Jaiprakash Power in talks with Reliance after Taqa withdrawal
Jaiprakash Power Ventures has entered into a deal to sell three power plants in India to a unit of Reliance Group days after Abu Dhabi National Energy, known as Taqa, pulled out of an agreement to acquire two of the plants.
Jaypee Group, the parent company of Jaiprakash Power, said it intended to use the proceeds from the sale to cut its outstanding debt.
Jaiprakash Power’s stock rose on the Bombay Stock Exchange and closed up 3.17 per cent at 19.55 rupees a share after the announcement yesterday.
The company said it had signed an exclusive memorandum of understanding with Reliance CleanGen, a subsidiary of Reliance Power, for the 100 per cent sale of Jaiprakash’s hydroelectric power portfolio. Comprising three plants, the portfolio has an aggregate capacity of nearly 1,800 megawatts, the largest in the private sector in India, and with an asset base of more than 100 billion rupees (Dh6.11bn), it said.
Taqa abandoned a deal to buy two of the plants for US$1.6bn, according to a separate filing by Jaiprakash last Thursday.
Taqa had been leading a consortium to buy the Baspa Stage II and Karcham Wangtoo hydroelectric plants, located on the River Satluj basin in the north Indian state of Himachal Pradesh. Taqa was to hold a 51 per cent stake in the consortium, with an unnamed entity, reported to be Canada’s Public Sector Pension Investment Board, holding a 39 per cent share. IDFC Alternatives’ India Infrastructure Fund II, an Indian private equity fund, was to hold a 10 per cent stake.
Taqa’s withdrawal from the deal made it liable to the payment of a break fee, according to the filing last week.
The agreement with Reliance covers the same two plants, plus the acquisition of Vishnuprayag, a 400MW plant in the northern state of Uttar Pradesh. With an asset life of more than 50 years, each facility uses run-of-the-river technology to convert natural water flow to electricity. Jaiprakash did not disclose the value of the sale.
The sale would make Reliance Power, a unit of the billionaire Ani Ambani’s Reliance Group, India’s biggest provider of hydroelectric power in the private sector.
“This is great for Jaiprakash as it’ll help it cut debt,” P Phani Sekhar, a Mumbai-based fund manager at Angel Broking, was quoted by Bloomberg News as saying. “The hydropower plants are operational assets, and will help increase Reliance Power’s cash flows.”
Jaypee Group, the builder of a variety of infrastructure in India, has been seeking to cut its multibillion dollar debts through infrastructure sales.
India’s growing population requires an extra 70,800 MW of extra capacity between 2012 and 2017 if GDP growth accelerates by 8 per cent every year, according to data on the Reliance website. Economic expansion in Asia’s second-largest economy reached only 4.7 per cent in the fiscal year to March.
Bloomberg reported the three plants were worth more than 100bn rupees, attributing the information to Reliance Power.
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Updated: July 28, 2014 04:00 AM