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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Many developers are trying their best to create new zones and addresses across India that can appeal to HNI (high-net-worth individual) property buyers. This endeavour has met with varying degrees of success on the ground when it comes to swaying the ultra-rich clientele. Barring upgrades in design concepts and the addition of some new accoutrements to amplify a luxury lifestyle, the baseline concept of luxury homes has not materially changed in many cities. Prominent addresses or 'pin code value' still matter, and the ultra-rich are willing to pay extra premiums to get them.That said, cities like Delhi, Gurgaon, Bangalore and Pune have by now seen a high incidence of developers offering branded residences as alternatives to premium homes at the most sought-after locations within these cities. The success in swinging interest levels of the target clientele has varied markedly in tandem with the actual features being offered. While there is evidence of first-generation wealthy buyers evaluating and considering such options in these cities, the conversion rate among the historically rich has been negligible. The consensus among this segment is that branded residences offering very little value addition, and that the premiums charged on them are based on artificial factors that do not provide true value.Demand continues to be robust for options in bonafide premium locations of the key Indian cities, but newly tailored luxury addresses are also seeing their share of action as long as the projects on offer meet certain parameters. To begin with, deals conclude rapidly in sellers' markets where demand exceeds supply. Annual returns in such pockets are in the neighbourhood of 25 per cent, and this figure will continue to see northward movement over the coming years as supply constraint drive prices up further.In Delhi, the preference of HNIs when it comes to established and high-value locations is more or less inflexible. South Delhi is still the micro-market of choice for ultra-rich clients from Delhi, Punjab and Uttar Pradesh with budgets ranging from Rs. 50-300 crore. Golf Links in Delhi is a more vibrant market in terms of demand when compared to even to Lutyens Zone. Shantiniketan and Vasant Vihar are two other key HNI destinations where demand exceeds supply. Golf Links is actually the most sought-after location in South Delhi. Most other cities have similar pockets, but also show evidence of a certain degree of demand diversion to newer locations and concepts, which is not the case in Delhi.In Mumbai, with the Central Business District (CBD) shifting to BKC for all practical purposes, clients who would previously not have considered any options other than Malabar Hill or Nepean Sea Road zone are now evaluating newer areas like Worli, Bandra-BKC and Mahalaxmi as alternatives. Considering the limited supply in the historically prized locations, HNI buyers are looking for premium options that provide 24x7 security, a gated community experience and premium club houses as an amplification on their experiences in stand-alone buildings in the traditional premium areas.The arrival of K. Raheja Corp's ultra-luxury gated community Vivarea in Mahalaxmi, Mumbai has seen many wealthy south Mumbai residents accepting this as a luxury address in all respects. As such, K. Raheja Corp has definitely managed to create a new location that re-defines luxury in South Mumbai. There are similar examples in BKC and Goregaon, where Sunteck and Oberoi have played a similar role in creating new luxury housing addresses for HNI buyers - and in fact rebooting the whole concept of luxury living.Similarly in Bangalore, developers such as Total Environment and Chaitanya have provided the city with genuine luxury projects in brand-new premium locations. These developers have been instrumental in turning Whitefield into a high-value address and their completed projects command steep premiums. The offering, product design, specifications and buyer profile are remarkable enough to make a difference. Total Environment's project in one of the best luxury offerings in India, and demand for such projects in Whitefield significantly exceeds supply. Likewise, another project by this company has turned Bangalore's JP Nagar into a highly aspiration luxury destination which now commands the necessary clout of 'an address that matters'. What Ultra-HNIs Look ForUltra-rich buyers look at following parameters when it comes to buying a luxury residence:1. The Profile Of The Residents: It really matters whether or not you share the neighbourhood with the tycoons, celebrities and prominent CEOs of the city, as this makes a definite status statement and is also good for business. While ultra HNIs do gravitate to creamy layer environments for reasons of prestige, it is also true that many business deals are concluded at these residential locations during social interactions over weekends and holidays. In Delhi areas like Amrita Shergill Marg and Jor Baugh come readily to mind for these reasons. In Kolkata, Ballygunge and Alipore are practically defined by such a resident profile.2. Low Density: The rich and famous do not like to live in the crowded areas of a city, but prefer locations with lower population densities offer. For this reason, locations like Malabar Hill, Worli and Bandra Bandstand in Mumbai are traditionally locations where the rich pay very high premiums.3. View And Privacy: A sea view, a view of a golf course and a high level of privacy (integral to the concept of exclusiveness) matter a lot when it comes to defining luxury for India's ultra-rich. Luxury offerings in cities like Mumbai, Delhi and Bangalore rarely generate a lot of interest from the wealthy set of buyers if they do not score high on this aspect are addressed in most aspects. 4. Ready Access To The City's Nerve Centre: Apartments in Mumbai's legendary NCPA commanded highest premiums for various reasons, which included the profile of residents. However, their USP was that NCPA is closest to the erstwhile CBD of Nariman Point. Boat Club in Chennai and Golf Course Road in Gurgaon share this important attribute of proximity to these cities' 'centres of gravity. Mumbai's BKC area has become the new luxury address of Mumbai because the CBD as well as the Diamond Bourse have now shifted there.5. Overall Luxury Experience: The definition of luxury has been extensively abused in Indian real estate, and is being closely scrutinized by ultra-rich buyers when it comes to evaluating offerings. Luxury goes beyond club houses and the quality of fittings used in a project's apartments. Multiple aspects of a project are evaluated to discern if the 'luxury' tag indeed applies. Among notable success stories, One Avigna Park in Mumbai stands out as a clear winner when it comes to offering real luxury in most respects.It may seem strange that India's ultra-rich are indeed booking into luxury projects in new locations. However, this is nevertheless true in many cases such as Atmosphere on EM Bypass and Urbania by Bengal NRI, south of EM Bypass in Kolkata against the traditional luxury locations of Ballygunge or Alipore. However, this trend is catching on in cities where HNIs perceive a vacuum in terms of offerings at the traditional premium locations.The author is CEO - Residential Services at JLL India
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