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FIs hesitant to warehouse Tractebel stake in Jindal Power

Abhijit S. Basu

MUMBAI, Sept. 18

FINANCIAL Institutions are likely to turn down the request from Jindals to pick up the Tractebel stake in Jindal Tractebel Power Company Ltd (JTPCL).

Top FI officials admitted that the institutions were not in favour of taking the Tractebel stake but said ``a final decision is yet to be taken on this issue''.

The Belgium-based Tractebel holds a 50 per cent stake in JTPCL with the Jindal group accounting for the rest. Tractebel had expressed its desire to pull out of JTPCL and asked the Jindals to scout for another partner.

The Jindal group had initiated talks with PowerGen but it was called off as the UK major was considering the sale of its worldwide assets including those in India, to part finance its $3.20 billion acquisition of a US-based energy company.

``Since Tractebel was insisting on an early completion of all formalities, it was thought necessary to involve the institutions till such time as an alternate partner is found,'' a senior Jindal official said.

FI officials said the institutions were not comfortable with the power company's functioning. ``The Group's steel subsidiary, Jindal Vijaynagar Steel Ltd (JVSL), owes the power company some Rs 37 crore and the issue has been pending for sometime. It is u nlikely that this issue will be resolved soon as it suits the promoters. Moreover, the power purchase agreements (with both JVSL and Karnataka Power Transmission) and the fuel supply agreement has not yet been signed. In such a scenario, it is difficult for us to risk our investment,'' a senior FI official said.

According to him, the institutions also have reservations on paying a premium to Tractebel for taking over their 50 per cent stake. The Belgian major wants to recover its original investment of $42 million which works out to about Rs 13 per share -- repr esenting a 30 per cent premium over the face value.

Another interesting aspect of the deal is that ICICI Ltd, which is the lead arranger for the group, is looking at the possibility of taking only 10 per cent (of the Tractebel investment) with IDBI being pressurised to pick up the balance 90 per cent.

FI officials said the Jindal Group wants the institutions to warehouse the Tractebel stake till such time as it finds another partner. ``The Group is in talks with PSEG and Larsen & Toubro Ltd but the due diligence is expected to take at least one year a nd there is no guarantee that the deal may finally take place. The institutions will then have no exit route left,'' an official said.

JTPCL runs a 260-MW plant at Bellary in Karnataka. The 2 X 130 MW plant was set up at an estimated cost of Rs 1,050 crore. The company supplies about 100 MW to the Karnataka Power Transmission Company Ltd and the rest goes to JVSL.