The decision to cap power prices on the exchanges at Rs12/unit is unjustified when the coal auction price is 4-5 times of the notified price and the imported coal is $300/tonne, says Prashant Jain, joint managing director of JSW Energy, in an interview with Fe’s Vikas Srivastava. He said that the merchant volumes on exchanges for the industry as a whole have fallen 70% to 60 million units per day from 225 million units a day in March. Companies will be forced to shut operation in the absence of market driven prices if the fuel prices continue to remain high. Excerpts:
Even after adjusting for one-off reversal of tariff provisions, the net profit and Ebitda in Q4FY22 grew substantially over the year ago period. What contributed to this performance when the sector is facing several difficulties?
Other than the one-off reversal, profits were driven by better control on operations and maintenance. The power generation in Q4FY22 rose 15% year-on-year (YoY) to 4,137 million units led by higher long term sales; finance cost declined by 61% YoY to Rs 100 crore. Also, the pending receivables from discoms reduced to 59 days. In FY22, we received `220 crore from discoms. Overall dues pending from discoms has come down to `1,300 crore as of March 31, 2022.
What is your debt position and cost of debt at present?
Our average weighted cost of debt as of March 31, 2022 was 7.74% which is the lowest rate achieved by us. Although, our debt has gone up to Rs 6,963 crore in Q4FY22 from `6,000 crore a year ago, it was largely led by higher capital expenditure in the March quarter.
What is the planned FY23 capex and where is it being utilised?
We started the capex with Rs16,000 crore for 2,500 MW of renewable projects last year. Of this, Rs 9,600 crore is invested while the balance Rs 6,400 crore will be invested in FY23. We completed 225 MW capacity in April, another 1,200 MW will be completed this year. So, on an average, we will invest between Rs 8,000 crore to Rs 10,000 crore every year till we achieve our 20GW renewable capacity by 2030.
Why has merchant sales declined 34% YoY in Q4FY22 when the rates reached as high as Rs 18 on the exchanges?
The rates only started to increase at the end of March. So we had a very short window in Q4FY22. Prior to that, the rates were very low. After the cap was introduced in April, the merchant volumes on the exchanges for the industry as a whole have gone down by 70% from the March levels of 225 million units per day to 60 million units now. However, we have been running our plants at 100% utilisation, our fuel price has gone up to Rs 10 per unit. The prices on the exchange will have to be market driven, especially when the auctioned coal is sold at 4-5 times of the notified price and the imported coal is priced at $300 per tonne. Who will make the investments when there is no return on the capital employed.
What is the capacity available with JSW to sell on the exchanges after meeting the PPA requirement?
We have around 700 MW of balance capacity with us. We sell on exchanges as and when the rate is more than the cost of fuel for us. We imported all our coal at $300/tonne freight on board (FOB) in April and the price is still the same in the international market.
What’s the outlook for FY23?
The power demand has increased substantially but there has not been enough investments to cater to it. Generators are not paid on time by discoms. So, where will the investments come from? If we need a vibrant sector, then there should be enough return on capital invested. People who aggressively bid out for projects then cancel later to participate in next bids should be blacklisted to create a vibrant system.
