Aditya Birla, Hinduja, Jaypee for CIPCL stake

Aditya Birla, Hinduja, Jaypee for CIPCL stake

Mumbai: At least three business groups are in the fray to buy a stake in Central India Power Co. Ltd (CIPCL), controlled by brothers Pramod and Vinod Mittal, which is building a 1,082MW coal-based power plant in Bhadrawati in Maharashtra, according to people familiar with the development.

Aditya Birla Group, Hinduja Group and Jaypee Group have received the offering memorandum—which consists of data on a target company meant for scrutiny by potential investors—prior to making possible bids for the stake, said an investment banker familiar with the development, who didn’t want to be named because of confidentiality reasons.

For the $29.2 billion (Rs1.35 trillion) Aditya Birla Group, which is expected to bid for 50% of CIPCL, a stake purchase will mark its re-entry into the power generation business, a group official said. Three years ago, the company sold a power plant it operated to the Reliance-Anil Dhirubhai Ambani Group.

“Power sector will be one of the new growth sectors for us and we will bid for the Bhadrawati power project," the official said, adding that the group would make a “reasonable bid". He declined to be named as he is not authorized to speak to the media. A spokesperson for the Aditya Birla Group declined to comment.

Last week, business television chanel ET Now reported that Mukesh Ambani-controlled Reliance Industries Ltd, India’s largest company by market value, would enter the power sector through the Bhadrawati project.

“The power sector is a logical extension for us and yes we will clearly bid for all the ultra-mega power projects and in the next few months we will have a very concrete investment programme," Ambani said at the company’s annual general meeting on Friday.

So-called ultra-mega power projects have an installed capacity of at least 4,000MW.

CIPCL has appointed investment bank SBI Capital Markets Ltd to find a partner to build the power plant that has been delayed for nearly 17 years because of a lack of assured coal supplies and environmental clearances, as well as the promoters’ inability to raise money, issues that have since been resolved.

Pramod and Vinod Mittal, who run Ispat Industries Ltd, are the brothers of L.N. Mittal, chairman and chief executive officer of ArcelorMittal, the world’s biggest steel maker.

“SBI Capital Markets will have to come to us with proposals from interested partners," Vinod Mittal, vice-chairman and managing director of Ispat Industries, told Mint over the phone on Saturday.

“We have 600 hectares of land and have entered into an agreement with Coal India Ltd to source coal," he said, adding that the plant’s capacity can be increased to 4,000MW, making it an ultra-mega power project.

The Bhadrawati project is one of the original fast-track power projects planned in 1993 with Electricite de France SA (EDF) and France-based Alstom SA as partners. Both pulled out subsequently from the project due to numerous delays in starting it. EDF owned 15.2% while Alstom had a 31.8% stake in CIPCL.

With crucial coal supplies tied up and land approvals for the project in hand, it makes sense to sell a stake in the project, analysts say.

“They can sell these projects at a premium of 40-50% like a recent CESC-Dhariwal deal for the Chandrapur project," said Madan Gopal, an equity analyst at Centrum Broking Pvt. Ltd.

In June, Kolkata-based RPG group-owned CESC Ltd (formerly Calcutta Electric Supply Co.) purchased Dhariwal Infrastructure for Rs300 crore. The company, which has permission to build a 600MW power plant in two phases in Chandrapur, Maharashtra, had all clearances and achieved financial closure.

Despite adding 21,080MW of power in the last Five-year Plan period (2002-07), against a target of 41,000MW, India faces a 14% shortfall in meeting peak electricity demand.

Earlier this year, the Planning Commission, in its mid-term review, said 62,374MW would be added in the 11th Plan period ending in 2012. That is still 20% lower than a targeted 78,577MW. Of that, 19,207MW had been added until December.

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