GMR Infrastructure buys InterGen

GMR Infrastructure has agreed to buy half of US power producer InterGen for $1.1 billion. The deal, subject to regulatory approval, makes GMR India’s largest private sector power developer followed by Reliance Energy and Tata Power. The acquisition also gives the Bangalore-based firm technical skill to boost its fledgeling electricity business and firepower to take on competition. GMR will gain access to InterGen’s technology, processes and financial engineering skills. Importantly, it strengthens GMR's position to bid for large projects, as earlier they could not qualify since they didn’t meet certain technical requirements.Compared to Tata Power and Reliance Energy (now Reliance Infrastructure), GMR is a small player, with a capacity of 808mw, and so, was barred from bidding for ultra mega power projects (4,000mw). For GMR group, whose interests ranges from airports and utility to roads, InterGen is its second international buy after Istanbul’s Sabiha Gocken International Airport. InterGen, with a turnover of $1.65 billion and EBITDA of $613 million, has 12 power plants in UK, Netherlands, Mexico, Australia and Philippines. The deal will take GMRs total capacity to 17,088mw (includes operational and planned power plants). GMR stated that there wouldn’t be any change at InterGen’s management team. InterGen has an employee base of 6,000 people. Other overseas deal in the utility segment include the acquisition of Globeleq’s Latin America and Carribean power stations by Delhi-based D S Constructions, in partnership with Israel Corp, for $568 million. It is the competitive acquisition at $360,000 per megawatt, which is half the current cost of similar facility. The GMR group has been working on the deal for the last four months with team of 80 people, including its external financial and legal advisors, and saw intense competition from large Indian and global power producers as well as from international funds. GMR bought the 50% stake from AIG Highstar. The balance is held by Ontario Teachers’ Pension Plan, Canada’s largest single-profession pension plan. AIG Highstar decided to sell as the fund had a 5-year tenure and had to unwind its holding. The deal comes three years after AIG Highstar and Ontario Teachers acquired InterGen for $1.75 billion from Shell and Bechtel.