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
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.