Ind-Barath Energy Utkal Limited

Nature of the business

Ind-Barath Energy Utkal Limited (“IBEUL”) was established to develop a 700MW coal-fired power plant in the state of Orissa. The business has agreed key contracts covering power transmission and received fuel linkage from operating coal mines located close to the plant. The company aims to sell 80% of its output through medium to long term power purchase agreements, with the balance being sold in the merchant power market.

Investment rationale

The market fundamentals for the business are attractive. Demand for power in India is expected to grow substantially, with the peak power deficit currently standing at c. 10%.

The business has low variable costs, following the allocation of domestic coal linkage where fuel is sourced from nearby coal fields. In addition, revenues are expected to be generated through a balanced mix of medium to long-term power purchase agreements (c. 75% of sales) and sales to the short term merchant market.

As usual with our investments in India, the business is backed by a strong promoter group with a strong track record of execution. The power holding company Ind Barath Power Infra Limited (IBPIL) has a portfolio of nine operational projects (675MW), three projects under construction (1,510MW) and two units under development (1,320MW); resulting in a total planned capacity of c3,500MW.