Billionaire Sajjan Jindal's JSW Energy will acquire a 1,000 mw power plant from his younger brother Naveen-led heavily indebted Jindal Steel and Power Ltd for Rs 6,500 crore.
JSW will pay at least Rs 4,000 crore, excluding net current assets, and an additional Rs 2,500 crore if JSPL's 1,000 mw power plant in Raigarh, Chhattisgarh secures a long term power purchase agreement, the firms said in statements.
Sajan and Naveen, sons of billionaire Savitri Devi Jindal, once competed to buy foreign assets, but JSPL has run into rough weather with Supreme Court cancelling its coal mine allocations and weak global commodity prices.
JSPL, which has a debt of close to Rs 46,000 crore, said the deal, to be completed by mid-2018, would help meet its liabilities while JSW gained a foothold in coal-rich Chhattisgarh.
JSW would also extend Rs 500 crore as advance against interest. The sale is expected to be completed by June 30, 2018.
The buyout by JSW comes close on the heels of its acquisition of Jaiprakash's 1,391 mw hydro-power plants. JSW is also said to be in talks to acquire Jaiprakash's 500 mw thermal power plant in Madhya Pradesh and Monnet Ispat & Energy Ltd's 1,050 mw power plant in Odisha.
These buyout would help JSW to expand its power portfolio to a planned 11,500 mw.
"The adverse operating environment within power sector in the country is driving distress sales in the sector, and JSW Energy's robust financial health coupled with a strong balance sheet is providing the company an opportunity to acquire quality power assets at reasonable valuations..." JSW said.
JSW said the buyout would be done through a special purpose acquisition entity, Everbest Steel and Mining Holdings Ltd.
Also, the acquisition would fall with the provisions of related party transaction as Sajjan and Naveen are related.
"The acquisition price is supported by an independent valuation and hence is at arms-length," it said.
Through this acquisition, JSW Energy is moving a step towards its strategic vision of becoming a leading private sector power company in India. Post acquisition, the aggregate installed and operational power generation capacity of JSW Energy will enhance to 5,531 mw," the statement said.
The deal was inked between both the firms yesterday.
However, the enterprise value of the deal is Rs 4,000 crore plus net current assets and "which will be increased to Rs 6,500 crore plus net current assets, if certain pre-arranged conditions regarding fuel security and power off take are satisfied," JSW Energy said in a statement.
The transaction also contemplates payment of an interest bearing advance of Rs 500 crore pursuant to the receipt of approvals from the shareholders of JSW Energy and JSPL and the fair trade regulator CCI, it added.
As per the deal, JSPL Board has approved to divest the 1,000 mw power unit of its subsidiary Jindal Power Ltd (JPL) into a special purpose vehicle (SPV), for the purposes of transferring the same to JSW Energy Ltd, through sale of the entire share capital and other securities.
On the deal, JSPL said: "As part of monetisation plans already advised, JSPL has been looking to generate cash flows from select divestments to be in much stronger position to meet all its liabilities and emerge as financially strong and sustainable company in 2016-17."
JPL, a subsidiary of JSPL, has a 4x250 mw plant in Raigarh and a 2,400 mw thermal plant in Tamnar, Chhattisgarh.
(PTI)
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