JSW Energy is planning to raise Rs 4,000 crore to Rs 5,000 crore in several tranches through a qualified institutional placement or QIP programme, according to reports.
Report said that the money will help fund acquisitions after the company completes the purchase of three hydro power plants.
Earlier, the board approved a fresh fund-raising plan of up to Rs 5,000 crore to meet growth opportunities, capital expenditure requirements and general corporate purposes.
Ideal Energy Projects Ltd has approached a group of six lenders led by state-owned Canara Bank Ltd to recast Rs. 1,300 crore worth of loans on the corporate debt restructuring (CDR) platform after its business was crimped by weak demand for power amid slower economic growth.
The proposal by Ideal Energy, a company promoted by the family of IRB Infrastructure Developers Ltd chairman Virendra Mhaiskar, has been admitted by the CDR cell, a forum of banks, and will come up for discussion on 24 December, a senior banker familiar with the development said.
“It should go through as there are very few banks in the consortium,” the banker said on condition of anonymity. Typically, if too many banks are involved, it takes time to reach a consensus on loan restructuring proposals.
The power sector contributes about 9% of the loans restructured through the CDR mechanism. Banks typically offer a payment holiday to a financially stressed company, stretch the period in which the loan has to be repaid, cut the cost of borrowing and sometimes even take a “haircut” by reducing the amount of debt the borrower has to pay back.
A CDR is approved if at least 75% of the creditors by value of the loan and 60% by number back the proposal.
Typically, 70-80% of the power generated by private power generators is sold under long-term contracts to state-government owned distribution utilities and the remaining to consumers either directly or through power exchanges.
“Hardly any state government-owned power distribution company (discom) has come out with bids inviting tenders from private power generators for supply of power and due to economic slowdown, there are no takers for merchant power,” said Jayant Mhaiskar, chairman of Ideal Energy.
Merchant power is the capacity of a power plant that is not tied up under long-term contracts with the discoms and is sold directly through bilateral contracts with large industrial or commercial consumers or through power exchanges. Some power plants are also facing problem of inadequate or no coal supply.
Mhaiskar confirmed that the company had approached banks for loan restructuring.
“We recently had a meeting with state government officials and told them their claim of state being power-surplus is not correct; many parts of the state are still facing regular load shedding and they must come out with bids to procure additional power,” he said.
India’s banking system has been weighed down by an increase in restructured loans as slowing economic growth, which slumped to a decade’s low of 5% in the year ended 31 March, and high interest rates make it difficult for many corporate borrowers to repay loans. As of the end of September, Indian banks had recast about Rs.2.7 trillion worth of loans under the CDR.
Ideal Energy is not the only power company which is in trouble. Weak demand has affected nearly 2,250 MW of power capacity in Maharashtra and many plants are not producing any electricity. “An investment of nearly Rs.12,000 crore has got locked up,” said a senior official from Maharashtra government’s energy department who did not want to be identified.
The companies whose projects are stranded include JSW Energy Ltd, CESC Ltd, KSK Energy Ventures Ltd and Gupta Energy Ltd.
While CESC’s spokesman declined to comment for the story, an email sent to JSW Energy’s public relations agency remained unanswered. Mails sent to KSK Energy and Gupta Energy also remained unanswered.
According to estimates by the Association of Power Producers (APP), a lobby group of private power generators, nearly 10,000 MW of power capacity at the national level has been stranded. Plants with a capacity to generate nearly 17,000 MW are operating at less than 60% of installed capacity because of inadequate fuel supply.
“If we want to end woes of power sector, we need to carry out reforms in distribution urgently,” said APP director general Ashok Kumar Khurana.
Kameswara Rao, executive director and leader of the energy, utility and mining practice at audit and consultancy firm PricewaterhouseCoopers, said there had been a dramatic increase in the number of coal-based thermal power projects that had been stranded for lack of fuel.
“A variety of reasons have hit the sector simultaneously —utilities are slow to bid or sign new power purchase agreements while many new projects got commissioned,” he said.
Power utilities such as JSW Energy and Tata Power are known to be evaluating GMR’s Emco power plant in Maharashtra for a possible buyout.
