GAIL has initiated preliminary talks with beleaguered infrastructure financier IL&FS and US-based infrastructure investment fund Global Infrastructure Partners (GIP) to pick up at least 49% stake in ONGC Tripura Power Company (OTPC) at a valuation of Rs 15 billion, two people aware of the development told ET.
PwC India is advising GAIL, India’s largest state-owned natural gas processing and distribution company, on the deal to acquire the stake in the gas-based power plant. If successful, the deal will give GAIL rights equal to Oil and Natural Gas Corporation (ONGC), which is the 50% owner.
IL&FS holds 26% in the power plant, while GIP has a 23.5% stake. The remaining 0.5% is owned by the Tripura state government. Rs 15 billion valuation includes Rs 5 billion as equity to be distributed among the two buyers.
The deal could resolve debt worth Rs 40 billion on the books of ONGC Tripura. Since it is 26% owned by IL&FS, the sale would have a positive impact on debt owed by IL&FS as well.
It was reported last month that the National Investment and Infrastructure Fund (NIIF) had also shown interest in a stake buy, potentially its first investment in the conventional energy sector. The bids are expected to come in by November.
“GAIL has initiated talks with the IL&FS board to buy a significant stake; earlier NIIF had also shown interest, these are initial talks and final bids are expected in November, after which it will be taken up with the Committee of Creditors for approval,” an official said.
In May, IL&FS had sought expressions of interest to acquire 26% stake held in OTPC by IL&FS Financial Services and IL&FS Energy Development Corporation. It also appointed Arpwood Capital and JM Financial as advisors to the deal. Subsequently, GIP hired financial advisory group Rothschild to help sell its entire stake.
One of India’s largest gas-based power plants, ONGC Tripura has an operational capacity of 726.6 MW. The plant also has secured the majority of approvals to add two 363.3 MW units to its existing capacity and expand to a total capacity of 1,453 MW.
