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Adani Transmission is now the largest private operator of power transmission networks in the country after buying the transmission assets of Reliance Infrastructure (R-Infra).
The Anil Ambani-promoted R-Infra has signed a binding agreement with Adani Transmission to sell its power transmission business and use the proceeds to pare its debt.
The company did not disclose the value of the transaction, but investment banking sources said it was expected to close at an enterprise value of over Rs 2,000 crore.
Adani Transmission recently also bought the transmission projects of GMR Infrastructure, taking its cumulative network to 10,800 circuit kilometres (ckm). Of this, 2,921 ckm are captive lines of Adani Transmission. Sterlite Power owns 7,000 ckm of independent transmission networks.
Sterlite Power owns 7,000 ckm of independent transmission networks. The other major players are Essel Infra, KEC and Kalpataru Power. State-owned PowerGrid Corporation is the largest power transmission company in the country, with a network of 131,000 ckm.
Gautam Adani, chairman of the Adani Group, said in a statement, “Adani Transmission will enjoy substantial benefit of scale and this is in sync with the company’s strategy to enhance value for stakeholders through organic and inorganic growth.”
Shares of Adani Transmission closed at Rs 43.05, up 2.95 per cent, and those of Reliance Infrastructure closed at Rs 591.05, up 1.30 per cent, on the BSE.
This deal also signifies power sector majors are shifting gears to transmission from generation. Experts said upcoming transmission projects for the private sector indicate growth of the sector. Power transmission projects worth Rs 15,000 crore are up for bidding in the current year.
Essel Infra last year won projects worth Rs 4,700 crore in auctions held by the Union ministry of power. It was followed by Adani Transmission, which won projects worth Rs 3,350 crore and Sterlite Power, which won projects worth Rs 2,400 crore.
R-Infra will transfer the Western Region System Strengthening Scheme (WRSSS) - B&C and Parbati Koldam Transmission Company to Adani Transmission as part of the deal. According to Reliance Infrastructure, WRSSS is the country’s first private sector transmission project.
R-Infra has been on an asset monetisation drive to reduce its debt burden. Proceeds from this sale, the company said, would be fully utilised to reduce debt.
“The deal value would be in excess of Rs 2,000 crore and it does not include the Mumbai transmission business. The deal is for all the transmission assets R-Infra holds outside the Mumbai region. The debt on these assets is around Rs 1,500 crore,” said a person with knowledge of the deal, who did not wish to be named.
Lalit Jalan, chief executive officer, R-Infra, expects to close the deal before the end of the current financial year.
“Reliance Power, with an installed capacity of 7,000 megawatt, will continue to expand its capacity, while the distribution arm will bring in new technology for further consolidation in Mumbai and Delhi,” Jalan told Business Standard.
While R-Infra exits power transmission, Sterlite Power has applied to raise funds through infrastructure investment trusts to unlock value for its upcoming projects. “Growth of Adani’s transmission business has mostly been inorganic. As the sector opens up, we will see more competition. Power transmission is the next sunrise sector in investment,” said an analyst based in Delhi. He said the asset quality of transmission projects made them ideal for long-term investment by global pension funds and infrastructure investment trusts.
