JSW Energy to acquire Jindal Steel’s plant.

Sajjan Jindal led JSW Energy recently agreed to buy out his brother Naveen Jindal’s debt laden Jindal Steel and Power’s 1000 MW power plant in Chhattisgarh for an enterprise valuation of Rs 6500 crore.

The brothers have decided to seal the deal on an arm’s length basis and arrived at the acquisition price through an independent valuation however, the deal will be subject to statutory and shareholders’ approval.

As per the definitive agreements the cost of the deal is linked to an initial enterprise value of Rs 4000 crore, which may be increased to Rs 6500 crore if pre-agreed fuel supply and power offtake arrangements are met. Under the terms of the deal, an interest bearing advance of Rs 500 crore is to be paid after shareholders’ approval of both firms and the competition watch dog CCI.

Everbest Steel and Mining Holdings Limited (ESMH), a special purpose acquisition entity has been created where the business undertaking of the JSPL plant will be transferred and JSW Energy will buy entire shareholding of ESMH, thereby enhancing its power generating capacity to 5531 MW.

“This (the acquisition) will diversify JSW Energy’s presence towards the eastern region of the country and in the state of Chhattisgarh, which is rich in coal reserves. The transaction is structured to be value-accretive to the shareholders of the company immediately upon consummation,” JSW Energy said in the statement.

For JSPL, with net debt of Rs 46,000 crore or over seven times of its market capitalisation of Rs 6331 crore, this divestment is part of its asset monetisation plan to generate stable cash flows to be in position meet all liabilities and emerge as sustainable company by end of this fiscal.

Besides, this deal will be a big relief for State Bank of India, with significant exposure to JSPL as it will get a part of the money and so was trying hard to broker the deal between Jindal brothers.

Surprisingly, the brothers have kept a long stop date timeline of June 30, 2018 for completion of the deal.

Sanjay Sagar, joint managing director &CEO of JSW Energy commenting on the deal said, “This acquisition demonstrates JSW Energy’s strategy to augment its existing portfolio with superior assets having potential long term value creation for its stakeholders.”

For JSW Energy, this marks completion of the second power asset acquisition in less than a year. Last year, it acquired two hydropower projects from Jaiprakash Power Ventures Ltd for an asset value of R9,275 crore.

Besides, JSW Energy has signed a binding agreement to buy 500 megawatt (MW) Bina thermal power plant in Madhya Pradesh from Jaypee Group and non-binding MoU with Monnet Ispat and Energy Ltd to acquire its power unit, which is developing two coal-fired thermal power plants with total capacity of 1,050 MW in Odisha. Both deals are yet to fructify.

Investment advisor S P Tulsian told The Hindu, “Sajjan Jindal’s JSW off late is seen very aggressive in cement and power sector given steel may not be scalable. On the other hand, Naveen Jindal is facing problems due to overleveraging and non execution of projects.”

Cyril Amarchand Mangaldas were legal advisors to JSW Energy while Pricewaterhouse Coopers (PWC) carried out the financial, accounting and tax due diligence.


The Hindu