GVK Power & Infrastructure Ltd., a builder of airports and utilities controlled by Indian billionaire GV Krishna Reddy, is in talks to borrow as much as $US850 million ($803 million) to fund the purchase of two Hancock Prospecting Pty coal mines, said two people with knowledge of the negotiations.
Hancock is owned by Gina Rinehart, the first woman to top Forbes Asia's list of Australia's richest people. The 56-year old widow is the daughter of Lang Hancock, the man who discovered the mines that made Australia the world's biggest iron ore exporter.
GVK will use the money to pay Hancock $US500 million for equity in the mines, and another $US350 million as compensation for costs incurred by the Australian company for running them, the people said, asking not to be identified because the discussions are private.
Banks may charge GVK about 425 basis points above the London interbank offered rate, or Libor, according to one of the people. A basis point is 0.01 percentage point. Manish Kalghatgi, a spokesman for GVK based in Bangalore, declined to comment.
GVK is seeking overseas coal supplies to help fuel power plants at home after its shares fell 45 per cent in Mumbai over the past year.
The Indian utilities company will pay about $US1.5 billion in total for Hancock's Alpha Coal and Kevin's Corner mines, with the balance to be paid in the next few years, two people familiar with the matter said April 6. GVK is in talks with investors including 3i Group Plc and Actis LLP about helping to finance the acquisition, one of the people said.
3i India Infrastructure Fund has invested 8 billion rupees ($167 million) in GVK Energy Ltd., a wholly owned subsidiary of GVK Power. Actis Infrastructure India PCC and an affiliate of the Government of Singapore Investment Corp. have each invested 3.49 billion rupees.
Ms Rinehart is a shareholder in Fairfax Media, publisher of this website.
