Jaypee Group selling two hydro-power assets to UAE utility Taqa, IDFC Alternatives’ consortium for $1.6B

Jaiprakash Power Ventures Ltd (JPVL), a subsidiary of Indian infrastructure conglomerate Jaypee Group, is hiving off two hydro-power plants as a part of its group asset-disposal plan to a consortium of investors, including Abu Dhabi National Energy which operates under the banner of Taqa, Canadian institutional investor Indo-Infra Inc and IDFC Alternatives.

The two plants are Baspa Stage II and Karcham Wangtoo in the northern Himachal Pradesh.

"The board of directors in its meeting held on March 1, 2013, accepted the recommendations for the divestment of 300 MW hydro-electric plant and 1,091 MW Karcham Wangtoo hydroelectric plant. The divestment is proposed to be by way of hiving off the two plants to two separate wholly owned subsidiaries through a scheme of arrangement to be sanctioned by the high court with eventual transfer of ownership of the said subsidiaries to the purchasers viz consortium led by Taqa India Power Ventures Pvt Ltd, Indo-Infra Inc and India Infrastructure Fund-II," the company said.

The equity value of the deal stands at $616 million (Rs 3,820 crore), of which 51 per cent will come from Taqa. Indo-Infra will bring 39 per cent of the equity commitment as its stake in the consortium with IDFC Alternatives holding the remaining 10 per cent in the special purpose vehicle (SPV) created for the acquisition. This would mean the Indian PE firm will contribute around $62 million in the deal.

The consortium will also acquire the assets’ non-recourse project debt which would take the overall enterprise value of the deal to $1.6 billion.

The transaction is part of the group’s objective to deleverage the balance sheet. Late last year, the group sold its cement plants in Gujarat to Aditya Birla Group's UltraTech for Rs 3,800 crore.

The deal would make Taqa one of the largest private operators of hydroelectric plants in India. It will also have control of operations and management of both facilities under the proposed deal.

The two plants have a combined power generation capacity of 1,391 MW and are located in Kinnaur district within 2 km of each other and share support facilities. They use run-of-the-river technology to convert natural water flow to electricity, eliminating the need for a reservoir. The plants are 35 km from the Sorang hydroelectric plant, in which Taqa acquired a stake last year.

Frank Perez, Taqa’s executive officer and head of global power & water, said: “India’s economic growth depends on having ample and reliable energy supply. Taqa is pleased to add these two high quality hydro power assets to our growing India business and to support the country’s economic growth.”

Following the completion of the transaction, Taqa’s gross operational power generation capacity in India will total 1,741 MW, comprising three hydroelectric facilities and a lignite power plant.

The acquisition is expected to close in 2014 and is subject to regulatory and third-party approvals.

The agreement follows the signing of the UAE-India Bilateral Investment Promotion and Protection Agreement in December 2013 and a commitment made by the UAE to invest $2 billion in India’s infrastructure sector at the first UAE-India High Level Joint Task Force on Investments meeting held in Abu Dhabi in February 2013.

Last year, another Abu Dhabi company made a large investment by picking a stake in the country’s largest private full-service airlines Jet Airways.

(Edited by Joby Puthuparampil Johnson)

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