GMR Energy Developing Power Projects and Looking at Overseas Coal Mine Acquisition

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Researched by Industrial Info Resources (Sugar Land, Texas)--According to recent media reports, GMR Infrastructure Limited (BSE:532754) (Bangalore) intends to purchase the PT Barasentosa Lestari coal mine on the Kalimantan Island in Indonesia for about $100 million. GMR is believed to be negotiating for a price that is 10% to 15% lower in view of the prevailing global market conditions. The coal mine is estimated to have reserves of about 110 million tons.

Contradicting media reports, GMR has since then stated that it is only considering the possibility of acquiring a mine and has not made any announcements to the media yet. According to GMR, the media reports are baseless.

GMR Energy Limited is a subsidiary of GMR Infrastructure and the holding company of the group's energy business. It is estimated to have lined up projects with a combined capacity of 3,300 megawatts (MW). The company currently has the capacity to generate 420 MW of power. Its barge-mounted power plant is capable of generating 220 MW while the unit in Chennai, Tamil Nadu, is capable of generating 200 MW of power. Several other projects are being set up by the group and will be operational in the coming years.

GMR Energy is currently developing the 180-MW Bajoli Holi hydropower project in Himachal Pradesh. The "run" of the project is located on the Ravi River in the state's Chamba district. GMR Energy was awarded the project for a period of 40 years on a build-own-operate-transfer (BOOT) basis. A part of the power generated will be supplied to the state at no extra cost. The company is currently developing the 1,000-MW GMR Orissa Power Project in Kamalanga in Orissa's Dhenkanal district. It is a coal-based thermal power plant being set up to supply up to 25% of the installed capacity for 25 years. It is scheduled to be operational in 2010.

The 300-MW Alaknanda Hydro Electric Power Project in Uttarakhand is being set up by GMR (Badirnath) Hydro Power Generation Limited, a consortium comprising GMR Energy and GMR Infrastructure. This is GMR's first project in the hydropower sector and the plant is expected to be operational by 2011-12. GMR has been awarded the project for a period of 45 years, which is extendable by another 20 years.

GMR Energy has signed a memorandum of understanding with Chhattisgarh's government to build, operate and maintain the 1,000-MW coal-based GMR Chhattisgarh Power Project. The company has also signed a memorandum of understanding with Arunachal Pradesh to set up the 160-MW Talong Hydropower Project on the Kemeng River in the Seppa district. The project has been awarded on a BOOT basis and is expected to be operational by 2011-12.

The Vemagiri Power Generation Limited project is a 388.5-MW natural-gas-based thermal power plant. It is located in Vemagiri near Rajahmundry in Andhra Pradesh. GAIL (India) Limited (BSE:532155) (New Delhi) will supply the natural gas that will be sourced from the Krishna-Godavari basin. However, the plant is idle because of the nonavailability of gas and is slated to be operational by February 2009 when gas will become available.

Soon after the NSG waiver for India in September, GMR Energy announced plans to set up India's first privately owned and operated nuclear power plant. The company plans to invest about $2 billion to set up the 2,000- to 3,000-MW power plant. The company envisages a project timeline of five to seven years. Although privately run nuclear power plants are not permissible in India at present, GMR is confident that the situation will change soon. The company has already begun talks with nuclear fuel and equipment suppliers based in France, Korea and the U.S.

Earlier this year, GMR Energy acquired a 10% stake in Homeland Mining and Energy SA Limited (Witbank, South Africa), a unit of Homeland Energy Group Limited (TSX:HEG) (Toronto, Ontario). GMR made the purchase in two units of 5% each at a total cost of $30 million. GMR had the option of buying another 40% and increasing its presence in South Africa but the company has decided not to exercise the option. According to media reports released today, Homeland SA now intends to buy back the 10% stake that GMR had bought earlier. This transaction is in agreement with the initial conditions of the sale.

GMR Energy is aggressively trying to raise funds for all its power projects and according to reports, the company recently raised close to $95 million in debt from Axis Bank (Mumbai, Maharashtra). The company intends to raise another $210 million within a year. According to GMR sources, the ongoing projects do not require cash immediately but the company is evaluating several funding options. GMR Energy's plans to go public this year have been put on hold for the time being because of the gloomy market situation.

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