On Thursday, Reliance Infrastructure (RInfra) announced the largest ever debt reduction exercise and said that it has signed a definite agreement with Adani Transmission Ltd for the sale of its Mumbai power business for a total consideration of Rs.18,800 crore.
Also known as Reliance Energy, Reliance Infra’s Mumbai power business is India’s largest private sector integrated power utility distributing power to nearly 3 million residential, industrial and commercial consumers in the suburbs of Mumbai.
As per a company release, the total deal value of the sale of the Mumbai power utility Reliance Energy is Rs.13,251 crore, regulatory assets estimated at Rs. 5,000 crore and net working capital on closing estimated at Rs. 550 crore. This would also accrue to RInfra as part of the agreement.
It also says that Reliance Infrastructure Ltd announced signing of a definitive binding agreement with Adani Transmission Ltd (ATL) for 100 per cent stake sale of its Mumbai power business. It would include the integrated business of generation, transmission and distribution of power for Mumbai.
The net working capital on closing estimated at Rs. 550 crore and regulatory assets under approval estimated at Rs. 5,000 crore would flow directly to RInfra. Total deal value is said to be at Rs. 13,251 crore which would comprise business valued at Rs. 12,101 crore and regulatory assets approved so far of Rs. 1,150 crore.
And the total consideration value is estimated at Rs. 18,800 crore.
RInfra is expected to utilize the proceeds of this transformative transaction entirely to reduce its debt, becoming debt free and up to Rs. 3,000 crore cash surplus. The proposed transaction is subject to the customary approvals.
The deal has been described as the largest ever debt reducing exercise by any corporate. As per RInfra, monetisation of the Mumbai power business is a major step in the company’s deleveraging strategy for future growth.
With annual revenues of Rs.7,500 crore and stable cash flows, the Mumbai utility caters to a peak demand of over 1,800 MW.
Going forward, RInfra will focus on upcoming opportunities in the asset-light engineering, procurement and construction, as well as defense businesses.