Piramal Enterprises and the the Dutch pension fund asset manager APG Asset Management on Wednesday (30 July) announced a strategic alliance for investing in rupee denominated mezzanine instruments issued by infrastructure companies in India with a target investment of US$ one billion over the next three years. PEL and APG have each initially committed US$375 million for investments under this strategic alliance.This will be one of the single largest commitments to date by a foreign investor to the infrastructure sector in India. The partners will focus on operational and near completion projects with limited execution risks and high visibility of cash flows coming from a portfolio of projects. The access to this source of capital will enable infrastructure players in India to retain their equity interest in the assets, while raising long term capital to help them complete their on-going infrastructure projects and enhance shareholder value, said a press release. APG Asset Management manages pension assets of €375 billion as at the end of June 2014. It represents over 30 per cent of all collective pension schemes in the Netherlands.Piramal Enterprises, which sold its pharmaceutical formulation business for about Rs.18,500 crore to multinational drug firm Abbott in 2010, is now looking at big investments in high growth sectors like infrastructure, knowledge management and financial services. It has done two structured investments last year, Rs 425 crore in Navyuga Road projects and Rs 500 crore in Green Infra. Piramal Enterprises also had started another joint venture reaI estate fund in February, with Canada Pension Plan Investment Board (CPPIB). The $500 million fund, with equal investment from both the parties, plans to offer project-level debt to local developers for residential projects in Mumbai, Delhi NCR, Bangalore, Pune and Chennai. Indiareit, a private real estate fund run by Ajay Piramal, was acquired by Piramal Enterprises in 2011. Currently it has Rs 5,000 crore under management and has exited a few projects fetching over Rs1060 crore.“This is an opportune time to be creating an aligned pool of capital to target what we believe to be very compelling funding opportunities in the infrastructure sector in India", said Ajay Piramal, Chairman of PEL. Dick Sluimers, CEO of APG said "In PEL, we found an aligned partner with the requisite expertise and industry knowledge to add value through active ownership, which is why we have teamed up with PEL for this strategic alliance in India. The strategy of the alliance to focus on mezzanine investments in infrastructure projects in India ticks the right boxes for our pension fund clients in terms of risk-return profile and high cash flow visibility.”Over $150 billion of equity and mezzanine funding is required to meet government target investment of $1 trillion until 2017, and this is the gap which our strategic alliance seeks to bridge, says Jayesh Desai, co-Head of Structured Investment Group (SIG), PEL. Macquarie Capital acted as the sole financial advisor for the transaction.
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The Indian power sector is going through a phase of consolidation whereby players with financing capabilities are acquiring projects from groups that have failed to manage their balance sheets.In this battle of consolidation, the Anil Dhirubhai Ambani controlled R-power managed to outbid other big conglomerates like Adani, Tata and JSW to enter in an exclusive deal with Jaypee Power Venture to acquire three of its operational hydro power plants with 1,791 mw generation capacity at a valuation of Rs 12,000 crore.According to industry sources, Adani group wanted to buy the same project for about Rs 11,000 crore. At the price of quoted by R-Power, it would not have been financially viable for Adanis to repay the debt and make returns on the project.As on March 2014, Adani Power had a debt of Rs 22,317.20 crore on its balance sheet. Its cash and bank balance were pegged at just Rs 412 crore at the end of FY14.For R-power, too, the deal will leverage the balance sheet of the country’s third largest private sector power generator by another Rs 9,000 crore by taking its debt to Rs 36,490 from 27,715 crore, reported in March 2014.The question here is how will R-Power fund this acquisition given that it has only Rs 3,000 crore worth of cash reserves. The company posted a profit of Rs 1,026 crore for FY14.According to industry sources, R-Power is already in talks with foreign banks for borrowing money to restructure their debt. In case the company raises money from Chinese banks for a low interest rate loan to fund its acquisitions, it will be the fifth time in three years, that R-Power will be knocking the door of Chinese banks.In January 2011, the company had taken a loan of $1,114 million from a consortium of Chinese banks to fund its Sasan thermal project. For the same project, the copany had raised funds from US Exim bank as well.In March 2011, R-COM had raised a debt of $1.93 billion from China Development Bank to fund its 3G spectrum acquisition. According to the group company, Reliance Communications saved more than Rs 500 crore ($111 million) annually by bringing down its cost of debt at 5 per cent.In January 2012, R-COM once again refinanced its foreign currency convertible bonds worth $1.18 billion dollars by a consortium of Chinese banks for the prominent Indian industrialist.The company saved an interest payment between 6-8 per cent for a loan of 7 years.While R-power has faced troubles for being aggressive in the past, as one of its UMPP (Krishnapattam) and a gas-based power plant (Samalkot) could not become operational for lack of fuel, the acquisition of the Jaypee’s already operational hydro project will be a positive for the company.
