A power puzzle
A power puzzle
Recent reports say that some Indian corporate groups are ready to bid for three power generation firms which Temasek Holdings, the investment arm of the Singapore government, is putting on the block.
We find the pricing quite interesting. The first of the three power companies to be sold is Tuas Power, which has the capacity to generate 2,670MW. Media reports suggest that Temasek will be happy with $2 billion (or about Rs8,000 crore) for this company. That means the eventual buyer will have to spend around Rs3 crore for every MW.
In contrast, the capital cost in most new Indian power plants is far higher, at around Rs4 crore per MW. And remember: The Singapore company has stable cash flows while new power plants in India have to deal with regulatory and other risks. This pricing puzzle is worth thinking about.
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