Home / Companies / News /  Jaypee in talks to sell stake in power transmission unit to JSW

Mumbai: The debt-laden Jaypee Group, which has so far sold power assets worth 11,900 crore, is eyeing more inflows as it is in discussions with the Sajjan Jindal-led JSW Group for selling its stake in Jaypee Powergrid Ltd, according to two people with direct knowledge of the talks.

Besides, the group is also likely to get more from the sale of its Bina thermal power plant in Madhya Pradesh than the stated 2,700 crore, said the two people quoted above, on condition that they remain unidentified.

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

“They may receive more funds over and above the 2,700 crore, if the company manages to get the required power purchase agreements (PPAs)," said one of the two people.

These deals are critical for the Jaypee Group as it struggles to reduce its debt to stay afloat. As of 31 March, Jaiprakash Power had a debt of 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% on a regulated basis and 5% at variable cost). The balance 30% is exposed to the merchant market."

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

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

Jaypee Powergrid is a joint venture between Power Grid Corporation of India Ltd and Jaiprakash Power Ventures.

The company has developed a 214km-long power transmission project to evacuate power from the Karcham-Wangtoo power project, according to Jaiprakash Power Ventures’ website. Karcham-Wangtoo is one of two hydro-power projects that JSW Energy bought from Jaiprakash Power Ventures in September 2015 for a combined 9,200 crore.

“It makes sense for the owner of the power plant to own and control the transmission evacuation facility as well. Transmission assets also give steady regulated return," said Debasish Mishra, partner at Deloitte Touché Tohmatsu India Llp.

However, JSW Energy, in a clarification sent to the BSE on 19 July with reference to news reports on discussions over Jaypee Powergrid, 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, clarified that it had not held any talks with JSW Energy for the sale of Jaypee Powergrid.

An e-mailed 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 the company. This could well give JSW Energy headroom for another asset buyout. So far, JSW Energy has bought all the power assets that Jaiprakash Power Ventures has sold.

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