MUMBAI: A Deutsche Bank-led consortium that had won a bid to buy out the debt of Jindal India Thermal Power Ltd (JITPL) has placed the acquisition on hold. This joins a growing list of stressed asset acquisitions that have been scuttled after the covid-19 pandemic broke out in India and a lockdown was imposed.
The consortium had been the sole bidder for the asset, and thus a resolution may be a long time in coming, according to two people aware of the development.
JITPL is a 1,200 megawatt coal-fired power plant in Odisha’s Angul district, owned by the BC Jindal Group company. It owes nearly ₹7,600 crore to a clutch of 17 lenders, led by Punjab National Bank. The lenders hold 51% in the unlisted JITPL after shares pledged by the promoter company were invoked because of difficulties in repaying bank loans. Since 2017, lenders have sought bids to sell their 51% stake.
The Deutsche Bank-led consortium had offered ₹2400 crore for the asset.
"The asset has a problem with inadequate coal linkages, which is why they needed debt resolution," one of the people cited above said. “After the lockdown, the power sector is facing a huge fall in demand across the country. Even well-performing power generators have had to now operate 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."
A spokesperson for Deutsche Bank declined to comment on the matter, while emailed queries to JITPL went unanswered.
JITPL is not the only thermal power project deal placed on the backburner.
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 has been put "on hold because of the ongoing uncertainty and will be revisited once the situation normalises."
Besides these, several large acquisitions in the infrastructure segment have been cancelled. On 2 June, Mint reported that Adani group is renegotiating terms of 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," Venkataraman Renganathan, managing director, Alvarez & Marsal, told Mint.
"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."
Over the last few years, lenders’ exposure to thermal power projects have singed their balance sheets.
A total of 34 thermal power projects, accounting for 40GW of generating capacity, have been stalled for either want of long-term power purchase agreements or shortages in the availability of coal and natural gas. Expensive and overleveraged projects struggling to earn revenue led to bad debts of ₹1.74 lakh crore. Less than a tenth of these bad loans have been resolved so far.
Meanwhile, because of the lockdown, demand for power contracted 25% year-on-year in April and nearly 9% in May.