Jhajjar Power Ltd (JPL), a subsidiary of CLP India, has shown an improvement in financial and operational performance and has adequate liquidity available in the first half of this fiscal year. JPL’s plant availability factor (PAF) improved to 92.5 per cent in the first half of FY20, as against 70.25 per cent in the comparable period of FY19. This translates into a 30 per cent growth and comes after the power company reported reduced profits of ₹647 crore in FY19 (compared to profits of ₹1,506 crore in FY18).

The PAF is the percentage of time available to provide energy to the grid. Even though a plant is available, it does not automatically mean that it can generate all of its capacity power.

Capacity charges

JPL, an independent power producer is a wholly-owned unit of CLP India, and entered the Indian market in 2002 with investments of ₹14,500 crore spread across wind, solar, coal and gas assets, with total equity generation capacity of 3,000 MW. The assets include a 1,320 MW supercritical coal-fired power project at Jhajjar and a 655 MW gas-fired plant at Paguthan in Gujarat.

In 2018, Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ) came in as a strategic shareholder of CLP India. Holding company CLP Holdings directly or indirectly holds 60 per cent in CLP India and the remaining 40 per cent is held by CDPQ.

The Jhajjar project benefits from the division of the tariff into fixed capacity charges and energy charges, with a full cost pass-through in fuel cost at an agreed rate. Capacity charges are based on the PAF and the project recovers 100 per cent of capacity charges at a normal availability of 80 per cent.

“As the capacity charges are based on availability and not on load factor, JPL’s profile will not be affected as long as the plant can declare availability (of power) above 80 per cent for any fiscal year,” noted India Ratings analyst Ankur Agarwal. This makes the project immune to the variable cost of production.

Stable outlook

Additionally, the Fuel Supply Agreement (FSA) linkages to the plant is a positive, said Rupesh Sankhe, Vice-President, Elara Capital.

The ratings agency has given a “stable” rating to JPL. The availability of adequate liquidity at the project level, backed by the timely payment from the off-takers, the availability of full debt servicing reserve and favourable PPA structure are other factors for the ratings. JPL has ₹896.7 crore in cash, in its books.

Additionally, JPL’s ability to raise short-term funds through commercial papers, within the overall sanctioned working-capital limit of ₹1,250 crore sanctioned by lenders, coupled with the availability of non-utilised working capital, strengthens the liquidity profile.

The project’s improving cash flows and debt servicing ability following increased coal availability at site are other positives. “Cash-flow visibility can improve debt rating and associated interest costs,” said Sankhe. The availability of reserve for two full quarters of debt servicing in the form of bank guarantees is also a positive for the project, noted India Ratings.

The improved scheduling of power from the plant demonstrates the financial viability of the variable cost of power from JPL for the power procurers. The plant load factor (PLF) improved to 59.4 per cent in first half of 2020 compared to 54.10 per cent in first half of 2019.

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