JSW Energy, the independent power arm of the $5 billion Sajjan Jindal-owned JSW Group, yesterday signed a deal to acquire power producer and coal miner CIC Energy Corporation, for C$422 million (Rs1,878 crore).

The deal, where the British Virgin Islands-based CIC, which operates in southern Africa has agreed to a break-up fee of C$10.5 million if the offer is not completed, is however vulnerable to rival bids by Hong Kong-based power producer Golden Concorde Holdings, which operates in China, and GMR Energy, the Bangalore-based power generation subsidiary of the G M Rao-controlled GMR Infrastructure.

Toronto-listed CIC, categorised as a junior coal miner, explores and develops coal properties in Botswana, where itsflagship property, the A-grade steam Mmamabula Coal Field is estimated to hold 2.6 billion tonnes of high-thermal coal.

It is also in the process of developing the Mmamabula power complex comprising a 1,200-MW power station that is targeted primarily to supply power to South Africa and a 300 MW power station to supply power to Botswana.

CIC also has a coal to gas project called the CTH Project, which has the potential to convert some of the coal at the Mmamabula Coal Field to gas, fuels and petrochemicals.

Since Botswana is landlocked and exports coal via sea, CIC has planned to join a transportation consortium to build the 1,500km Trans Kalahari Rail line to a Namibian port on the southwest coast of Africa that is expected to begin in June 2011.

The proposed Trans Kalahari Rail line will pass Botswana and the Waterberg Coal Field in South Africa.

Under the deal, Mumbai-based JSW Energy will buy all shares of CIC for $7.42 per share valuing CIC at around C$422 million. The transaction is expected to be completed by end-February 2010.

The offer represents a premium of 203 per cent to the volume weighted average trading price for CIC's shares on the Toronto Stock Exchange for the 30-trading day period ending 14 September 2010, the day prior to the announcement of the first acquisition proposal CIC received.

''We believe that the terms of this offer provide fair value for CIC Energy shareholders in the current environment,'' said Warren Newfield, chairman and CEO of CIC. ''With South Africa's increasingly apparent shift in energy policy the outlook for coal based power producers looking to supply South Africa has weakened.''

 JSW Energy has 1,430 MW of operational generating capacity and 2,145 MW of generating capacity in the construction or implementation phase. In addition, it has power generation projects at an early stage under development with a proposed combined installed capacity of 11390 MW by 2015.

JSW Energy, which imports 70 million tonnes of coal annually mainly from Indonesia and South Africa, said that CIC has reserves of good quality thermal coal with a low sulphur content and the proposed acquisition will meet all its project requirements.

JSW also said that production at Mmamabula coalfield may start in the next three to five years, and the reserves at the coal mines can be exploited with an exportable surplus of up to 20 metric tonnes a year over the next 40 years.

''This acquisition will enable JSW to not only secure the long-term coal requirements for its existing projects but will also be able to accelerate the capacity expansion for its imported coal-based projects, L K Gupta, chief executive officer of JSW Energy, said in a statement.

CIC also holds a 30-per cent stake in Botswana's 300 MW power station Mookane Domestic Power Project, currently under construction, in which GCL Projects Limited, an affiliate of Golden Concord Holdings had acquired a 70 per cent equity in March 2010.

Apart from investing in this project, CIC is also the construction contractor and operator of this power project.

Golden Concord, which operates power plants, coal mines, mineral mines and property development in China, could make a rival bid for CIC, while GMR Energy, which had already conducted limited due diligence of CIC in September could also take its bis directly to CIC shareholders.

GMR Energy had submitted a C$470 million bid that is $55 million higher than JSW Energy's offer of C$422 million, but its offer was rejected since it entailed making payments in two tranches subject to finalisation of the Trans Kalahari Rail Project.