Essar Power To Become Pvt Company

The Ruias of Essar have decided to convert Essar Power into a privately controlled company after their special purpose vehicle, Prime Hazira, secured government permission to hike its stake to 100 per cent in Essar Power.

Prime Hazira, owned by Prashant Ruia, Essar group director and son of chairman Shashi Ruia, holds 49 per cent in Essar Power. Essar Steel and Essar Oil holds the rest. Ruia holds his stake in Prime Hazira through Prime Asia NV of Netherlands Antilles.

The move will make Essar Power, which runs a 515 MW power plant in Gujarat, a Ruia family company. The exact amount to be paid by the Ruias for the stake hike is not known but it is stated to be between Rs 260 to Rs 275 crore.

 

In 1996, the Ruias desubsidiarised Essar Power by infusing fresh equity of Rs 178 crore into the company. This brought down the holding of Essar Steel to less than 51 per cent and Prime Hazira picked up 40 per cent consisting of 17.8 crore shares. They later increased it to 49 per cent.

The deal had evoked considerable protest as investors and analysts claimed that Essar Steel shareholders had been robbed of a good deal. Prime Hazira had picked up the equity Rs 10 per share and critics said it was too low a price for a company which has independent power producer (IPP) status.

Prime Hazira now holds around 25 crore shares of Essar Power's total equity base of 52.3 crore shares. The Ruias propose to do the new transaction also around Rs 10 per share. The move is likely to ignite a fresh controversy.

When contacted, an Essar spokesperson yesterday denied that Prime Hazira was involved in the deal. He said the company had only taken enabling permission from the Foreign Investment Promotion Board as the government permits 100 per cent holding in power generation companies. "Several foreign companies have expressed interest in picking up stake. We have not concluded any deal with them," he added.

The Ruias were supposed to offload their 49 per cent to a foreign power major. Talks were initiated with three British companies Powergen Plc, British Gas and lately the Royal Dutch\Shell group.

Top power sector analysts said yesterday that Ruias may have hiked the stake purely to get a better price from the foreign negotiators. "Some of these companies would have been reluctant to pay a high price for a 49 per cent stake. So, the Ruias would have decided to hike it to 100 per cent to get a better bargain.