GVK Power and Infrastructure is seeking to raise $500 million to $600 million by selling a stake in its Singapore arm and is in talks with Government of Singapore Investment Corp for a potential deal, two sources with direct knowledge of the matter said.The Indian developer of airports, power projects, roads and mines will sell a minority stake in GVK Coal Developers (Singapore) Pte Ltd, the sources said, adding that a deal may be a precursor to a Singapore listing of the unit that holds coal assets in Australia.The sale will help fund the huge capital spending needed to develop the mines in Australia and reduce debt linked to the $1.26 billion purchase last year.GVK Power is looking to sell a stake in GVK Coal Developers as soon as possible, Group CFO Issac George said on Monday, declining to identify prospective investors or the potential size of a deal."There are people who have approached us, who have shown tremendous amount of interest," he told Reuters.A spokeswoman with the Singapore sovereign fund declined to comment.GVK acquired the Australian assets to secure long-term coal supplies for the group's power projects in India and to meet demand in other regional markets.Shares in GVK Power rose as much as 4.8 per cent on Tuesday, beating a 0.3 per cent gain in the broader Mumbai market, after the Reuters report on the likely stake sale in the unit.Still, the group's market value of $384 million is only a fraction of what it was three years ago.GVK Coal, whose Australian mines may produce 84 million tonnes of coal a year at full capacity, may have a bigger market value than its parent, one of the sources said, without elaborating.Indian infrastructure builders have been struggling because the government has been dragging its feet on project approvals.Private equity investments in Indian infrastructure slumped 60 per cent to $183 million in 10 transactions during the quarter ended March from $459 million in 16 transactions a year earlier, according to industry tracker VCCircle.com.Poor infrastructure is also a bottleneck to India's economic growth, which slowed to 5.3 per cent in the March quarter, the weakest annual pace in nine years.(Reuters)
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India on 17 July said it is eyeing a bailout for state electricity distributors saddled with Rs 1.9 trillion in debt and increasingly unable to pay for new supplies as they sell power below cost and lose much to theft.State governments would be asked to take half the debt load from the companies with the government offering to pay them subsidies to help retire a quarter of that amount over time, India's power secretary P. Uma Shankar told reporters.The lenders, many of which are government-owned banks, would be asked to restructure payments on the remainder of the debt to free up cash flow for the distributors, Shankar said.India, facing chronic power shortages, plans to add 88,000 megawatts (MW) capacity to its existing 200,000 MW in the next five years. But analysts say failure to charge the full price for electricity is unsustainable with rising costs for fuel.States would need to agree to the proposal for it be implemented.(Reuters)
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Making a case for increasing prices of petroleum products, the Reserve Bank today said price adjustment was needed to curb demand of fossil fuel."...in the absence of pass-through from international crude oil prices to domestic prices, the consumption of petroleum products remains strong distorting price signals and preventing the much-needed adjustment in aggregate demand," RBI said in its mid-quarter monetary policy review.The consequent subsidy burden on the government, it said, "is crowding out public investment at a time when reviving investment, both public and private, is a critical imperative".The central bank also pointed out that though international crude prices have fallen significantly from their levels in April 2012, the rupee depreciation has significantly offset its impact on wholesale prices.Further, RBI said that even at the current lower level of global crude oil prices, significant under-recoveries persist in respect of administered petroleum product prices.Oil marketing companies (OMCs), at present, (effective June 1, 2012) are incurring daily under-recovery of about Rs 457 crore on the sale of diesel, kerosene and LPG.The rupee has depreciated by about 20 per cent against the US dollar over the past one year.While OMCs are free to decide on petrol prices, the government continues to regulate prices of diesel, LPG and kerosene, which are being sold at subsidised rates.Diesel is the most consumed fuel in the country but is sold at a discount to its imported cost. The current diesel subsidy is Rs 12.53 per litre and on an annualised basis, this amounts to Rs 1 lakh crore out of the total fuel subsidy, estimated at Rs 1,78,498 crore in the current fiscal.(PTI)
