TNB completes 30% acquisition of India’s GMR Energy

GMR Energy Ltd’s 235MW gas-fired combined-cycle power plant in Kakinada, Andhra Pradesh. Tenaga Nasional Bhd has bought a 30% stake in GMR Energy for US$300mil.

KUALA LUMPUR: Tenaga Nasional Bhd (TNB) has completed the acquisition of a 30% stake in Indian power company, GMR Energy Ltd (GEL), for US$300mil (RM1.26bil).

The strategic investment in GEL will be made via its wholly-owned subsidiary, Power and Energy International (Mauritius) Ltd (PEIM), TNB said in a statement on Friday.

The completion of the transaction marks TNB’s entry into India’s rapidly expanding power sector with demand for electricity growing between 6% and 7% of the compound annual growth rate (CAGR), adding 20GW of new capacity annually, an amount equivalent to Malaysia’s current installed capacity.

The acquisition cements a strategic investment in GEL which has a portfolio of five operational power assets in India comprising coal, gas and renewable energy with a combined capacity of 4,630MW, said TNB.

An additional four power assets are currently under construction in India and Nepal with a future combined capacity of 2,300MW.

“TNB’s acquisition of 30% of GEL is a highly strategic investment that seeks to harness the future value of Indias large and supply constrained power market,” said president and chief executive officer Datuk Seri Azman Mohd.

Strong growth in both the economy and energy demand coupled with a favourable energy policy framework means that this deal offers TNB attractive opportunities in the power sector on the sub-continent and establishes a strong foothold in the Indian power market.

“Growth in power generation is crucial to the success of India’s ‘Make In India’ industrialisation programme and progressive development of reliable supplies of new power will be needed to support the creation of new manufacturing bases throughout the country,” said TNB.

It added this growth in electricity consumption was in line with TNB’s international expansion roadmap to secure new generation capacity overseas. 

“We believe the deal makes strong commercial sense by increasing our competitiveness, maximising shareholder value and delivering sustainable long-term earnings growth,” it said.

Meanwhile, GEL chairman G.B.S. Raju said TNBs investment in GEL would result in the creation of a market leading Indian energy platform with significant avenues for growth and expansion.

TNB anticipates the transaction, to be financed by a combination of internal funds and external debt, to be earnings accretive by financial year 2018.

The advisors for this agreement included Credit Suisse (exclusive financial advisor), Slaughter and May and Khaitan & Co (legal counsels) and KPMG India Private Ltd (transaction due diligence, regulatory and commercial advisor). - Bernama