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Reliance Power, the Anil Ambani-led independent power producer, has finally emerged winner in acquiring the three hydro power projects of Jaiprakash Power Ventures (JPVL) that broke the deal with Abu Dhabi Energy Company (TAQA) led consortium last week.

Although the companies have not announced the deal size, it is believed Reliance Power will pay huge premium on the assets valued at around INR 10,000 crore, and could be negative for the company in the short term. Reliance CleanGen (RCL), a 100 per cent subsidiary of Reliance Power, and JPVL signed an exclusive Memorandum of Understanding (MOU), for the 100 per cent acquisition by RCL of the entire hydroelectric power portfolio of JPVL on Sunday. Analysts believe while the deal is extremely positive for Jaypee Power and would help it reduce its overall debt of close to INR 30,000 crore, it is not equally good for Reliance Power that is highly leveraged and promoters may have to dilute huge stake to raise the required amount for the deal.

SP Tulsian, market expert on Reliance Group, feels even if the company goes for Reliance Communications-like qualified institutional placements (QIP), the promoters will have to dilute huge amo­unt of stake since the market capitalisation of Reliance Power is only INR 25,000 crore. “The deal, though, could be positive for Jaypee Group,” said Tulsian.

AK Prabhakar, independent market expert and advisor to Anand Rathi Securities, believes the company may once again raise Chinese funds for these projects as they have done for their Sasan and other thermal projects. However it is going to be negative around 4-5 per cent for the stock when it opens on Monday. The Jaiprakash Power shares may move up 7-8 per cent on Monday. JPVL's hydroelectric power portfolio has an aggregate capacity of nearly 1,800 MW, fully in operation, the largest in the private sector in India. The portfolio comprises of the three plants, with an asset life of over 50 years, each using run-of-the-river technology to convert natural water flow to electricity, eliminating the need for a large reservoir.

The power plants are Baspa Stage II of 300 mw, Karcham Wangtoo of 1091 mw, both in Himachal, and Vishnu Prayag of 400 mw in Uttarakhand. The power offtakers are Himachal Pradesh, Rajasthan, Uttar Pradesh, Haryana, Punjab and Uttarakhand.

The completion of the proposed transaction would make Reliance Power the largest provider of hydroelectric power in the private sector in India. In addition to the assets to be acquired under the proposed transaction, Reliance Power has hydroelectric power projects of more than 5,000 mw under development, of which 4,200 mw is located in Arunachal Pradesh, 700 mw in Himachal Pradesh and 400 mw in Uttarakhand.

SBI Capital Markets are acting as advisors for the proposed transaction. Earlier last week on July 24, Jaiprakash Power had announced cancellation of its $1.6 billion deal with Abu Dhabi Energy Company-led consortium as TAQA pulled out due to change in business strategy. Experts believed the consortium failed to get security clearance for the deal. The Reliance Power deal still has to be approved by CEA and other state authorities.

Source-On Request