Sajjan Jindal-led JSW Energy has agreed to acquire two of the three hydroelectric projects of Jaiprakash Power Ventures Ltd (JPVL) in Himachal Pradesh at an enterprise value of about Rs 9,700 crore (approximately $1.57 billion), in one of the biggest infrastructure M&A deals in the country to date.
The board of JPVL, a fully owned subsidiary of the Jaypee group, has approved the transfer of 300 MW of Baspa II hydro-electric project and 1,091 MW Karcham Wangtoo hydro project into a separate company 'Himachal Baspa Power Company', the company said in the statement.
The acquisition will make JSW Energy the largest private sector hydro-power generator in the country. Once the acquisition is completed, the aggregate installed power generation capacity of JSW Energy will enhance to 4,531 MW.
“The acquisition will yield immediate cash flow and is expected to enhance JSW Energy's consolidated profitability and returns and create significant synergies,” the statement said.
In the fiscal ended March 2014, the Karcham project had earned revenues of Rs 1,242 crore while the Baspa project Rs 320 crore.
"Our strategy is to increase capacity manifold and create synergies through a mix of organic and inorganic opportunities, supported by excellence in operations to accelerate the growth in shareholder value,” JSW Energy CMD Sajjan Jindal said in the statement.
This comes two months after JSW Energy disclosed it may buy all three assets of JPVL.
The third project, Vishnuprayag with 400 MW capacity, is located at Chamoli district of Uttarakhand. This facility was hit by floods last year. This is being retained by JPVL, at least for the time being.
JPVL also has two operational thermal projects with capacity of 1,820 MW and another project expected to go on steam next month with another 660 MW.
JPVL share price rose 2 per cent while JSW Energy scrip rocketed almost 12 per cent in a weak Mumbai market on Monday morning. This is in sharp contrast to the earlier announcement two months back when JSW Energy scrip had crashed.
Axis Capital and SBI Capital Markets acted as financial advisors; Amarchand & Mangaldas & Suresh A Shroff & Co was the legal adviser; PricewaterhouseCoopers carried out financial and tax due diligence and Lahmeyer carried out technical due diligence on behalf of JSW Energy.
SBI Caps also advised JPVL. Bansi S Mehta & Co was the tax adviser, Vaish Associates was legal adviser and Sobhagya Capital was independent merchant banker for JPVL in the transaction.
A deal with many twists and turns
Previously Reliance Power and a separate consortium led by UAE's Taqa and including IDFC Alternatives have seen their proposed deals come unstuck.
JSW Energy had stepped in a day after Reliance Power called off its proposed mega deal to buy all three operational hydro power assets of JPVL.
Reliance Power had said it terminated the discussions with JPVL due to regulatory uncertainties and tariff issues which impact valuations.
JPVL had contradicted this and said the deal was called off for reasons not attributable to any regulatory uncertainties but due to differences over commercial aspects.
Reliance Power had moved swiftly after Abu Dhabi National Energy, which operates under the banner of Taqa, withdrew its offer to acquire two of the key assets of JPVL, on the pretext of changes in business strategy and priorities of Taqa.
In March JPVL had struck a deal to hive off two hydro-power plants as a part of its group asset-disposal plan to a consortium of investors, including Taqa, Canadian institutional investor Indo-Infra Inc and IDFC Alternatives.
Earlier another consortium of investors was to buy two of the three power assets for an enterprise value of around $1.6 billion.
It was to acquire the same two assets of JPVL. The deal for the two assets had an equity value of $616 million (Rs 3,820 crore), of which 51 per cent was to come from Taqa. Indo-Infra was to bring in 39 per cent of the equity commitment as its stake in the consortium with IDFC Alternatives holding the remaining 10 per cent in the special purpose vehicle (SPV) created for the acquisition. The Indian PE firm was to invest around $62 million in the deal. The rest was through takeover of debt.
After this deal came unstuck, two large private power producers, including Adani Group, which runs 3i-backed Adani Power, and Reliance Power entered the fray. Both these firms are large thermal-based power producers.
Scale
JSW Energy has an existing operational capacity of 3,140 MW and has projects worth 8,630 MW under implementation and development phase identified in several states. The bulk of these is in thermal power projects. Its sole hydro project is in Himachal Pradesh where the company is implementing a 240 MW (3 X 80 MW), run-of-the-river, hydroelectric power project on the upper reaches of river Ravi in the district of Chamba. It had won the project through a competitive bidding process in July, 2007.
If it completes the deal to buy the assets from JPVL it would become a strong player in the hydro power sector and also derisk its business model which is tied to coal supplies.
State-run NHPC has operational capacity of around 6,000 MW of hydro power capacity and is the largest player in its segment by far.
(Edited by Joby Puthuparampil Johnson)