JSW Energy to acquire Jindal Steel's power plant for Rs6,500 crore
04 May 2016
Sajjan Jindal-controlled JSW Energy has announced plans to acquire the Chhattisgarh power plant of Naveen Jindal-promoted Jindal Steel & Power's (JSPL) for Rs6,500 crore.
Cash-starved JSPL has been looking to sell its assets as part of monetisation plans to generate cash flows.
The sale, expected to be completed by mid-2018, will help JSPL meet its liabilities while JSW will gain a foothold in coal-rich eastern India through the acquisition. The deal is also help creditor State Bank of India (SBI) to steady its loan portfolio.
The sale is subject to some conditions on coal supply and power purchase agreements. JSW would also extend Rs500 crore as advance against interest.
The acquisition will boost JSW Energy's total power generation capacity to 5,531 megawatts. The company plans to nearly triple its power generation capacity to around 12,000 megawatts by early next decade.
The Naveen Jindal group has been hit by the cancellation of its coal mining licence by the Supreme Court and a weak commodity market that has hit profit margins.
"The adverse operating environment within the 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.
Jindal Steel, which has piled-up debt to the tune of Rs46,000 crore (or seven times its current market capitalisation) as of end-December 2015, had been in talks with lenders, including SBI, to reschedule loans due to "cash flow mismatches".