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Asian Genco – What’s the Big Deal?


Global private equity firm General Atlantic, along with a clutch of other investors like Morgan Stanley and Goldman Sachs, has invested $425 million (Rs nearly Rs 2,000 crore) in Asian Genco (AGPL), which has investments in Indian power generation assets. This is said to be the largest equity transaction in the Indian power sector so far.

Interesting. That’s a lot of money. And Asian Genco is not exactly a household name. I thought it was worth doing a bit of research to understand the company better.

The company web site ( http://www.asiangenco.com ) says the following:

“Asian Genco Pte Ltd is an infrastructure development company with investments in power generation assets and services business. The company has a target to build a portfolio of 10,000 MW of power generation assets by the year 2012. At current portfolio size of nearly 4000 MW with an estimated total capital outlay of ~ USD 4.5 bn our presence in India already establishes us one of the largest clean power companies in the country.”

The company was incorporated in November 2004 in Singapore (That’s not a lot of time). Since then, it has invested in a portfolio of hydro, thermal and non-conventional generation assets for an aggregate capacity of nearly 4000 MW. AGPL owns controlling stakes in all the portfolio assets. During the same period, AGPL has also built a complementary portfolio of service businesses focused on engineering, technical and project development for power projects.

The projects include three hydel power projects in the states of Himachal Pradesh and Sikkim, one gas based & one coal fired thermal projects in the state of Andhra Pradesh and a wind farm in the state of Gujarat. Among these is a project called Teesta III, among the largest hydro projects in the Indian private sector, with a capacity of 1,200 MW, and a coal-fired supercritical thermal project in Andhra Pradesh with a 1,320 MW capacity.

Well, it’s fairly clear that the company is thinking big, but was that the key reason for the large fund infusion? Was there something special about the team? I thought I’d look into the team at the helm – but unfortunately the team page at the web site does not say much ( http://bit.ly/bQ8dqc ).

Two other divisions of the company throw some light on the additional strengths of the company: Its fuel division and services division.

Fuel – Global Fuels, its wholly owned subsidiary engaged in acquisition of coal mine interests in Indonesia, and developing the transportation and port related infrastructure for supply and trading of coal in India. Global Fuels is expecting a targeted annual production of 30 Million Metric Tons by 2012. This is getting interesting. It is well known that Indonesia is likely to be the source for increasing amounts of Indian coal imports. Global Fuels securing a supply chain for coal imports naturally makes it hot property.

Services – Asian Infratech Pte Ltd is its wholly owned subsidiary that holds a controlling interest in Energy Infratech Pvt Ltd and employ about 500 engineering, construction, project management and project finance professionals. The project development team of Energy Infratech has collectively more than 1600 years of project management experience. Energy Infratech provides project management services from concept to commissioning. Now, this could have been an important factor as well – a large, skilled manpower force could prove to be an invaluable asset.

I think I’m getting the picture. What’s reported in general news about the company barely scratches the surface. I see the following as the key reasons why the company got such a huge funding:

  1. It is definitely thinking big
  2. It appears to have a diverse portfolio of energy assets, and in different parts of the value chain – from feedstock, to logistics, to project implementation and power production.
  3. Its diverse assets provide for a well-balanced portfolio in which specific assets could be leveraged well and excellent synergies achieved.
  4. Most of its projects are in traditional energy (as opposed to alternative energy), which implies achieving scales and profitability with a high degree of certainty, even if the IRRs are not very high.

I’d like to keep an eye on this company. It sure is an interesting one.

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