In 2009, GMR had bought the 600-Mw power plant from Emco, while the plant was being constructed. Now, the plant is operational and GMR is known to be expecting a premium on the purchase.
Responding to questionnaires on the development, GMR said it didn’t comment on speculation. “We maintain we are evaluating various options to create shareholder value,” Tata Power said in a response.
Earlier, JSW Energy had been talking about purchasing power projects and had actively looked at the assets of Lanco Infratech. “As a policy, we don’t comment on market speculations and rumours,” JSW Energy said in response to the questionnaire.
Some of the interested parties insist they won’t pay a heavy premium for the project. “It is a good asset and has coal supply tied up, but some of the power under power purchase agreements (PPA) don’t have a very attractive rate. So, if a premium is paid, there isn’t much money to be made,” said one of the bidders evaluating the project.
Apart from Indian players, international utilities such as Malaysian giant Genting and Singapore’s Sembcorp, which already have interests in India, are known to be eyeing the project.
“The sale of power projects have started progressing now,” said an analyst.
The Emco power project has already signed fuel supply agreements with South Eastern Coalfields, a subsidiary of Coal India. It also has all its power tied up in long-term agreements. The project is selling 200 Mw of power to Maharashtra State Electricity Distribution Company at Rs 2.9 a unit. However, power purchase agreements for the remaining power have a much higher rate. It has a 15-year agreement to sell 200 Mw to Dadra Nagar Haveli at Rs 4.6 a unit, as well as a seven-year agreement with Tamil Nadu Electricity Board to sell power at Rs 4.9 a unit.
While the first unit of the project went on stream in March this year, the second went on stream in August. Emco Energy is the GMR group’s first coal-based power plant to commence commercial generation. It has as much as 2,136 Mw of operational capacity. The company is also setting up additional capacity of 5,038 Mw.
Public sector power producer NTPC and private companies such as JSW, JSPL, Adani, Sterlite, GMR and CLP have submitted initial bids for 4,000 MW imported coal-based UMPP at Cheyyur in Tamil Nadu.
RFQ initial bids (request for qualification or RFQ) will be accepted till 11.00 a.m. today for the Rs 25,000 crore mega power project.
Earlier in this week, nine power developers have submitted their RFQ for the 4,000-MW ultra mega power project (UMPP) at Bhedabahal in Odisha.
The companies bidding for Odisha projects are Jindal Steel and Power Ltd (JSPL), Tata Power, NTPC, Adani Power, JSW, Sterlite Inventure, CLP India, Larsen & Toubro and NHPC.
The bids placed for both the the multi-billion dollar power projects would be scrutinised and those who meet the parameters would be asked to submit the request for proposal (RFP) or the offer for tariff.
Power developers generating electricity at the cheapest rate would emerge the winner. The project is likely to be awarded by the end of the current fiscal.
While the Odisha project will be based on domestic coal, the Tamil Nadu project would be fired from imported fuel.
The Government believes that it is offering investment-friendly parameters for these projects and claims to have cleared the major regulatory hurdles required for the setting up of mega power projects.
In August, the revised standard bidding documents were given the go-ahead by an Empowered Group of Ministers.
“The fuel charge is no longer a bid parameter. That takes away most of the variable risks of the project. Moreover, land, water and environment clearances have already been acquired for the project,” said a PFC official, the nodal body holding the auction.
At present, India has awarded four ultra mega power projects — one to Tata Power and three to Reliance Power. So far, only Tata Power’s project at Mundra in Gujarat is fully operational.
Nine companies including Tata Power and Adani Power have submitted preliminary bids for the 4,000 MW Odisha ultra mega power project.
"Nine participants -- NTPC, Tata Power, NHPC, Adani Power, JSW Energy, Jindal Steel and Power, Sterlite Infraventures, CLP India and Larsen and Toubro have submitted initial bids for the Odisha UMPP," said a source.
Power Finance Corporation, the nodal agency for UMPPs, invited preliminary bids in September.
Tata Group, Jindal Steel and Power Ltd (JSPL), and Monnet Ispat & Energy are among the 11 companies that will have to give up captive coal blocks.
