Power plants with long-term PPA are of interest, says JSW Energy

The company's revenue, which came in at Rs 2,706 cr in Q4FY16, grew at 22% y-o-y

After cancelling the media briefing on Thursday, JSW Energy went ahead with its analyst interaction to discuss its March'16 quarter (Q4FY16) results. The company's revenue, which came in at Rs 2,706 crore in Q4FY16, grew at 22 per cent year-on-year. However factors such as high interest cost and taxes resulted in flat net profit growth (Rs 305 crore) in the March quarter. The management of JSW Energy has guided for a volume growth of 17-20 per cent in FY17 and this captures the full year utilisation of its recently acquired hydro power project from Jaiprakash Power Ventures.

Also, with the new rules requiring the electricity distribution companies to purchase short-term power through an e-platform will also impact JSW Energy's per unit realisation by Rs 0.15 to 0.20 in FY17. In FY16, JSW Energy sold 10,175 million units (MU) of merchant power (47 per cent of total units sold) and pocketed an overall realisation of Rs 4.12 per kilowatt (versus Rs 4.24 per kilowatt in FY15). However the company may reduce its exposure to short-term contracts and move towards medium and long term contracts going forward, though visibility on this front is a bit dull for now. Cost of fuel which went up by 13 per cent in Q4FY16 partly due to Rajasthan Electricity Regulatory Commission's verdict on its fuel cost and rupee depreciation, may continue to remain in this range. However, higher revenues from its recently acquired hydro plants should aid in profit growth.

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But with media report on JSW Energy likely to buy the 1,000 megawatts capacity Chhattisgarh power plant of Jindal Steel and Power, repeated questions on this deal were put forth by analysts. To this, Pramod Menon, Director Finance, JSW Energy replied that the company would continue to look at acquisitions which have synergetic values and insulate business risk. "Plants with long-term power purchase agreements will be of interest," he added. While he neither confirmed nor denied the transaction, he said the company would be comfortable in acquiring assets which would enable it work with a debt-equity ratio of 2.5 to 3 times. Presently, this ratio stands at 1.7 times for JSW Energy, and here room for additional leverage appears limited. Menon also indicated that the company is open to acquiring solar assets at reasonable valuations.