GMR Energy plans to reduce debt by ₹2,000 crore

GMR Energy plans to reduce its debt by ₹ 2,000 crore by using the proceeds from its 30 per cent stake sale to Tenaga Nasional Berhad (TNB) of Malaysian, a senior company official said.

Last week, GMR Energy, which is a subsidiary of the GMR Infrastructure Ltd, had announced the all cash stake sale to Malaysian energy company TNB for $300 million (₹2,000 crore).

Parag Parikh, CFO of GMR Energy, told BusinessLine that the company has a corporate debt of about ₹2,800 crore but today with 2,300 MW of operational assets, revenues are also coming in for servicing that debt. The proceeds from the stake sale would be used fully for retiring the debt. In effect the company’s debt burden on a standalone basis will be reduced to about ₹800 crore, he said.

Explaining the logic of the stake sale, Parikh said given the set of business challenges in the power sector, the company thought of bringing in a strategic partner, who will understand those challenges. At the same time, TNB was also looking at expanding its horizon beyond Malaysia. TNB evaluated various destinations for investments but zeroed down on India. TNB is a significantly large entity in the energy value chain with presence from power production to transmission and distribution in the Malaysian market. It has over 50 per cent market share in Malaysia and a market cap of $20 billion. It has significant experience in the entire power value chain, he said.

He pointed that the company’s immediate focus was to consolidate its portfolio. Along with TNB, a strategy would be drawn for improving the operational efficiency, EBITDA margins and cost reduction in the company. TNB has better experience in operational and maintenance of power plant, which would be useful for GMR Energy,

In the long-term, the company could consider investing in the renewable project and some of the stranded assets in the market, could become opportunities for the company. A lot of opportunities are present in operations and maintenance (O&M) of power plants, GMR Energy along with TNB look at exploring those opportunities to third parties, he said.

Parikh added that the company was producing 2,300 MW of power, of which a major chunk was being procured by State unities and only a small portion of power was being sold on merchant power basis. Currently barring a small hydro project of 180 MW, all other projects of GMR Energy are producing power.

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