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In a bid to review Rajasthan's share of equity with the HPCL in the Rs 37,230-crore oil refinery, the ruling BJP government on Tuesday (29 July) told the house that a "consultancy firm" has been hired to review the financial aspects of the oil refinery and petrochemical plant.The plant's foundation stone was laid by the former UPA chairperson Sonia Gandhi at Pachpadra in Barmer district in September last year.Replying on the demands of grants on mining and industry after five hours of debate, minister-incharge R S Rathore said after giving free land, interest less loan of Rs 56,000 crore for fifteen years to HPCL to build the oil refinery-cum-petrochemical project of Rs 37,230 crore, it would give just 26 per cent of equity to the state.Thus, the state government hired the consultancy firm to review and propose new financial aspect of the oil refinery, Rathore, who is also Parliamentary Minister, said.Interrupting him, an Independent MLA M C Surana informed the house that there were reports that HPCL was ready to pay 50 per cent share in the business, on which Rathore said, "Wait, more will come out".Quoting recent figures of Cairn oil exploring targets, Rathore claimed that Rajasthan had got plenty of not only crude oil reserves but also gas reserves as Barmer-Jaisalmer basin would touch the production of 7.0 billion barrels from 4.6 billion barrels.Based on geological formations, Cairn also spotted new crude oil reserves in Fatehgarh, Dharvi-Dungar, and Barmer Hill (names coined in geological survey), the minister-incharge said, adding Cairn also found gas reserves of one trillion cubic feet. The minister said the state government would strengthen the "single window" with simplified rules and regulations to attract investment in the state.The state government would introduce Diploma in Mining at a college in Chittorgarh, and various other courses related to mining excavations, machines and tools in ITIs, he said.He also announced many concessions in mining lease and to create job employments in unorganised sector besides opening an attendance register for labourers working in the private mines.Rathore said the BJP government would open new avenues in mining in tribal-dominated areas, and gypsum field by giving mining lease to generate extra revenue.As proposed in the state budget 2014-15, the minister also underlined the concession and facilities to small, medium and big industries in textile, fibre and its raw material, garment export, food processing, and on the coming up Delhi-Mumbai Industrial Corridor (DMIC).Earlier in the day during call attention motion of BJP MLA G S Tiwari, Rural Development and Panchayati Raj Minister G C Kataria told the House that land allotted to people in Prathivi Raj Nagar in Jaipur would be regularised on priority without any further delay.(PTI)
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Anil Ambani Group firm Reliance Power (R-Power) on Sunday (27 July) said it has signed an initial agreement to acquire all the three hydroelectric power plants of Jaiprakash Associates Ltd. The Jaypee Group had announced on Thursday (24 July) that the Abu Dhabi National Energy Company (TAQA) was withdrawing from the nearly Rs 10,000 crore deal to acquire its two hydel power projects.The deal will make Anil Ambani's group the largest private hydropower provider in India.The companies did not disclose the terms of the deal but local media estimated the hydropower portfolio's value at around Rs 12,000 crore ($2 billion). The plants have a total capacity of nearly 1,800 megawatts."Reliance CleanGen Ltd (RCL), a 100 per cent subsidiary of Reliance Power Ltd, and Jaiprakash Power Ventures Ltd (JPVL), a subsidiary of Jaiprakash Associates Ltd (JAL), today announced the signing of an exclusive Memorandum of Understanding (MOU), for the 100 per cent acquisition by RCL of the entire hydroelectric power portfolio of JPVL," the company said in a statement here.JPVL's hydroelectric power portfolio has an aggregate capacity of nearly 1,800 MW, fully in operation, the largest in the private sector in India, and with an asset base of over Rs 10,000 crore.The portfolio comprises of the three plants, with an asset life of over 50 years, each using run-of-the-river technology to convert natural water flow to electricity, eliminating the need for a large reservoir.JAL intends to utilise the entire proceeds of the proposed transaction to reduce its outstanding debt, and thereby deleverage its consolidated balance sheet, Reliance Power said."The completion of the proposed transaction would make Reliance Power the largest provider of hydroelectric power in the private sector in India," it added.Currently, Reliance