IFCI Ltd will pick 7.72% stake in KSK Mahanadi, a $3.6 billion power project, that seeks to build a unit with a capacity to generate 3,600 MW of energy. IFCI will invest $56 million to part fund the equity contribution of $720 million for the project.
The power project is being promoted by KSK Energy Ventures Ltd, a subsidiary of London Stock Exchange-listed power project firm KSK Power Ventur plc (KSK) which also has investments from Lehman Brothers.
The project is being funded through a combination of debt and equity wherein the debt component is $2.88 billion. This is being funded through a consortium of 27 Indian banks and financial institutions. Both equity and debt side of funds have been tied up which means financial closure for the mega power project that is located in Chhattisgarh.
As per the latest update, civil work has started at the site. China’s largest EPC contractor Shandong Electric Power Construction Corporation is engaged in the design, supply and project engineering, construction, commissioning and testing services for the site. The Chinese firm has also entered into Indian construction companies such as Simplex and Punj Lloyd for sub-contract work. KSK Mahanadi has also signed bulk power transmission agreement with state-controlled Power Grid Corporation.
Early this year, KSK had entered into an agreement with Lehman Bros group that gives it the right of first refusal to buy back part of the stake in KSK Energy Ventures owned by the US firm that had filed for bankruptcy two years ago. KSK owns around 52% in the Indian listed firm through a wholly-owned arm and had signed a deal that gave it the option to raise its holding by purchasing 3.67% from Lehman Bros entity LB Mauritius III Ltd for $52.7 million (Rs 247.5 crore).
Another unnamed third party had been granted the right to buy a separate chunk of shares owned by a different Lehman Bros affiliate cumulating to 2.83% stake for $40.5 million (Rs 190 crore), as per the agreement. Lehman Bros firms owned 18.9% (70.7 million shares) in KSK Energy Ventures. Of the total, 12.23% stake (13.7 million shares) is locked up until October 2011 through a share lock up agreement where KSK already has the first right of refusal. KSK and the other investor now has the right to buy out the balance 6.5% stake by June 2011.