Adani Power to Borrow as Much as $1.5 Billion Overseas to Finance Projects

Adani Power Ltd., the best performing Asian stock in the Bloomberg World Utilities Index, plans to borrow about $1.5 billion overseas in the next two years to build power plants.

Indian billionaire Gautam Adani’s power producer has an agreement to draw $200 million in external commercial loans by September, Chief Financial Officer Ameet Desai said in a phone interview. The money will be used to refinance loans taken to build the first two phases of its Mundra power plant, Desai said.

“The environment is getting more conducive for borrowing overseas as credit spreads are narrowing and interest rates are hardening locally,” Desai said. “We will take more loans from abroad.”

The six-month dollar London interbank offered rate was 0.63 percent on Aug. 6, while State Bank of India is charging at least 7.5 percent for lending to companies. India’s central bank has raised borrowing costs four times in five months to slow inflation to 6 percent by March 31 from 10.55 percent in June.

Adani Power’s shares have risen 36 percent this year making it the best performing Asian utility stock in the 157-member Bloomberg World Utilities Index. They rose 1 percent to 136.15 rupees at 10:05 a.m. in Mumbai.

Asset in Australia

Adani Power has tied up the $200 million loan at 425 basis points above the six-month Libor, the same rate as the $150 million loan it raised from overseas in June, Desai said. One basis point is 0.01 percentage point.

The company plans to build power plants with a combined capacity of 6,600 megawatts by 2012, Desai said last year. Adani Enterprises Ltd., an affiliated company, this month agreed to buy a coal asset in Australia for A$3 billion ($2.8 billion) from Linc Energy Ltd. to fuel the plants.

India’s economy has expanded an average 8.4 percent since 2004, prompting companies to increase electricity output to end blackouts and sustain economic growth. The nation’s utilities aim to add 78,700 megawatts of capacity in the five years to 2012.

The central bank last month allowed infrastructure companies to refinance domestic bank loans through overseas borrowings to fund new projects.

Indian companies are allowed to borrow $500 million overseas in a financial year without having to get an approval from the Reserve Bank of India. The interest rate on loans maturing between three and five years can’t exceed 300 basis points above the six-month Libor rate while for loans due in more than five years the credit spread is 500 basis points, according to the central bank.

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

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