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POWER UTILITY | Cesar Tordesillas, India

Indian power project developers to divest assets

With ventures stranded due to fuel scarcity and other issues, power project developers in India are divesting stakes in their ventures even at lower valuations.


According to industry experts, such projects could together have at least a capacity of 10,000 MW.

Since the valuations are low, it would attract interest from parties who would like to utilise these projects for captive purposes, an industry person pointed out.

"There could be a trend of developers looking to divest some stake in their projects. Since many projects are stranded, selling stake would help them to generate cash flows," said PwC India Leader Kameswara Rao.

Developers might be looking at divesting 26 per cent to 49 per cent rather than outright sale, he noted.

Entities from the UK, the US and many other European nations are reportedly looking at the possibility of purchasing power assets in India at lower valuations.

"With continuing problems in the sector, some promoters are looking to exit their power projects. Many players entered the sector without long-term plans and now are suffering," a senior analyst of a leading rating agency said.

According to the analyst, many developers don't have enough financial strength to continue amid tough conditions.

At least 35,000 MW generation capacity are estimated to be currently stranded due to lack of fuel linkages.

Pegging the cost of setting up 1 MW at around Rs 5 crore, these would be worth over Rs 1.75 lakh crore.

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