Power & Utilities — Adani Power: Growth through acquisition

received a Letter of Intent for the acquisition of GVK Energy, whose subsidiary operates a 330 MW hydroelectric power plant in Uttarakhand. This creates an important lesson in corporate acquisitions. Acquisitions can increase capacity and strengthen a company's asset base, but investors must examine purchase consideration, debt, asset quality, regulatory obligations and expected returns. Adani Power is also relevant to the current energy environment because Reuters reported that India has been increasing coal shipments by rail as inventories at some power plants declined. Investor lesson: In power companies, capacity is only one part of the story; fuel availability, tariffs, utilisation, debt and cash flows matter equally.