The Hindu : Business : GMR Infra buys 50 % in InterGen for $1.1 billion

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Thursday, Jun 26, 2008
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GMR Infra buys 50 % in InterGen for $1.1 billion

Special Correspondent

Deal comes dirt-cheap, thanks to the U.S. sub-prime crisis

Financing planned through bridge-loan
GMR now qualifies for UMPP bidding

— PHOTO: SHASHI ASHIWAL

STRATEGIC INVESTMENT: Madhu Terdal (right), Executive Vice-President and CFO (International Business), GMR Group, with Y. M. Shivamurthy, President, Legal Affairs, at a press conference in Mumbai on Wednesday.

MUMBAI: In the largest ever acquisition of a global energy utility by an Indian company, GMR on Wednesday announced the signing of a definitive documentation for the acquisition of 50 per cent stake in the U.S.-based InterGen N.V., a global power generation company.

The transaction is valued at $1.1 billion and GMR Infrastructure (Malta) signed the share purchase agreement with AIG Highstar to acquire the 50-per cent stake. The remaining 50 per cent is held by Ontario Teachers’ Pension Plan Board (OTPPB).

GMR is an infrastructure company with a presence in energy, airports, highways and urban infrastructure. InterGen has power plants across the U.K., the Netherlands, Mexico, Australia and the Philippines, with a total capacity of 12,766 MW (8,086 MW of operational capacity and 4,680 MW of assets under development). The transaction is subject to regulatory approvals in each country where InterGen has operations and is expected to close in the third quarter of 2008.

N.M.Rothschild & Sons worked as the sole exclusive financial advisor while White & Case LLP worked as legal advisor to the GMR group on this transaction.

Addressing the media here, Madhu Terdal, Executive Vice-President and CFO, International Business, GMR, said, “We have paid half the price that it commands, thanks to the sub-prime crisis.

There were five top bidders for the company. InterGen is among the largest power generation companies in the world with 85 per cent of its feed being gas-based and 15 per cent coal-based. Of the 85 per cent, 50 per cent is through tolling arrangement where the off-taker supplies the gas to generate power. In all other cases, it is through 10-12 year contracts.

About, 70 per cent of InterGen’s revenues have been contracted till 2017-18 and they have a record of having developed 16,000 MW of power in ten countries.”

To finance the acquisition, GMR Infrastructure (Malta), its overseas special purpose vehicle will raise a two-year bridge loan which will be converted to long-term finance. It has already raised $1.1 billion debt from a consortium of banks, including Axis Bank, Canara Bank, Bank of India, Bank of Baroda and Indian Bank.

“We will decide in 2-3 months the equity portion from the GMR group. We will also have two members from GMR on the four-member management board of InterGen,” Mr. Terdal said.

GMR has an ambitious international business strategy whose focus sectors are energy, airports and aerotropolis (real estate development around airports).

According to Mr. Terdal, GMR can now also qualify for bids of the Ultra Mega Power Projects (UMPPs) domestically which it could not earlier.

GMR is developing airports in New Delhi, Hyderabad and Istanbul. According to Ashutosh Agarwala, CFO, Strategic Finance, GMR Group, “by 2010-11 airport infrastructure will account for 45-50 per cent of group revenues.”

In a statement G. M. Rao, Group Chairman, GMR group, said, “The acquisition is an integral part of our global strategy to be the world’s leading energy and infrastructure company. This acquisition will provide us a platform to expand in InterGen’s existing geographies and new geographies of strategic importance to both GMR and Teachers’ (OTPPB). Such growth will be supported by the strong management, high quality assets and a partner like OTPPB, which is also a leading global infrastructure investor.”

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