JSW Energy puts on hold decision to buy Jaypee’s 500-MW Bina plant

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Mumbai | November 19, 2014 3:46 AM

JSW Energy has put on hold its decision to buy a 500-MW thermal power plant in Bina, Rajasthan, from the Jaypee Group...

JSW Energy has put on hold its decision to buy a 500-MW thermal power plant in Bina, Rajasthan, from the Jaypee Group, the company told analysts on November 17.

The asset was one of the three owned by the Jaypee Group that JSW Energy had agreed to buy in September. On November 16, JSW Energy said in a statement that it was acquiring two hydroelectric power plants from the Jaypee Group for an aggregate consideration of R9,700 crore, but the Bina power plant didn’t find any mention.

JSW Energy will wait for further clarity to emerge on the coal block allocation to power plants for captive use before taking a final call on whether to acquire the Bina power plant. In September, the Supreme Court cancelled the allocation of 214 coal blocks awarded by the government to power and steel firms since 1993. In October, the government passed an ordinance to re-auction these coal blocks in a more transparent manner.

JSW Energy said on Sunday that it will acquire 100% interest in a new company to be floated — Himachal Baspa Power — and in which the two hydroelectric projects, located in Himachal Pradesh, are to be transferred.

“Management highlighted due to lack of clarity on coal mine auctions, the decision on Bina project has been deferred,” K Shankar, a power sector analyst with Edelweiss Securities, said in a report issued on Tuesday.

Analysts are divided on the benefits that will accrue to JSW Energy from the deal.

“Whilst this acquisition will address JSW Energy’s low power purchase agreement share in its portfolio, we do not expect major value accretion from these assets, given the high premium paid, regulatory uncertainties in Karcham Wangtoo’s tariffs and JSW Energy’s balance sheet deterioration,” Bhargav Buddhadev, an analyst with Ambit Capital wrote in a note.

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