit for Rs 2.6k cr

Reaps 2x returns; will free up Rs 1,616 crore towards group deployment

GMR Infrastructure, which has been creaking under a leverage of three times on a debt of Rs 37,000 crore, said it would sell its 70 per cent stake in a Singapore-based Island Power, for $488 million (Rs 2,600 crore).

GMR is selling the under-development power project to a global consortium — FPM Power Holdings — which is jointly owned by First Pacific Company Limited and Meralco PowerGen Corporation of the Philippines. GMR is making close to two times its investment from this power project in a span of four years, having so far invested $ 235 million (Rs 1,270 crore).

“The divestment is the off-shoot of the group’s well thought out strategy of an asset right, asset light and cash flow-based model that the group has embarked in the recent times. The cash flows will help GMR Energy to focus on our domestic energy business and accelerate ongoing projects totalling to 5,790 Mw,” said G M Rao, Group Chairman, GMR Infrastructure.

Island Power carries a debt of Rs 2,300 crore, which will be taken over by the consortium. FPM Power Holdings will infuse another $49 million as equity into this project, expected to go on stream by 2013-end.

The power project is a 2x400 Mw natural gas-fuelled power plant on Jurong Island, Singapore, in which Malaysian petroleum major Petronas has a 30 per cent stake, which it will continue. Earlier, GMR had exited from another major global power project, Intergen Power Project, for close to $1.2 billion. As part of that exit from Intergen, GMR had retained Island Power during 2009 for around $10 million.

Following the fresh transaction in Singapore, GMR Infrastructure will have Rs 1,616 crore to be deployed into various other group activities, after settling various GMR Infrastructure-related liabilities. GMR’s move to exit this power project comes hardly a few weeks after it divested a 74 per cent stake in one of its other highway projects at a premium to a private equity fund – SBI Macquarie, for Rs 206 crore.

Senior group officials had earlier indicated that GMR Infrastructure intends to slash its debt levels by Rs 10,000 crore by the end of FY14 and has identified some key assets as part of this portfolio re-alignment.

GMR Infrastructure, which has interests across highways, airports and power projects, will be aggressively offloading stakes in the highway projects, besides the ones in power segment including three global coal mines that it has in South Africa and Indonesia.

During the past year, GMR’s various power projects were lying idle due to lack of fuel, while the highway projects were hit by litigations and delays in getting various approvals. The flagship airports vertical, too, has been weighing in heavily on its balance sheet, due to which the company has been in the red for most part of the past eight quarters. Last year, the company was also forced out of the $500-million Male International Airport Project.

The stock of GMR Infrastructure gained 3.8 per cent on National Stock Exchange to close at Rs 18.75 a share on Monday.