Tata Group and JSPL were given mines to develop coal-to-liquid (CTL) projects, while nine companies, including Monnet Ispat & Energy, were awarded blocks to feed steel and power projects. (In a CTL project, liquid fuels such as methanol, petrol and diesel are produced from coal.)
A decision to this effect was taken on Monday by an Inter-Ministerial Group headed by Additional Secretary to the Coal Ministry.
The recommendations will be sent to Coal Minister Sriprakash Jaiswal for a final decision, a senior official told.
The committee that undertook a review of 30 blocks found progress in mines awarded to NTPC, SAIL and GVK Power, the official added.
In 2009, the North of Arkhapal Srirampur block in Odisha with nearly 1,500 million tonnes of estimates reserves was awarded to Strategic Energy Technology Systems Pvt. Ltd. (SETSPL), a joint venture between the Tata Group and South Africa’s Sasaol. Ramchandi Promotional block with similar coal reserves was awarded to JSPL. But neither of the companies has developed the block nor made progress in setting up the CTL plant.
Lower power offtake by state distribution companies and depreciation of the rupee led to a 36% year-on-year fall in profit for JSW Energy in the September quarter.
The company on Monday reported a net profit of Rs 162 crore for the quarter. A healthy monsoon resulted in weak demand for power during the quarter. As a result, JSW Energy's plant load factor (PLF), or capacity utilisation , for the quarter dropped to 69.3% from 82% in the year-ago period.
In addition, the depreciation in rupee led to high fuel costs for the company. However, correction in international coal prices partially offset the foreign exchange loss. Overall, the company reported an exceptional loss of Rs 168 crore in the quarter to September because of depreciation in the rupee.
A positive for the investors is that the foreign exchange losses are unlikely to continue in future. During the quarter, the company completely hedged its foreign exchange exposure. While this may lead to higher operating costs, it would reduce earnings volatility in the coming quarters. Over the past few quarters, the company has been shifting its revenue mix towards long-term contracts.
As of September, the company sold 60% of its output through long-term contracts compared with 48% in the previous year.
The company intends to sell up to 80% of its power through long-term power purchase agreements . This augurs well for the company as merchant or shortterm power tariffs have been under pressure due to lower off take. State distribution companies, or discoms, have become disciplined in buying power post their restructuring.
In addition, the integration of southern grid may reduce merchant rates in south India, the company's key supply region. At present, the company has three operational power plants with a combined capacity of 3,140 MW.
In addition, it has started tendering construction for its 240 MW hydropower project. A healthy debt-to-equity ratio of 1.4 gives the company opportunity to expand its capacity through organic route or acquire distressed projects in the near future. Another development to watch out for in the coming quarters is the final tariff for its Rajasthan power plant. At present, the company sells its power at Rs 3.74 per unit.
A higher price may increase investor sentiment in the stock. At the current price, the stock has been trading at a price-to-book value of 1.2, which is lower than the three-year historic average of 1.7. International coal prices and merchant tariff rates would be the key factors to watch out for the stock movement in the near term.
Adani Group, in line with Tata Steel, JSW and JSPL, is planning to participate in the auction of the coal assets of Stemcor India which are valued at around USD 800 Million.
Adani Group, having primary interests in coal, power and port sectors, has already evinced interests to buy Stemcor India assets with Stemcor management in London, said a source close to the development.
Adanis are all set to participate in the auction, slated for the middle of next month.
As said by the company officials, Stemcor India's assets is lucrative for the Adani Group mainly for two reasons. First, it would help the company to foray into the iron ore sector. Secondly, Stemcor India's trading business fits with Adani's existing business domain.
However, arranging funds could be a big issue for the company as it is already saddled with debt and thus, funds may not come easy for the company for carrying out the acquisition, industry sources said.
Meanwhile, with Adani Group in the list, the number of interested parties for Stemcor India's assets now goes beyond a dozen including Essar Steel, Vedanta Group, Adhunik Metaliks and Vale.
More literature on this...
http://www.moneycontrol.com/news/business/adani-grouprace-to-buy-stemcor-india-assets_931402.html
JSW Energy has posted a net profit of Rs. 214.3 Crore in the quarter ended June 2013 which in corresponding period last year was Rs. 3.41 Crore.
