MUMBAI/HYDERABAD: Ending months of negotiations, French energy powerhouse, GDF Suez is all set to buy a controlling interest in a power plant owned by Meenakshi Energy, part of the little known eponymous infrastructure group, based in Hyderabad.

This transaction will mark a revival in global investor confidence towards India's battered power sector which has been besieged by regulatory and financial woes and has been going through one of its worst phases ever. This will be the largest inbound acquisition by a strategic in Indian utilities space so far and will also mark GDF's much awaited entry in the domestic power sector.

GDF Suez — partly owned by the French government — is the world's largest independent power company that generates 116,000 mw of electricity, which is more than 50% of India's installed capacity of 211,766 mw. It will buy a 74% stake in the 1,000 mw coastal thermal plant from Meenakshi for around Rs 650 crore. This gives the project an equity valuation of Rs 900 crore. Located in Krishnapatnam in Andhra Pradesh, the Rs 6,000 crore Meenakshi Energy Private Limited project, largely fuelled by imported coal is already partially commissioned.

Currently, the first unit of 300 mw is already commissioned and is in the process of ramping up capacity by another 700 mw by 2015. For the operational unit, the company has already signed a first of its kind agreement with power trading firm PTC, under which the PSU will supply coal to the unit in return for an equivalent value of electricity.

A final announcement is expected by Tuesday. When contacted Meenakshi Group's CMD Devineni Suresh told ET, "the discussions are still going on with GDF Suez and the final agreement is yet to be signed." He refused to divulge details on the valuations saying, "the negotiations are still going on and the valuations may change even at the last minute."

GDF did not respond to ET's questionnaire till late evening.

Standard Chartered Bank is an advisor in the deal. ET in its July 23 edition was the first to report about the ongoing GDF-Meenakshi negotiations. Hyderabad-based Meenakshi group is into property development, roads and power projects.

The group's powersector projects include three hydro electric power projects with a cumulated capacity of 62 mw on the River Kolab in Orissa. The Rs 280 crore projects are funded by IREDA and PFC, while promoters brought in 30% as equity. The group is also implementing two biomass energy projects of 31 mw and 10 mw in Punjab.

Even though it has been looking to prune its European portfolio of wind and solar assets to raise over $750 million in an effort to reduce its 34 billion euro debt, Paris-headquartered GDF with interests across the power sector value chain of generation and distribution, natural gas has been strategically looking to expand its India footprint by buying out assets that have been hamstrung by lack of fuel linkages or cash. It has had discussions with several Indian utility companies for thermal, hydro and even renewable projects. Last year, it bought a strategic 26% stake in the 3.5-milliontonne floating LNG import facility being set up off the Andhra Pradesh coast by Andhra Pradesh Gas Distribution Corp, a JV between Gail Gas and Andhra Pradesh Gas Infrastructure Corp. It had also looked at BG's India assets.

"They are among the handful of European utility companies that are still keen on the long term prospects of India. They have been engaged in several conversations with Indian promoters for buyout opportunities. Along with strategic interests from Malaysia, Middle East and Singapore, GDF has been very opportunistic for plants which have fuel linkages and PPAs in place," said an investment banker privy to the plans.

Source : economictimes.indiatimes.com