JSW Energy, JSPL Dif­fer on Val­u­a­tion, Fail to Fi­nalise Deal

JSW Energy had agreed to pay about .₹ 6,000 cr to JSPL for 1000 MW plant

The Economic Times - - Companies: Pursuit Of Profit - @times­group.com

New Delhi: Sa­j­jan Jin­dal-con­trolled JSW Energy’s pro­posed ac­qui­si­tion of 1,000 MW power plant in Raigarh, Ch­hat­tis­garh, from Jin­dal Steel and Power, con­trolled by his younger brother Naveen, has hit a ma­jor road block, two peo­ple fa­mil­iar with the devel­op­ment said.

“Se­ri­ous dif­fer­ences have emerged from both sides in term of val­u­a­tion and pay­ment mo­dal­ity,” said one of the per­sons. “The trans­ac­tion was ex­pected to close on Wed­nes­day and, in fact, JSW Energy had sched­uled its an­nounce­ment in the cap­i­tal on Thurs­day,” he said. JSW Energy and Jin­dal Steel and Power (JSPL) now hope to fi­nalise the trans­ac­tion within a month, the sources said. “Since both sides have dug their heels, they de­cided to de­fer it for some time,” one of them said.

They blamed dif­fer­ences over val­u­a­tion and up­front pay­ment for the two com­pa­nies’ fail­ure to fi­nalise a deal. “JSW Energy had agreed to pay about .₹ 6,000 crore to JSPL” when the two signed a mem­o­ran­dum of un­der­stand last month, the sec­ond per­son quoted ear­lier. But the com­pany started squeez­ing the val­u­a­tion by in­clud­ing rid­ers, he said.

“Jin­dal Power should fa­cil­i­tate sign­ing of power pur­chase agree­ment for 90% of the out­put of 1,000 MW power plant with var­i­ous state elec­tric­ity boards (SEBs), oth­er­wise the val­u­a­tion should be ad­justed to about .₹ 4,500 crore, which was com­pletely re­jected by the Naveen Jin­dal group,” the per­son said.

Sim­i­larly, JSW Energy also re­fused to ac­cept Jin­dal Steel’s de­mand for an up­front bank guar­an­tee of .₹ 3,000 crore to­ward the trans­ac­tion, said one of the per­sons quoted above. “They were will­ing to pro­vide an up­front bank guar­an­tee of only .₹ 500 crore and not .₹ 3,000 crore. This has se­ri­ous im­pli- cation on JSPL as it is al­ready in stretched sit­u­a­tion and find­ing it dif­fi­cult to meet lenders’ obli­ga­tion in re­pay­ing in­ter­est as well as prin­ci­pal,” he said.

Up­front pay­ment of .₹ 500 crore and bal­ance af­ter the com­ple­tion of reg­u­la­tory process would de­feat the pur­pose for which the unit was be­ing sold, one of the per­sons said.

In re­sponse to ET’s queries, a JSW Energy spokesper­son said: “The queries raised by you are highly spec­u­la­tive in na­ture and we do not feel any need to re­spond to such un­founded queries.” A JSPL spokesper­son said: “JSPL fi­nan­cials have been im­pacted due to the can­cel­la­tion of coal blocks & pay­ment of ad­di­tional levy on coal of more than .₹ 3,300 crore in FY14-15 & FY15-16 as a re­sult of a Supreme Court or­der. Con­sid­er­ing neg­a­tive fi­nan­cial re­sults in the last 12 months, JSPL has been work­ing with fi­nan­cial in­sti­tu­tions/banks to­wards var­i­ous op­tions to meet our debt obli­ga­tions. JSPL has an ex­cel­lent track record in ful­fill­ing all its fi­nan­cial com­mit­ments over the years. As al­ready ad­vised in our moneti­sa­tion plans, JSPL con­tin­ues to eval­u­ate var­i­ous op­tions to mon­e­tise as­sets and im­prove cash flows to be in a much stronger po­si­tion to meet all its li­a­bil­i­ties and emerge fi­nan­cially stronger in FY16-17.” De­lay in rais­ing re­sources through as­set sale has an im­pli­ca­tion on JSPL in terms of meet­ing its re­pay­ment sched­ule.

JSW Energy also re­fused to ac­cept Jin­dal Steel’s de­mand for an up­front bank guar­an­tee of 3,000 crore

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