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JSW Energy Joint Managing Director & CEO Prashant Jain believes that the country’s power sector needs a three-pronged action plan: creation of a level playing field for public and private power generators, closure of old power plants and direct transfer of subsidy to consumers. Excerpts:
What were the milestones of the sector and JSW Energy in 2018?
It was an interesting year. We saw the overall power demand going up by around 7 per cent against 5 per cent in 2017.
Plenty of NPAs in the power sector have started coming for resolution and lenders have started taking certain actions. We have seen at least one resolution happening.
Many of these cases will get resolved in 2019.
Power prices have started going up after three years of depression. Though coal production also increased, because of faster growth in demand, there is a continuous shortage, and Coal India remains under pressure.
Talking about JSW, our long-term power purchase agreement (PPA) portfolio has gone up from 63 per cent to 80 per cent. Our plant load factor (PLF) has also improved because of the improvement in the demand.
Going ahead, I am very optimistic about the power sector because I believe demand will continue to grow close to 7 per cent in the next couple of years and because there is no more capacity addition taking place. For the JSW Energy, I see a number of growth opportunities, both organic and inorganic.
Will growth in power demand help all the stressed plants get back on track, or it is likely to benefit already functioning projects only?
Stressed power plants are stressed because of a number of issues. Some plants that have no PPA, no coal, or a wrong capital structure will not get resolved unless they are going through a resolution process. So the demand and supply situation is attractive for higher PLF of the plants that are already operating without any kind of stress.
The resolution process is altogether a separate issue, although in some cases they are interlinked.
JSW has actively explored inorganic growth opportunities by bidding for some of the stressed asserts. Have you found the resolution process under the IBA effective?
If you look at power plants under the National Company Law Tribunal (NCLT), so far there is no resolution because most of the assets are being resolved outside the NCLT.
We are yet to see more power assets and resolutions taking place, although I believe if assets go to the NCLT, there will be a faster resolution. In case of resolutions outside the NCLT, no assets could get resolved other than the Bara plant (owned by the Prayagraj Power Generation Company), so we can say it has not been very effective.
We remain interested in some of the assets.
Are many of those assets offered for resolution, under the NCLT or outside it, resolvable?
Each asset has its unique problems - most of the NPAs have improper capital structure or suffer from the inability of existing promoters to put the capital into the projects.
The new owner will have to take care of all these problems, including completion of the project, signing up PPAs and resolving issues related to supply of coal.
It is a complex subject but each of such assets can be resolved.
What policy change in 2019 would benefit the sector the most?
The sector requires three important things. First, there should be a level playing field between the private generators and public generators, be it for fuel or power. We should have a competitive bidding process and move away from preferential allocation (to the public sector). That is one major issue creating stress in the power sector.
Second, we should be retiring inefficient and old power plants so that new, efficient and environment-friendly facilities come up and there is better use of capacity.
Third, it is important to go for restructuring of the Discoms by direct transfer of subsidy to the bank occounts of consumers instead of subsidising power.
Without this, there will be no discipline in energy consumption in the country.
There are a number of other issues, but if these three core problems are addressed, 80-90 per cent of sectoral problems will get resolved and the sector will be shining back.
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