INDIA BUSINESS WORLD - DECEMBER 16th - DECEMBER 31st
- 2007
US CO TO SET UP $2.75-B POWER PROJECT IN MADHYA PRADESH
US-BASED ISN International company is setting up a $2.75 billion power project in Madhya Pradesh with 57% foreign equity holding. The 2,000 MW thermal power project, though smaller in size compared to the ultra mega power projects on the anvil, would be as big as the jinxed gas-based Dabhol power project in Maharashtra. The project which is estimated to involve investments worth Rs 11,000 crore is promoted by ISN International led by NRI woman entrepreneur Roma Malkani.
As part of an international bidding, ISN International was selected for the project in the mid 90s by the state government of UP. The inter-state mega project could not take off during that time due to pending clearances, lack of a suitable site and coal linkages for raw material. Now, the formalities for financial closure are expected to be completed by next month and payment for purchase of land is projected to be completed by the end of April'08. According to sources, ISN has formed an Indian company ISNI Electric Power Company and now looking at bringing in foreign equity worth Rs 1,867.15 crore constituting 57% of the company.
The remaining stake would be held by resident shareholders who would get 23% equity stake through investments of Rs 753.41 crore and 20% preference shares worth Rs 655.14 crore. It is not clear whether ISN International would invest directly for the foreign equity component or bring in external investors. The equity participation from local investors has also not been finalised.
The total equity component of the project would be Rs 3275.7 crore which would constitute 30% of the project cost. The remaining 70% or about Rs 7,643 crore would be raised through borrowings. Of the total borrowings, about $1.1 billion is proposed to be raised through external commercial borrowing and the rest through other financial institutions.
Power sector has been attracting huge investments, both domestic and foreign, given the supply demand gap in the country. For instance, during 2007, the power and energy sectors witnessed merger & acquisition deals worth $3.8 billion in addition to private equity deals worth $ 681.5 million, according to data compiled by advisory firm Grant Thornton. Power sector companies have also been enjoying high valuations in the Indian stock markets.
It is learnt that land for the ISN project has already been allotted, which is located at Siddhi in Madhya Pradesh. However, the acquisition process for the land is still on. The financial closure of the project is expected in 3-4 months time. The promoter of ISN International Rama Malkani left India in the 1960s and later formed Information Systems & Networks Corp in the US. The firm, which provided engineering services to federal and state governments over the years grew to become one of the largest woman-owned US government contractors.
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