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Reliance Power (RPower), a part of the Anil Ambani-led Reliance Group, has terminated talks with Jaiprakash Power Ventures (JP Power) to acquire the latter's portfolio of hydroelectric power generation assets.
This is the second time that a deal struck by JP Power to hive off its hydropower assets, totalling 1,791 MW, has fallen through. The company has been actively looking to sell its three hydroelectric power assets in Himachal Pradesh and Uttarakhand to pare debt.
In a notification to the bourses on Wednesday evening, RPower cited "regulatory uncertainties and tariff issues" for calling off talks with JP Power.
RPower said that lack of clarity on these issues had an impact on the valuation of the assets under consideration, implying that it wasn't any longer sure that the enterprise value of R12,000 crore at which it had agreed to acquire power generating assets from JP Power was viable.
In a statement, however, JP Power refuted RPower's contention that the deal had been called off due to regulatory uncertainty, and said that it was due to "difference of commercial aspects"
JP Power, a part of the Jaypee Group that has interests ranging across the infrastructure sector, had reached an understanding with RPower for divestment of the hydropower assets in July, barely a few days after it was announced that an earlier deal to sell the assets to Abu Dhabi National Energy (TAQA) had been called off. The deal with TAQA, which was announced in March, was struck at an enterprise value of around R9,700 crore.
With RPower backing off from the deal, the group's plans to de-leverage itself has suffered another blow. The group has around R58,000 crore of debt across companies. Apart from its power generating assets, the group recently divested some of its cement-making units to other entities like the Aditya Birla Group's UltraTech Cement and the Dalmia Bharat Group.
According to sources, the major bone of contention between the two companies was lack of regulatory clarity over the sanctioned generation capacity and tariff at JP Power's Karcham Wangtoo project in Himachal Pradesh. While the installed capacity of the project is 1,200 MW, it had only received techno-economic clearance for 1,000 MW from the Central Electrical Authority (CEA).
It was reported that CEA may issue a show-cause notice to JP Power in this context.
JP Power had also recently withdrawn a petition that it had submitted to the Central Electricity Regulatory Authority (CERC) to grant provisional tariff for the Karcham Wangtoo project.
"In the absence of clarity on capacity and tariff at the Karcham Wangtoo project, its valuation cannot be determined,"a person familiar with the development said, on condition of anonymity. "There is no fresh tariff petition pending with the CERC now."
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