Adani Power is all set to acquire Avantha group's Korba West Power, a wholly owned subsidiary of Avantha Power that has an installed generation capacity of 600 MW in Chhattisgarh and is implementing another 600 MW in the second phase for an enterprise value of about Rs 3,900 crore.
"Gautam Thapar-controlled Avantha Group is set to exit from the power generation business. The deal with Adani Power is almost final as both sides have agreed on the broad contours and is likely to be signed early this week," said one of the persons cited above.
"Avantha Power is also in serious discussions with the consortium of Tata Power and ICICI Venture for its second half--Jhabua Power that is implementing 1,260 MW thermal capacity in two phases of 600MW and 660 MW in Madhya Pradesh," the second person said. "The deal with Tata Power-ICICI Venture is likely to take a couple of weeks and would also be in the range of about Rs 4,000 crore." ET had first reported this on November 4.
The second divestment will mark the Avantha Group's exit from the power generation business. Avantha Power had unsuccessfully planned to enter the capital market in 2010. Subsequently, it raised $125 million from US-based leading private equity firm Kohlberg Kravis & Roberts (KKR) in two phases. KKR picked up a stake of about 19%. The investment by the private equity firm was in the form of structured instruments, giving a assured return of around 16%. Avantha and Adani spokespersons didn't respond to queries.
"From the entire proceeds that will accrue from divestment from Korba and Jhabua, Avantha Power will repay about Rs 1,000 crore to the PE fund against its investment of $125 million," .
This will be the second major acquisition by Adani Power since August, when it had entered into a definitive agreement to acquire Lanco Infrastructure's 1,200 MW Udupi thermal power plant in Karnataka for Rs 6,000 crore.
For the Adani group, this acquisition will further consolidate its position as an independent power producer in the country. In April this year, the Adani group announced it had become the largest private power producer in India, with an overall installed capacity of 8,620 MW.
Billionaire Gautam Thapar, who has interests in electrical goods, engineering and paper, has been trying to reduce his group's debt by selling assets. Earlier, Avantha hived off the consumer goods business of Crompton Greaves and sold its chemicals business to Aditya Birla Chemicals for Rs 133 crore. "These deals indicate that the power sector in India is undergoing through a major consolidation phase in which Indian promoters are buying out some of the stressed promoters. These acquirers are pursuing their expansion plan through the acquisition route to ramp up their capacity and save time," said a top banker associated with one of these deals.
Earlier this month, JSW Energy, controlled by billionaire Sajjan Jindal, acquired two of Jaiprakash Power Ventures' hydro power plants, with a combined capacity of 1,391 MW, for Rs 9,700 crore.
Tata Power, which has been seeking to expand capacity through acquisition, has tied up with ICICI Venture to take over troubled power plants that have been short circuited by regulatory uncertainties, fuel supply disruptions, low demand and high debt. The plan is that ICICI Venture will be responsible for organising debt and equity funding for the acquisitions while Tata Power will handle operation and maintenance.
Tata Power, which is present in generation, transmission as well as distribution, will use its expertise to resuscitate troubled power assets. Analysts tracking the power sector say the Tata group company has enough financial resources to buy Avantha Power and can reduce risks.
Source - ET