Naveen Jindal-led Jindal Steel and Power Ltd (JSPL) on Wednesday announced it has agreed to sell its 1,000 MW power plant in Chhattisgarh to elder brother Sajjan Jindal's JSW Energy for Rs.6,500 crore.
"JSPL agrees to divest the 1,000 MW 4 (250x MW) unit of Jindal Power Limited, located in Chhattisgarh in favour of JSW Energy Ltd," JSPL said in a statement here.
JSW will pay at least Rs.4,000 crore, excluding net current assets, and an additional Rs.2,500 crore if the JSPL plant in Raigarh, Chhattisgarh, secures a long-term power purchase agreement, the companies said in separate stock exchange filings.
Under the terms of the agreement, an interest bearing advance of Rs.500 crore is to be paid after shareholder approval of both firms and the Competition Commission of India.
A special purpose acquisition entity -- Everbest Steel and Mining Holdings (ESMH) -- has been created where the business undertaking of the JSPL plant will be transferred and JSW Energy will buy entire shareholding of ESMH, thereby increasing its power generating capacity to 5,531 MW.
"This (acquisition) will diversify JSW Energy's presence towards the eastern region of the country and in the state of Chhattisgarh, which is rich in coal reserves. The transaction is structured to be value-accretive to the shareholders of the company immediately upon consummation," JSW Energy said in their statement.
JSPL, which has massive debts of around Rs.46,000 crore and with significant exposure to the State Bank of India, said the deal, to be completed by mid-2018, would help meet its liabilities.
This is JSW Energy's second power acquisition within a year following its buyout of two hydropower projects from Jaiprakash Power Ventures for an asset value of Rs.9,275 crore.
"The adverse operating environment within power sector in the country is driving distress sales in the sector, and JSW Energy's robust financial health coupled with a strong balance sheet is providing the company an opportunity to acquire quality power assets at reasonable valuation," JSW Energy said.