Jaiprakash plunges into darkness

Jaiprakash Power Ventures (JPVL) as expected plunged the moment the market opened and it is now down over 7% at Rs.12.65. Its 52-week low stands at Rs.12.05.

The stock’s tanking was very much expected as a big reaction to Reliance Power pulling out of the divestment deal was announced after market hours yesterday.  Both the companies issued a statement, saying that it was on account of differences in commercial terms of the deal that it had been called off by both.

Reliance Power stated that due to prevailing regulatory uncertainties and tariff issues which impact valuations, the companies had decided to terminate discussions pertaining to Reliance Power’s acquisition of JPVL’s hydro portfolio of 3 projects with an aggregate capacity of 1791 MW.

Though the companies did not spell out the exact reason, speculation is rife that it was on account of uncertainty over the capacity of Karcham Wangtoo project. A couple of days ago, CEA had issued a show cause notice, alleging violation of terms at Karcham Wangtoo – it had received an approval to build 1,000 MW capacity but JVPL went ahead and built 1200 MW.

This now once again puts JVPL in a jeopardy as it has been looking hard to sell assets to bring down its Rs,12,000 crore.  This news comes closely on the heels of another deal which got cancelled; that between UAE’s TAQA and  JVPL. TAQA was to buy its two hydroelectric power plants. TAQA said that the deal did not go through due to a change in the group's business strategy and priorities. The deal with ADAG was made after the collapse of this TAQA deal.