Some other financials as released by the company are:
Company's views on the current power sector scenario are:
Currently the company is having the installed generation capacity of more than 3,140 MW. Further it has received all requisite environmental approvals and land acquisition is progressing satisfactorily for the 240 MW hydro power project at Kutehr, Himachal Pradesh.
Shares of the company, on Friday, ended at Rs. 44 on the BSE, down 0.90 per cent from the previous close.
Additional Reading...
JSW Energy, after putting on hold all new power projects due to policy and regulatory uncertainties, seems to be quite serious about increasing the portfolio by the way of acquisition of distressed power projects.
As announced by the company some days ago, JSW Energy has put on hold all the new power projects.
However, according the company, the current issues being faced by the power sector there are several distressed assets are available for sale and it seems that the company is highly interested in buying them due to low valuation to increase the power projects portfolio.
According to industry experts, this strategy would help the company in building the capacity at a cost lower than that of setting up news projects as developers may offer projects at a discount.
The company has seen a few proposals from Independent Power Producers (IPPs) and is keen acquiring the projects having fuel linkage and power purchase agreement in place to reduce the project related risks.
Additional Reading...
It seems that JSW Energy has put on hold its expansion project excluding the hydropower project due to the current regulatory issues being faced by the infrastructure projects in India such as power projects.
As per the company's announcement during the 19th Annual General Meeting of the company,
"Pending clarity on policy and regulatory issues, your company decided to consolidate our operations and has put most of its expansion projects, with the exception of the Kutehr hydro project, on hold.
Your company's focus remains on strengthening the balance sheet and keeping ourselves ready for growth opportunities. Further, as the regulatory scenario eases and an opportunity to participate in competitive bids opens up, we plan to grow organically while reducing our exposure to merchant capacities.
We believe as the sector matures and consolidates, there will be inorganic growth opportunities for evaluation with a strategic fit to your company,"
The Mumbai based, JSW Energy, has increased its operational capacity to 3,1450 MW in the March quarter after it started generation at four uits of its lignite based power plants at Barmer in Rajasthan.
However, currently JSW Energy seems to has no plans to review new projects which are put on hold due to recent policy hurdles. The only project it plans to go ahead with is the 240 mw-hydro power project in Kutehr, Himachal Pradesh.
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Additional Reading...
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Jindal Power’s Rs. 13,140 Crorer expnasion project in Raigarh district of Chhattisgarh received an in-principle clearances from the MoEF. This will pave the way for engineering and construction work to resume at the plant site.
The clearance is only for the first two units of 600 MW each under the expansion project. The total capacity of expansion project is 2,400 MW having 4 units of 600 MW each at Tamnar Thermal Power Project in Gharghoda tehsil of Raigarh district.
According to MoEF website "Environmental clearance shall be applicable for 2x600-MW only. However, at a later stage, when firm coal linkage for the third and fourth unit of 600 MW are also available, the project proponent may request the ministry for inclusion of 2x600-MW, which the ministry may consider appropriately on merit.”
The preliminary clearance had been withdrawn by MoEF after some allegations that Jindal Power had not followed the Terms of Reference (TOR) stipulated by the government.
Among the conditions stipulated by the ministry for the grant of final environmental clearance, the company has been asked to secure certain permissions from the Coal Ministry, as some of the plant area falls in coal-bearing area.
In addition, the Environment Ministry has directed the company to finalise a vision document outlining its plans for the site within six months.
The Environment Ministry clearance also makes it mandatory for the company to establish a three-tier green belt around the plant, as well as undertake specific schemes for the welfare of tribals affected by the project.
The company will have to earmark Rs 53.60 crore as a one -time investment on corporate social responsibility activities and recurring expenditure on CSR initiatives shall not be "less than Rs 10.7 crore per annum till the operation of the plant", as per the ministry's clearance.
"The proposed project is to entail an investment of Rs 13,410 crore, of which over Rs 10,000 crore debt has been tied up," the company said after getting the Environment Ministry's nod.
