Indian energy producer Reliance Power Ltd. plugged into an 1,800 megawatt surge on Monday with a deal that is set to make it the largest private sector hydroelectricity provider in the country.
Reliance, part of Anil Ambani's Reliance Group conglomerate, said it signed an exclusive memorandum of understanding to acquire the entire hydropower portfolio of Jaiprakash Power Ventures Ltd., a subsidiary of Jaiprakash Associates Ltd., also known as the Jaypee Group. It did not disclose the price of the acquisition, but said the portfolio was in full operation and together had an asset base of more than 100 billion rupees ($1.66 billion).
Indian media put the price at about $2 billion.
Two of the three assets in the portfolio were the subject of a $1.6 billion bid led by Abu Dhabi National Energy Co. PJSC, or Taqa, which collapsed last week.
Taqa and its co-investors, Canadian institutional investor Indo-Infra Inc. and Indian mutual fund IDFC Alternatives, signed a deal in March to acquire two plants with a combined capacity of 1,391 MW. But last Thursday, JPVL informed the market that Taqa had pulled out of the deal, citing changes in business strategies and priorities. The Indian company said Taqa would be liable for a breakup fee for the decision.
The seller will use the money to reduce debt, Reliance Power said.
The announcement lit up Reliance Power's share price, which rose 3.2% to finish the day at Rs94.00.
The deal came as General Electric Co. announced that its GE Energy Financial Services unit had invested an undisclosed amount in three wind projects under construction in India. The investments are in farms being built by regional energy player Atria Power in the states of Madhya Pradesh and Andhra Pradesh. GE said the windfarms will have a combined capacity of 126 megawatts and will support the Indian Ministry of New and Renewable Energy's program to generate grid-interactive windpower through feed-in tariffs. Atria was advised on the deal by Bangalore-based Kin Advisors LLP.
Reliance Power said the Jaypee acquisition would be made through 100% subsidiary CleanGen Ltd. It said each of the power plants in the portfolio had an asset life of over 50 years and used run-of-the-river technology to convert natural water-flow to electricity, "eliminating the need for a large reservoir."
The three plants -- the 300 megawatts Baspa Stage II, the 1,091 megawatts Karcham Wangtoo and the 400 megawatts Vishnuprayag installations -- together provide power to much of North India, including the most populous state Uttar Pradesh, as well as Punjab, Haryana, Rajasthan, Himachal Pradesh and Uttarakhand.
The portfolio is already the largest privately held hydropower business in India. But Reliance Power said it also has a further 5,000 megawatts of hydroelectric capacity under development, and the combination will further diversify its largely coal-based operations.
Reliance Power and rival electricity producer Adani Power Ltd., both of which are listed on the Indian exchanges, moved swiftly to enter the fray when the Taqa consortium pulled out. Indian financial publication VC Circle said Reliance Power won the deal both on valuation and certain other terms of the transaction.
British private equity firm 3i Group plc retains a small stake in Adani after selling part of its holding earlier this year.
Reliance Power is advised by SBI Capital Markets Ltd.
Separately, private equity firm Apax Partners LLP announced the acquisition Monday of an 8% stake in Cholamandalam Investment and Finance Co. Ltd., the financial services arm of India's Murugappa Group. Apax said it is investing Rs5 billion ($84 million) in a preferential issue of compulsorily convertible shares, which will convert into equity after a year and carry a 1% dividend coupon. The capital infusion will enable Chola to continue to grow its business rapidly in a recovering macroeconomic environment in India and to augment its Tier 1 capital adequacy ratio, Apax said.
Chola is a financial services provider offering products including vehicle finance, home loans, home equity loans and SME loans. Chola operates from over 575 branches across India with more than Rs250 billion in assets under management.
Kotak Mahindra Capital Co. was Apax's financial adviser. Khaitan & Co. and Kirkland & Ellis LLP provided legal counsel to Apax. Axis Capital Ltd. advised Chola.
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