JSPL likely to sell controlling stake in overseas mines
MUMBAI: Debtladen Jindal Steel and Power Ltd (JSPL) is looking to sell a controlling interest in its Botswana coal mine in Africa and a mine under Australian subsidiary Wollongong Coal Ltd as it looks to reduce debt and not commit further investments in "development stage" assets, a company spokesperson said.
"The overseas assets where the divestment is envisaged are primarily the development stage assets which will require substantial further capex and the company is not committing any further capex," said a JSPL spokesperson in an email response to a query. The company would raise about $300 million in the next two quarters by selling stakes in its overseas mines at a time when uncertainties in both iron ore and coal prices hurt its profitability, analysts estimate. The $300 million amount would include $46 million in a settlement with the government of Bolivia for its assets there and $70 million for sale of an aircraft, wrote Barclays analyst Chirag Shah in his report.
Despite stress on commodities, the company is progressing well in efforts to divest the identified assets at a fair valuation, said the spokesperson. The Naveen Jindal-led integrated steel producer and power company, which had debt of over Rs.44,000 crore as of 30 June, has since last year evaluated options including selling its mines in Africa and Australia, listing its subsidiary in Oman, and listing its power business in India to reduce debt. Finding buyers for its overseas assets in a market that has seen global power producers face severe financial constraints will be a challenge for the company, analysts said.
JSPL, which last week reported its third straight quarterly loss, operates a 3 million tonne per annum (MTPA) coalbased sponge iron plant. It is faced with a lack of captive coal as its mines were deallocated from 31 March, forcing it to buy external coal at higher prices. Two-thirds of the company's 3,400 megawatts (MW) power capacity is either idle or running at very low plant load factor (PLF). Sale of non-core assets and listing of subsidiaries are few of the options which "the company is vigorously pursuing to reduce debt in FY16", JSPL said in a statement last week without giving further details. "They have been trying to sell these (overseas assets) for the past six to eight months. With more and more news of slowdown coming in from China, the sale call gets tough," said one analyst, asking not to be named as he is not authorised to speak with media.