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Power sector sees $4 bn consolidation in 4 months

About 55,000 Mw of power capacity is up for sale as weaker players need to sell-off to de-leverage

Abhineet Kumar  |  Mumbai 

became the third domestic utility this year to join the ongoing consolidation race in the by acquiring the 540-Mw plant in Maharashtra from IRB group firm Ideal Energy Projects. The deal is estimated to be worth Rs 3,500 crore.

With this, the Indian has seen near $4-billion (Rs 24,000-crore) consolidation in the last four months as assets in the industry move from weaker to stronger hands.

In November, JSW Energy announced it had acquired two hydroelectric plants from Jaiprakash Power Ventures with a combined capacity of 1391 Mw for Rs 9,700 crore. The month also saw acquiring the 600-Mw Korba West plant from the Gautam Thapar-led Avantha group for Rs 4,200 crore. A Gautam Adani-promoted company had in August acquired a 1,200 Mw plant at Udupi for Rs 6,000 crore from the debt-laden Lanco Infrastructure.

“Clearly, there have been stressed assets in the market and now they are available at reasonable prices as banks tighten the noose on their promoters,” says Ajay Saraf, executive director at homegrown investment bank ICICI Securities.

Many infrastructure diversified into power over the past decade, sensing good opportunities. These include Jaiprakash Associates, IRB Infrastructure Developers and GMR Infrastructure, which has put its 600-Mw thermal power plant in Maharashtra up for sale. The infrastructure now want to get out of power as their balance sheets are overstretched and lenders are pressing them to de-leverage.

The consolidation was long awaited and it gained momentum only after the new government was formed. Its policy initiatives have made established power optimistic. Also, the rally on the stock markets has improved their ability to raise funds.

“You can expect accelerated consolidation in the industry once the coal auction is completed next year,” says Saraf. After the auction, the winners will see if they can use the awarded coal blocks for other assets in the vicinity and that will accelerate the consolidation drive. Early this year, public sector utility NTPC said it had been approached to buy a total of 55,000-Mw capacity. This is estimated to be valued around Rs 4 lakh-crore.

“Earlier, fuel was the major issue coming in the way of consolidation in the industry,” says Bhargav Buddhadev, power analyst with Ambit Capital. “With Coal India seeing near 7.5 per cent growth in production volume and the coal mine auction in the offing, the drive will certainly accelerate,” he says.

  • AUGUST acquires 1,200-Mw Udupi plant from Lanco Infrastructure for Rs 6,000 cr
  • NOVEMBER acquires 600-Mw Korba West from Avantha Group for Rs 4,200 cr
  • NOVEMBER JSW Energy acquires 1,391-Mw from Jaiprakash Power Ventures for Rs 9,700 cr
  • AUGUST Adani Power acquires 1200-Mw Udupi plant from Lanco Infrastructure for Rs 6,000 cr
  • DECEMBER acquires 540-Mw thermal plant from Ideal Energy for estimated Rs 3,500 cr

First Published: Thu, December 11 2014. 00:45 IST