Tata Power, India’s largest private power player has signed an agreement to raise US$300 million in Bhira Investments Limited and Bhivpuri Investments Limited Coal Special Purpose Vehicles (SPVs) through shares with differential rights to be issued to Olympus Capital Holdings Asia (Olympus Capital). Tata Power holds its interest in the KPC and Arutmin coal mines in Indonesia through these SPVs.
Taking current position of debt and cash in coal SPVs, the post money shareholding of Olympus Capital may be in the range of 14-15% for an investment of US$300 million.
The investment is subject to certain regulatory and lender approvals. The instrument will be in the form of differential rights (Class B) shares with no dividend rights which are the subject of a capital protection arrangement at the end of five years from the date of closing the transaction, unless converted. These Class B shares are fully convertible into ordinary shares through the end of the fifth year from the date of closing at the option of the holders of the Class B shares. The capital protection arrangement could be serviced either from Tata Power or the coal SPVs.
These funds could also be utilized to secure further long term coal supplies by investing in coal mines or to reduce the outstanding debt in the SPVs.
Mr. Prasad Menon, Managing Director, Tata Power said, "We are excited about this strategic partnership with Olympus Capital which we hope to expand into other areas of common interest given their on-the-ground presence throughout Asia and expertise in the energy and power sector This long term, flexible financing enhances our ability to achieve our strategic goals of securing sustainable sources of supply for our rapidly growing power generation base. Added Mr. S Ramakrishnan, Executive Director (Finance) “Olympus Capital approached us with this transaction idea last year; through this volatile period, we were able to adapt the structure and valuation to current market conditions in a manner that met each of our objectives.”
Mr. Daniel R. Mintz, Founding Managing Director, Olympus Capital, said “We are very pleased to partner with Tata Power in their Coal SPVs. We look forward to working with Tata Power to identify high quality projects to supply their growing resource requirements and also, given our experience in the power and energy sectors, to exploring additional opportunities to work together in other aspects of Tata Power’s business.”
Background on Tata Power’s Investment in Coal SPVs: In June 2007, the Company acquired 30% stake in Indonesian coal mines, KPC and Arutmin, with US$1,225 million which was funded as follows:
- A bridge loan of US$950 million borrowed by Tata Power (Cyprus) Ltd. [now named Bhivpuri Investments Limited (Bhivpuri)] fully guaranteed by the Company.
- US$273 million as shareholder loan from the Company to Tata Power (Mauritius) Ltd. [now named Bhira Investments Limited (Bhira)].
- US$1 million equity in each of Bhivpuri and Bhira.
The bridge loan was subsequently refinanced and the current outstanding debt is US$335 million as non-recourse and US$340 million as recourse debt.
About Tata Power:
The Tata Power Company Limited is India's largest integrated private sector power utility with an installed generation capacity of about 3000 MW. The company has emerged as a pioneer in the Indian power sector, with a track record of performance, customer care and sustained growth. Tata Power has a presence in all the segments of the power sector viz generation (thermal, hydro, solar and wind), transmission and distribution. The Company has established global footprint by acquiring 30% stake in Indonesian Coal Mines and its 4000 MW Ultra Mega Power Project at Mundra (Gujarat) is on fast track. It has successful public-private partnerships in generation, transmission and distribution- North Delhi Power Limited with Delhi Vidyut Board for distribution in North Delhi, ‘Powerlinks Transmission Ltd.’ with Power Grid Corporation of India Ltd. for evacuation of Power from Tala hydro project in Bhutan to Delhi and ‘Maithon Power Ltd.’ with Damodar Valley Corporation for a 1050 MW Mega Power Project.
About Olympus Capital:
Olympus Capital Holdings Asia is an independent middle market private equity firm established in 1997 with offices in Hong Kong, New Delhi, New York, Seoul, Shanghai and Tokyo. Olympus Capital’s investment portfolio in India includes Orient Green Power, a renewable energy company sponsored by Shriram EPC and Quatrro BPO Solutions led by Raman Roy, a pioneer of India’s business process outsourcing industry. Olympus Capital’s strategic partners in Asia have included Asurion, Liberty Global, Mizuho Bank, Sojitz Corp. and Toyota Tsusho. More information is available at www.olympuscap.com.
The lead investor in the Olympus Capital controlled vehicle investing in Coal SPVs is Olympus Capital Asia III, L.P., whose investors include leading pension funds, financial institutions, endowments and family offices from North America, Asia, Europe and the Middle East. After initiating the transaction, Olympus Capital hired Macquarie Capital Advisors India to advice on the transaction and Barclays Capital to provide financing and act as financing structuring advisor.
Disclaimer Statement:Some of the statements in this document, except for the historical information, are forward-looking statements. These forward-looking statements include references to growth projections, plans, strategies, intentions and beliefs concerning our business and operating environment. There are risks, uncertainties and other factors that may cause actual results to differ materially from those projected by these forward-looking statements. |
