PowerGen faces hurdles in buying full stake in GPECL

AHMEDABAD, OCT 18: There's many a slip between the cup and the lip, at least as far as the sale of PowerGen's 655 MW Pagathuan power proje...

AHMEDABAD, OCT 18: There’s many a slip between the cup and the lip, at least as far as the sale of PowerGen’s 655 MW Pagathuan power project is concerned. While Tata Electric Company (TEC) and China Light and Power have thrown their hats in the ring and emerged as final bidders for the project, PowerGen itself is likely to face stiff resistance in acquiring the remaining 12 per cent of the stake in Gujarat PowerGen Energy Corp (GPECL) from the Gujarat Power Corporation Ltd (GPCL) before it is in a position to sell off the project, lock, stock and barrel to either of the two parties bidding for it.

Sources close to the deal said that in all likelihood, the Gujarat government would issue an LC to PowerGen on the grounds that this ensured ready returns for the government. "The new GERC award has placed GEB on a strong footing and will enable it to accede to the demands of power sellers to open LCs. But even then it will have to prioritise the LCs in which case LCs will first be issued in case of projects which ensure returns to the government," said a senior state government official.

Till the time that the issue is resolved and the process of buying out the 12 per cent stake in GPCL is completed and a mutually acceptable share acquisition agreement is hammered out, PowerGen will obviously not be in a position to sell off the Pagathuan project. Interestingly, while several big corporates had originally displayed an initial expression of interest in the project including Reliance and Enron, only TEC and China Light & Power have finally been left in the fray. Sources said Reliance had backed out of the project since it is more interested in greenfield projects than in acquiring existing ones.

According to indications available, China Light & Power may have a distinct advantage in acquiring the Pagathuan project of PowerGen since it is a multinational player. State government sources said PowerGen has indicated that it would be more interested in selling off its projects in India and this part of the world to a single plyer, if possible. China Light & Power fits the bill since it is on an aggressive expansion spree and has already evinced interest in moving into the Bhadravati project as well following the pulling out of French power major, EdF earlier this year.