India's GVK Energy Secures Investment from 3i Group for Planned and Ongoing Power Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--India's GVK Energy Limited (Secunderabad, Andhra Pradesh), the energy division of GVK Power & Infrastructure Limited (BSE:532708) (GVKPI) (Secunderabad), plans to increase its power-generation capacity, especially gas-based capacity, by the increased use of natural gas discovered in the Krishna-Godavari basin of Andhra Pradesh. The company presently has an installed power-generation capacity of 900 megawatts (MW) in Andhra Pradesh.

GVK Energy is developing Phase III of the 800-MW Jegurupadu combined-cycle power plant (CCPP) in the East Godavari district of the state, and Stage II of the 800-MW Gautami CCPP at Peddapuram near Kakinada. The engineering, procurement and construction (EPC) contracts for both projects already have been awarded. The company's 216-MW Jegurupadu I, 220-MW Jegurupadu II, and 464-MW Gautami Power Project are operational. The company has about 4,400 MW worth of power projects in various stages of development, while the target is to achieve an installed capacity of 10,000 MW over the next three to five years.

Among the projects under development are the 600-MW coal-based power plant at Goindwal Sahib in Punjab; the 330-MW Shrinagar and the 370-MW Mapang-Sirkari hydroelectric power plants in Uttarakhand; and the 690-MW hydroelectric power plant in Jammu and Kashmir.

GVK Energy has just finalized a $271 million private equity deal with 3i India Infrastructure Fund (Mumbai), a fund promoted by investment company 3i Infrastructure plc (LSE:3IN) (Channel Islands, United Kingdom), whereby 3i will acquire a 21.1% stake in GVK Energy, which is expected to invest the secured funds in its planned and developing power projects. Asia Head at 3i Asia, Anil Ahuja, said that about $182 million of the amount would be sourced from the 3i India Infrastructure Fund, while the remaining amount is expected to be raised from its limited partner. Private equity fund Actis Capital LLP (London, England) is also known to have an interest in investing in GVK Energy. In May 2010, media reports indicated that Actis would invest about $225 million in GVK Energy.

"The overall story for power remains probably the best story in the country today," Ahuja said, commenting on India's power scenario and his company's optimism about growth in the sector. "If there is one sector where you really don't have to worry about overall demand-supply, it is power. If you look at 2012, we are talking about a gap, which is at least 80,000 to 100,000 MW, and those are very large numbers. We don't see those numbers coming up anytime soon. We think that India will remain short at least for the next three to five years going forward."

Explaining the attraction of GVK Energy for 3i Infrastructure, Ahuja said that GVK Energy's portfolio was very balanced in terms of projects in operation, under construction and those being planned. The company's division of power projects across hydro, coal, and gas displays a very mature split of resources, and the fact that it owns a few coal mines gives it an additional fuel security. The company's customers are spread across Andhra Pradesh, Punjab, Uttar Pradesh, and Jammu and Kashmir, all of which are power deficit states and will always need more power. Ahuja said that given GVK Energy's successful implementation of infrastructure projects, his company has no reason to be concerned about the projects in the pipeline.

GVKPI is a diversified business house that focuses strongly on infrastructure projects. It also has interests in India's manufacturing, life sciences and hospitality sectors. With an asset base of about $1.8 billion, GVKPI is currently implementing projects worth about $3.7 billion. The company's projects range from power projects, airports, roads, urban infrastructure, and special economic zones, to hotels, particleboard manufacturers and biosciences.

GVK Novopan manufactures melamine-fused particleboards in various sizes and thickness that are used in both interior and exterior applications. GVK Biosciences (Hyderabad, Andhra Pradesh), the group's research services organization, caters to pharmaceutical companies, academic institutions, and agriculture and life-science companies. In the hospitality business, Taj GVK Hotels & Resorts Limited (BSE:532390) (Hyderabad, Andhra Pradesh) operates a series of business class hotels in Hyderabad, Chennai and Chandigarh.

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