Co to sell stake in JPL, reduce standalone power assets: JSPL

Jindal Steel & Power (JSPL) is looking to sell some of its stake in Jindal Power and has been approached for the same, says Ravi Uppal, MD & CEO of JSPL. The company is also looking to transfer 920 megawatt (MW) from its standalone business to JPL. The company has been approached by various parties for JPL stake as well as for standalone power assets, Uppal says adding that power companies have shown interest in the company’s power assets. JSPL currently has 3400 MW power functioning at a 50 percent capacity, he says adding that parties from within and outside the country have expressed interest in power assets. Of the 50 percent power capacity, 30-32 percent is on power purchase agreement (PPA). Uppal says demand will improve especially with implementation of the government’s UDAY scheme. Speaking on steel demand, Uppal says there has been some upmove in demand and prices post the minimum import price (MIP) that was implemented by the government in February 2016. While the actual impact of MIP will be visible from first quarter of FY17, there has been a 4-7 percent increment in steel prices, he says.The group’s debt currently stands at Rs 46,000 crore of which Rs 27,000 crore is JSPL’s debt and Rs 6,500 crore is JPL’s and the rest Rs 12,500 crore is foreign subsidiary debt, he says adding that the aim is to bring down the debt to Rs 25,000 crore.The company is looking at divesting some of its non-core assets and also joint ventures (JVs) with foreign technology companies, he says. Some discussions are already at advanced stages and about 7-8 proposals for JVs are underway, he adds. Below is the verbatim transcript of Ravi Uppal's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18. Sonia: Have power companies approached you for your standalone power capacity or for Jindal Power Ltd (JPL)? A: 3,400 megawatt belongs to JPL, that is a separate company and 1,800 megawatt belongs to JSPL. So the set of people who have expressed interest are different, the advantage in JSPL is its more than 50-60 percent of its capacity is already catering to the requirements of steel plants. So you have the demand, which is already there. then they have a relatively smaller part which is left for exporting to any other third party customers. So, therefore both of them are different kind of assets catering to different clients. Latha: You are just clarifying to us that you have received interest for both the standalone power and for JPL, right? A: Both of them. People have expressed interest. JSPL's assets are considered to be amongst the best in this country - both the assets under the JPL as well as under the JSPL. People do know that they have benchmark assets, so they approach time-to-time expressing their interest to participate in the management of those assets.Latha: Can you give us some ballpark valuation for these power assets?A: I cannot give you any valuations now. This is what we are trying to discover. We are getting offers from players within and outside the country and we will soon be able to establish as to how they are being valued but as of this moment, I am not able to put any price tag on them.Sonia: Post the imposition of the minimum import price (MIP), what have been the price increases and also have you see any kind of demand improvement on the ground?A: The price of steel has started to move up but we must remember that the MIP was announced only on February 5. So it is just about a month since the MIP came into action.But we also have to remember that the importers have built a lot of stocks of the imported material. So it is about to take a little while before they get exhausted and the full impact of the domestic demand being available to domestic producers comes into effect. So, my personal view is that starting from Q1 of next financial year, I think the full positive impact of this will be realised by the Indian steel industry. Although, already now we do see some upward movement, which is indeed very encouraging, where demand has started to improve but the full impact will be realised only from Q1 of next year.Latha: Can you quantify the price increases then?A: It is very difficult to state across the board as to how much price has been there because depending which commodity we are talking, the price increase has been different but I would say that it could be anywhere between 4-5 percent and 6-7 percent increase which has happened in the last one month's time. I think there is a gradual movement and it also has to be matched by realisation or demand. So both of them are set to improve in the next quarter as I said earlier.Sonia: What is your current capacity utilisation now and how much of your power capacity has been tied up with power purchase agreements (PPAs)?A: It is about 50 percent of our capacity, which is in operation as of this moment and as you said earlier that our PPAs remain at about 30-32 percent of the total capacity. We are all set to sign more PPAs as soon as the state electricity boards (SEBs) come with their enquiries. Now the UDAY programme has kicked in which I think is a commendable initiative taken by the ministry of power. It should see in a couple of month's time more enquiries coming from the SEBs and more booking of capacity. Parallelly, the transmission capability will also enhance because sometimes you may have an enquiry. We have had cases where we booked the pporders for the power dispatch but then we found that the commensurate transmission capacity was not there but this is also something in the offing and I am sure that by the middle of this year, more transmission capacity will be added because government right now is very focused on expansion or the transmission capacity.Latha: Let me go back to your point about sale of the power unit, can you give us an idea how soon you maybe able to sell any of those power assets, some timeline?A: I cannot give you a timeline because end of the day, we have to make sure that the assets do get the value that they deserve. So it is difficult for me to give you a timeline right now.Latha: Let us come to your debt situation, that is in a troubled spot and we are constantly getting reports from the market that bankers are recalling loans, even mutual funds are recalling bonds, CRISIL has downgraded the rating on the bonds, your lenders are sitting on your head, asking for the money back?A: It is true that we are in discussion with a different banks and financial institutions on a bilateral basis with some of them we have done some or minor rescheduling but in a very amicable and with the mutual consensus, some rescheduling has been done.I just want you to remember that there is 30 year history that JPL and JSPL had never defaulted on any payments and we have absolutely flawless record of servicing and keeping to that spirit and tradition of JPL and JSPL, we have talked to some of our financers well in advance. We told them that there have been some mismatches and inflows and outflows, which were caused due to the industry distress not for we as a company alone and these are soon going to be overcome so keeping that in view, we have to do sort of rescheduling and they have global perspective, they are very empathetic and we have come to mutual agreement under which we will reschedule the servicing. There are no issues at all.Sonia: With respect to debt could you break it down for us in terms of standalone, the Jindal Power debt and the overall debt of the company?A: If you take the total loans including working capital, our JSPL is about Rs 27,000 crore and JPL is about Rs 6,500 crore and the balance Rs 12,000-12,500 crore is basically foreign assets. So the total is about Rs 45,000-46,000 crore and our companies are committed now to bring down the total volume of the loans that we are carrying as a company. Latha: Can you give us some idea of what non-core assets have and has anyone shown interest in any of those non-core assets?A: We are looking at this point of time divestment of certain select assets and also getting into joint venture with major foreign technology companies and producers within the steel domain and some of these discussions are in advanced stage and some of these joint ventures are basically designed to sort of give us more technology and more access to the market and these were the people who want to come into company as a minor shareholder. So these discussions are progressing very well and then as I mentioned earlier that some of the assets, which are non-core to us that we are looking at the selective divestment to those assets but the services out of those assets would remain uninterrupted. That is the normal that we are trying to adopt. So I think all total about seven-eight proposals are under discussion at this point of time and we are working on them with a certain sense of urgency. So, hopefully we will have something to tell in the weeks and months to come.Sonia: Can you give us some guidance in terms of bringing down your debt? You are still sitting on 45,000 crore of debt, what is the game plan as far as bringing it down?A: It is our keen desire that we progressively bring down this total debt from Rs 45,000-46,000 crore to about Rs 25,000 crore. So that is the kind of objective that we have. Historically JSPL, JPL has been a very low on the debt. We have to raise the debt to this level when we did massive expansion between 2011 and 2014 but this is only at one time. We believe that our natural debt level should be around Rs 25,000 crore and we will do everything possible to see we reach there as soon as possible.