Hyderabad based Infrastructure player, GMR on Wednesday acquired 50% stake in U.S based Power Company Intergen, for $1.1 billion. The deal makes GMR County’s largest independent power producer and qualifies it to bid for building ultra mega power projects (UMPP).

The company acquired the stake from AIG Highstar Capital II fund. The acquisition is subject to clearances under the US antitrust laws. The deal is expected to close in the third quarter of 2008.

GMR will jointly own 50% of Intergen along with Ontario teacher’s pension plan. The latter had been the owner of 50% stakes of Intergen since 2005. With $108.5 billion in net assets, it is the largest single-profession pension plan in Canada.

The deal will also help GMR to bid for privatization of airports in India and abroad. At present GMR manages airports at Delhi and Hyderabad. The co-owner of Intergen already has a strong presence in the Airport operations on worldwide level with being a part owner of Birmingham Airport.

GMR Infra has taken a bridge loan of $1.1 billion from a consortium of five domestic banks, including Axis Bank and Canara Bank to fund the acquisition.

The bridge loan has two-year tenure; therefore there is no pressure on the company to refinance it immediately. The promoters of the GMR group will partly bear acquisition cost from their personal cash reserves, while the company decides on the course of action to take for the bridge loan.
“It (the buyout of InterGen) has been one of the most competitive acquisitions and will give us access to developed power markets, superior power trading and hedging systems,” said executive vice-president Madhu Terdal, the key person behind the acquisition.

Terdal further said that the acquisition is most cost-competitive at $ 360,000 per MW, which is half the current cost of a similar facility. The US sub-prime crisis had also helped in getting the stake in the company at a lower cost.

The deal will help the company to bid for mega projects now. On InterGen’s power plants, Mr Terdal said 85% of the fuel used at its 12 plants was gas, while the remaining was coal. “This eliminates the risk associated with coal,” he said.

The shares of the company touched a 52-week low of Rs 94 during Wednesday trading. At the close of market hours, the share was traded at Rs 99.15, up 3.12 per cent over the previous day’s close of Rs 96.15.