JSW Energy plans to acquire Jindal Steel and Power’s (JSPL) 1,000-MW thermal power plant at Raigarh in Chhattisgarh for up to ₹6,500 crore, subject to conditions. The ‘family deal’ –– JSW Energy Chairman Sajjan Jindal is JSPL Chairman Naveen Jindal’s brother –– will help JSPL retire a part of its ₹42,500 crore debt.
JSW Energy Joint Managing Director Sanjay Sagar said on Wednesday that the acquisition cost would be pegged to the enterprise value of ₹4,000 crore, but could go up to ₹6,500 crore if JSPL secures fuel and enters into a long-term Power Purchase Agreement that guarantees a minimum return on investments. The deal must be completed by June 30, 2018, he said.
JSW Energy will also extend a ₹500-crore loan to JSPL after securing due approvals, Sagar said.
JSW Energy currently has an installed capacity of 4,531 MW; of this, 3,140 MW is from thermal plants, and 1,391 MW from hydropower. The company is targeting 10,000 MW of capacity by 2020.
Denying analysts’ comments that the company was trying to “bail out” JSPL with the two-year window to close the deal, Sagar said the asset price was competitive, and it typically takes a year and a half to acquire a large power plant. JSW has not given any leeway to JSPL, he added.
Both companies had entered into a binding agreement on the sale, but there would be no compensation or terminal fee if the deal falls through.
JSW Energy Finance Director Pramod Menon said funds for the acquisition would be raised from the market, with a debt-equity ratio of 75:25.
Explaining the rationale for the acquisition, a JSW Energy media statement said the plant would diversify the company’s geographical footprint and mark its entry into power generation based on domestic coal.
JSW Energy shares closed flat at ₹66 on the BSE on Wednesday, while JSPL was down 3 per cent, at ₹67 a share.