Coal news and updates

Adani Group inks Rs 400 crore deal to buy Welspun’s two ready-to-build coal plants

Adani Group of billionaire Gautam Adani has signed an initial agreement to buy two ready to build coal fired power plants from Welspun group for Rs 400 crore, two people with direct knowledge of the matter said.

The plants — one in Uttar Pradesh and other in Madhya Pradesh — have received all the necessary clearances and can together generate 4000 Mw of power. They will be transferred to the ports-to-power conglomerate along with 2,000 acres by December, the sources said. Adani group declined to comment, while Welspun had not responded to questionnaire emailed on Friday as of press time Sunday.

Adani group, which had been purchasing debt-ridden power plants in the past, has now shifted its strategy to buy ready-to-build plants with all necessary clearances and power purchase agreements, and use its core area of execution in building power plants rather than taking over running plants with heavy loans.

A ready to build power plant can be completed in three years. The proposed deal with Welspun also fits well with its strategy of going across India rather than being focused on Gujarat.

Last year Adani group had announced that it signed definite agreements to buy Avantha's Korba Power (600 Mw), owned by Guatam Thappar, and Lanco Infratech's Udupi Power (1,200 Mw) for a total of Rs 10,500 crore to beef up its power generation portfolio.

Pipe-to-home textile maker Welspun group has been trying to pare its debt for the past two fiscals by selling non-core businesses. In October last year, it sold its steel unit Welspun Maxsteel to rival JSW Steel for Rs 1,030 crore. The group, which supplies towels exclusively for Wimbledon championship every year, has already cut its debt by more than half to Rs 2,560 crore from Rs 5,800 crore in March 2013.
Welspun's net debt to operating profit, a critical indicator showing the financial health of a company, has fallen  to 0.8 during the period from 3.3. The group has now shifted its focus in power to renewable energy primarily solar by building 650 Mw and additional 550 Mw is under construction. It has invested roughly Rs 5,000 crore to become the largest solar energy maker.

Many coal-fired power producers have been trying to sell assets in recent times as lenders push them to trim debt and reduce non-performing loans, but regulatory constraints, financially weak state electricity boards, and lackof raw materials, primarily coal, at affordable prices have hit their sale plans. On September 29, Lanco Infratech, which has put its 3,000 Mw assets on the block for the past two years, said the assets sale has been pushed further.

"The appetite among buyers are low now for want of reforms pertaining to power distribution companies, coal linkages and rail network," Lanco group chairman L Madhusudhan Rao said. The group plans to sell power plants and repay debt of Rs 18,000  crore.

Consultants say the sector will see a spate of consolidation.

source: http://economictimes.indiatimes.com