Tata Power plans to raise $250 million via FCCBs

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Mumbai: Tata Power, which aims to achieve generation capacity of 8,242 mw by March 2013, plans to raise $250 million (Rs 1,170 crore) by issuing foreign currency convertible bonds (FCCBs). The FCCB issue would also have a green-shoe option of raising a further $50 million. The bonds would be listed on the Singapore Stock Exchange.

The FCCBs, having a coupon rate of 1-1.75%, would be convertible into the company's shares at a 10% premium over Rs 1,323.75 at Thursday's close on the National Stock Exchange. Nomura is the sole underwriter and book runner to the offering, the filing said. The company release said it intends to use the aggregate net proceeds from this issue for capital expenditure on its existing power plants, projects under implementation and other project plants of the company (including projects undertaken through its subsidiaries).

Tata Power's FCCB issue comes after it had raised $335 million through global depository receipts (GDRs) in July this year for a gross amount of $ 335 million. Of this, each GDR represents 1 equity share of a nominal value Rs 10 per equity share of the company. The company issued 14,838,110 GDRs and each GDR has been priced at $22.577 (Rs 48.27 is the reference exchange rate) as per relevant pricing guidelines for GDRs.

A Mumbai-based analyst, who did not want to be named, said, "The timing is crucial, especially when the US economy has shown positive growth and the global economy is reviving. Interestingly, the state-run Power Finance Corporation after a two-year gap proposes to raise funds from the global market."

The company’s growth plans include year-on-year capacity addition — 318 mw in 2010, 1,138 mw by 2011, 1,600 mw by 2012 and 2,400 mw by 2013. There are more projects under consideration. The list of projects include the 4,000 mw Mundra Ultra Mega Power Project, 1,050 mw Maithon Joint Venture Project, 114 mw Dagachhu Power Plant in partnership with the Royal Government of Bhutan.

Recently, S&P revised its outlook for Tata Power largely due to the significant progress made by the company on two key projects which include the 4,000 mw Mundra project and 1,050 mw Maithon project. Both are running ahead of schedule and within estimated costs. This reflects Tata Power's good project management skills, which benefit from the company's long track record of operating in India.