Mumbai: Jindal Steel and Power Ltd (JSPL) will sell certain steel and mining assets and will expand its power business portfolio into renewable energy and transmission and distribution (T&D), said chief executive Ravi Uppal in a phone interview, hours after agreeing to sell a 1,000 megawatt (MW) power plant to JSW Energy Ltd.
Late on Tuesday night, JSW Energy said it will buy 100% of JSPL’s 1,000 MW thermal power plant in Chhattisgarh at an enterprise value of Rs.4,000 crore, which could be increased to Rs.6,500 crore if JSPL manages to secure 100% fuel supply for the plant and enters into long-term power purchase agreements (PPAs).
Uppal described debt-laden JSPL as a “growing business” and said the company was working with urgency to completely divest “certain assets within its steel and mining business” to improve its liquidity and reduce debt. He did not name the assets citing non-disclosure agreements.
JSPL wants to sell controlling interests in its Botswana coal mine in Africa and a mine owned by its Australian subsidiary Wollongong Coal Ltd as it does not want to commit further investments in “development stage” assets, Mint reported on 19 August, citing a company spokesperson.
JSPL has since 2014 evaluated options including selling its mines in Africa and Australia, listing its subsidiary in Oman, and listing its power business Jindal Power Ltd in India to reduce debt. These efforts did not materialize.
“Power will remain one of the key businesses for JSPL. Going forward we may change the profile of power business, we might also invest in renewables, we might get into transmission and distribution (T&D) and waste-based power generation. So there are several initiatives in the pipeline,” Uppal said.
Of the 2,400 MW capacity remaining with JSPL after the sale of the Chhattisgarh plant, about 1,800 MW is operational with the balance yet to be constructed. The company does not yet have PPAs for a majority of the capacity.
The deal with JSW Energy will be completed by June 2018, at which point the full payment will be made to JSPL. In the interim, JSPL gets Rs.500 crore as advance payment which will help the firm meet immediate cash needs.
But the power asset sale to JSW Energy will allow JSPL to raise fresh funds against the surety of the sale agreement, said analysts.
“Sharp improvement in profitability of the steel business, advance of Rs.5 billion (Rs.500 crore) to be received from JSW Energy for the proposed sale of 1,000 MW and sale of captive power plants to JPL has put JSPL in a much improved position to meet its repayment obligation of Rs.35 billion in FY17,” Macquarie Capital Securities India Pvt. Ltd said in a note to clients on 4 May.