Speaking to the press after a board meeting of Gujarat Torrent Energy Corporation (GTEC) on Monday which saw the transfer of the entire equity of the Mehtas-owned Torrent Power Ltd amounting to 46.3 per cent to PowerGen, Gerry Grove-White, general manager of PowerGen India Pvt Ltd, said that the investment would provide the company with "a platform for growth in the energy market in India, which is a key market for us."

PowerGen has acquired Torrent's equity in GTEC for Rs 1,100 crore giving it total management control over the project with an equity of 74 per cent. Grove-White said that PowerGen had acquired 337.34 million shares at Rs 33 per share which is more than the bookvalue of the shares.

According to PowerGen officials, the company has paid a premium for the acquisition which essentially reflects the "value of investment and inherent value of the business." While almost 80 per cent of the transfer price of Rs 1,100 crore would be financed through the foreign direct investment (FDI) route by way of PowerGen's existing corporate debt facility from the UK, the remaining 20 per cent amounting to around Rs 220 crore would be raised by way of short-term loans from ICICI, Grove-White said.

Following the finalisation of the deal, GTEC has also reconstituted the company's board by inducting several new board members. Nitin Shukla has been appointed the new managing director of GTEC. He was earlier executive director of GTEC. The chief secretary, Gujarat, LNS Mukundan, will retain his position as chairman of the company which "shows the state government's deep interest in the project." As per the transfer agreement, PowerGen has been given six months to continue using the GTECname and change the name subsequently.

When asked the reasons that led to Torrent divesting its entire equity in the project, the PowerGen general manager said that it would not be fair for him to comment on Torrent's behalf. Torrent had approached PowerGen with the equity sale offer September last year following a major restructuring of the group's business, he said. "We do know that Torrent carried out a fundamental strategic review of its businesses last year after which we were approached." And given the fact that PowerGen has been GTEC's operation and manitenance contractor since the inception of the project as also the second largest equity holder, it was "only logical that we were approached."

When asked whether the multinational envisaged any long-term strain on its cash flow following the takeover of GTEC which has the state-owned Gujarat Electricity Board as its largest consumer, Grove-White said that GTEC's experience with GEB has been ideal ever since GTEC commenced commercial operation inDecember last. "GEB has been paying us our dues on time, every time, and has been extremely professional in its approach which goes to its credit," he said. As per GTEC estimates, the selling price of power would be "much less than Rs 3 per unit."

The PowerGen official also maintained that the British multinational had firmed up plans to get into the LNG business in India. "With an estimated requirement of 1.4 to 1.5 million tonnes of LNG per annum, we become an automatic contender for the business," he said. What also goes to GTEC's advantage is the location of its Paguthan station at Bharuch and its proximity to Petronet's LNG terminal at Dahej.

The multinational is also keeping its options open to get into the transmission and distribution business in India at a later stage. "We'll be driven by opportunities and will enter when we find value," Grove-White said.