Acquires 540MW Thermal Project In Maharashtra From IRB Infra Promoters
Tata Power's move comes close on the heels of JSW's purchase of a 1,391-MW unit (from Jaypee), Adani's acquisition of 1,200-MW and 600-MW plants (from Lanco and Avantha respectively) and GDF Suez's deal for a 1,000-MW facility (from a Hyderabad-based infra company).
Tata Power, part of the Tata business conglomerate, is acquiring the thermal-based power project from the promoters of IRB Infrastructure, which will increase its total capacity to 8,885 MW . It is learned that the Tata company has inked the deal for about $500 million (Rs 3,000 crore). However, it didn't disclose the value of the proposed transaction.
The power sector -which has been short-circuited by regulatory uncertainties, fuel supply disruptions and high debts -has seen M&A deals worth more than Rs 22,000 crore (over $3.5billion) in the recent past as big players consolidate their business.
Kameswara Rao, leader (power and mining), PWC India, said, “There are two sides to this trend. While on the one hand, large power companies are consolidating their positions, on the other, companies faced with financial pressures are exiting the business as part of their non-core strategy .M&As in the power sector, as a percentage of total private sector investments, however, have been small.“
Rao further said, “Power projects have been bogged down with regulatory issues and the buyers are making a judgment call on the deals and, if there are problems, they then adjust it in the final price. Similarly , big players could have done a lot of M&As but the acquirers themselves are in distress.“
In a regulatory notice, Tata Power said that out of the 540MW project in Nagpur, Maharashtra, 270 MW was commissioned in May 2013 and is fired by domestic coal. About twothirds of India's installed capacity is fuelled by thermal sources, mainly coal.
Tata Power, which until recently was the nation's biggest private sector electricity producer, has been dislodged by Adani Power, which now has a capacity of 11,040 MW . Shares of Tata Power closed at Rs 87, up nearly 2% in a firm Mumbai market. Tata Power has been clocking losses for the past three fiscal years, mainly because of below-cost sales at its 4,000-MW Gujarat plant.
