Tata Group-backed Resurgent Power has emerged as frontrunner to buy Jaypee Power Ventures after lenders, who own majority shares, put it on the block, said people directly aware of the matter. Jaypee has 2,200 MW of hydro and coal-fired power generation assets, with Rs 12,000 crore in loans following the debt restructuring.
Two Middle East sovereign funds — Kuwait Investment Authority and Oman State General Reserve — and Canadian pension fund CDPQ jointly own 65% in Resurgent Power, while Tata PowerBSE -2.10 % is the operating partner with a 25% stake. ICICI Bank, which owns 10%, is also shareholder in the restructured Jaypee Power. Brookfield Asset Managment and JSW Energy had looked at acquiring the assets with the former doing considerable work on a possible acquisition.
Jaypee has one hydropower plant in Himachal Pradesh and two coal-based plants in Madhya Pradesh. Tata Power, as a shareholder, will ensure the supply of coal to manage the daily operations of the assets, if the deal goes through. Tata Power said it cannot comment on behalf of Resurgent Power. Jaypee Power could not be reached for comments immediately.
Another person familiar with the matter said lenders might consider running a new process if they don’t strike a satisfactory deal with Resurgent Power. All the bids hovering around $1 billion came well below the asking valuation of around $1.5 billion.
Resurgent Power does not have electricity generating assets in its portfolio and has been looking at acquisition opportunities. Besides Jaypee Power, Resurgent has bid for GMR InfrastructureBSE 2.94 %’s 1,370 MW coal-based plant in Chhattisgarh.
Interestingly, the Tata Group’s move to ramp up the energy business inorganically comes after it last year raised valuation concerns about Tata Power’s Rs 9,250-crore buy of Welspun Renewables. Group chairman N Chandrasekaran believes that acquisitions will help the conglomerate’s key businesses to scale up and consolidate position in the country where it has slipped from the top slot. Tata SteelBSE -1.02 % is prospecting large alloy assets under NCLT driven debt resolution process — Essar and Bhushan — to ascend to the top position from the current third slot.
Since taking charge at the helm of the group in February 2017, Chandrasekaran’s actions were aimed at rationalising the conglomerate’s portfolio mainly through the sale of non-core assets. While those actions continue, he is looking at consolidating the group’s mainstay businesses through inorganic expansions. But instead of buying assets outside of India, Chandrasekaran is eyeing purchases in the domestic market propelled by economic growth, rising material prices and debt-laden units put up for sale by lenders.
Source: Economic Times