Mumbai: Visa Power Ltd, which attracted investment from Blackstone Group LP in July, is in talks with private equity (PE) firms to raise an additional $100 million (Rs 534 crore) to develop one of its power projects, according to two persons with direct knowledge of the matter.
“We are looking to raise money at the project level,” said a company official, who didn’t want to be named. A member of the company’s board confirmed Visa Power is looking to raise $100 million. He also didn’t want to be named.
Visa Power’s head of corporate communications, Shyamali Banerjee, declined to comment.
Founded by Vishambhar Saran and based in Kolkata, Visa Power is an independent power producer with a 1,200 megawatts (MW) coal-fired power plant in Chhattisgarh as its core asset.
On 25 July, Blackstone announced it will invest $111 million in the company. At that time, the company said the Chhattisgarh power plant was at an advanced stage of development. It said it had an additional 6,600MW under development, which included a 1,320MW coal-based power plant in Orissa.
The company declined to comment on the current status of its projects. Blackstone declined to comment in an emailed response.
An Indian PE investor examined Visa Power’s assets last month, but was not comfortable about investing in it at this particular stage, said the managing director of this PE investor, who declined to be identified.
An investment at the project level faces some challenges, and recent PE investments have been at the holding company level.
“This is primarily because of the ability to hedge one’s risk that a PE investor prefers investing into the holding company,” said Sanjay Sethi, senior executive director and head of the infrastructure group at Kotak Mahindra Capital Co. Ltd. “Another major challenge of investing at the project level is that PEs will find it tough to exit as the listing of particular projects is not well-received by the investor community.”
Still, there are a few instances of PE funds investing at the project level. Moser Baer Projects Pvt. Ltd, the renewable energy unit of Moser Baer India, raised $300 million at the holding-company level from Blackstone in August last year. It raised Rs 580 crore for its thermal power plant in Madhya Pradesh from Macquarie SBI Infrastructure Fund this January.
PE interest in the power sector, especially in the case of distribution companies, has been low because of challenges including project execution, land acquisition, coal availability and environmental issues. But given that sentiment in the public capital market is not conducive and the growing pressures to raise money, power companies are looking for strategic investors and PE or quasi-debt from non-banking financial companies.
The first eight months of this year have seen PE investments to the tune of $671 million in the sector, or about half of that last year, according to data from VCCEdge, a financial researcher that tracks PE deals. Last year, the total deal volume was $1.15 billion. This year, there have been four investments in the coal sector totalling $362.3 million. In comparison, there have been nine transactions in the solar and wind energy industry, amounting to $274 million.
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