Private equity (PE) player Blackstone Advisors India Pvt Ltd has backed out of final stage talks to invest about Rs 500 crore in Kolkata-based Visa Power’s 1,200-Mw power plant in Chhattisgarh.
Blackstone, which had been in talks for the last six months, decided to back out when Visa Power started negotiating with other PE firms in parallel for a better valuation, said sources familiar with the development. According to them, Blackstone always wants an exclusive negotiation with portfolio companies without interference by other PE firms. JM Financial was the advisor to Visa Power for the fundraising.
Visa Power, part of the Rs 5,000-crore Visa Group, had inked a memorandum of understanding with the Chhattisgarh government in 2007 for setting up the 1,200-Mw coal-based independent power plant. The plant, which has been allotted 99.12 million tonnes of coal from the Fatehpur East Coal Block, has an estimated project cost of Rs 6,200 crore.
| TOP PE DEALS IN POWER GENERATION SPACE | ||
| Buyer | Target | Deal size |
| 3i India, Actis, GIC | GVK Energy | 326 |
| Blackstone | Moser Baer Projects | 290 |
| Temasek | GMR Energy | 200 |
| Macquarie- SBI Infrastructure | MB Power Madhya Pradesh | 130 |
| Figures in $ mn Source: VCCedge | ||
Vikas Agarwal, managing director of Visa Power, did not respond to queries, while a Blackstone spokesperson said, “As a policy, we do not comment on market speculations.”
The company is executing projects of 2,520 Mw in Chhattisgarh and Orissa, while projects of 5,280 Mw in Jharkhand, Madhya Pradesh and Gujarat are under the planning stage.
The power generation space is one of the hottest destinations for private equity investments. According to a recent Bain & Company report, the share of PE/venture capital investments in the power sector was just 10 per cent of the $4-billion investments in the infrastructure space in 2007. It grew to more than 50 per cent of the $4-billion investments in the infrastructure space in 2010. While the 2010 calendar year witnessed 15 deals worth $1.1 billion in the power generation space,
2011 has so far witnessed 11 deals worth $370 million.
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In one of the largest investments in the power space, Blackstone invested $290 million in Moser Baer Projects Pvt Ltd in 2010. In the same year, it also invested $59 million in Monnet Power Co Ltd.
“The opening up of power trading, allocation of captive coal mines and open bidding for power projects have created different types of companies across the value chain, which has sparked increased investor interest. The Electricity Act, along with the policy changes during the past three to five years, has triggered significant capacity addition,” the report said. As of January, the private sector had accounted for more than one-third of the incremental installed thermal and hydro capacity under the 11th Five Year Plan, it added.
However, investment in the power sector, envisaged at Rs 10 lakh crore for the current plan period (2007-12), is facing a 40 per cent funding gap. The installed capacity in the power sector has grown from 1.2 lakh Mw in January 2006 to 1.7 lakh Mw in June 2011.