Reliance Power to raise Rs 9,500 cr debt to fund JPVL buyout

Written by ENS Economic Bureau | New Delhi | Updated: Jul 29 2014, 13:46pm hrs
Reliance powerReliance Power will raise a debt of close to Rs 9,500 crore to fund JPVL buyout. (Reuters)
The cash-strapped Anil Dhirubhai Ambani Group will raise a debt of close to Rs 9,500 crore to fund the acquisition of the hydro power business of Jaiprakash Power Ventures by Reliance Power for an estimated price of around Rs 12,000 crore.

A highly placed source in the company told The Indian Express that the company will float a special purpose vehicle (SPV) to fund the transaction.

While the group will infuse an equity of Rs 2,500 crore in the SPV, it will raise a debt of close to Rs 9,500 crore to fund the transaction.

It is learnt that the company will raise a 20-year loan from China to fund this transaction.

At the planned equity infusion and planned debt, the debt to equity ratio for the SPV will stand at close 4:1. Research houses are however of the view that the deal is positive for Reliance Power.

We believe that if a deal happens it will be positive for Reliance Power as the assets are some of the best operational hydro assets in the country. At end-March 2014, Reliance Power had net debt/equity of 1.3x, placing it in a relatively comfortable position financially to enter into this deal, said a UBS research report.

The shares of Reliance Power rose by 3.5 per cent on Monday to close at Rs 94 even as the broader market closed in the red.

Even the shares of Jaiprakash Power Ventures rose by 8.7 per cent during the day before closing at Rs 19.6 with a gain of 3.2 per cent.

Experts in the industry say that Reliance power has a better ability than other private sector power players to raise debt and also better placed to get a power purchase agreement (PPA) for Karcham Wangtoo (1,091 MW) plant located in Himachal Pradesh.

On Sunday, Reliance Power announced at the stock exchanges that it has entered into an MoU with Jaiprakash Power Ventures (JPVL) to acquire a 100 per cent stake in JPVLs 1,791MW of hydropower generating capacity (Baspa Stage II 300MW, Karcham Wangtoo 1,091MW, and Vishnuprayag 400MW) in Himachal Pradesh and Uttarakhand.