GVK Power & Infrastructure has reached a deal to buy two coal mines in Australia, taking a heavy bet which has the potential to put an enormous strain on its finances.
The Hyderabad-based company will pay $2.2 billion (about Rs 9,900 crore) for Hancock Prospecting's mines and the transport infrastructure which will be needed to move the coal at least 500 km to a port, lenders and company officials part of the negotiations told ET.
The deal will give GVK steady and secure access to the fuel for its plans in the power sector as supply in India gets crimped by environmental holdups and troubles in the Maoist-dominated coal-producing areas.
GVK will pay $1.3 billion for the Alpha Coal and Kevin's Corner mines and $900 million to develop the logistics infrastructure. The transaction will be funded by ICICI Bank, Standard Chartered Bank and Axis Bank. Ernst & Young advised GVK, whose board is expected to meet within 10 days to approve the deal.
"It looks like a leap of faith," said Kameswara Rao, the leader of the utilities practice at PricewaterhouseCoopers. "But if not GVK, someone else would have gone ahead for the mines," he added.
The Indian and Australian companies, which have been negotiating for about six months, did not reply to emailed questions. Hancock is run by Gina Rinehart, Australia's richest woman. The Hancock sale was initiated through an auction in which the bidders included GMR Infrastructure, JSW Energy and Essel Mining of the Aditya Birla Group.
"Since logistics will be vital for such a large deal, it won't be surprising that a significant part of the total payout would be for development of the infrastructure, including usage of existing rail," said a senior executive of a company that participated in the bidding.
GVK, which operates the Bangalore and Hyderabad airports, three gas-based power projects and the Jaipur-Kishangarh expressway, ended the 2010-11 financial year in March with sales of 1,900 crore and net profit of 155 crore. Its share price has fallen by more than two-thirds in the last 52 weeks, valuing the company at 2,600 crore. On Thursday, the GVK stock fell 4.6% to 16.60.
The company, which has debt of about 5,500 crore, is building a 540 MW coal-fired power station in Punjab.
The two coal mines that GVK will buy have combined reserves of 7.6 billion tonnes and are located in the Galilee Basin in Queensland province. They can produce 30 million tonnes of coal annually over a life of 30 years.
The deal, when it is signed, will be the third major acquisition by an Indian company of Australian coal mines as local firms venture overseas to overcome supply problems at home. Adani Enterprises paid about 12,000 crore to Linc Energy and Lanco Infratech agreed to buy the holdings of Griffin Coal earlier this year for nearly 3,500 crore. India is likely to import nearly 100 million tonnes of coal this year.
The power sector is one of the largest consumers of the fuel, accounting for 71% of demand, which is met through linkages with state-run Coal India and Singareni Collieries.
No comments:
Post a Comment