JSW Energy shelves plan to buy GMR unit

JSW Energy has put on hold its plan to acquire GMR Kamalanga Energy three months after announcing the deal, citing uncertainties in the wake of the Covid-19 pandemic and subsequent lockdown.

“We are putting this deal on hold for the time being because there are a lot of uncertainties in the sector,” Prashant Jain, chief executive officer of JSW Energy, said.

The power generation company of the Sajjan Jindal group had in February said it will buy the 1,050 mw Kamalanga project located in Odisha for Rs 5,321 crore from the highly indebted GMR Group.

“We had entered into a definitive agreement which was subject to certain conditions…the fulfilment of these conditions are on hold because of uncertainties,” Jain told ET.

He said the company would revisit the deal “once things normalise”.

GMR did not respond to ET’s query as of press time Wednesday.

The deal would have helped GMR pare debt, and added capacity to JSW’s portfolio.

JSW Energy on Wednesday reported an 8% decline in its total revenue for the quarter ended March at Rs 1,848 crore, primarily due to lower long-term sales and decline in fuel cost. The company’s net profit stood at Rs 108 crore for the quarter, up from just Rs 4 crore a year ago.

Several stressed power plants have been on the lookout for buyers after insolvency rules were relaxed in April last year. Some of these assets were also looking at resolutions outside the Insolvency and Bankruptcy Code (IBC) framework.

But industry players now fear that the severe impact of the Covid-19 pandemic on the economy may disrupt this process.

“The government has announced many measures for power sector reform,” Jain told ET. “I am not sure how much time these reforms will take to fructify.”

He said it’s difficult to raise money for any deal or to achieve financial closure in the current environment. “It is challenging, but we are optimistic that there would be recovery, even if it takes time,” he said.

GMR started scouting for buyers for this project in 2014-15 as the infrastructure conglomerate struggled with mounting debt and muted cash flows. In 2015, it was speculated that international energy majors like Sembcorp Industries of Singapore and Korea Electric Power Corp had held talks to acquire the plant. In October last year GMR and JSW entered into exclusive discussions for the deal.

JSW Energy is among a few power companies in the country looking for acquisitions. Two years ago, the company had to terminate its proposed acquisition of the 500 mw-Bina Power from Jaiprakash Power Ventures after months of delay in getting necessary approvals from lenders.

Jain said JSW Energy is not going back on its expansion plans, but there could be 6-9 months delay in its plans to expand its capacity from 4,559 megawatts now to 10 gigawatts. The company targets to scale it up to 20 gw by 2029-30.

JSW Energy is awaiting the National Company Law Tribunal approval for its resolution plan to acquire Ind-Barath Energy (Utkal).