Enterprise value of deal with IL&FS to be near Rs 7k cr: Orient

Orient Green Power's board has approved a plan to enter into exclusive discussions with IL&FS to explore a merger of their wind energy assets.

The combined entity will create one of India's largest listed wind energy company.

Speaking to CNBC-TV18, S Venkatachalam, MD of Orient Green said enterprise value of the deal is likely to be around Rs 7,000 crore.

He said the debt on the books of Orient stands at Rs 1,700 crore and for IL&FS Energy it is likely to be around Rs 3,000 crore, he said.Below is the verbatim transcript of S Venkatachalam’s interview to Reema Tendulkar & Nigel D'Souza on CNBC-TV18. Nigel: Could you explain to us certain details about this particular deal how it is going to be structured, is it going to be a stock reversed merger, is it going to be a demerger first then there is going to be a reversed merger explain that to us? A: Basically, as you said we are entering into an exclusive discussion with IL&FS wind energy and during this period of exclusivity for 90 days we will be doing the financial, technical and legal due diligence, each party will be doing it, after which the entire structure will emerge. Basically, IL&FS will merging into a Orient Green Power and as I said the overall total will be in terms of the wind energy assets will be IL&FS has got about 775 megawatts of wind energy assets. Orient Green Power has got 425, so together we will be a 1200 megawatt entity and will be the single largest listed independent power producer (IPP) in the country as such. Reema: Will the equity share be spilt in similar manner? Out of the 1200 megawatt 425 which Orient Green Power Company Limited (OGPL) has translates into about a 35 percent of the assets. So would that be the equity holding and also if you could give us what the total valuation of the company will look like- the equity it holds as well as the debt on the books? A: The debt in the books as far as Orient Green Power is concerned it is Rs 1,700, their debt would be about in excess of Rs 3,000 crore. We don’t have the numbers yet that will be worked out after the technical and the financial due diligence. So, really speaking most of it will emerge over the next 90 days and then we will have a discussions post the 90 days after the entire due diligence is done. So, the structure is fully not emerged, it will be very earlier to comment on the overall structure that will work out. Reema: Roughly, you could tell us how the equity share will be? A: It will be very early to comment, in fact it could be in proportion to the megawatt holding or in proportion to the assets that we will have to be worked out after the due diligence. Nigel: To set up 1 megawatt what is the total money that goes in is it Rs 6 crore, Rs 7 crore or Rs 5 crore? I am just trying to understand what is the Greenfield amount then we can come to an enterprise value so is it around Rs 5 crore? A: It will be between Rs 6-7 crore. Today the windmills are being sold between Rs 6-7 crore based on the IRR potential of the windmill that it gives so it range anything between Rs 6 and 7.