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CLP Wind Farms makes fresh attempt to raise up to Rs 1,200 crore from PEs

According to reports, India’s biggest wind utility firm, CLP Wind Farms, plans to sell a minority stake to global private equity investors to raise up to Rs 1,200 crore to fund expansion, two people with direct knowledge of the development said. The company, a unit of Hong Kong-listed power generator CLP Holdings, has appointed Standard Chartered Bank to scout for investors, these people said.

This is third attempt by the company to raise capital in two years. The earlier attempts were not successful as the company did not agree to the valuation offered by PE funds.

“The company is now seeking to raise between $150 million and $200 million from PE investors and is in talks with global funds,” an investment banker with knowledge of the development said. “The stake offered will range from significant minority to a majority.” An email to CLP India’s managing director Rajiv Ranjan Mishra did not elicit any response.

CLP Wind Farms owns more than 3,000 mw of power projects in the country. It generates 1,000 mw of wind power.

Founded by Hong Kong billionaire Michael Kadoorie, CLP entered India in 2002 by purchasing a majority stake in Gujarat Paguthan Energy Corporation, making it one of the biggest foreign direct investments in the country and the biggest in the wind power sector. In October, CLP said it will raise money by selling bonds in the global market. It received approval from key lenders such as Standard Chartered Bank, IDBI Bank and IDFC to consider its debt ratings on a pooled financing basis for its wind assets.

Pooled financing takes into account the total revenues of the different assets that the company owns rather than on an asset-by-asset basis, which also cuts down the risk of performance variations between individual farm assets of the firm. “The fund raise will be to cash out a part of the equity for the next phase of growth,” said Hemant Dharnidharka, research head at Bangalorebased credit research firm SJS Markets. “PE funds will be interested if they see cash flow visibility.”

The challenge for wind farm business is to have continuous fiscal support and an assured price from state governments to developers, he added.

CLP owns a 655 mw gas-fired power plant at Baruch in Gujarat, one of the largest independent power projects to have been set up in India following the government’s 1992 policy of allowing foreign investment in power generation.

It also runs 1,320 mw supercritical coal-fired power project at Jhajjar in Haryana. CLP is now exploring power generation opportunities in hydro, solar, and entering power transmission.

In the past, CLP signed an agreement with Suzlon to jointly build a 100.8 mw power plant for Rs 600 crore in Rajasthan. It also has a similar arrangement with global wind power generator Gamesa to jointly build a 130 mw power plant in Maharashtra.

Many local power developers are seeking to raise capital as lenders push them to repay loans and existing PE funds seek to exit their investments. GVK, GMR and Lanco are among others seeking to raise capital from PE funds. Lack of fuel linkages after cancellation of coal blocks by the government has hit the Indian power sector. According to an October 2013 CLP report, the company lost HK $212 million in India in the first half of 2013, around 10 times more than it lost the previous year on the back of shortage in fuel supplies leading to lower production in its coal-fired power plant in Haryana.

“Within the set of investors who are still looking at investing in infrastructure in India, they are chasing power and road assets. In power, projects that have been executed well and have adequate coal linkages for thermal power plants and suitable sites for the wind are in demand. However, not every asset will find a taker,” said Mayank Rastogi, partner, private equity and transaction advisory services at Ernst & Young India.

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