JSW En­ergy Set to Buy JSPL Power Plant in Ch­hat­tis­garh

Deal in­volves el­der brother Sa­j­jan Jin­dal’s co tak­ing over as­sets & debt of younger sib­ling Navin’s plant

The Economic Times - - Companies: Pursuit Of Profit -

Arun Kumar & Arijit Bar­man

New Delhi | Mum­bai: Sa­j­jan Jin­dal’s JSW En­ergy looks set to ac­quire a 1,000 MW power plant in Raigarh, Ch­hat­tis­garh from Jin­dal Steel and Power Ltd, con­trolled by his younger brother Naveen, in a deal that in­volves takeover of the project’s debt.

The trans­ac­tion is ex­pected to be fi­nalised on Wed­nes­day fol­lowed by a for­mal an­nounce­ment, three peo­ple fa­mil­iar with the de­vel­op­ment told ET.

“Both boards are likely to clear the pro­posal to­mor­row along with the quar­terly num­bers fol­low­ing which a bind­ing agree­ment will get inked,” one of them said on Tues­day. “The val­u­a­tion is ex­pected to be be­tween .₹ 6,000 crore and .₹ 6,500 crore,” he added.

The oth­ers, how­ever, said JSW is likely to pay only .₹ 4,000-4,500 crore ini­tially, which would in­clude a bridge loan of .₹ 3,500 crore and the rest as up­front cash con­sid­er­a­tion. Upon the com­ple­tion of cer­tain pre-agreed mile­stones like for­mal­i­sa­tion of power pur­chase agree­ments, JSW may pay a sec­ond tranche. The com­pany will also take over the project’s debt of around .₹ 4,000 crore. The two com­pa­nies had signed a mem­o­ran­dum of un­der­stand­ing last month and fi­nalised most of the terms of a share­hold­ers agree­ment 10 days ago, the sources said. The ac­qui­si­tion will give JSW a foot­print in the east while JSPL will get to lighten up its debt bur­den.

Spokesper­sons of both the com­pa­nies de­clined com­ment. “JSW En­ergy Ltd wants to clar­ify that as part of our growth strat­egy, the com­pany looks to eval­u­ate var­i­ous op­por­tu­ni­ties, both cit­ing de­layed pay­ment of in­ter­est on term loans due to weak­ened liq­uid­ity. On March11, CARE down­graded JSPL’s debt in­stru­ments to a de­fault rat­ing.

This would be the sec­ond ma­jor ac­qui­si­tion by JSW En­ergy that has an in­stalled ca­pac­ity of 4,531 MW. Last year, it had ac­quired two hy­dro power plant with in­stalled ca­pac­ity of 1,391 MW from Jaiprakash Power Ven­tures (JPVL) for .₹ 9,275 crore. Ad­di­tion­ally, it has signed a non-bind­ing agree­ment with JPVL for its 500 MW Bina ther­mal power plant. It has also signed a non­bind­ing MoU to ac­quire 75% of Mon­net Power, which is de­vel­op­ing two coal-fired ther­mal power plants with a to­tal ca­pac­ity of 1,050 MW in Odisha.

Jin­dal Power, the first do­mes­tic pri­vate sec­tor player to com­mis­sion an in­de­pen­dent power plant (IPP) in 2007, has to­tal in­stalled ca­pac­ity of 3,400 MW set up at coal pit­heads.

JSPL has been in dis­cus­sions with Adani Group and Sin­ga­pore’s Sem­b­corp for its power port­fo­lio, ei­ther as a whole or piece meal. Some still be­lieve that if the Jin­dals do not stitch up an agree­ment, Adani may once again make a play for it like the way it out­ma­noeu­vred JSW En­ergy last minute to scoop up the Udipi Power unit from Lanco. Sources said with min­i­mum sup­port price kick­ing in, Jin­dal’s steel oper­a­tions may get a much needed breather. “Cur­rently, JSPL is gen­er­at­ing about .₹ 300 crore of EBIDTA ev­ery month from the steel busi­ness. This in ef­fect means it will gen­er­ate an an­nual op­er­at­ing profit of about .₹ 3,600 crore that would be enough to meet the re­pay­ment obli­ga­tion or resid­ual debt af­ter the planned di­vest­ments,” said a per­son close to JSPL.

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