GVK Power Buys Australia's Hancock Coal for $ 1.3 billion;

GVK Power Buys Australia’s Hancock Coal for $1.3 b

GVK will pay the deal amount in phases with $500 m upfront

CR SUKUMAR HYDERABAD

Infrastructure major GVK Power, part of the GVK Group, on Friday announced it has agreed to acquire Australia’s Hancock Coal for $1.3 billion, in one of the largest overseas acquisitions by an Indian infrastructure entity. GVK said the deal — which includes acquiring majority holding in coal resources and railway line and port infrastructure projects of Hancock Coal — will offer the Hyderabad-based company an option for long-term coal supply contracts for the purchase of up to 20 million tonnes annually. This can support around 7,500 megawatts of power generating capacity. On August 26, ET had reported that GVK Power was close to acquiring two coal mines from Hancock Coal for about $1.3 billion.

“While this builds a strong resource business for GVK, it will also significantly enhance the value of GVKPIL’s shareholders as we will now be able to increase the capacity of our coal power business with an assured in house supply of raw material,” said GVK chairman GVK Reddy. GVK will pay the consideration in a phased manner to the Hancock Group, with $500 million upfront. About $200 million will be paid in one year from closing the deal and another $560 million on financial closure of the project, which is expected next year.

The Hancock coal project consists of 7.9 billion tonnes reserves. The acquisition enables GVK Power to secure adequate fuel supplies for its power ventures. Hancock Group chairman Georgina Hope Rinehart, one of Australia’s richest women, will join the board of GVK Power as a non-executive director.

The Hyderabad-based infrastructure group said it has tied-up the funding for the acquisition with banks and the financing documents for funding the acquisition are being executed with the banks and the transaction is expected to close and assets transferred in about two weeks. Ernst & Young acted as the financial advisor to GVK for the acquisition. Amarchand & Mangaldas & Suresh A. Shroff were the legal advisors, while Minter Ellison Lawyers were Australian legal advisors to GVK.

GVK estimates a total investment of $10 billion in the first phase of developing the mines, rail line and port. However, it did not disclose details on funding arrangements for this investment.The transaction was done by GVK Coal Developers (Singapore) (GVKCDPL), a step down subsidiary of GVK Natural Resources.
Power Booster

• The deal includes acquiring majority holding in coal resources and railway line and port infrastructure projects of Hancock Coal

• GVK estimates an investment of $10 b in the first phase of developing the acquired mines

Source: ET