INDIA BUSINESS WORLD - JULY 1st - JULY 31st - 2008
WARBURG PINCUS TO TAKE 10% IN MONNET POWER FOR RS 350 CRORE
PRIVATE equity firm Warburg Pincus is close to picking up 10% stake in Monnet Power, a subsidiary of Delhi-based Monnet Ispat & Energy for around Rs 350 crore. Monnet Power is in the process of setting up a 1,000-MW power project in Orissa and is sourcing funds for the same, sources close to the deal said.
Other PE firms such as Blackstone and IDFC were also in the race to pick up equity in Monnet Power. However, sources said, Warburg Pincus is likely to seal the deal. When contacted, Monnet Ispat & Energy executive vice-chairman and managing director Sandeep Jajodia declined to comment.
Monnet Power plans to raise Rs 600-700 crore, which will be used to part finance its power plants coming up in Andhra Pradesh, Maharashtra and Orissa. These plants will have a combined capacity of 4,000 MW and would require an investment of around Rs 15,000 crore.
The Indian power sector is looking to increase generation capacity to 78,000 MW by 2012 and it could see investments of $100 billion in next four years. India has a total generation capacity of about 1,45,000 MW and plans to add about 80,000 MW in the ongoing 11th Eleventh Five-Year Plan, which ends in 2012.
Major private equity players are actively involved in this sector with Goldman Sachs and Macquarie acquiring 40% equity in PTC Financial Services (PFS) in 2007 for about Rs 120 crore. Warburg has acquired 11.2% for $110 million in Havell’s power distribution arm and Blackstone holds 1.1% in Power Finance Corporation. ICSA India has said that Deutsche Securities Mauritius increased their stake in the company to 7.16% through open market purchases.
Companies in the mining, steel and cement and other industries are building up captive power units to feed their plants as this could lower their costs. It made great a lot of sense for companies in the steel and aluminium sectors to have their own source of power as electricity accounts for almost three-fourths of the total cost in a smelter.
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