Lanco's partner may exit Sasan

Question mark over showcase ultra-mega power project.

Six weeks after Lanco Infratech and Globeleq won the Rs 16,000-crore Sasan ultra mega power project, the Hyderabad-based company is planning to buy out its 70 per cent foreign partner.

A top Lanco executive confirmed the development and said, "If they decide to sell their stake in the project, we would like to buy it." However, he did not rule out the possibility of Globeleq offering the stake to a third party.

The executive added that the Lanco group was also considering bidding for some of Globeleq's Asian and African assets. "We have not yet begun valuation of those assets, he said."

Lanco bought the 220 Mw Kondapalli gas-based power project from Globeleq last November.

Globeleq's pullout is a part of a global strategy, devised by Lehman Brothers, to sell its assets. A Globeleq team is in the country to assess the possibilities. Globeleq is the investment arm of DFID, a development agency of the British government.

Globeleq and Lanco Infratech were awarded the first pit-head ultra mega power project at Sasan in Madhya Pradesh last December, with Globeleq as the lead developer. Though there were several suitors for the venture, the duo won the project with its aggressive price bid of Rs 1.196 per unit.

As the lead partner in the project, Globeleq has committed to investing 70 per cent of the equity, or Rs 2,240 crore, with Lanco investing Rs 960 crore. A recent KPMG report had said Lanco needed Rs 1,346 crore in equity for its existing commitments, besides the Sasan expenditure.

V K Garg, chairman and managing director of Power Finance Corporation, the nodal agency for the ultra mega power projects, refused to comment, saying the company was yet to receive formal communication from the bid winners on the issue.

He also refused to comment on whether the current bid would stand in the eventuality of a third party taking a stake in the project.

However, according to the terms of the bid, the winners have to complete the documentation process within 60 days of receiving the Letter of Intent.

Otherwise, they will have to forgo the Rs 120 crore they have deposited with the PFC. Power ministry sources said the project might then need fresh bidding.