Saturday, August 28, 2010

Tata Power is eyeing to acquire GMR’s stake in InterGen

Tata Power is going to acquire GMR’s 50 percent stake in InterGen, a US-based power company. InterGen has operations in the UK, the Netherlands, Mexico, the Philippines and Australia. It has a total capacity of 81,46Mw and another 4,500 Mw capacity is under development. Majority of InterGen’s plant (80 percent) are gas-based.

This acquisition would increase Tata’s global presence in countries like Saudi Arabia, Bangladesh, Kuwait, Algeria, Myanmar and Thailand and power asset portfolio. In addition, the acquisition would increase Tata Power’s current operational capacity of 3,000 Mw and would take the company a step forward towards achieving its target of 25,000 Mw capacity earlier than 2016-17.

GMR acquired InterGen stakes for $1.1 billion in October 2008. GMR raised most of the money through debt but the company’s dividend did not cover the interest cost of the loan taken for acquisition. The fund GMR would procure through selling its InterGen stakes would be used to buy up more lucrative assets in India.

As on March 2010, Tata Power has a cash deposit and investment worth $1.7 billion. The company, if necessary, can raise money through selling equity. So, funding is not a problem. Normally, for thermal plant acquisition the cost ranges from Rs.30 million to Rs.40 million per Mw and less for gas-based plants.

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