INDIA BUSINESS WORLD - AUGUST 2006
THE MONTH THAT WAS...

FOREIGN PE COS FIND POWER HOT

THEY could turn out to be the new batch of power-puff funds. Foreign private equity (PE) funds led by Warburg Pincus, Actis, Citigroup, Temasek, Government of Singapore and Clearwater are in talks with leading power companies such as Tata Power, Reliance Energy and GVK Power & Infrastructure (GVKPIL).

PE funds are beginning to show an appetite for infrastructure sectors like power, aviation and roads, and you could be talking big money here. The government's recent moves to whip up investment in the power sector through ultra mega power projects (4,000 mw and above) have caught the attention of power majors and PE funds alike.

"We had some preliminary discussions with major funds. The foreign PE players wanted to understand what are the new opportunities available for investment in the power sector," said S Ramakrishnan , executive director, Tata Power.

Some of these funds are particularly interested in sustainable energy projects like the ones being built on coal rejects. The Tatas, for instance, operate about 2,000 mw on such fuel, which is primarily a residual product of coal after it is used in steel plants. “We have almost 2,000 mw captive capacity based on this fuel, and PE funds are showing great interest in such projects,” a senior Tata Power official said.

Senior officials from GVK group said they had made presentations to PE investors in Mumbai. "Many of them are keen to invest in power projects that are built under the competitive bidding process," said an official. GVKPIL, which is currently in the process of integrating itself with half-a-dozen unlisted group companies in the power and infrastructure sectors, is also planning to offload around 15% stake to PE investors, post-restructuring. An official said the wholly-owned family business wants to keep its stake at 51% in GVKPIL and offload up to 15% to one of the investors.