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‘Stake’ Fate Of Jaiprakash Power: Power Companies Show Interest

Scouting for potential buyers, lenders to Jaiprakash Power Ventures invited bids last month to sell at least a 30 per cent stake in the company, under bankruptcy and Insolvency proceedings

Diversifying into the multiple business areas and placing all the bets to capture a large market share, JP Group’s debt story has been palpating. While two of the Jaiprakash group companies — Jaiprakash Infrastructure and Jaiprakash Associates — are under insolvency resolution, its power subsidiary, Jaiprakash Power which is under strategic debt restructuring (SDR) seems to have found its potential buyers. This comes at an interesting time when the power sector itself is undergoing ‘stresse’.

Lenders of Jaiprakash Power Ventures have managed to get as many as 11 suitors for the beleaguered company, reported Business Standard on Wednesday (13 September). According to the report, Adani Power, JSW Energy and Resurgent, a joint venture of ICICI Ventures and Tata Power are among those who have put in expressions of interest.
A consortium of banks, including IDBI and SBI, had taken over the company last year. The lenders had acquired the stake under the strategic debt restructuring scheme in by converting Rs 3,058 crore worth of debt into equity, according to the company’s annual report for 2016-17. Initially, the lenders had formed a joint lenders’ forum (JLF) and formulated a corrective action plan (CAP) for the company in order to resolve its financial stress. Later, the JLF invoked the provisions of SDR on July last year, giving the lenders the right to divest their equity holding to new promoters.

As on 31 March, Jaiprakash Power had a debt of about Rs 22,414.94 crore. The company has an operational portfolio of around 2,200-megawatt power projects. The company also owns a stake in a 2,000 MW thermal plant and in an entity which owns and operates a 214-kilometre 400 KV transmission line, according to the information released by SBI Capital and EY, who were hired by the lenders for potential stake sale process.

As the power sector itself loom under low demand, the company has been piling up debt due to change in the tariff regulations and lack of Power Purchase Agreements (PPAs). CARE Ratings had downgraded the rating for JP Power's long-term loans from "B" to "D", a default grade indicating a precarious situation after the firm ran a net loss of Rs 294.5 crore on operating income of Rs 3,883.68 crore for the financial year 2016.

“Restricted operations of the Nigrie super thermal plant, higher costs at the Amelia coal mine and cheaper merchant power hurt the company. Lower demand depressed power generation at the Bina thermal plant, Jaiprakash Power said in a statement.

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