Malaysia’s Tenaga to buy 30% energy assets of debt-laden GMR

Tenaga Nasional Berhad, Malaysia's largest electricity utility and one of Southeast Asia's largest power companies, is picking up 30-per cent stake in some of the energy assets of debt-laden GMR Energy for nearly Rs2,000 crore ($300 million)

Tenaga is acquiring 30-per cent stake in select generation assets of GMR Infra's subsidiary, GMR Energy Ltd (GEL) through its wholly owned subsidiary, Power and Energy International (Mauritius) Ltd, in a cash transaction worth $300 million.

Under the deal, Tenaga will hold 30 per cent stake in GMR Energy's total capacity of 4,600 MW, which includes 2,300 MW of operational capacity and rest is under development.

The operational capacity consists of 1,650 MW of coal-based generation assets and 623 MW of gas-based plants. The deal will cover all the under-development projects, dominated by hydro power capacity including two plants in Nepal.

GMR Energy has kept over 2,000 MW generating capacity outside the purview of this deal. The assets include recently commissioned coal-based plant in Chhattisgarh with a capacity of 1,370 MW and fuel-starved gas-based plant at Rajamundhry in Andhra Pradesh with a capacity of 768 MW. GEL operates nearly 6,500 MW of capacity, which includes 4,200 MW operational capacity.

The proceeds from the stake sale would be used for repayment of corporate debt, the GMR Infra said, adding that the asset sale would help the company to reduce it corporate debt to Rs4,300 crore from the current Rs6,300 crore.

''This would lead to a reduction in GMR Infra's consolidated corporate debt and will result in a stronger balance sheet,'' GMR stated in a release.

''We will use the entire proceed towards debt reduction which will allow us to save nearly Rs250 crore in interest payment annually,'' GBS Raju, chairman, GEL said in a conference call.

GMR Infra, which operates in verticals such as energy, roads, airports, etc, had reported consolidated debt of Rs47,738 crore at the end of March 2015.

In March, GMR Infrastructure had agreed to sell a 51-per cent equity stake in its 99-km highway project in Karnataka to its joint venture partners for Rs85 crore. Before that, in December, it had raised $300 million by issuing 60-year foreign currency convertible bonds to Kuwait Investment Authority.

The debt is spread across various special purpose vehicles across various verticals the company operates in. GMR said it is now in a position to service the debt in the various SPVs and will now be able to reduce it at the corporate level also.

GMR Infrastructure is among the 10 most heavily indebted firms in India and has so far sold assets worth about Rs11,000 crore between 2012 and end of last fiscal, as per a Credit Suisse report.

''The assets that are part of the deal have long-term power purchase agreements (PPAs) and stable cash flows while the other assets are yet to be operationally stable,'' Raju said. He added that the agreement accords the first right to Tenaga to invest in the remaining assets of GEL within a period of five years.

Tenaga, a $10-billion company, was established in 1990 as a public company. It has operations across the value chain in the power sector, including generation, transmission and distribution in Malaysia.