Hinduja to sell 49% stake in power unit

Written by MG Arun | Baiju Kalesh | Mumbai | Updated: Nov 24 2011, 05:36am hrs
London-based Hinduja Group, with $23 billion in revenues, will sell its 49% stake in Hinduja National Power Corporation (HNPCL), which is building a 1,040 mw coal-fired power plant in Visakhapatnam in Andhra Pradesh, a senior group official with direct knowledge of the development said.

We have agreed to sell 5% stake to Steag, the operations and maintenance contractor of the project at a lower premium, and the rest 44% to strategic partners, the same person said. Domestic investment bank Enam Securities is the advisor to the stake sale. The banker has short-listed 16 strategic investors.

The group, which needs to invest $1.2 billion or R6,000 crore to build the plant in two phases, will keep majority 51% as agreed with its lenders.

The group, which earns just 15% of its revenues from India, seeks to double its revenue in a few years betting on investing in power, road concessions projects, real estate development, building hospitals and is looking at feasibility of building ports. In power, the company plans to build a mix of both coal and gas fired and wind based plants that will generate 10,000 mw in India over five to seven years.

"However, the DNA of the group is banking and financial services," said Abin K Das, director, Hinduja Group.

The first unit of 520 mw will be completed by June 2013, while the second by September that year," says Ashok Puri, managing director HNPCL. We are looking at sites in Maharastra, Karnataka, Gujarat and Orissa to set up up new power plants, but, much will depend on coal linkages.

Rise in coal prices, lack of adequate coal from Coal India's coal mines and inability of state electricity boards to pay for power have deterred companies to invest in power even as the government sets a target to generate an additional 1,00,000 mw during the 12th Five Year Plan, which will run from 2012-17. India generated 217.6 billion units of power during the first quarter of financial year 2012 and has a total generation capacity of 1,75,000 mw, even as 600 million Indians do not have power to light up their homes.

Analysts said lack of adequate fuel supply has been stalling or delaying power projects in India, raising investor concerns. Most private power producers hunt for overseas coal assets to meet the shortfall, analysts at domestic brokerage Karvy Stock Broking wrote in a report released in July.

HNPCL will bid in auction for coal from Coal India, import coal from overseas mines and purchase coal mines abroad. We are open to picking up equity stake in coal assets, or entering into trading arrangements, Puri said. The company has begun talks with Qatar to import LNG to build gas fired power plants. 'We are already in talks with Qatar for LNG, but we are waiting for prices to come down.

LNG prices are trading at $12-$14 per million British thermal units or mmBtu, while it is $4 in the US.