JSW Energy has put on hold all discretionary capex: Prashant Jain, joint MD & CEO

By: |
August 7, 2020 5:20 AM

Privatisation of discoms and opening up of commercial coal mining are welcome steps. We will evaluate these opportunities to decide if it fits in our overall risk-return framework.

Majority of the incremental growth will stem from the renewable segment.

JSW Energy has put on hold all its discretionary capital expenditure due to Covid-19 related uncertainties and lower power demand. The company, however, plans to double its generation capacity to 10 GW over the medium term focusing primarily on renewables, Prashant Jain, joint MD & CEO, JSW Energy, told Vikas Srivastava during an interview. Going ahead, he said incremental growth will mostly stem from the renewable energy segment and a strong liquidity position will help the company navigate astutely through any adverse conditions. Edited excerpts:

What could be the reason for the drop in Ebitda by around 4% but an increase in operating margins to 44% in Q1FY21? How do you see the operating income and margins going ahead in short-to-medium term?

Our Q1FY21 consolidated actual Ebitda decreased by only around 4% year-on-year, despite a 23% y-o-y drop in revenues. But our Ebitda margins improved significantly in Q1FY21 to around 44% vis-à-vis around 35% in the corresponding quarter of the previous fiscal. This is partly attributable to the de-risked nature of our business with more than 80% of our capacity tied under long-term PPA under two-part tariff, wherein we receive fixed capacity charges based on our plant availability and fuel costs are fully pass through at actuals. Additionally, around 95% of our Ebitda is contributed by long-term power sales, which brings in resilience to Ebitda. Going further, the incremental upside in Ebitda will largely depend on the merchant prices.

What is the current cash flow situation and what would be the priority areas for investment in a turbulent period like the present?

At JSW Energy, we have a robust working capital management system which has enabled us to reduce our debtors efficiently. As in July end, our debtors were around 20% lower than the reported figures as on March 31, 2020, despite a turbulent macro-environment. This has boosted our liquidity position with ample cash and equivalents of over around `1,000 crore, which will enable us to navigate astutely through any adverse condition. Further, on the new investment, our incremental growth will majorly stem from the renewable energy segment in a calibrated manner.

What is your planned total capex for FY21 and where would it be spent?

Given the ongoing pandemic-induced uncertainties, we have put on hold all our discretionary capex and this will be revisited once the situation normalises. However, some routine annual capex on maintenance activities will be spent during the year. Apart from this, we are developing a 240 MW hydroelectric plant in Kutehr, Himachal Pradesh. We plan to begin full-fledged construction once we receive the approval of our PPA.

What is the status on privatisation of discoms and your plan for participation in commercial mining?

Privatisation of discoms and opening up of commercial coal mining are welcome steps. We will evaluate these opportunities to decide if it fits in our overall risk-return framework.

The chairman said they plan to double the generation capacity to 10 GW mostly through renewables. How do you plan to take this ahead?

At JSW Energy, we have set an ambitious target of becoming a 10 GW company over the medium term supported by our robust balance sheet. Majority of the incremental growth will stem from the renewable segment. However, I would not like to preempt the proportion that wind or solar will contribute to the total generation growth. It will depend on various opportunities and environment going ahead. For us the quality of growth is more important than just growth.

How do you see your revenue growth outlook going ahead?

During Q1FY21, our total consolidated revenue decreased by around 23% on a y-o-y basis primarily due to lower long-term and short-term sales, impacted by the subdued demand scenario attributable to Covid-19. However, our profitability was largely insulated as more than 80% of our capacity is tied under long-term PPA with two-part tariff…Going forward, revenues will depend on factors such as power demand growth, merchant tariffs etc.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Govt proposes allowing cos with not less than 300 workers to fire staff without its nod
2MTNL working on monetising certain assets in Mumbai
3Amazon, Samara Capital push Rs 275 cr into supermarket chain MORE’s parent as retail space heats up