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Business News/ Companies / JSW in talks with Monnet Ispat to work out majority stake package
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JSW in talks with Monnet Ispat to work out majority stake package

Severe cost overruns of Monnet Power's projects and issues related to winning coal blocks via negative bids could be negatives for JSW

Earlier this month, the company said it signed an initial agreement to buy a majority stake in Monnet Power Co. Premium
Earlier this month, the company said it signed an initial agreement to buy a majority stake in Monnet Power Co.

Mumbai: JSW Energy Ltd is in talks with the promoters of Monnet Ispat and Energy Ltd and its lenders to work out a package that will let it buy a majority stake in the latter’s power subsidiary without bearing heavy cost overruns in its two power projects, chairman Sajjan Jindal said.

Earlier this month, the company said it signed an initial agreement to buy a majority stake in Monnet Power Co., a unit of Monnet Ispat and Energy. JSW did not disclose transaction details since only a non-binding memorandum of understanding (MoU) has been signed.

Analysts have raised concerns about the deal since its announcement on 9 July, given that Monnet Power’s projects have seen severe cost overruns and the company has won coal blocks through negative bids.

This would be a negative for JSW Energy if a deal goes through, Dhirendra Tiwari, an analyst with Antique Stock Broking, wrote in his note to clients on Wednesday.

“The existing promoters (of Monnet Power) will have to take the haircut as well as the existing lenders. So that new package is being discussed right now," Jindal said in Mumbai on Wednesday.

Jindal, who was speaking to reporters after attending JSW Energy’s annual meeting, declined to share further details. Jindal said the deal would only go through if a package was worked out.

Monnet Power is setting up two coal-fired thermal power plants with a capacity of 1,050MW (525MW each) located at Malibrahmani in Angul, Orissa. These plants have seen delays of about five years in completion leading to a cost overrun of about 1,900 crore, according to analysts.

“In this deal it is the lenders who might have to take the biggest haircut followed by the promoter of Monnet Ispat. JSW stands to buy the stake at a discount," an analyst with a brokerage said, declining to be named.

Monnet Ispat’s promoter Sandeep Jajodia is married to Jindal’s sister.

Analysts estimate the total revised projects costs of Monnet’s two projects to be between 7,000 crore and 7,500 crore. Monnet Ispat declined to confirm this number.

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Published: 23 Jul 2015, 01:40 AM IST
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