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APR 29 2016

JSW might renegotiate acquisition of JSPL's unit

  • Economic Times, ET Bureau / Hyderabad
  • Created: Fri 29th APR 2016

Sajjan Jindal’s JSW Energy could be renegotiating aproposal to buy a 1,000-Mw power plant in Chhattisgarh from his brother NaveenJindal’s Jindal Steel & Power (JSPL).

 According to sources, JSW was set to announce the deal onThursday morning at a press conference which was cancelled a night before.

 The invite for the cancelled press briefing had mentionedthat Sanjay Sagar, joint managing director and chief executive officer of JSWEnergy, and Pramod Menon, director (finance) would talk “about the businessupdates”.

 Company sources said the meet was called to announce thedeal to buy the 1,000-MW Chhattisgarh power plant of JSPL.

 On April 27, the BSE had also issued notices to JSWEnergy and JSPL to reply on media reports of the former buying the power plant.

 In its reply, JSW wrote, “JSW Energy continues toevaluate various opportunities and as a part of such evaluation, discussionwith various parties take place from time to time. Accordingly, no disclosableevent under the Securities and Exchange Board of India (Listing Obligation andDisclosure Requirements), Regulations 2015 has taken place. We will duly informthe exchanges as and when the disclosable event occurs.”

 However, sources said both JSW and JSPL are waiting forresponse from BSE and National Stock Exchange (NSE) to their respectiveclarifications.

 According to sources, JSPL will sell 1,000-Mw power plantin Chhattisgarh to JSW Energy. This will help JSPL meet interest paymentobligations and pare overall debt of Rs 42,500 crore. Jindal Power has a totalcapacity of 3,400 Mw.

 JSPL, in its communication to BSE and NSE said, “We wishto clarify that Jindal Steel and Power Limited (JSPL) continues to evaluatevarious opportunities as a part of its group strategy. Whenever any proposalresults into execution of binding documents, the company will comply with theprovisions of the Sebi (Listing Obligations and Disclosure Requirements)Regulations, 2015 and make requisite disclosures accordingly. As stated in ourearlier response, JSPL is working on various options to monetise assets, toimprove its cash flows, and as a part of such evaluation, discussion withvarious parties takes place from time to time.”

 Meanwhile, in a call with analysts to discuss Marchquarter results, Menon said JSW would continue to look at acquisitions whichhave synergetic value and insulate business risks. “Plants with long-term powerpurchase agreements will be of interest,” he added. While he neither confirmednor denied the negotiations with JSPL, he said, the company would be comfortablein acquiring assets which would enable it work with a debt-equity ratio of 2.5to 3 times. Presently, this ratio stands at 1.7 times for JSW Energy and roomfor additional leverage appears limited. Menon also indicated that the companyis open to acquiring solar assets at reasonable valuations.

 JSWEnergy Q4 revenue increases 22%

JSW Energy management told analysts that it sees a volumegrowth of 17-20 per cent in FY17. This includes utilisation ofrecently-acquired hydro power project from Jaiprakash Power Ventures.

 In Q4 FY16, the company’s revenue grew 22 per centyear-on-year to Rs 2,706 crore. However, factors such as high interest costsand taxes resulted in a flat net profit growth of Rs 305 crore.

 Also, with new rules requiring electricity distributioncompanies to purchase short-term power through an e-platform, JSW’s per unitrealisation would be impacted by Rs 0.15 to Rs 0.20 in FY17. In FY16, JSWEnergy sold 10,175 million units (MU) of merchant power (47 per cent of totalunits sold) and earned Rs 4.12 per kilowatt (versus Rs 4.24 per kilowatt inFY15).

 The company may reduce its exposure to short-termcontracts and move towards medium- and long-term contracts going forward. Costof fuel, which went up by 13 per cent in Q4, partly because of RajasthanElectricity Regulatory Commission’s verdict on its fuel cost and rupeedepreciation, may continue to remain in higher range.



JSW Steel Ltd. Jindal Steel and Power Ltd Finance Energy Power Plant Power Electricity India Solar

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