We reduced our debt by Rs 2,700 crore in FY21 to Rs 8,907 crore and improved our leverage substantially. Our net debt to equity is the lowest in the industry at 0.43 times compared to five times of the other industry players.
Reliance Industries’ gigafactories will be a game changer for power generation companies like JSW Energy, and will change the dynamics of the sector, given the cost and price competitiveness of solar panels produced, according to Prashant Jain, joint MD of JSW Energy. Jain tells Vikas Srivastava the company will source solar panels from RIL as and when they are available, though it is too early to talk about about partnerships for JSW Energy’s planned Rs 70,000-crore green energy push by 2030. Edited excerpts:
What was the reason for the strong operating margins in Q4FY21 even though the revenues were impacted?
You have to look at the overall long-term power purchase agreements (PPAs), which in our case was 86% of the total power portfolio. The PPAs provide us long-term visibility and keeps our Ebitda stable. We have the security of fixed cost and compensation in case the buyer refuses offtake of power. In January-March quarter of 2021, total generation dipped 8% year on year (y-o-y), but the operating profit stayed flat, because we got a compensation of Rs 100 crore from a buyer who did not purchase power last year. Also, our profit before tax was up by 6% y-o-y in Q4FY21 because our interest cost was lower. So, all these factors helped us to have a positive operating margin.
What is your debt position at present and how will it impact your Rs 70,000-crore expansion plans for renewable push?
We reduced our debt by Rs 2,700 crore in FY21 to Rs 8,907 crore and improved our leverage substantially. Our net debt to equity is the lowest in the industry at 0.43 times compared to five times of the other industry players. We also reduced our receivable by 38% y-o-y in FY21 to Rs 1,300 crore, which is the best in the industry. Our cash and cash equivalent is Rs 2,000 crore as of March 31, 2021.
The low leverage position will help us achieve a 20 GW renewable capacity expansion target by 2030 at a cost of Rs 70,000 crore. Given our strong balance sheet, we plan to fund our entire equity requirement from internal accruals without any dilution. The board has approved an addition of 2,500 MW capacity by June 2024, where 200 MW will be added between January-March of 2022 followed by 150 MW every month. This will help us reach 7GW renewable capacity, which will be 65% of the portfolio compared to 4.6 GW at present. In addition, we will participate in several bids and undertake projects to increase capacity to 10 GW by 2025. Further, we will add 2 GW every year to reach 20 GW by 2030. This will entail an investment of Rs 27,000 crore by 2025 with an equity contribution of 30% and a debt component of 70%
RIL is setting up four gigafactories in the green energy space. Would JSW Energy like to partner with RIL for its green energy push?
These manufacturing units will be a game-changer for a company like us. It will change the dynamics of the sector as the price of modules will become very competitive. We will source the panels for our projects from RIL as and when they are available. However, to talk any further on partnerships will be a matter of conjecture.
How do you see the demand and generation outlook in FY22, given the first three months were affected by the Covid-19 second wave?
In April, the demand was very robust and it saw a 35% y-o-y growth. However, in May and June it grew only 7% as the second wave had already hit the country. However, I believe FY22 will see a 4-5% y-o-y growth in power demand compared with a degrowth of 1.2% a year ago. The growth will be led by industrial and commercial demand which were badly impacted due to lockdowns.