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The Deutsche Bank-led consortium, which had offered  ₹2,400 cr, was the only external bidder for the asset.mint
The Deutsche Bank-led consortium, which had offered 2,400 cr, was the only external bidder for the asset.mint

Deutsche Bank-led consortium puts Jindal Thermal deal on hold

  • In the last few years, exposure to thermal power projects have burnt lenders’ balance sheets
  • Jindal India Thermal Power owes nearly 7,600 crore to a clutch of 17 lenders, led by PNB

A consortium led by Deutsche Bank, which won a bid to acquire Jindal India Thermal Power Ltd’s (JITPL) debt, has placed the transaction on hold.

The consortium was the sole bidder for the asset, putting paid to any hopes for resolution now, said two people, requesting anonymity.

JITPL runs a 1,200-megawatt coal-fired power plant in Odisha’s Angul district, owned by the BC Jindal Group. It owes nearly 7,600 crore to a clutch of 17 lenders, led by Punjab National Bank (PNB). The lenders hold a 51% stake in unlisted JITPL, after shares pledged by the promoter company were invoked following difficulties in repaying bank loans. Since 2017, lenders have sought bids to sell their 51% stake in the company.

The Deutsche Bank-led consortium, which had offered 2,400 crore, was the only external bidder for the asset. “The asset has a problem with inadequate coal linkages, which is why they needed a debt resolution," the first person said. “After the lockdown, the power sector is facing a huge fall in demand across the country. Even well-performing power generators are operating near or just above their technical minimums in the last two months. With no clarity on when industrial or commercial demand will return, it may not make sense at the moment to invest in a power project."

When contacted, a Deutsche Bank spokesperson declined to comment, while emailed queries to JITPL went unanswered.

JITPL is not the only thermal power project placed on the back burner after the coronavirus-induced lockdown.

In May, Sajjan Jindal-backed JSW Energy said it was placing its 5,321 crore acquisition of GMR Kamalanga Energy Ltd, another stressed coal-fired power plant in Odisha, on hold. JSW Energy said the transaction had been put “on hold because of the ongoing uncertainty and will be revisited once the situation normalises". Besides, several large acquisitions in the infrastructure segment have been cancelled.

On 2 June, Mint reported that Adani Group is renegotiating terms on several big-ticket asset purchases, spanning power, ports and airports.

“Within the infrastructure space, companies are taking a second look at the price of acquisitions, valuations, what future consumption will look like and trying to strike a balance with the performance of their existing businesses," said Venkataraman Renganathan, managing director, Alvarez and Marsal. “Things are still very fluid and it will take a couple of months to get some clarity. I don’t think capacity expansions or acquisitions will happen for at least another quarter. So, in some sectors like power and roads, we’re seeing deals put on hold. However, there is still some activity in the renewables space."

In the last few years, exposure to thermal power projects have burnt lenders’ balance sheets. A total of 34 thermal power projects, accounting for 40GW, were stalled either due to the absence of long-term power purchase pacts or shortage in coal and natural gas availability. Expensive and over-leveraged projects struggling to earn revenue led to bad debts of 1.74 trillion, and only about a tenth of such bad loans have been resolved so far. After the lockdown was implemented, power demand contracted 25% year-on-year in April and nearly 9% in May.

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