UPDATE 1-India's Reliance to buy Jaiprakash's hydropower business
* Reliance to buy 3 hydropower plants
* MoU follows collapse of Jaiprakash-Abu Dhabi deal
* Jaiprakash to pay down debt (Recasts, adds Reliance comment, estimated value, context)
NEW DELHI, July 28 (Reuters) - Reliance Power Ltd will buy Jaiprakash Power Ventures Ltd's entire hydropower business, the companies said on Monday, in a deal that would make billionaire Anil Ambani's group the largest private hydropower provider in India.
Reliance CleanGen Ltd, which with Reliance Power is part of Ambani's Reliance Group, has signed an exclusive memorandum of understanding with Jaiprakash to buy three power plants.
Reliance's bid for the business follows the collapse last week of a plan by Jaiprakash and parent Jaiprakash Associates Ltd to sell two of the three plants for $1.6 billion to an Abu Dhabi-led consortium.
The companies did not disclose the terms of the deal but local media estimated the hydropower portfolio's value at around 120 billion rupees ($2 billion). The plants have a total capacity of nearly 1,800 megawatts.
For Reliance, whose business empire includes technology, financial services and media assets, the plants would add to about 5,000 megawatts of hydropower capacity it is already developing, the company said in a statement.
Jaiprakash, which like many Indian power and infrastructure companies is trying to strengthen its balance sheet and revive profitability, said it would use the proceeds to pay down debt.
Shares of Jaiprakash Power were 3.7 percent higher by 0535 GMT, compared with a slight decline in the benchmark index . Shares of Reliance were up 2.5 percent. (1 US dollar = 60.0950 Indian rupee) (Reporting by Tommy Wilkes; Editing by Christopher Cushing)