The Hindu : Business : CCEA clears Rs. 8,000 cr. FDI by Essar Power

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CCEA clears Rs. 8,000 cr. FDI by Essar Power

Special Correspondent

UAE developer to invest $250 m

Essar Power to raise capacity to 6,000 MW by 2012
Rakindo will be the holding company for Rakeen investment

NEW DELHI: The Union Cabinet on Friday approved Essar Power’s proposal to infuse up to $2 billion (nearly Rs. 8,000 crore) as foreign equity in the company for undertaking various downstream projects including power and coal mining.

Briefing presspersons after the meeting of the Cabinet Committee on Economic Affairs (CCEA), Finance Minister P. Chidambaram said the approval would allow Essar Power to invest in the permitted downstream activities, including investment in the power sector and coal mining for captive consumption.

The proposal had already been cleared by the Foreign Investment Promotion Board (FIPB).

Since the investment inflows have exceeded Rs. 600 crore the proposal needed to be cleared by the CCEA.

The foreign direct investment (FDI) in Essar Power would be increased to 100 per cent with an estimated investment of Rs. 8,000 crore as equity from Essar Power Holdings Limited (EPHL), a foreign entity which is a part of the Essar Group and is incorporated in Mauritius.

Foreign equity

[The private companies setting up or operating power projects as well as coal or lignite mines for captive consumption in such projects will be allowed foreign equity up to 100 per cent provided that coal or lignite produced by them is meant entirely for captive consumption in power generation.]

Essar Global Limited (EGL), a company incorporated in Cayman Islands, is the holding company of EPHL and also holds diverse investments in India and other countries.

At present, Essar Power Limited is the operating company of the Essar Group in the power sector.

It owns and operates a 515 MW power plant at Hazira in Gujarat.

The company has lined up plans to invest over Rs. 20,000 crore in the power sector in the next couple of years, although EPH would provide funds only for the equity stake.

Essar Power plans to increase its installed capacity to 6,000 MW by 2012, which includes power plants of 1,200 MW each in Madhya Pradesh, Gujarat and Jharkhand.

The UAE-based real estate firm Rakeen Development was allowed to invest up to $250 million (Rs. 1,000 crore) in the infrastructure sector, including integrated townships and special economic zones (SEZs).

Downstream ventures

The CCEA gave its nod to set up a wholly-owned holding company with foreign equity of up to 100 per cent by Rakeen Development, Al Jazeera Al Hamra or its fully-owned subsidiary Rakeen Ltd (Mauritius) to undertake downstream investments in Indian companies engaged in infrastructure and construction development projects.

The Chennai-based Rakindo Developers, which will be the holding company for the investment, would invest in several downstream joint ventures.

Rakindo is a joint venture between Rakeen Pvt. Ltd, promoted by the Government of Ras-Al-Khaimah (UAE) and Dubai- based Trimex group.

These downstream joint ventures would be engaged in infrastructure construction development projects, which include integrated township, information technology parks, hotels, resorts, hospitals, housing, retail, office and commercial premises, educational institutions and special economic zones across the country.

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