Easing red tape makes power assets easy pick

by / Sunday, 09 November 2014 / Published in News & Updates

Several power projects with total capacities exceeding 30,000 mw that have been up for sale could clinch deals now as easing regulatory hurdles have improved investor sentiment.

There have been no buyers for about 28 power projects, including L&T’s 1,400 mw Rajpura power plant in Punjab, CLP Inda’s Jhajjar plant, GMR Infrastructure’s Nagpur-based Warora Power Plant and JP Power’s thermal power plant in UP, due to regulatory issues and also because some investors find the valuations too high.

Industry officials say easing of bureaucratic red tape and a plan to provide single-window clearance to coal mining, fuel linkages and environment clearance ca-n boost investor se­ntiment and qui­cken these deals.

Many of these are coal-based the­rmal projects, wh­ose valuations took a dent due to fuel linkage issues. Gas-based projects may still take longer to find buyers, as fuel linkage and gas pricing issues remain deadlocked.

JSW Energy has been looking at around seven secondary assets across India and is believed to have shortlisted a few.

With improved sentiment, deals that were not moving ahead due to valuation issues might get worked out now.

Sanjay Sagar, CEO of JSW Energy, declined to confirm reports that his company was looking to buy promoter’s stake in Jaiprakash Power, which has already sold around 1,300 mw of projects and put up for sale its thermal power project in UP. JP Power is also looking to offload a stake in the Vishnu Prayag hydro project in Uttarakhand, which got affected by the Badrinath floods last year. JP Power MD Suren Jain declined to comment when asked if the promoters were looking to exit.

A senior consultant with a Mumbai-based Consultancy, who is advising a number of power firms, said projects like L&T’s 1,400 mw Rajpura power plant in Punjab, CLP Inda’s Jhajjar plant and GMR Infrastructures’ Nagpur-based Warora Power Plant could get better valuations now. Some promoters may even take their projects off the block, as with better sentiment they expect things to work out in the long run.

The Uttarakhand government recently refused to approve JP Power’s bid to sell its project to a Qatar-based company. TÜV SÜD South Asia, a Germany-headquartered technical consultancy, said it was receiving enquiries from European companies for such assets. “They have also shown interest in clean-tech projects,” said Bratin Roy, VP and head of industry services.

Industry watchers point out to last week’s Rs 3,500 crore share sales by GMR and Jaiprakash Group, which showed improvement in investor sentiment on the sector and also showed that companies were exploring meeting capital requirement without selling assets.

“Earlier they were dependent on project sale for raising funds, but the improvement in market sentiment has offered more options to raise funds for their working capital requirements,” said Mahesh Singhi, founder and MD of Singhi Advisors, a Mumbai-based investment banking firm.

Singhi pointed out that investments were flowing in from multilateral agencies like ADB and World Bank. The two agencies recently agreed to partner the Assam government with investments of $300 million and $700 million, respectively, in the state’s power sector.

“These institutions are also in discussions for some clean-tech projects. Improved sentiment with single-window clearances and resolution of land and water issues would increase interest of foreign as well as domestic investors in these stalled projects,” he said.

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