JSW-O2 Power: Buying is better

JSW Energy Ltd has announced the acquisition of O2 Power Pooling, a company engaged in renewable power, for an enterprise value (EV) of ₹12,468 crore.

- Manish Joshi

While the total consideration is ₹15,154 crore, the net working capital is ₹2,686 crore largely made up of cash, thus resulting in a lower net EV. Additionally, ₹14,000 crore capital expenditure will be required to reach total capacity of 4.7 gigawatts (GW), which means the total cost for the entire capacity works out to about ₹26,000 crore. Note that 4.7GW of capacity is split into 3GW of solar and 1.7GW of wind—building this capacity would have come at the same cost, that is approximately ₹26,000 crore, as setting up solar power plants that cost ₹4 crore per megawatt (MW), and ₹8 crore per MW for wind.