The proposal of Essar Power Ltd to operate as a holding company and to infuse up to $2 billion (Rs 8,000 crore) as foreign equity in the company for undertaking various downstream projects including power, coal mining is coming up for the approval of the Cabinet Committee on Economic Affairs (CCEA) on Thursday.
The foreign direct investment in EPL is being increased to 100% and the amount of Rs 8,000 crore being inducted in the company as equity is from Essar Power Holdings Limited (EPHL), a foreign entity which is part of the Essar Group and is incorporated in Mauritius. Essar Global Limited (EGL), a company incorporated in Cayman Islands is the holding company of EPHL and also holds diverse investments in India and other countries.
It will be only after CCEA?s approval that EPL will be granted the status of ?foreign owned holding company?.
According to a ministry of finance communication of April 11, 2008, the proposal has already been cleared by the Foreign Investment Promotion Board (FIPB) and the same has also been concurred by the finance minister, P Chidambaram. However, as the investment inflows exceeds Rs 600 crores, as per Press Note 7 (1999 series), the same has to be cleared by the CCEA.
At present, EPL is an operating company of the Essar group in the power sector. It owns and operates a 515 mw power plant at Hazira in Gujarat at a cost of Rs 2,295 crores. As on January, 31, 2008, 46.73% shares of EPL ae held by EPHL while the balance are held by residents.
?EPL intends to acquire shares and infuse equity capital in 16 companies. The acquisitions are proposed to be funded by way of equity infusion from EPHL upto Rs 8,000 crore, wherein additional shares would be issued to EPHL.