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An Indian consortium said it was no longer considering making an offer for Britain's Cove Energy , confirming the battle for the Mozambique-focused explorer is a two-horse race between Thailand's PTT Exploration and Production and oil major Shell.India's Oil and Natural Gas Corp, through its Videsh unit, and GAIL India said in February they had teamed up to look at making an offer for Cove before saying on Monday, after three months of silence, that they were no longer mulling a takeover approach.The withdrawal of the Indian consortium leaves Shell and PTT vying for Cove, with the latter currently in pole position.PTT's $1.9 billion, 240 pence per share offer for Cove is higher than Shell's, although a number of analysts expect the oil major to return with a higher bid, possibly before the first closing of PTT's offer on Friday.At stake is access to East Africa's huge gas resources through Cove's 8.5 ownership of a block off the coast of Mozambique.East Africa is set to become one of the world's largest gas exporters supplying energy-hungry Asia, after a string of major discoveries across Mozambique and Tanzania.Shares in Cove, which continue to trade above the offer price on investor hopes of a higher bid, were up 0.9 to 266.25 pence at 1152 GMT.(Reuters)
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Planning Commission said on 16 July India will not be able to achieve $1 trillion target for investment in the infrastructure sector during the 12th Plan (2012-17) in view of lower economic growth prospects."The earlier figure was based on the 9 per cent growth target and if the growth target is less, it (investment target) does not have to be same number," Planning Commission Commission Deputy Chairman Montek Singh Ahluwalia said when asked about trimming of the infrastructure investment target."Obviously, if the five year perspective is lower than 9 per cent then investment requirement would also be lower. I don't think that USD 1 trillion should be seen as sacrosanct figure. I don't regard the $1 trillion figure as some kind of figure written in stone," he said."The figure was given two years ago when the rupee-dollar exchange rate was Rs 44. So we are calculating, what is needed in rupee. So the dollar equivalent of that is bound to change," Ahluwalia said.The Commission had set the $1 trillion target with an assumption that the economy will grow at the rate of 9 per cent during the 12th Plan period."The cumulative investment in infrastructure in the 12th Plan is targeted at around USD 1 trillion. Nearly half of this investment will be channelised into construction projects," the Commission had stated in its Approach to the Plan.The paper was approved by the country's apex decision making body National Development Council (NDC) last year.About the growth prospects, Ahluwalia said, "Given the situation around the world and our own domestic current growth prospects, I think achieving 9 per cent for five year average, is just not going to be feasible."The Commission was earlier eyeing annual average economic growth rate of 9 per cent during the 2012-17 period, which was also approved by the NDC last year.(PTI)
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The government has appointed eminent banker Deepak Parekh as the new Chairman of the high-level committee on Financing Infrastructure.The committee was set up in November 2010 under the chairmanship of Rakesh Mohan, former Deputy Governor of Reserve Bank of India.The committee was mandated to review existing policies and suggest necessary changes in the investment framework in the high-priority infrastructure sector.Parekh was appointed chairman of the committee earlier this month after approval from Prime Minister Manmohan Singh.Parekh, who is the Chairman of housing finance major HDFC Ltd, would function in an honorary capacity with the rank of a minister of state.Parekh is also a part of the sub-committee of the Prime Minister's council on Trade & Industry for promoting Financial Inclusion, besides being a member of the expert group on restructuring of Hindustan Aeronautics Ltd (HAL).Parekh is known for his frank views on various policy issues and has often been drawn in for consultation during crisis situations including in Satyam and UTI cases.While setting up the HLC on Financing Infrastructure, the government had said in November 2010 that it would have a tenure of 18 months.The other members of this committee now include R Gopalan (Secretary, Department of Economic Affairs), D K Mittal (Secretary, Department of Financial Services), insurance regulator IRDA Chairman J Hari Narayan, PFRDA Chairman Yogesh Agarwal, RBI Deputy Governor Subir Gokarn, SBI Chairman Pratip Chaudhuri and LIC Chairman D K Mehrotra.The other members include PFC Chairman Satnam Singh, ICICI Bank chief Chanda Kochhar, IDFC chief Rajiv Lall, as also Uday Kotak, G M Rao, G V Sanjay Reddy, Sonjoy Chatterjee and Madhav Dhar.Gajendra Haldea, Advisor to Planning Commission Deputy Chairman, will be the member-convenor of the committee.The special invitees to the committee include Railway Board Chairman Vinay Mittal, secretaries in power, road transport and highways, urban development, petroleum and natural gas, telecom and water resources ministries, Sebi Chairman U K Sinha, Finance Ministry's Chief Economic Advisor Kaushik Basu and the chief statistician TCA Anant.Among other things, the committee would make recommendations relating to financing of the projected investment of Rs 40,99,240 crore (over $one trillion) during the 12th Five Year Plan period (2012-17).(PTI)
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Edward Murphy would not be surprised. Everything that could have possibly gone wrong for Essar Oil in its wrangling with the Gujarat government over a Rs 6,300-crore tax dispute has gone wrong. The latest blow being the seizure of some of its bank accounts by the state last week.At the heart of the dispute is the company's poster project, its refinery at Vadinar, Gujarat, newly spruced up to refine 20 million metric tonnes (mmt) of crude oil annually; and a 1995 state government sales tax incentive scheme. The state claims that Essar Oil did not meet the conditions as the refinery was not operational by the stipulated time limit of August 2003 (commercial production started in 2008). Early this year, the Supreme Court ruled that Essar Oil was not eligible for the scheme, which left it with Rs 6,300 crore of dues, payable immediately. Adding salt to its wounds, the government demanded interest on the delayed payment, taking the total sum owed to over Rs 8,000 crore. This, for a company that made a profit of just Rs 400 crore last year from its normal operations. For the December quarter, it reported a loss of Rs 3,986 crore after it wrote off the tax part of the claim as loss as per accounting standards. That still leaves Rs 1,700 crore in interest claims, which will have to be written off in the current quarter. Predictably, the company's stock fell 30 per cent at one point of time before recovering about 18 per cent since the day of the Supreme Court verdict. The scheme allowed a company to retain the money collected as sales tax for 17 years. Essar Oil claims that it relied on a 2008 Gujarat High Court verdict that ruled it eligible, and that since the funds were invested in the project in the intervening period, it could not cough up the amount immediately. Click on the graphic to view an enlarged image Efforts to reduce the immediate cash outgo have been met with a stoic refusal by the government. The company wants the interest to be waived, and the principal repayment staggered over eight years beginning April 2013.The company knocked on the Gujarat High Court's door, only to be reprimanded for filing an "absolutely misconceived petition". The court took the view that as per the scheme, the company was supposed to invest the incentive in another project in the state, and not expand the same project (at the time of going to press, Essar Oil is locked in renewed negotiations with the state government).Meanwhile, in February, a claim of Rs 3,013 crore against United India Assurance for loss of profits in the aftermath of the 1998 cyclone was turned down by an arbitration tribunal. Silver Lining?At stake is the Rs 25,000-crore refinery, which the company claims is the second most advanced in Asia after Reliance Industries (RIL), at a complexity of 11.8 as per the Nelson Complexity Index. A higher complexity allows Essar to refine heavier (and thereby, cheaper) varieties of crude oil, thus improving margins to almost the levels at which RIL operates. The refinery was recently ramped up to refine 20 mmt annually, up from around 14 million in March. Click on the graphic to view an enlarged image This fact gives analysts comfort. Alok Deshpande, research analyst at Elara Capital, says the upgraded refinery can deliver on the operational front, and that the challenge would be to ensure that the exceptional items like the sales tax outgo are managed smoothly. "We are confident that lenders will extend the credit" L.K. Gupta, CEO, Essar Oil Goldman Sachs, in a report dated 4 May 2012, estimates that beginning this