New Delhi: The inability of Visa Power Ltd to meet some milestones, a reflection of larger challenges in the power business in India, has made private equity firm Blackstone Advisors India Pvt. Ltd defer payouts in its investment of $111 million (around Rs 617 crore today) in the power company, according to six people who independently confirmed the development.
Akhil Gupta, senior managing director and chairman, Blackstone Advisors, said, “We don’t comment on deal specific details.” A Visa Power spokesperson also declined to comment.
Mint couldn’t ascertain the value of the initial disbursement made by Blackstone or the remaining amount.
“While a commitment to invest $111 million was made by Blackstone, a significant portion of the money was not disbursed as it was linked to certain conditionalities,” said one of the six, a person aware of the development who, like the other five, did not want to be identified.
A Bangalore-based banker, who didn’t want to be identified due to commercial considerations, said such milestone-linked payments are common. “In power sector investments, these could refer to environmental clearances, licences and sanctions that need to be into place in a stipulated time period of six-eight months. It is after the fulfilment of these conditions that the company will get its first or second tranche of funding.”
A third person said certain “terms” had not been met, without specifying which ones.
Announced last year, the deal between Blackstone and Visa was among the 10 largest private equity (PE) deals in the Indian power sector and its present status is symbolic of challenges faced by the sector such as project execution, land acquisition, coal availability and environmental issues.
And if the company doesn’t meet conditions, it is usual for private equity firms to “hold back on capital”.
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. At the time of the announcement of the deal, Visa Power 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.
“While an initial amount was given to Visa by Blackstone, the remaining wasn’t as it was milestone-linked,” said a third person.
Interestingly, in an interview in June last year, Gupta had said his firm would not hesitate to put $1-1.5 billion out of its $2-3 billion investment target for the next five years in the power sector.
Other investments made by Blackstone in the Indian power sector include $300 million in Moser Baer Projects Pvt. Ltd, the renewable energy unit of Moser Baer India. It had earlier invested in Monnet Power Co. Ltd, a subsidiary of Monnet Ispat and Energy Ltd, which owns a coal-fired plant in Orissa.
The number of PE deals in India has slowed to a trickle, largely on account of policy paralysis.
According to data from VCCEdge, a financial researcher that tracks PE deals, the power sector’s deal volume for the current year (1 January-17 June) was down from a high of 10 deals in the corresponding period last year to four deals. Similarly, the deal value in the corresponding period was $42 million from a high of $244 million last year.