Gautam Adani-led Adani Transmission has signed a definitive agreement to acquire Anil Ambani-led Reliance Infrastructure’s power generation and distribution business in Mumbai in a deal valued at Rs 13,251 crore, the two company said on Thursday.
The deal, which marks Adani Transmission’s foray into power distributions business, will help Reliance Group to pare its debt.
“We have succeeded at closing the deal at the best possible rate and the proceeds will help the group significantly reduce its debt,” said Lalit Jalan, chief executive officer at Reliance Infrastructure (RInfra). “We are confident of getting approvals from Maharashtra Electricity Regulatory Commission and our lenders soon, so that we can conclude the transaction before March,” he said.
While there will be an upfront payment of Rs 13,251 crore, Reliance Infrastructure will also get regulatory assets under approval estimated at Rs 5,000 crore and net working capital on closing estimated at Rs 550 crore, making the total consideration around Rs 18,800 crore, Jalan said.
Adani Transmission has valued the business at Rs 12,101 crore. In addition to this, the regulatory assets approved to the extent of Rs 1,150 crore for the period April 1, 2018 to 31 March, 2019 will be added to the account of Reliance Infrastructure.
With this deal, RInfra plans to repay most of its outstanding debt of Rs 15,000 crore, easing the stress from its balance sheet. This is the second deal between the two companies, after Adani Transmission acquired two transmission projects from Reliance Infrastructure in a deal valued at Rs 1,000 crore in November.
In October, the two companies had signed an agreement to enter a period of exclusivity to consider sale of Reliance Infrastructure’s integrated business of generation, transmission and distribution of power for Mumbai city to Adani Transmission.
“The acquisition marks our foray in the distribution sector in India,” Adani Group head Gautam Adani said. “We see the distribution sector as the next sunrise sector as India embarks on its mission to achieve 24×7 power for all. We see a massive growth opportunity and will look at both organic and inorganic opportunities to build a market-leading distribution company,” he said.
The transactions entails transfer of a 500 mw power plant based in Dahanu in Mumbai, license for power distribution in the city and related infrastructure. The Mumbai distribution circle of Reliance Infrastructure caters to around three million customers, with a total requirement of 1,892 mw of power, of which 500 mw is sourced from its own power plant.
In 2015, Reliance Infrastructure had signed a pact to sell 49% stake in it Mumbai electricity business to the Public Sector Pension Investment Board (PSP Investments) of Canada but the deal fell through. Since then, the company was on the lookout for a buyer for this business, which is often referred to as a “cash cow”.
Source: Economic Times