Over the past year, India’s power sector has witnessed an unusual trend: a slew of deals to acquire distressed assets has fallen through at the last minute.
There are more than 50 distressed power assets in the country that have been looking for buyers. However, due to regulatory and fuel linkage issues plaguing the sector, a number of interested parties scouting for brownfield projects have called off their deals at the eleventh hour.
Adani Power’s Rs 6,000-crore deal to acquire Lanco Infrastructure’s 1,200 megawatt (MW) thermal power plant in Udupi is the latest example of the hurdles that parties face in acquiring a distressed asset.
Despite paying Rs 125 crore in advance to Lanco, Adani Power has not been able to acquire the power plant in the stipulated time period as Lanco is facing opposition from its lenders over the use of funds that would be generated through the deal. The deadline for closing the deal expired on December 29. Both the parties have moved court for extending the deadline but looking at the current scenario a breakthrough looks unlikely.
Similarly, NTPC, the country’s largest power generating company, has been doing due diligence on various brownfield projects over the past year. So far, the company management has not been able to take a decision on any of the distressed assets.
Earlier, deals to sell the power assets of Jaiprakash Power Ventures fell through on two occasions. First, when Taqa, a consortium led by Abu Dhabi National Energy, withdrew from an agreement to buy two of Jaiprakash Power Ventures’ hydro plants for Rs 9,689 crore on 24 July 2014. Second, when Anil Ambani-owned Reliance Power, which entered into a non-binding MoU with Jaiprakash Power Ventures to buy its three operational hydro power plants for Rs 12,000 crore, backed out within two months of signing the MoU.
Following the twin fiascos, Jaiprakash Power Ventures entered into a binding agreement with Sajjan Jindal-owned JSW Energy to sell its power plants, which have a combined generation capacity of 1,891 MW. The bouquet includes the 300 MW Baspa-II plant, the 1,091 MW Karcham Wangtoo hydro-electric plant and the 500 MW Bina thermal power plant.
For now, the deal between Jaiprakash Power Ventures and JSW Energy seems intact and, hopefully, should go through. But going by the rate at which deals have fallen through in this sector, it is better to keep one’s fingers crossed.
(This story was published in BW | Businessworld Issue Dated 09-02-2015)
