Blackstone closes in on third India power deal

Reports added that the timescale for these investments would be three to five years.

This week Blackstone is expected to close its third deal in the sector in 15 months, with total expenditure already reaching $500 million. According to reports, the firm has signed a definitive agreement to pay INR500 crore ($111 million) for a 25.2% stake in Visa Power, the power generation arm of Kolkata-based conglomerate Visa Group.

The deal, for which JM Financial is believed to be the sole advisor, is the culmination of discussions stretching back more than a year. Visa Power’s core asset is a 1,200 MW coal-fired plant in Chhattisgarh, which is said to rely on a captive coal mine for much of its fuel, thereby minimizing costs. It also has 6,600 MW of capacity under development, including a 1,320 MW coal-based super critical plant in Orissa.

The power sector fits in well with Blackstone’s stated objective to target opportunities related to infrastructure development and domestic consumption in India. Last July, the private equity firm paid approximately $60 million for a 12.5% interest in Monnet Power, an independent power producer with a 1,050 MW plant backed by captive coal reserves in Orissa state as well as 2,000 MW in other thermal projects. 

It followed up one month later with a $300 million investment in Moser Baer Projects Private (MBPP), which plans to commission 4,000 MW of thermal power, 500 MW of solar and 500 MW of hydro capacity by 2016. In January of this year, Macquarie SBI Infrastructure Fund committed $129 million to the first phase of one of MBPP’s thermal energy projects.

Statements issued by Moser Baer, Blackstone and Macquarie all highlighted India’s energy shortages and the opportunities this offers to external investors. Power demand is growing at 6-7% a year and the country is already grappling with a 10% base load and a 13% peak load deficit.

In late June, the Indian government finalized the broad structure for an $11 billion infrastructure debt fund. The fund’s responsibilities would include plowing much needed capital into the power sector by supporting the construction of power-generation facilities as well as helping existing energy companies boost capacity. The government wants to attract long-term investors domestically and overseas.
According to Gautam Bhandari, head of infrastructure investment at Morgan Stanley India, $1 billion can fund 1,200 MW of power. But even if the entire fund was devoted to energy projects it wouldn’t solve “one-sixth of the problem.” 

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• Topics
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