JSW Energy to convert part of Jaiprakash Power Ventures' loan into equity

More than three years after JSW Energy extended a loan to debt laden Jaiprakash Power Ventures (JP Power), the company has decided to convert part of the outstanding debt exposure into equity and write-off the remainder.

JP Power availed this loan as an advance payment for the proposed sale of its power unit to JSW Energy in 2016. The deal, however, was later called off. On Thursday, JSW Energy informed the exchanges it had entered into an agreement to re-structure the outstanding principal amount that JP Power owes.

JSW Energy in 2016, entered into an agreement with JP Power to buy its Bina power plant in Madhya Pradesh. In due course, JSW Energy also agreed to extend a loan of about Rs 1,000 crore to the company as part of the deal. The sale agreement was later called off, while the debt continued to sit on JP Power’s books. JP Power's current outstanding loan from JSW Energy is Rs 751.77 crore.

As part of the restructuring plan, JSW Energy on Thursday said, "An amount of Rs 351.77 crore will be converted into equity shares of JP Power at par value of Rs 10 each." The BSE statement added, "Another Rs 280 crore would be written off and Rs 120 crore to continue as debt to be paid by JP Power to the company, quarterly on priority basis, out of the available cash flows after JP Power has paid 10% of the re-structured sustainable debt to its secured lenders.”

JSW Energy, in its BSE statement, said the company had already made a provision for Rs 574.19 crore in the Q4FY18, towards this loan. The statement further said, “JP Power and JSW Energy have agreed to waive their respective rights to receive any payments from each other and unconditionally release each other from all liabilities in to transfer of Karcham and Baspa hydro asset.” JSW Energy acquired the two hydro assets from JP Power through a share purchase agreement in November 2014. JSW Energy said this waiver would result in reversal of an amount of Rs 177.48 crore of liabilities payable to JP Power as part of the hydro power assets deal.

This is not the sole instance where JSW Energy extended a loan as part of an acquisition agreement. A similar loan was extended to Jindal Steel and Power for the purchase of its Chattisgarh power plant in 2016. That deal too, was later called off.