Power has hydroelectric power projects aggregating over 5,000 MW under development, of which 4,200 MW are located in Arunachal Pradesh, 700 MW in Himachal Pradesh and 400 MW in Uttarakhand.SBI Capital Markets Ltd are acting as advisors for the proposed Transaction.Manoj Gaur, executive chairman of Jaiprakash Associates, had said in March that the wider group planned to cut its Rs 62,000 crore of debt by Rs 25,000 crore by March 2015, largely via asset sales.Group debt currently stands at Rs 66,000 crore, television channel ET NOW reported. A spokesman for Jaiprakash could not immediately be reached to confirm the current size of its debts.Read Also: TAQA Pulls Out Of Power Deal With Jaypee Group(Agencies)
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The Jaypee Group on Thursday (24 July) announced Abu Dhabi National Energy Company (TAQA) is withdrawing from the nearly Rs 10,000 crore deal to acquire its two hydel power projects.Abu Dhabi National Energy Co (TAQA) told Jaiprakash Power that the decision was due to a change in the group's business strategy and priorities, Jaiprakash said in a stock exchange filing on Thursday.A senior TAQA official earlier told Reuters that it was exiting the deal, which was made public in March, because of "a change in strategy".The deal, announced in March this year, would have helped Jaypee Group to pare its debt.TAQA India Power Ventures Ltd has decided to withdraw from its agreement with Jaiprakash Power Ventures Ltd (JPVL) to acquire Baspa II and Karcham Wangtoo hydro projects in Himachal Pradesh, Jaypee Group said in a statement."It is unfortunate that the Abu Dhabi based company TAQA has decided to undo its agreement with Jaiprakash Power Ventures Ltd to buy 1,000 MW Karcham Wangtoo and 300-MW Baspa II projects due to a change in their business strategy and priorities," Jaypee Group Executive Chairman Manoj Gaur said.He also emphasised that the development would not impact its commitment to reduce debt to Rs 45,000 crore by March next year.The break up fee to be paid by TAQA is estimated to be over Rs 500 crore, a source said.The deal entailed selling JPVL's two hydel projects, together having a generation capacity of about 1,300 MW, for an enterprise value of Rs 9,689 crore.Describing the move as "sudden and unexpected", the group said it was informed by TAQA that they had some compelling reasons forcing them to review their investment strategy and opt out of the transaction.In a filing to the BSE, JVPL said that TAQA was "constrained to take the said decision as a result of a change in the business strategy and priorities of their group"."We recognise that TAQA has exercised the buyer's prerogative to opt out of the deal, but as per the agreement, they will have to pay to JPVL the break away fee," the statement noted.Manoj Gaur, executive chairman of Jaiprakash Associates, said in March the wider group planned to cut its Rs 62,000 crore of debt by Rs 25,000 crore by March 2015, largely via asset sales.Group debt currently stands at Rs 66,000 crore, television channel ET NOW reported. A spokesman for Jaiprakash could not immediately be reached to confirm the current size of its debts.TAQA is liable to pay a "break fee", Jaiprakash Power said on Thursday, without giving details.(Agencies)
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Independent regulators are expected to safeguard the interest of industry from the selfish motivation of politicians. But there is hardly any regulator in India that has lived up to the principles on which they came into existence. In the electricity sector it has been proved once again that regulators have hardly any say independent of the state governments, points out the latest report from research firm Icra.The Icra report shows that the state governments are paying a lip service to the conditions set to opt for the financial restructuring plan that allows restructuring of the debt of the state discoms. The State Electricity Regulatory Commissions (SERCs) also have not played their role in ensuring that the discoms maintain their freedom in running their business. In the current financial year, most of the state discoms have filed tariff petitions but only 16 out of 29 states have issued tariff orders for FY 2014-15, so far. Clearly, general elections have influenced the decision making of the SERCs.SERCs in seven states namely Arunachal Pradesh, Bihar, Gujarat, Jammu & Kashmir, Odhisa, Uttarakhand and Madhya Pradesh have not approved any tariff revision for the distribution utilities.Interestingly, Bihar had sought special status along with Odisha, Jharkhand and Andhra Pradesh under the FRP scheme and was allowed to convert its outstanding loans till March 2013 