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Sajjan Jindal’s JSW Energy could be renegotiating a proposal to buy a 1,000-Mw power plant in Chhattisgarh from his brother Naveen Jindal’s Jindal Steel & Power (JSPL).
According to sources, JSW was set to announce the deal on Thursday morning at a press conference which was cancelled a night before.
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The invite for the cancelled press briefing had mentioned that Sanjay Sagar, joint managing director and chief executive officer of JSW Energy, and Pramod Menon, director (finance) would talk “about the business updates”.
Company sources said the meet was called to announce the deal to buy the 1,000-MW Chhattisgarh power plant of JSPL.
On April 27, the BSE had also issued notices to JSW Energy and JSPL to reply on media reports of the former buying the power plant.
In its reply, JSW wrote, “JSW Energy continues to evaluate various opportunities and as a part of such evaluation, discussion with various parties take place from time to time. Accordingly, no disclosable event under the Securities and Exchange Board of India (Listing Obligation and Disclosure Requirements), Regulations 2015 has taken place. We will duly inform the exchanges as and when the disclosable event occurs.”
However, sources said both JSW and JSPL are waiting for response from BSE and National Stock Exchange (NSE) to their respective clarifications.
According to sources, JSPL will sell 1,000-Mw power plant in Chhattisgarh to JSW Energy. This will help JSPL meet interest payment obligations and pare overall debt of Rs 42,500 crore. Jindal Power has a total capacity of 3,400 Mw.
JSPL, in its communication to BSE and NSE said, “We wish to clarify that Jindal Steel and Power Limited (JSPL) continues to evaluate various opportunities as a part of its group strategy. Whenever any proposal results into execution of binding documents, the company will comply with the provisions of the Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015 and make requisite disclosures accordingly. As stated in our earlier response, JSPL is working on various options to monetise assets, to improve its cash flows, and as a part of such evaluation, discussion with various parties takes place from time to time.”
Meanwhile, in a call with analysts to discuss March quarter results, Menon said JSW would continue to look at acquisitions which have synergetic value and insulate business risks. “Plants with long-term power purchase agreements will be of interest,” he added. While he neither confirmed nor denied the negotiations with JSPL, he said, the company would be comfortable in acquiring assets which would enable it work with a debt-equity ratio of 2.5 to 3 times. Presently, this ratio stands at 1.7 times for JSW Energy and room for additional leverage appears limited. Menon also indicated that the company is open to acquiring solar assets at reasonable valuations.
JSW Energy Q4 revenue increases 22%
JSW Energy management told analysts that it sees a volume growth of 17-20 per cent in FY17. This includes utilisation of recently-acquired hydro power project from Jaiprakash Power Ventures.
In Q4 FY16, the company’s revenue grew 22 per cent year-on-year to Rs 2,706 crore. However, factors such as high interest costs and taxes resulted in a flat net profit growth of Rs 305 crore.
Also, with new rules requiring electricity distribution companies to purchase short-term power through an e-platform, JSW’s per unit realisation would be impacted by Rs 0.15 to Rs 0.20 in FY17. In FY16, JSW Energy sold 10,175 million units (MU) of merchant power (47 per cent of total units sold) and earned Rs 4.12 per kilowatt (versus Rs 4.24 per kilowatt in FY15).
The company may reduce its exposure to short-term contracts and move towards medium- and long-term contracts going forward. Cost of fuel, which went up by 13 per cent in Q4, partly because of Rajasthan Electricity Regulatory Commission’s verdict on its fuel cost and rupee depreciation, may continue to remain in higher range.
