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Adani Group in talks to buy Avantha Power & Infrastructure’s Madhya Pradesh power project

The Adani Group is in talks to acquire Avantha Power & Infrastructure’s 1,260-Mw power project in Madhya Pradesh.

, ET Bureau|
Updated: Jun 17, 2015, 12.25 PM IST
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The Adani Group is in talks to acquire Avantha Power & Infrastructure’s 1,260-Mw power project in Madhya Pradesh. 
The Adani Group is in talks to acquire Avantha Power & Infrastructure’s 1,260-Mw power project in Madhya Pradesh. 
JHABUA: The Adani Group is in talks to acquire Avantha Power & Infrastructure’s 1,260-Mw power project in Madhya Pradesh, in what would be a second such deal between the two companies. Avantha Power was believed to be in talks with a consortium of Tata Power and ICICI Venture to sell its Jhabua Power unit but now the company has sent a proposal to Adani Power for a possible deal, two people aware of the development told ET.

“Avantha is keen to close the deal soon and given their relation with the Adanis after the sale of the first project, they have now initiated talks to sell the second projects. But it is still early days,” one of them said.

Gautam Adani-led Adani Power has been on a buying spree and has so far acquired Avantha’s Korba Power (600 Mw) and Lanco Infratech’s Udupi Power (1,200 Mw) projects for a total value of .`10,500 crore to beef up its power generation portfolio. Both the acquired projects were the best generating units of the original developer. On the other hand, Gautam Thapar’s Avantha Group, which entered the sector with ambitious plans of adding capacity and subInfrasequently listing its power company, has changed gear and is now looking to exit as part of a strategy to streamline businesses. Avantha declined to comment. “As a policy, the Avantha Group does not comment on rumours and speculations,” the company said. Adani Power also declined to comment.

Experts said that the total project cost for executing the Jhabua Power project could be .`7,500 crore. The value of the deal was not known but a source said Avantha Power could offer a significant discount to Adani Power given its desire to exit the project that’s still under implementation.

Experts said the deal could hinge on approval from the bankers of Adani Power and Avantha Power. “Adani Power has a debtto-equity ratio of over 7. They would need their banks to approve another acquisition if it is adding to the debt. Jhabua Power’s banks too would need comfort that the new sponsor’s balance sheet can sustain the project,” an industry executive following the development said. India’s power sector has been hit by issues such as lack of fuel, problems with land acquisition, environment approvals and the poor financial health of state electricity distribution companies.

Private sector power companies, which have been dealing with these macro issues as well as stretched balance sheets, are looking at ways to divest to free up capital. While these companies are shying from new projects, they are looking at consolidation as many power units are up for sale at substantial discounts to the project cost. Experts believe that the conventional power generation sector has entered a phase of consolidation with bigger companies such as Adani Power and Tata Power making acquisitions and others like JSW Energy being on the lookout as well.

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