Four-month-long negotiations between GVK Infrastructure and Dainik Bhaskar Power (DB Power) to buy the latter’s power plant have fallen through.
Sources close to the developments said GVK had been evaluating a Chhattisgarh-based 1,200 Mw power project that is being developed by DB Power, which has plans to set up 5,000 Mw of power capacity. DB Power is promoted by the Bhaskar Group.
The deal fell through following differences over the amount of coal allocated for the project. DB Power’s project comes with a captive coal mine with reported reserves of 100 million tonnes and it has a window to sell as much as 60 per cent of the power produced on a merchant basis.
In an emailed response, GVK said it did not want to comment on speculation. The Bhaskar Group did not respond. A senior company official said no such deal had been discussed in any case. He also said the group had completed land acquisition for the project and was in advanced stages of financial closure.
GVK, meanwhile, has already started looking out for more power plants that are under development. The advantage of such buys, industry experts said, was that it gives the company access to licences to develop power plants without having to bid or sign agreements with state governments, both of which are cumbersome and time-consuming processes.
GVK is looking out for a project that has considerable upside from merchant sales — as opposed to sales to state grids — to the tune of 40-50 per cent. Merchant power tariffs have been in the green in 2009 (at an average Rs 7 per unit) and experts said that would continue for two or three years more until a considerable chunk of power projects are commissioned.
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"The company is scouting for projects with higher merchant sales, preferably in south India and the east coast. Imported coal-based projects located on the east coast will be more economical," says the source.
GVK raised $150 million through a Qualified Institutional Placement in July last year and sources said it was planning to use these funds for its plan to buy a power plant.
Last year, Bangalore-based GMR closed a similar deal with Emco Energy, which has a 600 Mw plant under development in Maharashtra. Industry sources said there were many opportunities because several small companies and new entrants into the sector have found it diffcult to raise money and have put their assets on the block.