- Mar 24, 2009
NEW DELHI/MUMBAI: In the largest corporate takeover in the power sector in recent times, debt-laden Reliance Infrastructure has sold its electricity generation, transmission and distribution business in Mumbai run under the Reliance Energy brand to Adani Transmission Ltd in an all cash deal valued at Rs 18,800 crore.
On Thursday, R-Infra, a flagship arm of Anil Ambani's ADAG group, and Adani Transmission announced the signing of a binding SPA (share purchase agreement) to formalize the transaction once regulatory and other statutory approvals are in place.
Reliance Energy caters to close to three million consumers in Mumbai, including two million in the eastern and western suburbs right up to Bhayander. After Reliance hands over the business, its consumers will be billed by Adani Transmission.
R-Infra CEO Anil Jalan told TOI the deal will deleverage the company and leave Rs 3,000 crore surplus funds after clearing its standalone debt of Rs 15,000 crore. "It will help us focus more on construction, infrastructure projects...defence.
With zero debt, we will have easier access to cheaper funds. We are almost the second-largest construction company in the country with an order book worth Rs 10,000 crore," he said.
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The acquisition gives the Adani group a foothold in the distribution business and completes its transition from a generation-and-transmission company into a fully integrated power utility. "We see distribution as the next sunrise sector as India embarks on its mission to achieve 24x7 power for all," a company statement quoted group chairman Gautam Adani as saying.
According to Jalan, R-Infra will get Rs 13,251 crore upfront from Adani the day it hands over the Mumbai power business. This payment will consist of Rs 12,101 crore for the enterprise value of the generation, transmission and distribution business and Rs 1,150 crore for cost claims—known as 'regulatory assets' in industry parlance—already approved by the regulator.
In addition, R-Infra will also get Rs 550 crore, estimated as receivables on the day ownership is switched. Besides, the deal also involves appeals on regulatory claims valued at Rs 5,000 crore, which will flow to R-Infra once the appeals are settled. "We have various ongoing appeals on regulatory assets. All are in advanced stages.
Our deal has taken into account the value of these assets as well. The understanding is that R-Infra will not get this money upfront but as the appeals are settled, the money that is recovered by Adani Transmission on this count will flow to R-Infra," Jalan said.