Anil Ambani looks at China to fund Jaiprakash Power deal

Anil Ambani's Reliance Power will be taking on a Rs 9,500 crore debt to finance the purchase of three hydroelectric power plants of Jaiprakash Power Ventures Ltd. Sources privy to the deal say Reliance Power is looking at restructuring the debt and might look at Chinese financial institutions for this purpose.

The power plants will be bought by a 100 per cent subsidiary of Reliance Power, Reliance CleanGen.  "Interest rates in China are half of what they are in India. The plan is to reduce the cost of the capital," says an insider. He confirmed that group was already in touch with three Chinese institutions for the purpose.

The group has already appointed SBI Capitals to advise it on this deal. Jaiprakash Group is looking for buyers for its various assets to reduce its own mounting debt of Rs 28,164 crore as on March 31 this year. The company's interest cost for 2013/14 almost doubled to Rs 6,094 crore from Rs 3,134 crore a year earlier.

On Sunday, Reliance Power announced the initial agreement for what could be India's biggest deal in the infrastructure sector outside telecom. On Monday, the stock price of Reliance power reacted positively to the news. It closed at Rs 94 a share, a one rupee gain on its Friday close, after touching Rs 94.65 as the all day high.
 
The three hydroelectric power plants being bought are a 400 MW plant at Chamoli district in Uttrakhand, the 300 MW Bhapsa stage II and the 1061 MW Karcham Wangtoo power plants in Kinaur district of Himanchal Pradesh. All the power plants run on run-of-the-river technology, so there is no need to maintain a reservoir of water, and have asset life of 50 years.

Those privy to the deal say that Reliance Power is looking at raising roughly Rs 1500 crore of equity participation from the other financial institutions, including FIIs, along with another Rs 1500 crore by Reliance Power itself. "All these financial details will be finalized in next few weeks," says a source.
 
Anil Ambani has moved quickly for his first big ticket acquisition. The negotiating team was led by his son Jai Anmol Ambani -announcing the latter's arrival on the big stage. His cousin Akash - Mukesh Ambani's son - is already active in his father's business.   

Earlier on Thursday, a consortium led by Abu Dhabi National Energy Co pulled out of negotiations to buy two of these three plants, citing change of priorities.

Meanwhile, Ambani's team was aggressively pushing for this deal and bettered the valuation of Gautam Adani's Adani Power. Reliance Power valuated three hydel projects at Rs 12,300 Cr, whereas Ahmedabad-based Adani, evaluated these assets at Rs 11,700 Cr. The major allurement for Ambanis was these assets are already giving roughly Rs 800 cr in net profit.