Sector experts pointed out that JSW, with its strong balance sheet, is seen to reduce borrowing costs and improve the cost economics of the plant.
JSW Energy Ltd said Monday that it will take over 100% stake in GMR Kamalanga Energy Ltd (GKEL) ― the business unit of GMR Infrastructure that houses the 1,050 mega-watt (MW) thermal power plant in Odisha ― for Rs 5,321 crore. After the acquisition, JSW Energy’s installed power generation capacity would reach 5,609 MW. About 84% of the power plant’s capacity supplies electricity to Odisha, Haryana and Bihar under long-term power purchase agreements. It also has adequate coal supply arrangements from nearby mines, reducing fuel costs and resulting in lower risks of under-recoveries.
The deal will help GMR Infrastructure reduce its debt of Rs 4,141 crore which the company owed to IDFC (lead lender), SBI, IDBI, Canara Bank and UCO Bank. GMR had infused equity of Rs 2,250 crore into this power plant. It was not immediately known how much haircut has been borne by the lenders. Operating the plant did not turn out to be viable for GMR because the competitive rates (Rs 2.89/unit-Rs 3.39/unit) at which it sold power was not sufficient to recover the costs.
The price to be paid is subject to working capital and other adjustments and the transaction shall be subject to customary regulatory and other approvals for its completion, JSW said. Sector experts pointed out that JSW, with its strong balance sheet, is seen to reduce borrowing costs and improve the cost economics of the plant. JSW Energy is also eyeing the acquisition of the 700 MW Ind-Barath (Utkal) plant through the National Company Law Tribunal (NCLT) route. It expects to complete the Utkal plant deal by Q2FY21.
Other stressed plants resolved outside the NCLT include Tata Power acquiring 75% stake in Prayagraj Power Generation Company Ltd’s 1,980 MW Bara power plant for Rs 6,000 crore (reflecting a haircut of more than 50%), Hong Kong-based Agritrade Resources Ltd agreeing to purchase 100% of the equity in SKS Power’s Binjkote power plant for Rs 2,170 crore (at 57% haircut). In a first instance of resolution of a stressed power asset outside the insolvency and bankruptcy code (IBC) mechanism where the promoters have retained management control, Aditya Birla Asset Reconstruction Company Ltd agreed to take over RattanIndia Power’s 1,350 MW Amravati plant’s Rs 4,050 crore debt with funding from foreign investors including US-based Goldman Sachs and Varde Partners. A consortium of lenders led by the Power Finance Corporation agreed to take a 36% haircut through this deal.
Under the IBC, NHPC in September, 2019 signed an agreement to take over and commission the 500-MW Teesta-6 hydro electric project in Sikkim. State-run power generation behemoth NTPC is also preparing to bid for the distressed 600 MW Jhabua power plant in the NCLT.