Companies line up for DLF’s wind business

Several Indian and overseas companies have shown interest in acquiring the wind power business of DLF Ltd, India’s largest real estate developer by market value, which is seeking to raise money by selling assets outside of its main business.
Adani Group, Essar Power Ltd, Infrastructure Leasing & Financial Services Ltd, Hong Kong-based CLP Group and the UK’s BG Group Plc have evinced interest in the unit, said a person close to the development who didn’t want to be identified. An executive at one of the firms independently confirmed that his company was interested in the business. He also didn’t want to be identified.

DLF plans to sell assets that are “non-strategic” to its main business of property development and reorganize debt as it weathers a downturn in the real estate market. The company expects to raise Rs2,000 crore by selling assets such as the wind power business.
DLF’s plan to divest its wind power generation business was reported on Tuesday by Business Standard newspaper, which cited unnamed people in the company as saying it intended to use the proceeds for a more related business.
DLF has net debt of around Rs13,000 crore, according to the company. At Rs24,750 crore, the company’s net worth (equity and reserves) as of 31 December 2008 was far higher than its net debt, according to a presentation DLF made to analysts.

DLF has hired audit and consulting firm Ernst and Young to help sell the wind power business, which has a capacity of 250MW, the person close to the development said. “These companies are doing due diligence to acquire the DLF wind power business. While CLP is looking at this opportunity through Roaring 40s, IL&FS’s wind-focused group is looking at this opportunity,” he added.
Roaring 40s is an equal joint venture between CLP and Australian power producer Hydro Tasmania. A DLF spokesperson declined to comment, saying the company is in its “silent period”—a time close to an earnings announcement when it is not allowed to make public statements. “Wind power is a vibrant and emerging sector and has a great potential,” said Vikas Kaushal, a partner at management consulting firm AT Kearney. “Globally, renewable (energy) is becoming a mainstream business. The short-term business outlook will have an impact on valuations. However, the fundamentals of wind business remain strong.” Rajiv Mishra, managing director of CLP Power India Pvt. Ltd, said, “We continue to remain interested in expanding our renewable portfolio in India. In the current financial crisis, there are a number of opportunities that have been brought to us and we are considering them.” Mint had on 12 January reported on CLP Group’s plans to take over power projects in the country that may be surrendered by developers, who find it tough to raise resources in a tightening credit market. Questions emailed to Adani Group and IL&FS remained unanswered, a BG spokesperson said in an email response that the company doesn’t comment on “market speculations”. “As a group, we keep evaluating growth opportunities, but as a policy we don’t comment on specific projects or speculation,” said an Essar Group spokesman.