year, Essar Oil will be able to clock operational profits of over Rs 4,500 crore. That would still leave some money for shareholders after interest payment of up to Rs 2,500 crore. But here the assumption is that the company will be able to raise the funds to pay off the liability immediately.Essar Oil is in a tight spot. Its current debt of over Rs 13,000 crore mean it is leveraged almost four times. But debt is still its best option. With promoter holding at just under 90 per cent, fresh infusion of funds by promoters is not possible as public shareholding in listed companies has to be at least 10 per cent. While the company has announced an equity fund-raising of around Rs 3,000 crore, it admits that the process could take 12-15 months. Will it be able to convince lenders that it is worthy of additional funds? Lalit Kumar Gupta, Essar Oil's CEO, seems confident. "We have conveyed to our lenders that we may approach them for further funds, and we are confident that they will extend the credit." His optimism stems from the fact that the refinery is up and running, and will generate cash flows. He argues that if his lenders supported the company when the going was tough, why would they pull the plug when the future seems more certain. But what of Murphy's Law — if anything can go wrong, it will?abraham (dot)mathews (at)abp (dot)in(This story was published in Businessworld Issue Dated 23-07-2012)
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Faced with a public outcry over the steepest increase in India's history, petrol prices were on Saturday cut by Rs 2.02 per litre in a partial rollback of the Rs 7.54 a litre hike effected more than a week ago.The first reduction in rates in six months, that will result in price in Delhi going down to Rs 71.16 a litre with effect from midnight tonight from Rs 73.18 at present, is a fallout of a dip in international oil prices.Technically oil companies should have cut rates on May 31 -- the due date as per the practice of fortnightly revision -- but the announcement was deferred in an apparent bid to strip opposition BJP from taking credit for the move.NDA and Left had on Thursday organised a nationwide strike in protest against the hike, which had also come under sharp attack from allies like TMC and DMK and some ministers in the UPA.Petrol in Mumbai has been cut by Rs 2.12 to Rs 76.45 per litre while in Kolkata it has been reduced from Rs 77.88 to Rs 75.81. In Chennai, the price has been cut by Rs 2.13 to Rs 75.40 a litre.Saturday's decision will come as some relief for consumers battered by double-digit inflation and the May 24 hike - the first in six months and third in a year."It has been decided to revise the petrol prices downward by Rs 2.02 per litre (including state levies in Delhi)," Indian Oil Corp, the nation's largest fuel retailer, making an announcement on behalf of the industry, said."The decrease in other states will vary depending upon the rate of state VAT/sales tax".Oil companies had last reduced rates by Rs 0.78 per litre on December 1 and by Rs 2.22 a litre on November 16. The reductions had followed a Rs 1.80 hike in rates from November 4. .The Rs 7.54 per litre hike on May 24 was done considering an average gasoline price of $124.37 per barrel and a rupee-dollar exchange rate of Rs 53.17 in the first fortnight of May.Gasoline price have since fallen to USD 115.77 per barrel in the second fortnight but rupee-dollar rate has worsened to Rs 54.96 to a US dollar during the period.The fall meant that petrol rates be cut by Rs 1.68 per litre, excluding local sales tax or VAT. In Delhi, after including 20 per cent VAT, the reduction will be Rs 2.02 a litre."Petrol prices are reviewed on fortnightly basis. Since last pricing cycle, though international oil prices have decreased quite significantly, the USD-rupee exchange rate has shown further deterioration," the statement said.In addition, oil firms are losing heavily on diesel, domestic cooking gas (LPG) and kerosene, rates of which were last revised in June 2011."As compared with last price change, current revenue loss on diesel has gone up from Rs 6.13 per litre to Rs 12.53 per litre, for kerosene from Rs 24.16 per litre to Rs 30.53 per litre and for LPG from Rs 331.13 per cylinder to Rs 396.00 per cylinder," it said."At these rates, it is estimated that under-recovery (revenue loss) on sale of sensitive products during 2012-13 shall be around Rs 96,000 crore for IOC and Rs 181,000 crore for the industry," it added.Oil companies, it said, continue to closely monitor the international gasoline (petrol) prices and exchange rates to assess their potential impact on selling prices in future. (PTI)
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