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Relaince Power in talks with Temasek Holdings and PSP Investments to fund Jaypee Group deal

  • Anil Ambani-controlled Reliance Power has initiated early stage discussions with Temasek Holdings, the Singapore government-owned investment firm, to raise up to $500 million and tie up funding for the three Jaypee Group hydroelectric power assets that it's acquiring. A clutch of other marquee global pension and infrastructure focused funds have also been tapped as RPower begins to firm up its funding strategy for the Rs 12,300-crore ($2 billion) acquisition - the biggest in the domestic power sector as well as for the entire group. Other than Temasek, Reliance is also in discussions with Canadian pension fund giant PSP Investments and homegrown PE firm IDFC Alternatives, part of infrastructure finance company IDFC, for equity funding, added the people cited above. Both had joined Abu Dhabi's TAQA as 49% financial investors in a consortium that had agreed to buy the same hydro assets in March.

  • Last Thursday, in a sudden move, TAQA pulled out of the deal, citing a global "shift in strategy." PSP is believed to have shown its readiness to offer up to $1 billion dollars of funding to Ambani last week. The commitments till date far exceed the actual funding requirement, so the final disbursals may actually be a lot less. However, the talks are still in early stage. The Anil Ambani-led Reliance Group plans to raise Rs 9,500 crore debt on the back of cash flows of the Jaypee assets that have already touched Rs 800 crore in FY14.

  • Additionally, it will infuse Rs 2,500 crore as equity. But there are no plans to raise equity at RPower. Instead, the company may offer minority stakes to financial investors such as long-only pension, sovereign funds or even infrastructure-focused PE firms at a 100% dropdown subsidiary, Reliance CleanGen (RCL), the vehicle used to acquire the Jaypee assets. The plan is to club the three operating Jaypee assets with the three that RPower has in its own portfolio and bring them all under the aegis of Reliance CleanGen. The company may eventually need only Rs 1,000-1,500 crore equity funding from outside sources. The rest will be funded with its cash flows, reserves and accruals.

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