Private equity financing for coal plants in India

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According to a Bain Company report cited by Reuters, private equity funding for infrastructure in India grew from $1 billion in 2006 to $4 billion in 2010.[1] Such funding is especially important in India due to the lack of a "mature bond market."[1] However, during 2011 private investors became increasing wary of coal projects due to mounting concerns over inadequate coal supplies, rising coal prices, over-capacity, local resistance to land acquisition, and other issues. As a result of such concerns, private equity funding has moved increasingly toward renewable power. During the 2011-2012 period, 70 percent of private equity investments were in renewable energy and 30 percent were in conventional energy. According to consulting firm Frost and Sullivan, from April 2012 to February 2013 there was no private equity investment in coal or other conventional energy projects.[2]

December 2011: IDFC leader says the agency is halting funding

The most important source of private equity funding of coal plants in India is the Infrastructure Development Finance Company (IDFC). In December 2011, the head of IDFC said the agency was halting its loans to new coal-fired power plants due to inadequate coal supplies and other problems. Forty-two gigawatts of planned capacity has been mothballed as of Jan. 2012, due to coal supply bottlenecks and price curbs. In an interview with The Times of India, IDFC managing director and CEO Rajiv Lall said,

"The biggest problem is in the power sector due to (un) availability of fuel, notably coal, and due to continuing challenges of the state electricity boards (SEBs). Coal India never really believed that we can add 50,000 mw capacity addition in the plan period. It was unprepared to meet the extra demand. It is also true that they have had challenges in terms of developing new mining assets because of the environment debate. Thousands of crores ave been invested in generating plants that are about to come on stream and will not have enough coal to allow them to function at their optimal capacity. This has all kinds of potential knock-on effect. As cash generation will decline, debt servicing capacity shrinks, banks will have to either restructure loans or they will have less capital to fund growth. As banks become nervous on funding such projects, they are not financing to build more capacities. Problems in land acquisition and environment have led to most entrepreneurs losing risk appetite. Public sector banks are not lending to SEBs. The structural problems can't be brushed under the carpet and tariffs have to be raised, which some states have done. We don't have any exposure to SEBs. We have ring-fenced our exposure to coal-fire projects very well. But if SEBs start defaulting, then we can't help it. We are basically not lending to new coal-fired projects... We will not get back to thermal until a couple of these issues are solved."[3]

July 2011: Blackstone invests in Visa Power and Moser Baer

In July 2011, Asian Venture Capital Journal reported that Blackstone India was expected to invest INR500 crore ($111 million) for a 25.2% share in Visa Power.[4]

August 2010: Blackstone invests in Moser Baer

In August 2010, Blackstone India invested $300 million in Moser Baer Power & Infrastructures, which was constructing the 1200 MW Anuppor Thermal Power Project Phase 1 in Madhya Pradesh.[4]

July 2010: Blackstone invests in Monnet Power

In July 2010, Blackstone India invested approximately $60 million for a 12.5% share in Monnet Power Company, an independent power producer building the Malibrahmani power station in Orissa.[4]

2009: GRM Energy raises $982 million

In 2009, a consortium of private equity investors led by IDFC India Infrastructure Fund invested $982 million in GMR Energy, which is building the 1050 MW Kamalanga power station in Orissa.[1]

Ind-Barath seeks additional private equity after failure of IPO

In 2007, City Ventures and UTI Ventures invested Rs 300 crore in Ind-Barath, raising the private equity stake in the company to 35%.[5]

In 2009, private equity firms City Ventures, Sequoia Capital, and Bessermer Venture Partners invested $100 million in Ind-Barath, picking up an 18% share in the company.[5]

In 2009, Ind-Barath filed a draft prospectus to raise more than $200 million via an initial public offering (IPO).[1] The IPO attempt failed "due to volatile market conditions."[6]

In March 2011 UK-based private equity firm 3i Group said that its India infrastructure fund was investing about $45 million for a minority share of Ind-Barath Energy (Utkal) Ltd.[1]

In August 2011 a press report stated that the Ind-Barath company was seeking to raise Rs 1,000 crore through private equity, after shelving its IPO.[6]

In December 2011 Reuters reported that Ind-Barath was in talks to raise about $150 million from TPG Capital and Apollo Global Management.[1]In 2011, Ind-Barath Power filed a draft prospectus to raise more than $200 million via an initial public offering (IPO).[1] The IPO attempt failed "due to volatile market conditions."[6]

Articles and resources

References

  1. 1.0 1.1 1.2 1.3 1.4 1.5 1.6 "Ind-Barath Power in Talks for $150M PE Funding," Reuters, December 14, 2011
  2. Siddhartha P. Saikia, "Private equity steps down funding for power projects," The Hindu Business Line, March 13, 2013
  3. "No loans to thermal power projects," Times of India, December 21, 2011
  4. 4.0 4.1 4.2 Tim Burroughs, "Blackstone closes in on third India power deal," Asian Venture Capital Journal, July 27, 2011
  5. 5.0 5.1 "City arm, Sequoia & Bessermer invest $100 m in Ind-Barath," Economic Times, October 28, 2009
  6. 6.0 6.1 6.2 Katya B Naidu, "Ind-Barath to raise funds through PE," Business Standard, August 10, 2011

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