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Power firms jostling for bigger market shares

Analysts believe that the new govt and its policy initiatives have made established power companies optimistic

Abhineet Kumar  |  Mumbai 

When a consortium led by Abu Dhabi’s (Taqa) announced in March it was acquiring Jaiprakash Power Ventures’ two hydroelectric plants that can produce 1,392 Mw, it was an opportunity Indian power producers missed for consolidation.

Earlier in February, Singapore’s bought a 45 per cent stake in a 1,320 Mw thermal power plant being built by at Nellore in Andhra Pradesh. Last December, French player acquired a 74 per cent stake in a 1,000 Mw thermal power project of in Andhra Pradesh.

But as soon as Jaiprakash Power Ventures’ plants were back on the block in July with cancelling the deal, Reliance Power, and joined the race. This time, Manoj Gaur, promoter of Jaiprakash Power Ventures, threw in another plant. bought the three plants with a combined capacity of 1,800 Mw.

“The new government and its policy initiatives have made established power optimistic. The rally on the stock markets has also improved their ability to raise funds,” said Bhargav Buddhadev, an analyst with Ambit Capital.

Over the past decade many infrastructure diversified into power, seeing an emerging opportunity. Some of them now want to get out.

For instance, has been selling power projects to trim debt. It has sold a natural gas power plant in Singapore. Now it has put Emco Energy, a 600 Mw thermal power plant in Maharashtra, up for sale.

On Wednesday, Lanco Infratech sold its 1200 mw Udupi power plant in Karnataka to at an enterprise valuation of Rs 6,000 crore.

“There are lot of conversations happening and you will hear of more deals in the next nine months than were announced over the past four years,” said Ajay Saraf, executive director at investment bank ICICI Securities.

State-owned power producer NTPC estimates there is 55,000 Mw of power projects awaiting buyers, of which 8,000 Mw is buyable in terms of clearances.

“There is a growing confidence among local and overseas investors to pursue acquisitions in the power sector, but I have no illusions that the deal cycle will be long,” said Kameswara Rao, leader for energy, utilities and mining at PwC India. “This is because a wide range of policy, regulatory, fuel, and commercial issues need to be worked out before a deal concludes.”

But this has not deterred like Other companies like Tata Power are de-leveraging their balance sheets by selling non-core assets. Last month, the Tata Group company brought down its holding in Indonesian coal mine KPC to 25 per cent by selling a 5 per cent stake to raise $250 million.

“There are players trying to sort out their internal capital structure before they can go out again for acquisitions,” said M K Sinha, managing director of IDFC Alternatives. “Domestic consolidation is a strong way to describe it, opportunistically people will buy each others’ assets.”

First Published: Thu, August 14 2014. 00:44 IST