In a key stressed asset deal update in the power sector, private power major JSW Energy Limited has secured the letter of intent (LoI) for its resolution plan submitted for KSK Mahanadi Power Company Limited (KMPCL) under the corporate insolvency resolution process of the Insolvency and Bankruptcy Code, 2016. This paves the way for JSW Energy to acquire the 3,600 MW thermal power plant in Chhattisgarh from KMPCL.
Sharad Mahendra, Joint Managing Director and Chief Executive Officer of JSW Energy, stated in a press release, “This strategic move positions us to address the increasing energy needs of our nation through a diversified energy mix, integrating both conventional and renewable sources. Strategically located near a coal block, the plant boasts power purchase agreement tie-ups and efficient operations, ensuring a reliable power supply. As we move forward, we will continue to explore new opportunities and strive to remain at the forefront of the
energy sector.”
Deal details
The LoI follows approval by the Committee of Creditors, with the transaction’s closure subject to the required regulatory clearances from the National Company Law Tribunal (NCLT) and the Competition Commission of India (CCI). KMPCL was admitted into the Corporate Insolvency Resolution Process in 2019. Due to legal issues, KMPCL’s debt resolution process had faced delays since entering NCLT proceedings. In 2018, the KSK Mahanadi project was among the 34 plants deemed as stressed by the power ministry.
KPMCL operates a 1,800 MW (3×600 MW) coal-based power plant in Akaltara in Chhattisgarh, with over 95 per cent tied up in long- and medium-term power purchase agreements with the states of Andhra Pradesh, Uttar Pradesh, Tamil Nadu and Chhattisgarh. The project is strategically located close to coal mines
in Chhattisgarh.
An additional 1,800 MW (3×600 MW) is under construction. Of the capacity under construction, one unit (600 MW) is 40 per cent complete. The balance of plant, including transmission lines for evacuation of power, is in place for the remaining 1,200 MW. The plant has firm arrangements for water and coal transportation for all 3,600 MW
of capacity.
With the addition of KPMCL’s assets, JSW Energy’s locked-in thermal capacity will rise to 7.5 GW, and its total locked-in generation capacity will reach 28.2 GW.
Other contenders reportedly in the fray were Adani Power and NTPC Limited. Reportedly, JSW’s Rs 159.85 billion offer to financial creditors surpassed that of the other bidders.
The KMPCL deal is set to be favourable to state-run lenders REC Limited and PFC Limited as well. According to CLSA, both companies have exposure to KMPCL, with REC’s exposure at Rs 27.27 billion and PFC’s at Rs 34.28 billion, accounting for about 0.5 per cent and 0.7 per cent of their loan books respectively.
Outlook
The Chhattisgarh thermal plant is expected to be a good asset for JSW Energy’s portfolio. JSW Energy began commercial operations in 2000, with the commissioning of its first 2×130 MW thermal power plants at Vijayanagar, Karnataka. Since then, JSW Energy has steadily grown its power generation capacity from 260 MW to 7,864 MW, comprising 3,508 MW of thermal, 2,290 MW of wind, 1,391 MW of hydro power and 675 MW of solar energy.
JSW is currently constructing projects totalling 8.3 GW as part of its vision to achieve 20 GW of capacity by 2030. Recently, JSW Energy began operations of the second unit (350 MW) of the Utkal Thermal Power Plant in Odisha. Within two years of the acquisition, JSW Energy has restored and made both units (700 MW total capacity) fully operational.
In December 2024, JSW Neo Energy Limited, a wholly owned subsidiary of JSW Energy Limited, announced the acquisition of O2 Power’s 4.7 GW renewable energy platform. O2 Power is a renewable energy platform, jointly established by EQT Infrastructure and Temasek, with a capacity of 4,696 MW. The transaction valued the platform at an enterprise valuation of approximately Rs 124.68 billion. The transaction entailed the acquisition of O2 Power Midco Holdings Pte Ltd and O2 Energy SG Pte Ltd, and is subject to CCI approval and other customary approvals standard to a transaction of this size.
Conclusion
With India experiencing economic growth, the demand for energy is slated to rise. According to the Ministry of Power, India will need to add 80 GW of thermal capacity to cater to the growing power demand. There are already several power plants that have been constructed but are not operational due to insolvency issues. Hence, the revival of stressed assets is a positive for the sector as a whole. Stressed assets that already have the necessary permits and land in place can be resolved faster and brought back online.