Reliance Power has signed an agreement to buy all three operational hydro power assets of Jaiprakash Power Ventures Ltd (JPVL), a subsidiary of Indian infrastructure conglomerate Jaiprakash Associates Ltd (JAL), in one of the largest deals in the infrastructure sector which would make it the top private hydro power player in the country.
Although it has many hydro power projects in its portfolio with capacity aggregating over 5,000 MW, almost all of them are under development and this transaction would make it the biggest private sector hydro power generator in terms of operational capacity. The bulk of it’s under construction projects are in Arunachal Pradesh; so this deal would also derisk its hydro power business in terms of geographic concentration.
State-run NHPC has operational capacity of around 6,000 MW of hydro power capacity and is the largest player in its segment by far.
Reliance Power did not disclose the deal value buy said it would lead to transfer of assets worth over Rs 10,000 crore. Separate media reports citing sources it is pegged around $2 billion. Earlier another consortium of investors was to buy two out of three power assets for an enterprise value of around $1.6 billion.
If the value is indeed around $2 billion, it would be around twice the market cap of JPVL. It is not clear if JPVL will continue as a separate listed firm after selling all its assets or would be merged with the listed parent.
The firm said the money garnered through the deal would be used to repay debt of JAL.
The assets being acquired include three plants-Baspa Stage II and Karcham Wangtoo in northern Himachal Pradesh which have combined capacity of 1,391 MW. The third plant Vishnuprayag with 400 MW capacity is located at Chamoli district of Uttarakhand. This facility was hit by floods last year.
These three assets have life of over 50 years and are run-of-the-river units which do not require large reservoir like a typical plant.
SBI Capital Markets is the advisor in the proposed transaction.
Reliance Power moved swiftly after Abu Dhabi National Energy, which operates under the banner of Taqa, late last week withdrew its offer to acquire two of the key assets of JPVL, on the pretext of changes in business strategy and priorities of Taqa.
In March JPVL had struck a deal to hive off two hydro-power plants as a part of its group asset-disposal plan to a consortium of investors, including Taqa, Canadian institutional investor Indo-Infra Inc and IDFC Alternatives.
It was to acquire JPVL’s assets in Himachal Pradesh which have combined capacity of 1,391 MW. The deal would have made Taqa the largest private operator of hydroelectric plants in India. It already has a small hydroelectric plant at Sorang, in which Taqa acquired a stake last year. Following the completion of the transaction, Taqa’s gross operational power generation capacity in India would have become 1,741 MW, comprising three hydroelectric facilities and a lignite power plant.
The deal for the two assets had an equity value of $616 million (Rs 3,820 crore), of which 51 per cent was to come from Taqa. Indo-Infra was to bring in 39 per cent of the equity commitment as its stake in the consortium with IDFC Alternatives holding the remaining 10 per cent in the special purpose vehicle (SPV) created for the acquisition. The Indian PE firm was to invest around $62 million in the deal.
Taqa is liable to pay break fee based on the earlier acquisition agreement, according to a statement by JPVL.
After this deal came unstuck, two large private power producers, including Adani Group, which runs 3i-backed Adani Power, and Reliance Power entered the fray. Both these firms are large thermal based power producers. Reliance Power is said to have pipped Adani over valuation offered as also some terms of the proposed transaction. According to The Economic Times, Jai Anmol, son of Reliance Group chief Anil Ambani, and Karan Adani, son of Adani Group chief Gautam Adani, were directly involved in the negotiations for the deal.
(Edited by Joby Puthuparampil Johnson)