June 21--MUMBAI -- The Rs.10,320 crore deal between Jaypee Group and a consortium led by Abu Dhabi National Energy Co. PJSC, or Taqa, on the sale of two hydropower plants owned by Jaypee in Himachal Pradesh, appears to have run into a snag.
The Himachal Pradesh state government will not allow the sale because of "some local issues", a top government official said.
"There were some deviations in the plant and certain conditions under the memorandum of understanding (MoU) have not been met. Hence, the state government has not given its approval for the deal," said S.K.B.S. Negi, principal secretary (power) to the Himachal Pradesh government.
The MoU is the in-principle agreement Jaypee Group signed with the Himachal Pradesh government to develop the two hydropower projects. Negi did not say what specific issues had been raised by the state government.
He said the state government had taken up the matter with the Central Electricity Authority (CEA), Negi added. Once the CEA, India's top power sector planning body, submits its findings, a final decision will be taken on the deal, he said. CEA officials said they were not aware of the development.
Negi said Jaypee officials had already met the state government and informed the administration that the group would not go ahead with the deal if the government had objections.
A consortium led by Taqa, which means energy in Arabic, agreed to buy the 1,000 megawatt (MW) Karcham Wangtoo and 300MW Baspa II hydroelectric power plants from Jaypee in March in a deal that would have enabled the group to repay some of its debt. The transaction was also seen as helping hasten consolidation in India's power sector, burdened by debt, delays in project approvals and fuel shortages.
On Wednesday, The Times of India's Shimla edition quoted the Himachal Pradesh minister for power, Sujan Singh Pathania, as saying that both projects would remain with the Jaypee group and it would not be allowed to sell them to Taqa.
A Jaypee spokesperson told Mint on Friday that "the deal is on". He did not respond to specific questions on concerns raised by the state government.
Manoj Gaur, executive chairman of the Jaypee Group, replied to a text message saying he had no comments to offer.
An investment banker involved in the transaction, requesting anonymity, said that there were no major issues that can derail the deal.
A global media spokesperson for Taqa declined to comment.
The other investors in the consortium included Canada's
Public Sector Pension Investment Board and IDFC Alternatives Ltd, the private equity arm of infrastructure finance company
Taqa already has a presence in Himachal Pradesh. It holds a majority stake in Nagarjuna Construction Co. Ltd's power plant in the state. It also operates a 250MW lignite-based power plant in the Neyveli region of Tamil Nadu and wants to scale it up to 500MW. The latest acquisitions would make Taqa the largest private operator of hydro-power plants in India, it had said in a statement when the deal with Jaypee group was announced.
After the sale, Jaypee would have been left with only one hydroelectric plant, which is in Vishnuprayag, Uttarakhand.
There may have been some concerns over the location of the assets, which could have prompted the state government to refer the deal to the CEA, said Sandeep Upadhyay, senior vice-president and head of the infrastructure solutions group, at
A deal envisaging the transfer of control over such assets to a foreign entity may have to undergo "further scrutiny to take care of security concerns if any", said Upadhyay.
The two plants are located on the banks of the river Satluj or its tributaries, which eventually flow into Pakistan. The Baspa project site is located on the river Baspa, a tributary of Satluj in Kinnaur district. The second project's reach is between Karcham and Wangtoo villages and is envisaged as a run-of-the-river development on the Satluj.
"As per the guidelines the regulator needs to endorse any change in the ownership of asset and hence the deal will have to be invariably ratified by the government," added Upadhyay.
The sale of the two hydro projects was part of the Jaypee group's overall strategy to reduce debt and the proceeds were to be used to pare the group's debt of Rs.60,000 crore. It plans to reduce its debt to Rs.35,000 crore by the end of this fiscal year, Gaur said in May.
Since September last year,