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BW Businessworld

It Takes Two To Tango

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French energy major GDF Suez acquired a 74 per cent stake in Hyderabad-based Meenakshi Energy and Power (MEPL) from Meenakshi Energy and Infrastructure Holdings (MEIHPL) in mid-December. The deal, which marked the entry of one of the world’s largest power companies into the Indian power generation market, has been adjudged the best in the mergers and acquisitions (M&A) category of the BW | Businessworld Magna Awards 2013. GDF Suez is listed on the Paris, Brussels and Luxembourg stock exchanges and has a turnover of €82 billion. Standard Chartered Bank (SCB) was the sole financial adviser to GDF Suez on the deal. KPMG India was MEIHPL’s adviser.

The deal stands out as M&As were few and far between in India’s troubled power market. MEPL is executing a 1,000 MW project at Thamminapatnam in the coastal district of Nellore in Andhra Pradesh. Of the total capacity, 300 MW is already operational.

“This foray into India is in line with the group’s strategy of investing in fast-growing markets and gives it an entry point into the Indian power sector through an economically attractive state. India has a growing demand for energy and a significant power supply deficit,” says GDF Suez, in a statement.

“A portion of the sale proceeds has been utilised to satisfy some of the existing shareholders,” says D. Suresh, chairman, MEIHPL. The company owns the remaining 26 per cent equity in MEPL.

The mandate for looking at Indian thermal power assets in coastal regions was given to SCB in 2012. After due dilligence, the deal with Meenakshi was closed on 16 December 2013. A team of three bankers from SCB’s Indian arm worked with a team from its Paris office on the deal.

“The challenges in this deal involved handling the complex finances involved, tying up with all the shareholders and aligning all the lenders,” says Topsy Mathew, managing director and regional head, Mergers and Acquisitions, South Asia, Standard Chartered Bank.

“This, indeed, will go a long way in reviving global investor confidence in India and the Indian power sector,” says R.M. Malla, MD and chief executive, PTC India Financial Services, which sold its 16.76 per cent stake in MEPL to GDF Suez. “Considering the difficulties in the infrastructure sector and keeping in view the project’s interests, we are satisfied with the valuation,” says Suresh.

PTC sold its stake for Rs 209.73 crore. If the deal is valued based on this price, GDF Suez is estimated to have paid around Rs 950 crore for its 74 per cent stake. GDF and the bankers involved did not disclose the amount.
“The whole idea was to leverage the global expertise of a large strategic player without loosing the value that local developers can continue to provide... Accordingly, the deal was structured so that the existing promoter group could  retain 26 per cent, and continue to play a role in project implementation”, says Manish Aggarwal, partner, Corporate Finance and Infrastructure, KPMG India.

“For GDF, it is a long-term investment,” says Mathew.

(This story was published in BW | Businessworld Issue Dated 24-03-2014)