JSW Energy to convert part of Jaiprakash Power Ventures' loan into equity

JP Power availed this loan as an advance payment for the proposed sale of its power unit to JSW Energy in 2016. The deal, however, was later called off

More than three years after JSW Energy extended loans to debt-laden Jaiprakash Power Ventures (JP Power), the company has decided to convert part of the outstanding debt exposure into equity and write off the remainder.
 
JP Power availed of the loan as advance payment for the proposed sale of its power unit to JSW Energy in 2016. The deal, however, was later called off.  On Thursday, JSW Energy informed the exchanges it had entered into an agreement to restructure the outstanding principal amount that JP Power owes.
 
JSW Energy had in 2016 signed a deal with JP Power to buy the Bina plant in Madhya Pradesh. It also agreed to extend a loan of about Rs 1,000 crore to the firm as part of the deal. It was called off, while the debt continued to sit on JP Power’s books. JP Power’s current dues from JSW Energy are Rs 751.77 crore.

 

As part of the restructuring plan, JSW Energy on Thursday said, “An amount of Rs 351.77 crore will be converted into equity shares of JP Power at par value of Rs 10 each.  Another Rs 280 crore would be written off and Rs 120 crore to continue as debt to be paid by JP Power to the firm, quarterly on priority basis, out of the available cash flows after JP Power has paid 10 per cent of the restructured sustainable debt to its secured lenders.”
 
JSW Energy, in its BSE statement, said the company has already made a provision for Rs 574.19 crore in the March 2018 quarter, towards this loan. The statement further said, “JP Power and JSW Energy have agreed to waive their respective rights to receive any payments from each other and unconditionally release each other from all liabilities in transfer of Karcham and Baspa hydro asset.”

 
JSW Energy acquired the two hydro assets from JP Power through a share purchase agreement in November 2014. JSW Energy said this waiver will result in reversal of Rs 177.48 crore of liabilities payable to JP Power as part of the hydropower assets deal.
 
This is not the sole instance where JSW Energy extended a loan as part of an acquisition agreement. A similar loan was extended to Jindal Steel & Power for the purchase of its Chhattisgarh power plant in 2016. That deal, too, was later called off.