 "GVK's Hancock assets to be funded by equity: Reddy")
In one of the largest overseas acquisitions made by an Indian infrastructure company, GVK Power and Infrastructure on Friday said it has bought a major coal resource and infra development project of Australia’s Hancock Coal for $1.26 billion.
The Hancock Group will receive $500 million upfront, $200 million once the deal closes and remaining $560 million once the financial closure of the prjoect is achieved in 2012. According to the GVK Group, around $10 billion will be used to finance the first phase of developing, mines, port and the rail line.
In an interview with CNBC-TV 18, GVK Power vice-chairman Sanjay Reddy said the funding for the acquisition has been tied up and the project will be primarily be funded by equity. He added that there would be no dilution of equity in GVK Power.
When asked why the company had kept a minimum stake of ten percent in GVK Coal Developers, which has actually carried out the deal, Reddy said te main purpose of this deal is to not invest too much in equity but to get coal for GVK Energy.
Talking about the acquisition, Reddy said two levels of funding are required -
one is at the acquisition level, which is the holding company level of all the projects in the Hancock Group and the second is the project level itself. “The intent is that GVK Power is not going to be funding a lot of that equity.”
He said that GVK will bring in other equity players and the company is hoping to raise around $ 1 billion at the holding company level, which will be used to repay a significant portion of the debt. He also said that this investment will be raised in the Singapore holding company from various investors.
He felt that the project is a significant investment because it is large-scale and a very-high quality one. “It is one of the most advanced coal projects in the world.” Moreover, he said Alpha and Alpha West coal mines are in a regulatory region of Australia, which is of the safest regions to invest in.
On the infrastructure side, he said “We have financial investors and investors from other parts of the world including infrastructure players who are very keen to partner with us.”
Watch video: This is one the largest overseas acquisitions made by an Indian infrastructure company
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