‘JSW Energy shuns thermal power projects for better ESG rating’

We will not do any thermal projects going ahead. Renewables will be future of power business in the country because of technology development and policy initiative. The government has come up with RPO (Renewable Purchase Obligation). All distribution companies have to sign PPA (Power purchase agreement) separately for renewable based on their RPO. Currently, distribution companies have to buy 21 per cent of their demand compulsorily to meet their RPO. Most distribution companies have tied-up for thermal power.

Also read: JSW Energy Q3 net plunges 65%

For incremental supply, they have to buy only renewable. The government recently notified hydro power also under RPO. Hence, distribution companies have to buy hydro power from companies getting commissioned between 2019-30.

ESG compliance is getting more stricter. Banks, foreign bond and other investors are not ready to fund projects that are based on fossil fuel. Incrementally, it will become difficult to tie-up funds for projects based on fossil fuel. Moreover, there are substantial technology developments that support green projects. Wind energy turbine use to be of half-a-megawatt but now it can go up to 5 MW in India. Globally, offshore turbine are upto 13 MW each. Earlier the module for peak solar power generation use to be 200 watt but we have reached 540 watt and close to achieving 600-800 watt. Following this, the tariff in the quantitative bidding has fallen sharply. The cost of renweable power which use to be ₹15-16 a unit are now ₹2-3 a unit which is lower than the thermal power. All these are driven by ESG norms and government policies.

Our net debt is at about ₹6,700 crore and I believe no power company can survive on such high net debt to Ebitda ratio of 2.17. In fact, we are at the end of deleveraging cycle and entering into the process of increasing our capacity. With the completion of planned projects, our Ebitda will increase and net debt to Ebitda ratio will come down. The new capacity will be put up at 70:30 per cent debt-equity ratio. We are among the few power companies with debt to equity of 0.5 per cent and debt to Ebitda at two times besides generating ₹2,000 crore free cash every year.

Also read: We are interested in acquiring Ind-Barath: Prashant Jain of JSW Energy

We are focussing to use the balance sheet to grow in renewable portfolio to touch 10 GW in 3-5 years. Besides signing PPA with discoms, we will also be developing group captive green projects of 1100-1200 MW and building the book forward.

The plant load factor in hydro projects are always lower and range 45-50 per cent. Hydro is a seasonal business. Real water flow starts from March end. In the first half there is a generation of 70 per cent, third quarter it is about 35-40 per cent and fourth quarter it is less than 20 per cent. And for the entire year it ranges 50-55 per cent generation.

Our receivables are coming down steadily in last seven quarters and it is down 22 per cent last quarter because our cost of power is lower. Since our power cost is low, it is scheduled on priority in merit order dispatch and get paid on priority also. This has been magic win for us. Our receivable is about ₹1,693 crore as of last March-end.

The proposal is with the board of independent companies. The value of the deal will be finalised by valuers separately. However, the sale prices will be more than the investment of ₹100 crore made in the project. The deal will closed in this quarter.

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