GMR Energy-Tenaga to look at T&D business, stressed asset buyouts

Deals in october hit record volumes
GMR Infra is overhauling its business its energy vertical, GMR Energy, which recently partnered with Malaysia’s Tenaga Nasional Berhad. 
“First, we are going to look at consolidation and then developing multiple revenue streams. Thereafter, we’ll grow in businesses such as transmission & distribution and look at buying stressed power assets,” said G B S Raju, chairman, GMR Energy. 

GMR would look at these verticals with Tenaga as a partner. “The next 6-12 months will go into consolidating the existing assets,” Raju added. 

Last Friday, GMR completed the transaction of allotting 30% stake in GMR Energy to Tenaga for a cash consideration of $300 million, implying an equity value of $1 billion or around Rs 6,665 crore. 

With Tenaga’s investment in GMR Energy, the company will be able to bring down its corporate debt to negligible levels and service the remaining with the operations assets. At the group level, however, the key would be to find the right resolution for the remaining energy assets. 

As on date, company officials said GMR Energy’s consolidated debt stands at Rs 9,600 crore with a healthy debt to equity ratio of 2.1 times. The corporate debt, which was earlier around Rs 3,000 crore, would now be negligible thanks to the Tenaga investment, company officials said. 

“We have close to 2,300 megawatts of operating assets. Barring a small hydro asset, all are into operations,” said Parag Parikh, chief financial officer, GMR Energy.

What has helped GMR Energy the most is the carving out of financially or operationally troubled energy assets, GMR Rajahmundry Energy and its Chhattisgarh coal-based power project. The two projects are now part of GMR Infrastructure, the parent company. 

“Banks have picked a 45% stake (in Rajahmundry) and they have to look for a buyer now, it is an evolving process,” Raju said. According to a strategic debt restructuring scheme, out of outstanding debt of Rs 3,780 core, a debt of Rs 1,414 crore was converted into equity by which consortium lenders would have a 55% shareholding and the remaining 45 per cent is with GMR. 

The total debt on the 1,370-Mw Chhattisgarh power project is upwards of Rs 8,000 crore. Earlier, the project had suffered owing to lack of coal supply. It now has a total untied capacity of 65%. 

“We’re looking at multiple options with lenders for Chhattisgarh. In two years from now, India will need capacity addition. We are making sure we participate in the medium-term, short-term and long-term power purchase agreements,” Raju said. He added that once the contracting of power is achieved, there is a possibility of bringing it back in GMR Energy itself. “In addition, we can also work a long-term solution with lenders,” he said. The group is also evaluating various options including a stake sale and other debt financing options.

GMR Infrastructure’s debt woes have been the result of delays in completion of assets, policy issues, demand slowdown, exposure to gas-based power projects and investments made in coal assets at the peak of commodities prices in 2011. 

“There is no stress in any other subsidiary and may not be required to emulate the energy’s lean structure model,” Raju said. 

The group is also evaluating selling its stake in the Indonesian coal mine asset. “We have an existing partner who might be interested; we are evaluating various options,” Raju said. In 2011, GMR Infrastructure invested $500 million to buy a 30% in Indonesia’s PT Golden Energy Mines stake. Raju added the mining assets continue to remain profitable.