Billionaire Sajjan Jindal-led JSW Energy on Monday said it will buy GMR Energy Ltd's 1,050 MW thermal power plant in Odisha for Rs 5,321 crore.
JSW Energy signed a share purchase agreement to acquire 100 per cent of GMR Kamalanga Energy Ltd, which owns and operates a 1,050 MW (3x350 MW) thermal power plant in Odisha, for Rs 5,321 crore (subject to working capital and other adjustments), the company said in a statement.
"Post-acquisition, the total installed power generation capacity of the company will increase to 5,609 MW," it said.
The buyout will expand JSW Energy's presence in the eastern region of the country and further diversify its fuel mix and offtake arrangements.
The transaction is subject to customary regulatory and other approvals for its completion.
Of the Rs 5,321-crore enterprise value of GKEL, JSW Energy will pay promoters Rs 755 crore in upfront cash and another Rs 615 crore on achieving different milestones. The balance Rs 3,951 crore is on account of GKEL debt that JSW Energy is taking over.
GMR Kamalanga Energy Ltd (GKEL), a subsidiary of GMR Energy, owns and operates 3 units of 350 MW at Dhenkanal in Odisha.
JSW Energy, as part of its strategy for expansion and consolidation in the power sector, has been scouting for strategic assets.
"Consequent to the acquisition, GKEL will be a 100 per cent subsidiary of JSW Energy," it said.
The deal is subject to the approval of the Competition Commission of India (CCI) and GKEL lenders. Also, Haryana, which buys power from Kamalanga, also has to approve of the power purchase agreement.
GKEL had a revenue of Rs 2,195 crore in FY2019.
It sells 263 MW of electricity generated to Odisha for Rs 3.11 per unit and another 283 MW to Bihar at Rs 3.39 a unit. To Haryana, it sells 334 MW at Rs 2.89 per unit.
Explaining the rationale for the acquisition, JSW Energy said GKEL was an optimal fit with the company's strategic framework of acquiring assets with low power generation cost, thus minimising receivable risk.
Besides, helping the company to expand its portfolio and diversify its fuel mix, geographical spread, and off-take arrangements, GKEL has been operating a power plant with 5 years of satisfactory operational history, it said.
Also, substantial offtake security with about 84 per cent capacity tied-up under long-term PPA with 3 states.
GKEL had adequate fuel security of 3.64 million tonnes per annum of coal that was sufficient to meet the generation requirement for the entire power purchase agreement.
Strategic location in the coal-rich belt of Talcher ensures low variable cost, it said the acquisition would increase EBITDA.
The plant has an option of expansion by another 350 MW unit at a low incremental project cost.
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