JSPL to focus on debt reduction

Commissions 2nd unit of Chgattisgarh power expansion; 2 more to follow by Oct

After investing Rs 12,500 crore this year, the Naveen Jindal-promoted Jindal Steel & Powerd plans to focus on debt reduction in 2014-15, along with an increase in earnings before interest, tax and amortisation (Ebitda).

The company's subsidiary, Jindal Power Ltd (JPL), has announced commissioning of its second 600 Mw unit at the Tamnar power plant in Chhattisgarh. It plans to reach 5,100 Mw capacity by October, even after de-allocation of three coal blocks. Ravi Uppal, managing director and chief executive officer of JSPL, told Business Standard: "We are aiming for an orbital jump and targeting a turnover in excess of Rs 30,000 crore next year. As we enter 2014-15, we will harvest investment made across sectors."

The group debt is around Rs 35,000 crore and the plan is for a three-fold strategy-restructuring debt, partially offloading equity in some projects and not investing any capital in the coming year, Uppal told BS.

The 600 Mw unit commissioned was part of the 4x600 Mw expansion project there. Total capacity of JPL is now 2,200 MW. The first unit of 600 Mw was commissioned on March 14. The third unit of 600 Mw is complete and ready for synchronisation, and the fourth unit of 600 Mw should be commissioned by October. On completion of the expansion, JPL will have a total capacity of 3,400 Mw in Tamnar. "We intend to become a significant thermal power player in India over the next two years. We have a vision of having installed capacity of 10,000 Mw by the year 2020, with a unique approach of amalgamating diverse forms of power -- thermal, hydro, solar and wind energy," said Uppal.

JPL has tied up 450 Mw from the first unit under a power purchase agreement (PPA) with the Tamil Nadu Electricity Board. Another 1000 Mw has been tied up under a short-term (less than one year) and medium-term (between one to three years) power agreement. With merchant power rates down to historic lows of less than Rs 3 a unit, the company is looking at the more secured PPA supply arrangement.

"Power rates at the exchange are erratic. We want to supply power under long-term agreements. States are expected to come out with more tenders once the case-I bidding documents are finalised," said Uppal. Between JSPL and JPL, there would be around 4000 Mw available for sale after meeting around 1,100 Mw requirement within the group.

Power producers who are commissioning generation capacity are facing a paucity of long-term PPAs, with state distribution companies finding themselves comfortably placed in power tie-ups. Uppal said there was an artificial demand suppression and among various issues needing to be resolved was the transmission constraint, particularly in the southern region. "By 2015, a lot of these constraints will be resolved because transmission links between Maharashtra and Karnataka would come up."

JPL is also working on creating hydel capacity; 3,000 mw in Arunachal Pradesh would be commissioned by 2012-22. In its overall planning, the group has not taken into account the capacity impacted by the recent de-allocation of coal blocks. The Ramachandi coal block in Odisha will impact its coal to liquid project. Uppal said, "The government move to de-allocate the block was not fair, since the state government did not sign a memorandum of understanding with us and the prospecting licence was not issued." In the case of the Gare Palma IV/6 block, the high court here had stayed the de-allocation, after the company petitioned that it had got the environment clearance within the February 6 deadline but the letter reached an inter-ministerial group after four days. Besides these two, the company is under the scanner of the Central Bureau of Investigation for alleged irregularities in the allocation of the Amarkonda Murugadangal block.