Jaypee group shares fall after Reliance Power deal hits dead-end

Written by feBureau | Mumbai | Updated: Sep 25 2014, 19:25pm hrs
Shares of Jaiprakash group companies fell as much as 24% in Thursday's trade after Reliance Power and Jaiprakash Power Venures (JPVL) said that they called off talks over sale of the latter's hydro-power assets.

In an exchange notice, Reliance Power said, "Due to prevailing regulatory uncertainties, and tarrif issues, which impact valuations, Reliance Power and Jaiprakash Power Ventures have terminated discussions regarding Reliance Power's acquisition of JPVL's Hydro portfolio of 3 projects, with an aggregate capacity of 1,791 MWs."

The JPVL scrip fell as much as 17.94% on Thursday, while the shares of the parent company Jaypee Associates fell as much as 24.48%. At 1:15 pm IST, the JPVL shares were trading 14.91% lower, while Jaypee Associates' shares were trading 9.52% lower on the BSE.

RPower added that lack of clarity on these issues (regulatory and tarrif) had an impact on the valuation of the assets under consideration, implying that it wasnt any longer sure that the enterprise value of R12,000 crore at which it had agreed to acquire power generating assets from JP Power was viable.

In a statement, however, JP Power refuted RPowers contention that the deal had been called off due to regulatory uncertainty, and said that it was due to difference of commercial aspects.

JP Power, a part of the Jaypee Group that has interests ranging across the infrastructure sector, had reached an understanding with RPower for divestment of the hydropower assets in July, barely a few days after it was announced that an earlier deal to sell the assets to Abu Dhabi National Energy (TAQA) had been called off. The deal with TAQA, which was announced in March, was struck at an enterprise value of around R9,700 crore.

With RPower backing off from the deal, the groups plans to de-leverage itself has suffered another blow. The group has around R58,000 crore of debt across companies. Apart from its power generating assets, the group recently divested some of its cement-making units to other entities like the Aditya Birla Groups UltraTech Cement and the Dalmia Bharat Group.

According to sources, the major bone of contention between the two companies was lack of regulatory clarity over the sanctioned generation capacity and tariff at JP Powers Karcham Wangtoo project in Himachal Pradesh. While the installed capacity of the project is 1,200 MW, it had only received techno-economic clearance for 1,000 MW from the Central Electrical Authority (CEA). It was reported that CEA may issue a show-cause notice to JP Power in this context. JP Power had also recently withdrawn a petition that it had submitted to the Central Electricity.