Dear Shareholders At JSW Energy sustainable value creation is the cornerstone of ourbusiness strategy. Despite near term challenges we continue to strive towards progresswith a strong Balance Sheet industry-leading best practices robust growth appetite and acommitment to create value for the nation and all our stakeholders.
India's long-term energy appetite is enormous but a large proportion of the demand islatent. The Government's continued focus on infrastructure creation manufacturing andrural development is expected to lead to an accelerated momentum in the investment cycleand energy demand. The impending GST rollout is also likely to boost economic growth overthe medium term as it improves efficiency of goods movement between states as well asstrengthens tax compliance and governance. This is likely to boost GDP growth rate to 8%or above consequently driving power demand.
Considering the macro picture India's power sector has a huge opportunity to grow inthe future. However at present it is beleaguered by multiple challenges. Sluggishindustrial demand unsustainable capacities lack of long-term PPAs and poor financialhealth of DISCOMs are adversely impacting the power sector. The Government has takenmultiple policy initiatives to strengthen the power sector including path-breakingmeasures like 24/7 power for all by 2019 increasing domestic coal availability aproposal to auction coal linkages under SHAKTI and the Ujwal DISCOM Assurance Yojana(UDAY) scheme to improve financial health of the DISCOMs. These measures are expected toprovide Electricity for all at a fair and just price' which is absolutely necessaryas we strive to sustain our position as one of the leading economies of the world.
In the coming years the emerging power demand will have to be addressed with clean andefficient technologies to meet global commitments to reduce emissions. We are now seeing alot of focus on solar power with auction-based tariff bids reaching all-time lows.Although a part of the reduction can be attributed to decline in equipment costs it alsoraises questions on the long-term viability of projects at such low tariffs. TheGovernment has set ambitious targets for setting up renewable capacities in India; and theviability of projects will be a crucial factor to achieve the long-term goal of energysecurity for India. In this context the recent draft proposal of Government to includehydropower as renewable energy and to stipulate a mandatory hydropower obligation (similarto renewable purchase obligation) is a welcome step.
As one of the leading industry players in the domestic sector we maintained ourrelentless focus on cost control and operational excellence during the year. During thepast year we continued to move towards a leaner cost structure reduced our debt levelsensured prudent capital allocation and maintained efficient plant operations. While theseefforts are likely to continue into the future we would continue to evaluate relevantopportunities for growth both organic and inorganic.
During FY 2016-17 we saw a continuation of the trend of poor power demand translatinginto weak merchant off-take and lower tariffs. This got compounded due to an increasingtrend in the price of imported coal thereby impacting our standalone business. Howeverat a consolidated level our subsidiaries continued to function as strong pillars ofsupport with their portfolio of long-term PPAs and necessary fuel security therebyinsulating your Company to a large extent from the difficult business environment.
During FY 2016-17 your Company delivered a total turnover of Rs. 8480 crore on aconsolidated basis achieving a net generation of about 21.6 billion Units. Of this ourhydro plants in Himachal Pradesh which were acquired in September 2015 operated for thefull year for the first time in FY 2016-17 contributing about 5.7 billion Units to thenet generation.
Creating Long-term Value
We are working towards building a sustainable energy business that can withstand allchallenges present and future. Hence it is important that we continue to be on thelookout for opportunities to invest wisely and build an enviable portfolio of powerassets. Given the stress in the power sector we are anticipating consolidation in thedomestic space which will offer us good prospects for investing for the future.
We believe our teams have the capability and the commitment to take us to the nextlevel of growth and sustainability. We have steadily enhanced our investments in providingour people need-based training and handholding to build an army of future leaders. Ourtransformational DNA is best reflected in the way our people respond to challenges learnfrom them and move forward to greater glories.
Before I conclude it is worthwhile to mention that we will continue to work towardsour mission to empower communities and help them achieve their aspirations.
Besides our interventions in conserving the environment and reducing the carbonfootprint continue to be a priority for us.
On behalf of the Board and the entire leadership team I thank all our stakeholders fortheir guidance and support in helping us build a value-focused and energised enterprise.
Chairman and Managing Director