India’s Jaypee Group Close to Selling Power Assets for $1 Billion

Indian infrastructure major Jaypee Group is close to selling a majority stake in two of its hydro-electric power plants in north India for about $1 billion, according to three people familiar with the matter. Jaypee is talking to a consortium led by Middle Eastern power producer Abu Dhabi National Energy Company PJSC or TAQA, which would buy 51% in the two plants and assume a part of Jaypee’s debt, according to the people. Suren Jain, managing director of Jaypee Power Ventures Ltd., a unit of Jaypee Group which owns the power plants in discussion, declined to comment. TAQA spokesman Allan Virtanen also declined to comment and said that any material announcement would be made through the Abu Dhabi stock exchange, where it is listed. One person familiar with the discussions said that the deal is close to completion. “The companies are targeting to sign the deal before the end of this financial year,” this person said. He added that other minority investors in the TAQA-led consortium include Canada’s Public Sector Pension Investment Board or PSP Investments, and IDFC Alternatives532659.BY -0.92%, an asset-management unit of Indian financing firm IDFC Ltd.. Spokesmen for PSP Investments and IDFC Alternatives did not immediately respond to request for comments. The people familiar with the discussions said that Jaypee will use the money from the deal to repay its massive debt. If it goes through, this would be the latest in a series of asset sales by Indian companies, to pare their debt. Jaypee Group, which has interests ranging from real estate, cement to building India’s first Formula One track, had around $10 billion of debt at the end of June, according to company filings on the Bombay Stock Exchange. The group had expanded aggressively into power production and construction during the boom in the Indian economy post 2006. However, the global financial downturn in 2008 and a slowdown in India’s economy has hurt its expansion plans. In addition, delays in regulatory approvals, and rising interest rates in India, have slowed infrastructure and power projects broadly. Meanwhile, Indian banks have lately shown a degree of angst about companies that have large debt burdens, and have been pressurizing them to repay their loans. In September, Jaypee Group sold its cement plant in the western state of Gujarat for about $600 million. The group has been looking to sell all three of its hydro-power projects for more than a year, one of the persons with direct knowledge of the matter said Tuesday. However, one of the plants, in the north Indian state of Uttarakhand was damaged in the floods last year, and is no longer being considered for sale, he added. The discussions with TAQA are currently centered around two plants in the northern Indian state of Himachal Pradesh. These plants produce 1300 megawatts of power. Jaypee also owns three coal-based power plants, which produce total 3800 megawatts of power. TAQA already owns a 100-megawattt hydro-electric project in Himachal Pradesh, and operates a 250 megawatt lignite-based power plant in the southern state of Tamil Nadu. Consulting firm Ernst & Young LLP is advising Jaypee on the deal. The deal was reported earlier by the Economic Times newspaper. http://blogs.wsj.com/moneybeat/2014/02/04/indias-jaypee-group-close-to-selling-power-assets-for-1-billion/