State owned Malaysian company 1MDB & JSW Energy are leading the race for Lanco’s UPCL power project based in Karnataka.
1Malaysia Development Berhad (1MDB), the 2nd largest power producer in Southeast Asian countries, has appeared as a shoo-in to get hold of Lanco Infratech’s 1,200 MW Coal-fired Power plant at Udupi, Karnataka.
The deal of over USD 1 billion is poised to be the largest asset sales in the country and will help Lanco from cash strapped. Lanco Group is under dept of INR 365 billion, which the company has taken for building power plants, roads and to purchase overseas Coal mines. Earlier, the company had made effort to raise INR 41.5 billion by selling stakes to a subsidiary, which owns stakes in its different power plants, roads and projects, but could not succeed.
JSW Group already has its presence in Steel & Energy sectors in Karnataka. This acquisition will help the company to further strengthen its presence in the state. The group already has an 860 MW power plant and a steel plant with an installed capacity of 10 MnT at Vijaynagar. Also, this project has long been on the radar of Jindal.
For strategic buyers, this project is more beneficial as any price hike in fuel can be wholly passed on to buyers. Lanco has an agreement with five power distribution companies in Karnataka, for selling 90% its production and rest 10% to Punjab State Power Corporation. It also owns a jetty at Mangalore port to import Coal for the plant.
The final round of diligence is conducted by the potential buyers, which is expected to be completed in the beginning of May’14. After that, final negotiations for terms & documentation will be commenced.
In the media, one of the officials stated, “In diligence, Malaysians are ahead as compared to others. They are advanced in most of discussions and serious to make their debut. They have much longer term bilateral strategy. 1MDB with a mission to improve energy security of Malaysia has been scouting for operational assets in the region.”