JSW Energy says plans to buy GMR’s Odisha unit on hold due to Covid-19 disruption

Sajjan Jindal-led JSW Energy has put on hold its plan to acquire GMR Kamalanga Energy three months after announcing the deal in February due to the ongoing uncertainty due to the Covid-19 pandemic and the subsequent lockdown.
JSW Energy had said that it will buy the 1,050 mw-Kamalanga power project located in Odisha for Rs 5,321 crore from the highly indebted GMR Group. The deal would have helped GMR pare debt, and added capacity to JSW’s portfolio.

“We are putting this deal on hold for the time being because there are a lot of uncertainties in the sector. We had entered into a definitive agreement which was subject to certain conditions, the fulfillment of these conditions are on hold because of uncertainties,” Prashant Jain, joint managing director and chief executive officer told ET.

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

GMR did not respond to ET’s query.

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 IBC framework. But the industry players now fear that the pandemic may disrupt this process.

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 with the company to acquire the plant. It was in October 2019 that GMR and JSW entered into exclusive discussions for the deal.

JSW Energy is among the few power companies in India who are looking out for acquisitions. But 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 that JSW Energy is not going back on its expansion plans, but there could be 6-9 months delay in capacity addition from the earlier targets of doubling it from 4,559 megawatts now to 10 gigawatts (gw) and subsequently scale it up to 20 gw by 2029-30.

“The government has announced many measures for power sector reform. I am not sure how much time these reforms will take to fructify. In the current environment it is difficult to raise money for any deal or to achieve financial closure. It is challenging, but we are optimistic that there would be recovery, even if it takes time,” Jain said.

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

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