Wednesday, July 22, 2009

Developments in Cuddalore power project

Sivasankaran looks south for power play - LiveMint

The ace deal maker could take a 26% stake in the 4,000MW project being developed by IL&FS in Tamil Nadu

Baiju Kalesh

Mumbai: Investor C. Sivasankaran, known for buying companies low and selling high, is in talks to buy a 26% stake in a 4,000MW power plant at Cuddalore in Tamil Nadu, promoted by Infrastructure Leasing and Financial Services Ltd, or IL&FS, three people familiar with the development said.

Sivasankaran, chairman of the Sterling group that operates in businesses as diverse as mobile telephony and coffee bars, will buy the stake through an unlisted group company, Siva Ventures Ltd, they added.

IL&FS, one of India’s leading infrastructure development and finance firms, will build the power project in four phases of 1,000MW each, at an investment of about Rs18,000 crore, a senior IL&FS executive said. Going by the IL&FS estimate, the cost of production of 1MW would be around Rs4.5 crore.

“Sivasankaran is one of the investors and we are taking to eight others,” added the ILF&S executive who asked not to be identified as the deal has not yet been signed with prospective investors.

One of the two other people mentioned in the first instance is involved with the proposed power project and the other is close to Sivasankaran. Both asked not to be identified because the deal is yet to be signed.

IL&FS and Siva Ventures will hold 26% stake each in the proposed power project, the largest private sector power plant in the southern state, and the remaining 48% stake will be sold to several domestic and international investors.

Vaidyanathan Srinivasan, Siva Ventures’s director, said over the phone: “As a private equity fund, we look at various projects. Some discussion must have taken place but nothing has happened as yet.”

At a debt-equity ratio of 70:30, the Rs18,000 crore project will need Rs5,400 crore equity. For their 52% stake, ILF&S and Sivasankaran will bring in Rs1,404 crore each as equity.

The 3,960MW Sasan ultra mega power project in Madhya Pradesh, one of India’s largest coal-based power projects, promoted by the Anil Dhirubhai Ambani Group, has a 75:25 debt-equity ratio. It has recently achieved its financial closure. While banks and financial institutions will lend Rs14,550 crore, the promoters are chipping in Rs4,850 crore in the form of equity.

IL&FS and Sivasankaran have begun discussions with Indonesia’s Bumi Resources Tbk, Asia’s largest coal miner, to source coal for the project and are also scouting for coal mines in Indonesia, Australia and Africa, one of the three people said.

Tata Power Ltd, India’s second largest utility firm by sales, has purchased a 30% stake in Kaltium Prima Coal and Arutumin Coal mines in Indonesia that entitles the company to source 10 million tonnes of coal to fire its 4,000MW ultra mega power project near Mundra port in Gujarat.

The relationship between Sivasankaran and IL&FS dates back to 2000 when the financial institution lent Rs100 crore to Aircel, a cellular firm Sivasankaran sold to Maxis Telecommunications Bhd of Malaysia in 2005.

IL&FS had won a mandate to raise $400 million for the telco from private equity funds and financial investors but Sivasankarn sold his firm before this transaction was completed.

Tamil Nadu has been keen to promote private sector investment in power to bridge its 1,700MW deficit that sometimes causes power cuts as long as eight hours a day.

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