New Delhi: The sale of Ideal Energy Projects Ltd’s (IEPL’s) 540 megawatts (MW) power project in Maharashtra has been hit by the controversy surrounding Bharatiya Janata Party president Nitin Gadkari , and his relationship with IRB Infrastructure Developers Ltd ( IRB ) and its founders, the Mhaiskar family, some of whose members are promoters of Ideal.
IEPL has been trying to sell the project near Bela, a village in Maharashtra’s Nagpur district, since 2011, said a person familiar with the matter who did not want to be identified.
“One unit is ready for light-up. While they have been planning to monetize the project for some time now, no one is willing to touch it given the controversy associated with IRB. It (the Bela project) is next door to Purti Power and Sugar Ltd (PPSL),” added this person. PPSL is a part of Gadkari’s Purti Group.
Bajaj Consultants Pvt. Ltd is the financial adviser for the proposed sale.
Ideal Energy “is not a group company of IRB Infrastructure Developers Ltd and as per the available information with us, IRB does not have any investment in IEPL”, said G. Parameshwaran, chief executive of Bajaj Consultants, in an email response to Mint queries.
Ideal Energy “had mandated us as financial advisors in December 2010 to find out strategic investors/partners for their proposed 540MW thermal-based power plant to be implemented in two phases of 270MW each at that time”, he said. “But due to coal availability situation prevailing in the country at that point of time and there being no consensus on the valuation, IEPL in August 2011 decided to go ahead with the implementation of the Phase I of 270MW on its own and decided to shelve the Phase II of 270MW.”
According to documents reviewed by Mint, Dattatraya P. Mhaiskar, who is a director on the board of IRB, held a 53.3% stake (on his own and jointly with others) in IEPL, which is developing the Rs.2,868 crore thermal power project at Bela. The IRB website also describes him as “Chief Mentor of the Group.”
Mhaiskar couldn’t be contacted for comment. An external spokesperson for IRB said he did not know how to reach Mhaiskar.
The spokesperson, while denying any relationship between IRB Infrastructure and IEPL, referred Mint to the company’s advertisement on 30 October.
IRB, in an advertisement published in several newspapers, including Mint, on that day, stated, “Ideal Power Ltd or Ideal Energy Projects Ltd has never been part of IRB Group. Neither IRB Infrastructure Developers Ltd nor any of its subsidiaries has ever committed or made any investments in Ideal Power Ltd or Ideal Energy Projects Ltd.”
Nikhil Gadkari, son of Nitin Gadkari, too had a stake in the company along with other members of the Mhaiskar family.
“As per the information available with us, Mr Nikhil Gadkari initially held 10,000 shares of Rs.10 each in IEPL and we understand from the company that the same were sold subsequently in 2011 and presently he does not hold any shares in IEPL,” Parameshwaran said.
According to media reports, Nitin Gadkari allegedly favoured IRB when he was public works department minister in the Maharashtra government. The firm, in return, allegedly invested in Gadkari’s Purti Group through dummy companies. Gadkari has denied the charges as has IRB.
Manoj Wadekar, a personal assistant of Nitin Gadkari, said in an email response, “We want to put on record that Mr Nikhil Gadkari, son of Mr Nitin Gadkari, is not director of M/s Ideal Energy Projects Ltd. He was independent director of the company earlier; ... Mr Nikhil Gadkari has resigned on 8 April 2011. Further to mention that he is not the shareholder/equityholder of the company. These details are also available in public domain through the ROC.” ROC stands for the Registrar of Companies.
A second person familiar with the matter confirmed that IEPL’s efforts to sell a stake in the project hadn’t been successful.
“The project has been in the market for some time. Given the controversy surrounding this project due to its political links, it will be very difficult for the transaction to take place at desired valuation,” added this person, who too did not want to be identified.
An investment of Rs.600 crore has already been made towards the project, of which the promoters have contributed Rs.250 crore (the balance has come from bank loans). While the project has 1.11 million tonnes of domestic coal linkage for 270MW, no fuel supply agreement has been signed for the project.
Such supply pertains to only those projects that do not have a captive coal block and instead need to source coal commercially from state-owned Coal India Ltd at a discounted price.
In its ad, IRB admitted that Ideal Road Builders Pvt. Ltd, also promoted by Mhaiskar, made an investment of Rs.1.85 crore in equity shares of Gadkari’s Purti Sakhar Karkhana Ltd in 2001, but added that “allegations linking the IRB Group to the Purti Group” were “baseless”.
The developers have acquired around 250 acres for the Bela project. The plant will sell electricity on a merchant power basis.
Merchant power is electricity that’s sold not to pre-identified customers under long-term agreements, but as a commodity at market price. With the weighted merchant tariff from the project estimated around Rs.4.25 per unit, many such projects have been generating strong cash flows by utilizing low-cost coal.