JSW Energy to acquire JP's 1,891-Mw power assets

JSW Energy on Thursday said it would acquire Jaiprakash Power Ventures' 1,891-Mw power assets. The move comes a day after talks in this regard between Jaypee Group and Reliance Power collapsed and the Supreme Court cancelled the allocation of four coal blocks of Jaypee Group entities JP Associates and Jaiprakash Power Ventures.

In a joint statement on Thursday, JSW Energy and Jaypee Group announced they had signed a memorandum of understanding for three operating plants - the 300-Mw Baspa stage-II plant, the 1,091-Mw Karcham Wangtoo plant (both hydro power plants) and the 500-Mw Bina thermal power plant.

The deal was signed following a meeting between JSW Energy chief Sajjan Jindal and Jaypee Group chief Manoj Gaur. The companies didn't disclose the deal size and the financing plan. Sources said the deal was estimated at about Rs 12,000 crore, the sum Reliance Power had offered for the three plants two months ago.

MEGA PLAN

• Jaiprakash Power Ventures’ had terminated its agreement with Reliance Power on Wednesday citing regulatory uncertainties as the reason
• JP’s debt was Rs 28,164 cr as of March-end
• Deal comprises 300-Mw Baspa Stage-II plant, 1,091-Mw Karcham Wangtoo plant and 500-Mw Bina thermal power plant
• Sources said the deal would be around Rs 12,000 crore, the amount Reliance Power had offered for the three plants

Jaypee has been considering selling assets, including in the power segment, to cut debt, which stood at Rs 28,164 crore as of March-end this year. However, talks for two deals, with Abu Dhabi National Energy Corporation and Reliance Power, collapsed within a few months of each other. Abu Dhabi National Energy Corporation had agreed to acquire the two hydro power plants for Rs 9,689 crore.

JSW Energy's operational power generation capacity stands at 3,140 Mw, while projects with a capacity of 8,360 Mw are under implementation. For the quarter ended June this year, JSW Group's profit after tax stood at Rs 1,172.62 crore, against a loss of Rs 317.26 crore in the year-ago period. As of March this year, its overall debt was Rs 24,974.98 crore, against Rs 16,543.79 crore a year earlier.

In July this year, JP Associates, the flagship company of Jaypee Group, sold shares to a clutch of investors at Rs 74 a share in July. Since then, the stock has fallen consistently. Many have also sold shares of banks with significant exposure to the group. While ICICI Bank has debt exposure of Rs 12,800 crore to Jaypee Group, IDBI Bank's exposure is Rs 7,900 crore and State Bank's is about Rs 6,400 crore.

Analysts say the Supreme Court's verdict on Wednesday is bad news for Jaypee Group, as it takes away the captive mines linked to Jaypee's power and central India-based cement capacities, and takes away supply of inexpensive fuel. This, they add, will impact the viability and profitability of the group's power and cement businesses. "Also, the possibility of no fuel supply for its power plant cannot be ruled out. But with the court decision behind us, the government will be in a position to decide the future path," says a Goldman Sachs analyst.

The company did not respond to messages seeking comment on the fall in its stock.

MEGA PLAN
| Jaiprakash Power Ventures' had terminated its agreement with Reliance Power on Wednesday citing regulatory uncertainties as the reason
| JP's debt was Rs 28,164 cr as of March-end
| Deal comprises 300-Mw Baspa Stage-II plant, 1,091-Mw Karcham Wangtoo plant and 500-Mw Bina thermal power plant
| Sources said the deal would be around Rs 12,000 crore, the amount Reliance Power had offered for the three plants