Yet another attractive deal by Mansha Group

After the MCB-RBS deal, buying the majority shares of two power plants under AES management is yet another attractive deal by Nishat Group in a virtually hedged sector - energy generation.
As per management of Nishat Group, a roughly $100 million deal of consortium buyout of two power plants with collective name plate power generation of around 700 MW is roughly at 30 percent discount to the rule of thumb power price of similar size power projects. No doubt, Mansha Groups managers are deal crackers!
The deal, which is said to be finalized (although the management hasn disclosed the exact details yet), is going to be a consortium acquisition with over 50 percent ownership and full control right of Nishat Group with the rest of ownership belonging to Dubai-based investors.
With the biggest player in textile and one of the top in banking, cement and insurance, this deal will take Nishat Groups penetration in Pakistan power generation sector to more than 11 percent. And what could be a better avenue to invest in energy starved country!
Although, this deal would not directly increase energy supply of the country as its a mere changing hands of ownership but increasing penetration by Mansha in power sector, after the completion of Nishat Power deal, is reflecting a promise from the giant to plug the countrys energy needs.
AES Lalpir (362 MW) and AES Pak gen (635MW) under the power policy of 1994 generating furnace oil based power for over 10 years with a little over 18 years remaining life are promised to give a return of well above 20 percent in rupee terms with a financing cost of around 14 to 15 percent for similar projects. The nature of return is implicitly guaranteed. This implies a clear arbitrage of over 5 to 6 percent for the acquirer.
Nishats management is likely to inject equity (Nishat likely investment is $500-550 mn) from different group companies, primarily from Nishat Mills, with no intentions of raising significant debt for the said transaction. Sources in Nishat Group reveal that different companies of group excluding financial companies (MCB and AICL) will also inject equity in the deal, but the major beneficiary of listed peers of this deal will, of course, be Nishat Mills.
This deal will not only provide stable cash flows that will allow the company to earn decent dividends at a low cost of investment but will also help the company to book gains - thanks to the new accounting laws that permit booking gains at P&L for negative good will - as the deal is likely at a discount to the book value of the project.