into bonds as part of an amendment to the discom debt restructuring package. The other states were allowed conversion of their debts till March 2012.Tamil Nadu, Rajasthan and Uttar Pradesh have not even paid the lip service to the conditions of FRP and have not issued the new tariff order for state discoms, so far.In Uttar Pradesh, where the duration of power cuts ranges between 7 and 12 hours during summer months, saw the state discom posting a loss of over Rs 9,000 crore at the time of opting for FRP in 2012.The less than required or no tariff revision will lead to an increased subsidy dependence of state discoms to the tune of Rs 72,000 crore in FY15. It is unlikely that the state government will pay the subsidy amount to their discoms upfront, leading to more power cuts in the coming times as power producing companies are getting stricter with their payment schedules.In 2001, based on the roadmap drawn by the Montek Singh Ahluwalia committee, the government offered a bailout package for cash-strapped state power utilities. The package was given to ensure that the dues owed to central public sector enterprises such as NTPC, NHPC and Coal India, amounting to over Rs 41,000 crore, were repaid.The centre on its part waived almost 50 per cent of the interest due. The remaining 50 per cent plus the principal due about Rs 33,000 crore — was to be securitised through tax-free bonds issued by the state governments.The plan failed to get the state discoms out of the red and the government had to come up with another plan called FRP. However, the present state of affairs hints at a similar fate for the FRP if the government does not ensure complete independence of the electricity regulators.
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In 2010-11, Ultratech Cement moved into a consolidation phase, merging Grasim’s cement business with itself and acquiring Dubai-based ETA Star Cement. The move helped Ultratech emerge as one of the top 10 cement companies in the world. In addition, chairman Kumar Mangalam Birla allocated $2.4 billion towards capital expenditure for the next three years in a bid to maintain the company’s leadership position.Ultratech’s revenues have increased at a compound annual growth rate of 30 per cent to Rs 20,077 crore in the last four years. Maintaining a profit of over Rs 2,000 crore in each of the past three years, the company has achieved a market valuation of over Rs 60,000 crore.Despite competition and inflationary pressures, the company has continued with its acquisitions and expansion and increased its cement-making capacity to 62 million tonnes per annum (mtpa) from 52 mtpa four years ago. “In the next two years, we expect it to touch 70 mtpa, when all ongoing projects are fully commissioned,” Birla said in the recent annual report.In the last financial year, Ultratech acquired the 4.8 mtpa Gujarat Cement unit of Jaypee Cement Corporation for Rs 3,800 crore as part of its growth strategy. It strengthened the company’s base in the growing western market, bolstered its coastal footprint and enhanced its exports. As part of its expansion plan, it commissioned a 10,000 tonnes per day clinker plant at Rajashree Cement Works in Karnataka, a 1.6 mtpa cement grinding unit in Odisha and thermal power plants of 30 megawatts at Rawan Cement Works and 25 megawatts each at Rajashree Cement Works and Andhra Pradesh Cement Works at a capex of Rs 2,562 crore. (This story was published in BW | Businessworld Issue Dated 11-08-2014) ]]> ]]> ]]>
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Energy conglomerate Reliance Industries (RIL) on Saturday (19 July) reported a 13.7 per cent rise in first quarter consolidated net profit, beating street expectations, on the back of higher refining margin. profit, helped by strong revenue growth in its refining and oil and gas businesses.Consolidated net profit in April-June quarter at Rs 5,957 crore was 13.7 per cent higher than Rs 5,237 crore in the same period a year ago, the company said in a filing to stock exchanges.Reliance, controlled by India's richest man, Mukesh Ambani and operator of the world's largest single location refinery complex, earned $8.7 for turning every barrel of crude oil into fuel in the first quarter of this financial year as compared to a gross refining margin of $6.7 a barrel a year ago.The total income increased from Rs 99,895 crore for the quarter ended June 30, 2013 to Rs 106,614 crore in April-June this year.Analysts on average expected the company, which operates the world's biggest refinery complex in a single location in western India, to earn a net profit of Rs 5614 crore, according to Thomson Reuters data.(Agencies)
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