Sajjan Jindal-controlled JSW Energy on 16-11-2014 agreed to acquire two hydropower projects from Jaiprakash Power Ventures for Rs. 9,700 crore, making it one of the largest deals in the power sector.
The transaction will include a court-monitored transfer of the assets of the two projects – 300 mw Baspa and 1,091mw Karcham Wangtoo in Himachal Pradesh – into a special purpose company, which will be acquired by JSW Energy.
"This is an attractive deal for our shareholders. It is expected to be earnings accretive. Our strategy is to increase capacity manifold and create synergies through a mix of organic and inorganic opportunities," said JSW Energy chairman Sajjan Jindal.
The deal signifies the hectic activity seen recently in the Indian power sector where large conglomerates have rushed to acquire troubled assets from promoters after the latter were unable to service loans taken when interest rates were high. Jaiprakash is one of several Indian power and infrastructure companies weighed down by debts and weak profitability and the deal will help the company retire its mounting debt.
JSW Energy initiated acquisition talks after Jaiprakash failed to conclude a similar transaction with the Anil Ambani-led Reliance Power and with Abu Dhabi National Energy Co. Jaiprakash's talks with the two companies had failed due to differences over valuations.
JSW Energy has a current installed capacity of 3,140 MW. Post-acquisition, the aggregate installed power generation capacity of JSW Energy will enhance to 4,531 mw.
"The acquisition will yield immediate cash flow and is expected to enhance JSW Energy's consolidated profitability and create significant synergies," JSW said. In 2013-14, the Karcham project earned a revenue of Rs. 1,242 crore while the Baspa project Rs. 320 crore, it added. Axis Capital and SBI Capital Markets acted as financial advisors for the transaction.
JSW has a net worth of Rs. 7,000 crore and an operating profit of Rs. 3,500 crore. Current outstanding debt is about Rs. 9,000 crore.
"The funding pattern will be finalised in the next couple of days. This transaction also improves our portfolio of electricity buyers. Since the Jaiprakash project sells 85% of its power through long term PPAs (power purchase agreements), it improves our share of total PPAs to 65% compared to the current 55%," said JSW Energy CEO Sanjay Sagar.