Abu Dhabi firm pulls out of JP Power deal

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In a major setback to the debt reduction plan of Jaiprakash Power Ventures — a consortium led by Abu Dhabi Energy Company (TAQA) that planned to buy close to $1.6 billion worth of two hydroelectric plants in Himachal Pradesh and their associated debt — has pulled out due to change in ‘business strategy’.

Jaiprakash Power said in a filing to the Bombay Stock Exchange that TAQA has informed that it will be withdrawing from the acquisition transactions.

Manoj Gaur, executive chairman of Jaypee Group, told reporters that it is unfortunate that TAQA has decided to undo its agreement with Jaiprakash Power Ventures to buy 1,000 MW Karcham Wangtoo and 300-MW Baspa II projects. However, “The development would not impact its commitment to reduce debt to Rs 45,000 crore by March next year,” Gaur added. The debt at group level stands close to Rs 60,000 crore.

As per the agreement, TAQA is liable to pay penalty for severing ties. It is estimated that the company will have to pay around Rs 500 crore in penalty to JP Power.

However, the amount could not be verified independently by the company.

Rajiv Lall, managing director of IDFC, that owned around 10 per cent stake in the consortium led by TAQA, said there is no clarity on why TAQA took the decision, though they have said there has been a change in priorities.

"I would also like to quell any rumour that it has anything to do with JP Power seeking higher valuations for the projects with improved market conditions," Lall said.

An official from the Mumbai-based consultancy that advised TAQA on the projects said on conditions of anonymity that TAQA could have pulled out of JP Power investments since JP Power had to meet lots of regulatory conditions and had to get permission from the CEA to check the operator’s ability to run hydro plants above 1000 mw capacity, which was taking lots of time. JP Power could also get better valuations now for the projects as the situations have improved substantially.

Allen Virtanen, media head of TAQA, could not be reached by this newspaper on his mobile despite several attempts.

The consortium let by TAQA that owned 51 per cent comprised of Canada’s largest institutional investors with 39 per cent stake and IDFC Alternatives’ India Infrastructure Fund II with 10 per cent stake. The equity invested by the consortium in the acquisition of the two hydroelectric plants would have amounted to around Rs 3,820 crore or $616 million, of which 51 per cent would have been from TAQA. The consortium was also to acquire the asset's non-recourse project debt that would have taken the total deal size to $1.6 billion.

The agreement in March followed the signing of the UAE-India bilateral investment promotion and protection agreement in December 2013. A commitment was made by the UAE to invest $2 billion in India’s infrastructure sector at the first UAE-India high level joint task force on investments meeting held in Abu Dhabi in February 2013.

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