GVK eyes Middle East for operations & maintaining contracts

GVK Power & Infrastructure Ltd, which plans an initial public offer, will be looking at gas-based power plants in the Middle East for operations and maintenance (O & M) contracts.

The company is keen to capitalise on its experience in operating and maintaining gas-based power projects and is already in the process of bidding for O & M contracts in the Middle East.

"We will bid for an O & M contract for a 300 mw gas-based power plant in Oman next month," Som Bhupal, director, GVK Power & Infrastructure Ltd (GVKPIL) said on the sidelines of a press conference organised in connection with its forthcoming public issue.

The company sees business potential for O & M services in the Middle East as the manpower cost of US companies, which are currently executing the contracts, is comparatively higher. With its low cost of operation and experience in operating gas-based plants, it expects to secure more contracts in this region.

O & M agreements are signed for a period of 5-10 years and a 300 mw power plant would require 20-30 people for such services, he added.

The company also sees huge potential in the domestic market.

A number of captive power plants, both in private and public sectors, are being set up. Most of these plants need power to generate electricity. Fee-based O & M services can be offered to these units, he said.

The company has been operating and maintaining the Jegurupadu (Andhra Pradesh) Phase-I 216 mw plant of its subsidiary GVK Industries Ltd (GIL). It has signed O & M agreement with GIL for the proposed Jegurupadu Phase-II 220 mw unit, which will be commissioned next month. GVKPIL holds 53.96 per cent stake in GIL.

GVKPIL, holding company of the power businesses of GVK Group, also holds 47.47 per cent stake in Gautami Power Ltd (GPL), which is into developing a 464 mw combined cycle power plant in Andhra Pradesh. This is expected to be commissioned in September. GVKPIL has signed a 15-year agreement to operate and maintain the GPL project.

These three contracts are expected to garner a revenue of Rs 18 crore per year, he added. GVKPIL proposes to raise Rs 237 crore by tapping the capital market with an IPO of 8,275, 556 equity shares of Rs 10 each through 100 per cent Book Building Process. The issue opens on February 2 and closes on February 7.

The company proposes to use the funds raised through the IPO to contribute a part of the equity required by Gautami Power Ltd and repay the bridge finance availed of for funding the equity of GPL. GVKPIL also proposes to increase its ownership in GPL to 51 per cent by subscribing to the equity of GPL.

The diversified business group has identified power, transporation and urban infrastructure as its core focus areas for future growth. It is also expected to bid for the proposed monorail project in Chennai.