Sajjan Jindal-promoted JSW Energy acquired the 500-megawatt (Mw) power plant of debt-laden Jaiprakash Power Ventures at Bina in Madhya Pradesh for Rs 2,700 crore, 10 months after the two firms got into a binding agreement.
In September 2015, JSW Energy had acquired two hydropower assets of Manoj Gaur’s company for Rs 9,700 crore in a deal that was the largest ever in the power sector. Following the deal, both companies signed a binding agreement for the Bina deal.
“The acquisition demonstrates JSW Energy’s commitment to the power sector, which is vital for the sustained economic growth of the country,” said Sajjan Jindal, chairman and managing director, JSW Energy.
Meanwhile, JSW Energy has been on an acquisition spree. In May, it announced the purchase of Jindal Steel & Power (JSPL)-owned 1,000-Mw thermal power plant in Chhattisgarh for Rs 4,000 crore, which could be increased to Rs 6,500 crore if the seller manages to get 100 per cent fuel supply and long-term power purchase agreements.
With these deals, JSW Energy will reach the total installed capacity of 6,031 Mw now. This has helped JSW Energy come closer to its ambition of achieving power generation capacity of 10,000 Mw by 2020.
“The acquisition will enable the diversification of geographical foot print and fuel source, thereby strengthening the existing business model,” said JSW Energy in a media statement.
Over the past few years, the power sector has found it difficult to source adequate coal. Power companies are finding it tough to find buyers for the power generated as debt-ridden state electricity boards are unwilling to buy expensive power. Most power companies are weighed down by debt, forcing some of them to sell their assets.
Both Jaiprakash Power and JSPL are undergoing stress due to high debt. JSPL has a consolidated debt of Rs 46,000 crore.
The Jaypee group has been on an asset sale spree in a bid to cut its debt. The group has so far focused on selling its best assets in the power and cement sectors to reduce debt. Jaiprakash Associates agreed to sell its entire cement division of 21.2 million tonnes to UltraTech Cement, which will fetch the company an enterprise value of Rs 16,189 crore in a deal that was approved in July.
Last month, bankers to Jaiprakash Associates also invoked the strategic debt restructuring provision, which allows lenders to convert debt into equity and take control. Jaiprakash Associates holds 60.69 per cent stake in Jaiprakash Power. As of March 2016, Jaiprakash Associates had a consolidated debt of Rs 58,250 crore.
Pramod Menon, director (finance) at JSW, had in May said JSW Energy carried a net debt of Rs 15,000 crore on its books and had cash of Rs 300 crore.
Jindal Energy continues with its plan to grow its power business inorganically and has also been in talks with Monnet Ispat to buy the latter's power assets for a year. Monnet Power is developing two coal-fired thermal power plants with total capacity of 1,050 Mw in Odisha.