New Delhi: L&T Infrastructure Finance Co. Ltd may fund Bharat Light and Power’s (BLP) acquisition of real estate developer DLF Ltd’s wind power business in a deal valued at a potential Rs.900 crore.
BLP is promoted by Tej Preet Chopra, former president and chief executive of GE India. JP Morgan Asia Pacific Equity Research said in a 13 January report that the wind power business could fetch Rs.1,000 crore for DLF.
“Bharat Light and Power plans to fund this acquisition with the help of L&T Infrastructure Finance,” said a person aware of the deal on condition of anonymity.
DLF, which is seeking to raise money by selling assets that aren’t integral to the main business, has been trying to sell its wind assets in Gujarat, Rajasthan, Tamil Nadu and Karnataka. Similar efforts made earlier, as reported by Mint on 1 April 2009, had to be abandoned because of differences over valuation. The proposed transaction between India’s largest real estate developer and BLP is expected to be completed by March, according to a 12 November analyst presentation by DLF. The company’s net debt was Rs.21,220 crore as of 12 November.
L&T Infrastructure Finance is in talks on the deal, said chief executive Suneet K. Maheshwari. “Yes we are in discussions with him (Chopra) for a financial package to support him for this acquisition,” Maheshwari said. “The entire discussions have been in the process for a long time.”
Chopra declined to comment.
Maheshwari didn’t give further details citing confidentiality agreements. L&T Infrastructure Finance is a non-banking financial company (NBFC) and has an asset base of Rs.10,914 crore.
BLP had earlier picked up a stake in SunEdison’s 2.5 megawatts (MW) grid-connected solar roof-top project in Gandhinagar, Gujarat, in early 2012. Venture capital firms VenturEast and Draper Fisher Jurvetson picked up minority stakes in the company in 2011 for a total investment of Rs.53 crore.
This acquisition by BLP comes in the backdrop of interest in wind power generation declining after the government scrapped depreciation benefits of 80% on investment in the first year of a project’s operation.
A DLF spokesperson declined to comment. The company has the approval of its shareholders for the proposed transaction.
Amol Kotwal, associate director (energy and power systems practice) for South Asia at consulting firm Frost and Sullivan, said, “The news of DLF reaching an agreement to sell its wind assets to Bharat Light and Power augurs well for both parties. DLF has been trying to get rid of huge debt pile by divesting non-core businesses. BLP, with a vision to operate 1 gigawatt (GW) of operating assets by 2015, has been actively pursuing opportunities in wind, solar, gas and other clean sources.”
While there is interest in developing wind energy sources from conventional power generation utilities, the funding of such efforts has become a concern. It takes capital expenditure of Rs.4.2-4.5 crore per MW of power generated through coal-based or gas-based projects, compared with wind-based projects requiring Rs.6-7 crore per MW.
Brokerage firms have welcomed the proposed sale.
Anand Rathi India Equities said in 31 December report: “Wind turbines sale also in an advanced stage. The company has wind-turbine generating capacities of 161.2MW for which it is in an advanced stage of inking a deal and has already obtained shareholder approval. We expect this would fetch Rs.10 billion and further reduce its debt level in FY14e.”
Similarly, JP Morgan said in its 13 January report: “Debt is finally headed down—DLF’s net debt should reduce down to ~Rs.190B (billion) by Mar-13 from Rs.40B from 2Q13 levels driven by recent asset sales.”