Jaiprakash Power deal with TAQA valuations lower than Street expectations

Written by Nitin Shrivastava | Mumbai | Updated: Mar 3 2014, 01:16am hrs
JaiprakashJaiprakash Power's deal with TAQA led consortium for two hydro assets seems to be have been done at discount to market expectations. (AP)
The Jaiprakash Power Ventures Ltd's deal with TAQA led consortium for two hydro assets seems to be have been done at discount to market expectations.

Though the Abu Dhabi National Energy Company PSJC (TAQA) led consortium will also acquire the assets non-recourse project debt,the deal implies equity valuation of $616 million or Rs 3820 crore for the 1392MW hydro power assets (Baspa-II and Karcham Wangtoo projects) which is much lower than what some analysts had factored in their projections.

Take for instance, JP Morgan had ascribed equity value of Rs. 5400 crore for the two said projects in their projected March 2014 sum of the part valuations. Similarly, Deutsche Bank too in its recent results review report had factored in equity value of Rs. 4389 crore for the two plants.

Though the equity valuation may be lower, nevertheless the deal is likely to help the company - that had a gross debt of Rs. 19000 crore on standalone basis as at end of Q3FY14 - to bring down the same to Rs. 12,800 crore and Jaiprakash Associates consolidated debt would also come down to around Rs. 50,000 crore considering the inflows from previous Ultratech deal.

"The enterprise value of two Indian hydroeletric power plants which a consortium led by Abu Dhabi National Energy Co (TAQA) is buying - including equity and debt which the group will take over - is about $1.6 billion,"" a TAQA spokesman said on Sunday in Abu Dhabi, reported Reuters.

TAQA - - an international energy and water company with interests in conventional and alternative power generation, water desalination, oil and gas exploration and production, pipelines and gas storage - had formed a consortium of financial sponsors to conclude this transaction including Canadian pension fund PSP Investments and IDFC Alternatives - Private Equity arm of infrastructure finance company IDFC.

Post deal, TAQA will own the majority stake of 51% and will operate both the units while Canadas PSP and IDFC will hold the rest in the hydropower units.

The hydropower generation company that has further 500MW of operational coal based capacity and under construction coal based power projects of 3300MW, had in last quarter reported net loss of Rs. 153 crore on under recovery of fixed assets at Bina thermal power plant and seasonally weak hydro generation. Karcham Wangtoo the biggest driver of earnings for the company reported merchant realization of just Rs3.1 to Rs. 3.4/kWh on volumes of 565 million units.

The sale of hydro assets come after the group had sold its 300 acre land in Noida and two cement plants at Gujarat so far this year for total consideration of Rs. 5,300 crore. With this deal further cutting debt by around Rs. 6200 crore, management seems to be on track to execute its guidance to reduce its consolidated debt by around Rs. 15,000cr through monetisation of its land parcel, cement business, and thermal & hydro assets.