JSW Energy scraps Rs 27 bn deal to buy JP Power's Bina assets over delay

The company had extended the long stop date for completion of the deal to December 31, 2017

Sajjan Jindal-backed JSW Energy on Monday announced that the deal to acquire Jaiprakash Power Ventures’ Bina power assets has been terminated as the long-stop agreement date expired last month.

In July 2016, JSW Energy announced it would acquire JP Power’s 500 megawatt Bina power asset for Rs 27 billion, subject to certain conditions, in a deal that was to be completed by May 2017. However, the company later extended the long-stop date for deal completion to December 31, 2017.

“We now wish to inform you that with the elapsing of the long-stop date, the proposed acquisition of the Bina project stands terminated,” the company said in its statement on Monday. The company added that the consummation of this transaction was subject to fulfillment of certain precedent conditions. According to sources with direct knowledge of the deal discussions, the acquisition ran into trouble as lenders were unwilling to approve the deal.

In a separate announcement sent to the exchanges, JP Power said with the termination of the deal, it will not transfer its Bina power assets to its Bina Power Supply (BSPL) subsidiary. Earlier, the company had announced it will transfer these assets to BSPL to facilitate the deal with JSW Energy.

As part of the deal agreement with JP Power, JSW Energy also extended an advance loan of Rs 10 billion to JP Power. With the deal not terminated, it is not clear what would be the repayment schedule of the loan extended to JP Power. An email query sent to JSW Energy asking for details on the loan repayment remained unanswered. Analysts had earlier raised concerns over the repayment security for these loans. “I think this loan when it was given, there were several rounds of discussion both with JPVL as well as lenders and there is an understanding that we have that you will get priority treatment to this loan in terms of servicing,” company officials told analysts on an investor call in August last year.

In 2016, JSW Energy entered into two separate deals to acquire power assets — Jaiprakash Power Ventures's Bina power plant in Madhya Pradesh and Jindal Steel and Power’s (JSPL) Tamnar power plant in Chattisgarh. While the Bina deal was terminated on Monday, the deal to acquire Tamnar power plant continues to hang fire. JSW Energy agreed to buy 1,000 Mw Tamnar plant for an enterprise value of Rs 40 billion, which could be increased to Rs 65 billion if JSPL manages to secure 100 per cent fuel supply for the plant and enters into long-term power purchase agreements. The long stop date for the Tamnar deal expires in June this year.