Infrastructure conglomerate GMR has decided to sell Emco Energy Ltd, which has a 600 mw power plant in Maharashtra, part of an exercise to reduce debt.
GMR has mandated global investment bank JPMorgan to help sell the recently commissioned unit, several people with direct involvement in the discussions said. They add that early talks have been held with several global and local utility companies as well as infrastructure buyout funds.
GMR Energy — the energy subsidiary of the listed GMR Infrastructure — owns 100% in the project. The highly indebted Hyderabad based group has been selling assets, including road projects in India and power and mining ventures abroad, in order to cut debt.
Emco is a 600 mw coal fired project located in the Chandrapur district of Maharashtra. In August this year, the 2x300 mw plant was commissioned and synchronised with the grid becoming GMR's first thermal project to commence commercial generation. What makes Emco attractive to potential suitors is the fact that it has signed fuel supply agreements (FSAs) for the entire 600 mw, primarily from Coal India and from imports. Further, it has long-term power purchase agreements already in place for 400 mw with Maharashtra and Dadra & Nagar Haveli and is in advanced negotiations with the Tamil Nadu SEB for off-take of another 150 mw.
According to company officials, the total project cost is Rs 3,948 crore ($658 million), out of which Rs 880 crore is equity while the rest has been funded by debt from Indian lenders like Axis BankBSE -0.36 %. Sources said GMR is expecting an enterprise valuation of 1.5 to 2 times the equity book value of the project, translating to Rs 4,388 crore to Rs 4,828 crore. At the end of Q2 FY14, Emco's top line was Rs 1,730 crore. A GMR spokesperson responded to by saying as a matter of policy, the company would not comment on speculation.
"There will be enough takers for Emco since it is an operational asset with signed FSAs and PPAs. Investors are looking for commissioned assets where the risks are all boxed in. Even infrastructure PE funds would be willing to pay a premium for such assets which are few and far between," said Vibhor Singhal, infrastructure analyst at PhilipCapital.
No comments:
Post a Comment