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Renewable is the future, it will co-exist with thermal for some time: JSW Energy CEO

Venkatesh Ganesh Mumbai | Updated on June 04, 2019 Published on May 31, 2019

 

Prashant Jain, Joint MD & CEO, JSW Energy, part of the $13-billion Sajjan Jindal-led JSW Group, has seen an interesting couple of years. It diversified into EV, put a team together, lined up investments and then decided to pull the plug.

On the power front, the sector has been under stress, but the Supreme Court ruling on stressed assets offered some relief. Jain spoke to BusinessLine on a range of topics, including priorities for the new government, reasons for the group’s exit from the EV business, efficiency measures it is taking to reduce the debt and the road ahead in the backdrop of all this. Excerpts.

Post the Supreme Court’s decision to quash the RBI circular concerning resolution of stressed assets, is there a better visibility across all stakeholders in the power sector?

The macro picture is that the power sector is stressed and the reason is simple-- demand and supply. If you look at the 9th to 11th Five- Year Plans, whatever capacity we added was always lower. In the 12th Plan, as against a planned capacity of 88 GW, the addition was around 123 GW. Additional capacity, coupled with economic slowdown, energy efficiency measures and reduction in distribution losses came down from 27 per cent to 22 per cent during this period.

Also, the demand from the manufacturing sector was lower and coal mining re-allocation added to the stress. All this resulted in a reduced demand for power. However, there are reasons to cheer. The overcapacity created is starting to get absorbed. Merchant tariff prices are also going up. The power demand is growing by 6 per cent.

Also, new capacity addition is moderating. In 2016-17, it was 24 GW and now it is 12 GW. So, no new capex is taking place. For a country with a GDP at 7 per cent, power addition is 6 per cent.

Is the capacity addition restricted to certain segments like renewables ?

For solar, the gestation period is 18-24 months. In the renewables space, capacity is not getting added. This can be seen from the fact that against a target of 22 GW, only 8 GW got added in the 2019 fiscal. It is not happening across-the-board. So, you will see power outages.

You have decided to shelve your EV project. Why?

What we realised is that there are a few factors. Firstly, the policy shift by the Centre and incentives veered towards mass transit.

Also, we feel that EV uptake in India will be slower. The cost of a vehicle is prohibitively high and India is a home for low-cost cars. Eighty per cent of sales of Indian vehicles is below $10,000. Hence, we backed out and prefer to maintain capital cushion for growth opportunities in power and other related businesses.

You were not aggressive with your capex plans for acquisitions last year. Will this year be different?

I strongly believe that renewable is the future. That doesn’t mean that thermal has no future. What I mean is that the capacity added in renewables will be much faster. Both will co-exist for some time in India. Meanwhile, we see consolidation in the thermal sector and will look at inorganic growth. In solar and wind, it will be organic growth.

Is the price per unit in solar an issue?

The prices have moderated now. It is as low as ₹2.42 per unit. Now, the tariff is ₹2.80-₹2.90 and on the other side there is a decrease in panel prices. As soon as we have rationality in the sector, we will take a quick plunge. We have the capability and the balance sheet to do so.

Your net debt-to-equity ratio is one of the lowest in the industry (0.85 : 1). How did you achieve this ?

In the last two years, we have been looking to reduce debt. It was ₹16,000 crore and now it has come down to ₹10,000 crore. Also, our net-worth has gone up. We reduced our receivables from discoms.

Also, we increased our operating EBITDA by increasing our long-term PPA portfolio. Add to that, internal efficiencies which played a part despite wage increases. This allows us to repay our debts and interest costs. The latter will be in three digits.

Independent power producers have been affected by domestic coal shortfall. How have you managed?

We set up capacities based on both domestic and imported coal. In plants where we use imported coal, there too we have ensured that 50 per cent of the coal is domestic. However, there is not enough coal produced in India. The government should speed up coal-linkages in certain cases as there is a shortfall in domestic production.

Nevertheless, we have done PPA with our counterparties wherein the power sold based on imported coal is totally passed through (which means end-consumer pays for it). This year imported coal prices have fallen by almost 40 per cent.

You had plans of solar panel manufacturing. What’s the update?

The moment we started to look at panel manufacturing, there was a shift in the government policy in China. Also, China is slowing down on its renewable capacity addition. The Indian government too has put safeguards against Chinese imports.

For these reasons,we didn’t go ahead with it.

Published on May 31, 2019
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