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‘After Thermal, We Will Eye Gas, Renewables’

Global energy major GDF Suez is betting big on India’s power sector. The company, which clocked a turnover of $82 billion in 2012, has acquired controlling stake in Meenakshi Energy after evaluating 200 companies and wants to be among the leading power generators in India. But electricity distribution, where politics influences tariffs, or oil and gas exploration, is not on its radar. GDF Suez Chairman and CEO Gerald Mestrallet said he is upbeat about its LNG business in India, where the company partners Petronet LNG.

After the acquisition of 74% stake in Meenakshi Energy, what is your strategy for India?

Our strategy is to be the benchmark energy group in emerging countries and leader in the energy sector of Europe. Out of our 1,20,000 mw of power generation capacity, 70,000 mw is outside of Europe. First we want to build strong position in India as we have done in Brazil, Peru Chile, Indonesia, Thailand and Singapore. India has enormous need of energy and it has a large market with growth prospects. India does not have adequate power generation capacity to meet today’s demands. And hence the group wants to be present here. We built plants with a capacity of 4,000 mw overseas and we can do that in India as well. We have started with coal-fired plant in India but we will also look at natural gas and renewable power projects.

Are you satisfied with regulations in India?

So far, yes. First we have to complete the construction of Meenakshi and than we will take a look. Question of stability in emerging countries used to be very tough question for European companies. But, we are taking more risk in staying in European countries than going to emerging countries. Ten or 15 years back, Middle East was in the category of market to be watched. In 2003, its status improved to stable with evolving regulations. And it turned promising country subsequently. Today, India is also evolving in this manner.

Are you aiming at more acquisitions in India?

When we invest, we remain invested for very long. We have number of conditions to invest. We look for visibility and stability of market, perspective, regulations and rules of the game. There is some volatility in Indian currency but the country is not a problem. We have not decided on acquisitions or commissioning own projects. Most of the development we have made overseas is through organic route. Most of our 1,20,000 mw capacity has been built by us. The acquisition Meenakshi Energy that has 300 mw operational and 700 mw under construction will enable us to study the market, partners and regulations of Indian power sector.

Do the uncertainties in power sector of India worry you?

We have been working for more than two years to identify suitable project to acquire in India. We evaluated some 200 opportunities and zeroed in on one. To mitigate the fuel risk, we preferred coastal power plant that will procure coal from our coal and natural gas trading arm that deals with Asia. We are selling power from existing 300 mw plant at Rs 5.50 per unit and open to sign long term agreements with distribution utilities as we expand. We want to remain in upstream part of power sector in generation and not enter in electricity distribution. Also, we do not have intentions to be transmission activities in India though we are present in this segment in other countries.

Why do you want to remain limited to only power generation?

We want to clearly avoid getting into the area where the tariff is decided by political parties. We are dealing with activities related to power and water that is sold to large population. Tariffs are politically sensitive and parties tend to interfere in pricing. You need to have contractual framework completely protected from uncertainties and political interference.

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