Reliance Infrastructure Ltd has signed a pact with Adani Transmission Ltd to sell its Mumbai power business, which includes generation, transmission and distribution of power for the city, the companies said in a statement.
The Mumbai power business is valued at Rs 12,101 crore ($1.88 billion), the statement said.
Reliance Infrastructure expects to get an additional Rs 550 crore as working capital, Rs 1,150 crore as payment for the so-called regulatory assets that have been approved and Rs 5,000 crore for regulatory assets under approval. Regulatory assets are essentially costs incurred in previous years that it can recover via tariff hikes in the future.
The Mumbai power business has about 29.7 lakh customers and involves distribution of 1,892 megawatt of power. Its power generation business includes the 500 megawatt Dahanu thermal station. It has over 540 circuit km of transmission lines.
The transaction will mark Adani Transmission’s entry into the power distribution sector and increase the company’s footprint in the power transmission space.
“The acquisition marks our foray in the distribution sector in India. We see a massive growth opportunity and will look at both organic and inorganic opportunities. With this acquisition, Adani Transmission will enjoy the benefit of scale and of being an integrated distribution and transmission business in India,” said Gautam Adani, chairman of Adani Group.
Reliance Infrastructure will use the proceeds of the transaction to reduce its debt. It will focus on upcoming opportunities in engineering, procurement and construction (EPC) and defence businesses, it said.
In November 2015, Reliance Infrastructure had signed a pact to sell a 49% stake in its power business in Mumbai to Canada’s Public Sector Pension Investment Board, but the deal didn’t fructify.
In December last year, the firm agreed to sell its power transmission assets in the western region to Adani Transmission at an enterprise value of Rs 1,000 crore ($148 million).
Reliance Infrastructure posted consolidated revenue of Rs 27,036.47 crore for 2016-17. Its Mumbai power distribution business registered revenue of Rs 7,532 crore.
Adani Transmission is part of the Adani group. It is the largest power transmission company in the private sector and owns and operates around 5,450 circuit km of transmission lines, according to its annual report. In 2016-17, the company posted consolidated revenues of Rs 2,901.55 crore.
SBI Capital Markets acted as financial adviser to Adani Transmission on the transaction.