Adani Power Buys Lanco Infratech’s Udupi Thermal Power Plant

NEW DELHI: Adani Power has acquired Lanco Infratech’s 1,200 mw Udupi thermal power plant in a Rs 6,000-crore transaction, marking the second mega deal in twoand-a-half weeks for the sector that is seeing a spurt of fund-raising and M&A activity after being down in the dumps for years.

The deal, the largest in thermal power in terms of value and capacity, catapults the Adani Group, already India’s biggest private sector power producer, to a bigger league with a capacity of nearly 10,000 mw while helping Lanco reduce debt.

Lanco Infratech, which has a market capitalisation of Rs 2,054 crore, said it will receive Rs 2,000 crore in cash and transfer debt of about Rs 4,000 crore to Adani.

Adani pipped other bidders including Mumbai-based Sajjan Jindal in the acquisition of the Udupi plant, which runs on imported coal and sells 90 per cent of the power to Karnataka and 10 per cent to Punjab.

Adani was also in the race for the Jaypee group’s hydropower portfolio, India’s largest, but lost out to Anil Ambani’s Reliance Power which signed the initial pact for the Rs 12,000-crore deal. After the Jaypee deal, ET had reported that Adani was aiming to acquire 5,000 mw of capacity.

The sellers, in both cases, were driven by the need to pare debt that had ballooned in recent years when the power sector was in deep trouble, with many plants stranded due to lack of fuel, low tariffs and distribution bottlenecks.

However, the sector’s outlook has improved significantly after the change in government in May this year, increasing the appetite of potential buyers and prompting some sellers to seek higher valuation for their assets.

In recent months, infrastructure firms raised about Rs 5,000 crore from qualified institutional placement (QIP), or share sales to institutional buyers. The flurry of transactions augur well for the sector and is expected to breathe life into so-called stranded assets -- power plants that are running below capacity on account of fuel shortages -- and repair distressed balance sheets of sellers.

Lanco and Adani said in a statement that the deal is valued at more than Rs 6,000 crore. Even before the transaction, Lanco had signed an agreement with the Karnataka government to expand capacity by a further 1,320 mw, to a total of 2,500 mw.

Udupi is India’s first independent power project in the country based on 100 per cent imported coal with a captive jetty of 4 million tonnes per annum and an external coal-handling system located at Mangalore Port. The capacity can be expanded to handle another 4 million tonnes, Lanco said.

"For Lanco Infratech, this transaction will support the company in reducing its debt and will enable Lanco to receive about Rs 2,000 crore as cash and additionally, Adani Power will take Udupi Power’s long-time debt of around Rs 4,000 crore," the statement said.

As reported by ET, experts and industry players expect infrastructure companies to raise Rs 8,000-10,000 crore more through QIPs, initial public offering (IPO) and other equity sale. They also believe more deals in the renewable energy, thermal power and road sectors are in the pipeline as highly leveraged companies have been looking to sell stake in projects.