JSW Energy plans recast, to separate renewables business

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August 05, 2021 7:00 AM

The company’s low leverage position has enabled it to undertake a Rs 25,000 crore capacity expansion by 2025, which will be followed by another Rs 45,000 crore investments in the next five years to 2030.

In April-June quarter of 2021, the power generator reported a 6% y-o-y drop in net profit due to one-time charge of Rs 92 crore towards prepayment of loan.

With a Rs 70,0000-crore expansion plan in renewable energy under way, Sajjan Jindal-led JSW Energy has initiated a plan to separate its green and grey (thermal) businesses, in order to attract capital and strategic investors into the fast-growing renewables segment.

Prashant Jain, managing director of JSW Energy told FE that with the board’s in-principle approval to evaluate various restructuring options, the company would appoint advisors and valuers for the businesses soon.

“We will implement the separation at the right point of time. We expect clarity to emerge in the next 90-120 days after that we will approach the board again for final approval,” Jain said.

The plans could include listing of the green business and inviting a strategic partner, he added.

The independent power producer would, however, continue to hold on to its existing thermal power projects, even as it aims to increase its green portfolio to 85% of the total capacity by 2030. “The target is to become a 20GW company by 2030 with the entire new capacity coming from wind, solar and hydro segments,” Jain said.

On July 30, the company announced its intention to enter the green hydrogen space by partnering with Australia’s Fortescue Future Industries. The two companies would evaluate the scope of opportunities in the green hydrogen space across large industries and long-haul transportation space.

The company’s low leverage position has enabled it to undertake a Rs 25,000 crore capacity expansion by 2025, which will be followed by another Rs 45,000 crore investments in the next five years to 2030.

As of June 30, 2021 the company’s net debt to equity was 0.41 times and net debt to ebitda came lower at 2.09 times. JSW Energy’s cash and cash equivalent position as of June 30,2021 was Rs 1,648 crore. The net debt reduced to Rs 6,565 crore compared with Rs 12,202 crore a year ago.

In April-June quarter of 2021, the power generator reported a 6% y-o-y drop in net profit due to one-time charge of Rs 92 crore towards prepayment of loan. The drop was also “on account of higher-than-expected other expenses, which were up by 55% y-o-y, and higher repair and O&M costs,” analysts at Motilal Oswal said in a report. At consolidated level the operating profit was down 6% y-o-y to Rs 700 crore, which was 7% below our estimates, the Motilal Oswal report said.

JM Financial in its report said that delays in power purchase agreements with SECI, off-take in existing PPA at Ratnagiri, sharp fall in merchant rates or rise in coal prices would impact JSW Energy’s earnings adversely. Rise in working capital levels due to weak health of discoms is also seen as a key risk.

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