JSW Energy said its Canadian $422-million (Rs 1,900-crore) deal to acquire Canadian coal producer CIC Energy Corp has fallen through.
JSW Energy said the deal was subject to CIC obtaining regulatory approvals, completing confirmatory due diligence and CIC complying with certain conditions stipulated in the acquisition and supplementary agreements, which were not fulfilled.
Last year, the company agreed to take over CIC Energy Corp for Canadian $422 million for its coal assets in Africa.
On Tuesday, CIC said its board had approved the termination of the deal and that it was opening talks with other potential acquirers.
JSW TO BENEFIT
Ms Gracy Mittal, Research Analyst, Dolat Capital Market, said there was disagreement over the fuel supply agreement (FSA) and the power purchase agreement (PPA) of the power project.
CIC and GCL, an indirect unit of the Hong Kong based-Golden Concord Holding Group, had agreed to build a power station and develop a feeder mine at Mmamabula, but later fell out over the terms of the power purchase and coal-supply agreement. GCL Botswana alleged that CIC has a contractual obligation to agree to the terms of a PPA and FSA for the project. However, CIC stated that there was no such provision.
JSW's offer was contingent on no outstanding liabilities or obligations related to the shareholders' agreement. The disagreement over the commercial terms of the power project led to the deal's termination. It was further aggravated by non-issuance of a letter of comfort by the Botswana Government over the power project and refusal to renew CIC's licence for the Mmamabula South mine.
Ms Mittal said scrapping of the deal was positive for JSW Energy as its balance-sheet could not support the acquisition and mandated equity dilution as well as a worsening debt-equity ratio.
The total capex, including infrastructure development and power project, was estimated at $1 billion. The mine acquisition also did not ensure coal supply to the company for the next 7-10 years due to the absence of adequate infrastructure between the mine and port.
Coal supply from the mine was dependent on setting up of a railway line of over 1,500 km.