Mumbai: The Sajjan Jindal-controlled JSW Energy Ltd on Sunday said it will buy two hydroelectric projects from Jaiprakash Power Ventures Ltd (JPVL) for 9,700 crore in cash.

The transaction is expected to close in 2015-16.

On 25 September, the companies had announced a binding agreement for the transfer of three projects, including Baspa Stage II (300 megawatts-MW) and Karcham Wangtoo (1,091MW), both in Himachal Pradesh, and Vishnuprayag (400MW) in Uttarakhand.

However, a statement issued by JSW Energy on Sunday said that the companies have agreed upon the valuation of only two projects—Baspa and Karcham Wangtoo.

JSW Energy will buy 100% in the special purpose vehicles, or SPVs, which are running both projects.

Selling the hydropower projects is critical to the Jaypee Group’s efforts to reduce debt of around 60,000 crore.

Interestingly, the debt levels of the JSW Group are also high.

At the end of 2013-14, the group’s debt, which include companies like JSW Energy and JSW Steel Ltd, stood at 44,868.55 crore.

The Jaiprakash Power Ventures’ two previous attempts to sell off these projects were unsuccessful.

In July, Abu Dhabi National Energy Co. PJSC (Taqa) had called off the discussions to buy the Baspa and Karcham Wangtoo projects at 9,689 crore.

Subsequently, Jaiprakash Power Ventures started talks with the Anil Ambani-led Reliance Power Ltd.

Reliance Power valued all three projects at around 12,500 crore, but talks failed in September, after which JSW entered into a binding agreement with Jaiprakash Power Ventures.

Unlike a non-binding agreement, if either party in a binding agreement walks out of the deal, then that party has to pay the agreed damages as compensation to the other.

When the Jaiprakash Power Ventures-JSW Energy deal was announced, a power sector consultant had cautioned that Reliance Power had valued these three assets at around 12,500 crore in a non-binding deal.

JSW Energy has signed a binding agreement with a company that had faced two deal terminations.

This, the consultant said, hinted there was some issue with the projects.

However, some others did not agree, saying raising money should not be a problem for JSW Energy as the company is making steady profits.

On Sunday, Manish Aggarwal, partner, corporate finance and head, energy and natural resources at KPMG India, said, “It is a perfectly sound deal as both the projects which have been bought by JSW Energy are good quality operational projects and generating cash. So, raising additional debt on the strength of these projects is also a strong possibility."

JSW Energy closed at 75.85 on BSE on Friday, up 1.07%, and Jaiprakash Power Ventures closed at 14.37, up by 5.82%.

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