JSW Energy has embarked on a growth cycle with focus on renewable energy. In a conversation with BusinessLine , Prashant Jain, Joint Managing Director & CEO, JSW Energy, outlines the growth strategy going forward, power demand in the aftermath of Covid-19 and the company’s debt reduction plans.
How do you see power demand playing out in the aftermath of Covid-19?
We have come a long way. In the months of April, May and June, power demand witnessed a stark double-digit year-on-year de-growth. However, it moderated in July and August. In September, power demand grew by 4 per cent year-on-year (YoY), indicating a gradual recovery with easing of the lockdown and restrictions. The recovery continued in October, with a double digit year-on-year growth. Overall, we expect the power demand to recover well with the economy opening up. In the medium term, the power sector outlook is sanguine, as rapid urbanisation and stabilisation of various schemes undertaken by the Government such as ‘Power for All’ and ‘24x7 Power’ is expected to spur the power demand. With universal household electrification nearly complete in the country, latent power demand from rural India should also get unlocked.
Also read: JSW Energy net profit remains flat in September quarter
So, do you materially see the second half of this fiscal to be significantly better?
It is difficult to say so. There are sectors such as travel and hospitality which continue to be under stress. Overall, economic recovery is now contingent upon the pace of recovery from the pandemic. Even as recent numbers seem to indicate recovery reaching pre-Covid-19 levels, we continue to be cautiously optimistic.
In the June-ended quarter, you put a hold on the GMR Kamalanga Energy acquisition. Was it due to any differences in valuation?
We opted out of it due to strategic reasons. Over time, we felt that we need to push more towards renewable energy (RE) going forward, given the strategic shift of the sector towards RE, attributable to improving economics. So, we will add 5 GW in clean energy over the medium term.
Also read: JSW Energy calls off deal to acquire GMR’s Odisha plant
Currently, your dependence on conventional energy is high in comparison to renewables. How would this change going forward?
Currently, of our total 4.6 GW capacity, 70 per cent is thermal and the remaining is a mix of RE and hydro electric. We intend to reverse that mix in the medium to long term. As a first step, in September, JSW Solar (a subsidiary of JSW Energy) received Letter of Award for setting up a total blended wind capacity of 810 MW from Solar Energy Corporation of India (SECI). We are also working on additional opportunities to meet the Group’s requirements for Renewable Purchase obligations through RE projects. So, we have a fair amount of tailwind with regard to our RE push. Also, a Sustainability Committee of the Board of Directors has been constituted to review progress of our sustainability initiatives. This Committee will consist of two independent directors and one executive director.
For more than a year, JSW Energy has wanted to acquire Ind-Barath. Will you continue to be interested in the acquisition considering that there is no clear visibility on the acquisition timeline?
We are interested in acquiring Ind-Barath and our resolution plan is awaiting approval from the NCLT bench. Initially, we had estimated that approvals will come through in time. However, there are multiple litigations underway. Moreover, with the emergence of Covid-19, timelines have become uncertain.
The government has taken steps such as capital infusion in the power sector. How have these steps helped?
It is a step in the right direction. Further, the relaxation provided to Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) for extending loans to discoms, above the limits of working capital cap of 25 per cent of the previous year’s revenues under UDAY, will help. Overall, these consolidated measures will help to significantly improve discom’s liquidity, and augurs well for the sector.
How are your debt reduction plans faring?
We have one of the strongest balance sheets in the power sector, which we have built over the years through proactive de-leveraging and prudent capital allocation. This leaves ample headroom to pursue attractive growth opportunities. During the quarter, we reduced our net debt by ₹822 crore, leading to a net debt-to-equity of 0.59x and net debt-to-EBITDA of 2.44x. Going forward, we have ambitious RE plans, which will pause the deleveraging cycle. Nevertheless, the ample headroom we have created in our balance sheet will ensure very robust leverage ratio and gearing.
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