Brothers Sajjan Jindal and Naveen Jindal have agreed to extend the deadline for their $1-billion power deal by another one year, as the latter’s Jindal Steel & Power Limited (JSPL) has failed to meet the preconditions of the deal, the deadline for which expires in June this year.
Confirming the development, JSW Group chairman Sajjan Jindal told The Hindu , “The deal deadline has been extended by another year.”
‘₹6,500-crore deal’
In May 2016, JSPL had agreed to sell its 1,000-MW power plant in Chhattisgarh for an enterprise valuation of ₹6,500 crore. The brothers had decided to seal the deal on an arm’s length basis (a deal in which typically the buyer and seller of a product act independently and have no relationship to each other).
“The deal is on the backburner as the power sector is not doing well,” said a source in the know of the development. “JSPL is yet to secure a long-term power purchase agreement (PPA) and coal linkages for the plant; both are preconditions for the deal.”
A JSPL official clarified that its power unit is yet to secure a long-term PPA and coal linkages for the plant and the company was working towards achieving both milestones to close the deal.
“We have signed a binding agreement with JSW Energy for the 1,000 MW power plant, and June 2018 is the long stop date,” a Jindal Power Limited spokesperson had earlier said in an e-mail reply to The Hindu ’s queries.
As per the deal, Everbest Steel and Mining Holdings Limited (ESMH), a special purpose acquisition entity, had been created. The business undertaking of the JSPL plant was to be transferred to this entity and JSW Energy was to buy the entire shareholding of ESMH.
Analysts said that with JSPL’s improving profitability and debt reduction, the company may not be forced to sell its power plant.
The company posted a net profit of ₹145 crore for the March quarter, in a return to profitability after 13 quarters of reporting losses.
The numbers came on the back of the firm’s highest-ever steel production and sales in the fourth quarter and for the financial year 2017-18, with the 5 MTPA integrated steel plant at Angul getting fully commissioned.
The credit ratings for JSPL have been upgraded by rating agency Crisil to a ‘stable’ outlook. The upgrade followed similar upgrades by agencies Care and ICRA.
The net debt for JSPL fell ₹4,500 crore from the peak level of ₹46,500 crore to end FY18 at ₹42,000 crore.
In January, JSW Energy terminated its deal to buy Jaiprakash Power’s 500 MW Bina unit for ₹2,700 crore after two years of delay in getting necessary approvals from the lenders.
(With inputs from Sara Vernekar)
