Covid-19 won't impact us, examining if we need pay cuts: JSW Energy CEO

The privatisation of distribution in Union Territories is a positive move by the government, says Prashant Jain, joint MD & CEO of JSW Energy

After the government's new policy for conventional energy, JSW Energy plans to explore opportunities in both commercial mining and power distribution businesses, Prashant Jain, joint managing director and chief executive officer, tells Amritha Pillay. The company, which reported a profit before tax of Rs 92.50 crore for the March quarter, a significant jump from Rs 18.41 crore a year ago, has, however, placed its capital expenditure and GMR acquisition on hold. Edited excerpts:

Why have you put GMR Kamalanga Energy acquisition on hold? Will you pursue other expansion plans drawn up earlier?

It is on hold because of the current uncertainty (Covid-19-induced). As far as Ind-Barath Energy is concerned, no new NCLT hearing has taken place in the past three months. We are continuing with plans for our Kutehr hydro project in Himachal Pradesh. In the past two months, however, no new construction activity has taken place due to the lockdown.

Would you be interested in commercial coal mining? And, would you prefer switching to domestic coal instead of imported?

For commercial mining, we need to examine which mines are coming up, in terms of location, the logistics costs, and other terms and conditions. Our power plants were technologically designed for imported coal. We have the permission to use 50 per cent domestic coal at our plants. If we see merit in it, we will definitely look to switch to domestic coal.

Would you also consider branching out to power distribution for Union Territories (UTs)?

The privatisation of power distribution in UTs is a positive move by the government. The distribution sector needs to open up to avoid payment issues. We will look at it and decide once details are known.

What is the reason that your profit for the March quarter appears not much impacted by Covid-19-related issues?

Close to 87 per cent of our sales are under long-term contracts and, hence, generation on deemed plant load factor basis has been quite good. Offtake under power purchase agreements was down 15 per cent, however, short-term contract was up 30 per cent. So, overall generation was down only by 3 per cent. Lower fuel costs and interest costs also helped.

June would be the first quarter where the full impact of Covid-19 will be seen on financials. Are you expecting power firms to report higher losses?

It will vary according to the company. JSW Energy will not be impacted by Covid-19.

How is the company optimising costs and go about its capital expenditure plans?

We have been cutting down our operations and maintenance costs for the past three years. We will look at a maintenance capex of Rs 75-100 crore for our power plants. Growth-related capex will be decided as and when the situation improves. We are examining if we need to take any salary cuts. If at all we do that, it will be for the top and middle management. Given we are under-leveraged, we do not need any money to be raised.

What is the status of receivables from state discoms?

For JSW Energy, the receivables are on a flat to reducing trend. Last quarter also saw a decline in receivables. After March, receivables have come down further by 15 per cent.

Has the power demand trend changed with some industrial units resuming operations?
 

The situation is improving. Total demand was up 1.9 per cent in the last quarter even though power demand was down 27 per cent in the last week of March. For April, power demand was down 23 per cent year-on-year. For May, so far, it is 19 per cent down. 

What is the outlook for power demand for the full year?

It is difficult to give an opinion at this point. It will depend on the economic activity. Probably we may not see any growth in for the entire year. The demand we are referring to is commercial demand and not industrial. Most of the industrial demand is met through captive sources.