Jaypee Group in talks to sell stake in power transmission unit

Industry:    July, 2016

The group is also likely to get more funds from its asset sale of Bina thermal power plant than the stated Rs2,700 crore.

Mumbai: Debt-laden Jaypee Group, which has so far sold power assets worth Rs.11,900 crore, may get luckier and get more funds as it enters into discussions with JSW Group for selling its stake in Jaypee PowerGrid Ltd, according to two people with direct knowledge of the deal. The group is also likely to get more funds from its asset sale of Bina thermal power plant than the stated Rs.2,700 crore, the two people quoted above said.

On 18 July, group company Jaiprakash Power Ventures Ltd agreed to sell its 500 megawatts (MW) Bina thermal power plant to JSW Energy Ltd for an enterprise value of Rs.2,700 crore. Separately, Jaiprakash Power Ventures has also started discussions to sell it’s 74% in power transmission subsidiary Jaypee PowerGrid Ltd.

“They may receive more funds over and above the Rs.2,700 crore if the company manages to get the required power purchase agreements (PPA),” said one of the two people mentioned earlier in the story.

These deals are critical for Jaypee Group as it struggles to reduce its debt to stay afloat. As on 31 March, Jaiprakash Power had a debt of Rs.22,414.94 crore.

According to an Emkay Research report on JSW Energy dated 19 July, “The Bina thermal power plant has 70% PPA with MP Discom (65% at the regulated basis and 5% at variable cost). The balance 30% is exposed to merchant market.”

“Jaypee can expect more funds which have been linked to certain milestones, including the signing of PPAs,” said the second of the two people mentioned earlier.

This is not the first time JSW Energy has linked a deal value to achieving certain milestones. On 4 May, JSW Energy said it will buy 100% of JSPL’s (Jindal Steel and Power Ltd) 1,000 MW thermal power plant in Chhattisgarh at an enterprise value of Rs.4,000 crore, which could be increased to Rs.6,500 crore if JSPL manages to secure 100% fuel supply for the plant and enters into long-term PPAs.

However, in a clarification sent to the BSE on 19 July, JSW Energy said the company continues to evaluate various opportunities as part of its growth strategy and in the course of such evaluations, discussions with various parties take place from time to time.

Jaiprakash Power Ventures, in its statement to the BSE on 19 July, said it has not held any talks with JSW Energy on the subject.

An email query sent to JSW Energy and Jaypee Group on Thursday remained unanswered.

JSW Energy, in a separate announcement to the BSE on Thursday, said lenders to Monnet Power Co. Ltd have rejected its proposal to acquire a majority stake in Monnet Power. This could well allow JSW Energy headroom for another asset buyout.

So far, JSW Energy has bought all the power assets Jaiprakash Power Ventures has intended to sell. In September 2015, JSW Energy bought two hydropower assets from Jaiprakash Power for Rs.9,200 crore.