JSPL to invest additional Rs 1,500-2,000 crore for operationalizing Monnet Power assets

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Jindal Steel & Power (JSPL) will spend another Rs 1,500 - 2,000 crore as capital expenditure for the newly acquired assets of Monnet Power, which is expected to be fully operational in the coming 1-1.5 years. Lenders are believed to have undertaken a haircut of nearly 90-95 percent on the asset, according to sources familiar with the situation.

Earlier in the day, Moneycontrol reported that JSPL has acquired Monnet Power’s power plant for Rs 410 crore.

The power plant, which still would provide less than the company’s steel plant requirement of nearly 1800 MW per annum, is expected to result into cost savings of nearly Rs 300 crore just in terms of coal usage, the sources added.

Further, the plant would have to apply for environmental clearance which would take another four to six months and since it has no Power Purchase Agreement (PPA), any incremental power may be sold on exchanges, they added.

A company spokesperson could not be contacted. This story will be updated if there is a comment from them.

Earlier History With Power Business

It remains to be noted that it was in September 2021 that JSPL approved the deal to sell stake in its arm Jindal Power (JPL) for Rs 7,400 crore to its promoter-owned firm Worldone.

The decision to revise the offer was arrived after taking into consideration the investor feedback received by the company after the initial offer in May, which drew flak from a section of investors who cited low valuation of the deal and related-party nature of the transaction as contentious issues.

Also, the company had then cited the divestment of JPL in-line with JSPL’s strategic objective to focus on its Indian steel business and significantly reduce its carbon footprint by almost half as part of its broader ESG objectives.

According to Ritesh Shah, an analyst at Investec Securities, the company’s latest move to acquire Monnet’s 1,050-MW power plant is perplexing and opportunistic in nature.

At the assumption of Rs 2,000 crore of incremental capex alongside Rs 410 crore would translate into Enterprise Value/ Megawatt at Rs 22 million – which is at par with sale of 3400 MW of JPL assets, added Shah.

History With Monnet Group: It’s All In the Family

Back in 2018, Sajjan Jindal’s JSW Energy was the sole bidder for Monnet Power as the Adani Group had backed out. The company had earlier made an offer outside the IBC process but lenders weren’t keen to take a steep haircut. Also, the litigation from BHEL kept the plant stuck for several years.

JSPL Chairman Naveen Jindal is the brother in-law to Monnet group’s promoter Sandeep Jajodia. While Sajjan Jindal-led JSW Steel acquired Monnet Ispat and Energy, the power business has been taken over by his brother Naveen.