JSW Energy Expects Clarity On GMR Kamalanga Acquisition In 4-8 Weeks

JSW Energy Ltd. said it has paused the acquisition of GMR Kamalanga Energy Ltd. as a result of the uncertainty following the novel coronavirus outbreak.

“We aren’t sure how economic recovery is going to pan out,” Prashant Jain, the firm’s joint managing director and chief executive officer, told BloombergQuint in an interview. “We believe we will get clarity in the next 4-8 weeks.”

JSW Energy was slated to acquire Kamalanga power unit in Odisha from GMR Group at an enterprise value of Rs 5,321 crore. A share purchase agreement for the deal was signed in February. The acquisition would have increased JSW Energy’s installed power generation capacity to 5,609 MW.

“The power sector was already under stress and because of Covid-19, the health of distribution companies are getting deteriorated,” he said. We need to assess each and every situation before we take a final move.”

Although the power producer’s revenue declined by 6.8 percent over the previous year to Rs 1,793 crore in the quarter ended March, operating profit rose 21 percent to Rs 575 crore. Higher short-term sales, lower operating, maintenance and interest costs aided Ebitda and profit before taxes, Jain said.

“We have been deleveraging our balance sheet consistently because of which interest cost has been coming down,” Jain said. “We have also been reducing operating and maintenance cost, which has played very well.”

Jain also expects power demand to improve. “In the last week of March, demand fell by 27 percent which moderated to 23 percent in April and in 15 days of May, it has moderated to negative 19 percent.”

Jain said the reforms introduced in the power sector such as privatisation of discoms in union territories, amendments to Electricity Act, commercial coal mining and direct subsidies to beneficiaries are steps in the right direction. “Generators have been facing problems because of poor health of distribution companies and non-availability of coal,” Jain said. “Once these issues are sorted, power sector will attain its glory back, but the execution is key.”

On Thursday, JSW Energy shares fell 1.23 percent to Rs 40.20 apiece on the BSE whlle the benchmark Sensex gained 0.37 percent to end the day at 30,932.90 points.