Demand for power will stabilise to grow at 6% on a yearly basis after it fell to a six-month low in November, according to JSW Energy Ltd.’s Prashant Jain.
“If you look at the year as a whole, the first quarter saw demand contract 16% year-on-year. The second quarter was flat while the third quarter shows 5-6% growth so far,” Jain, joint managing director and chief executive officer at JSW Energy, told BloombergQuint’s Menaka Doshi in an interview.
The dip in November, he said, was largely because of low industrial demand in the festive months. “I’m quite optimistic about the power sector going forward.”
Any dip seen in demand, in turn, is being absorbed solely by the thermal power plants where the environment looks gloomy, he said, pointing out that JSW Energy is focusing on adding capacity only in the renewable energy segment. Moreover, coal prices have nearly doubled to $85 per tonne, Jain said.
The cost of imported coal is likely to rise even further to $100 per tonne but the company remains insulated, Jain said. “Whatever price at which we import coal, it will completely pass through for our long term PPA.”
Other companies such as Adani Power Ltd. and Tata Power Ltd. will face difficulties in maintaining profitability because they use imported coal to supply power to the already stressed distribution companies, he said.
Commodity prices, however, will not be sustainable at those heights and will also stabilise at some point, Jain said.
Here are the other key highlights of what Jain said on India’s power sector, JSW Energy’s strategy and key challenges:
Organic Growth Ahead
- JSW Energy’s growth ahead is likely to be organic because of two problems.
- First, assets available through insolvency resolution are thermal, which the company isn’t interested in. Second, the cost of power in renewable energy space is north of Rs 3-4 a unit, ruling out their acquisition.
Debt To Double
- The company decreased its debt to Rs 7,700 crore as of September this year, which will further fall to Rs 7,000.
- However, after that, it will increase by another Rs 7,000 crore over the span of the next five years as the company participates in new projects.
- In the next 24 months, JSW Energy will complete projects of close to 2000 MW entailing about Rs 11,000-12,000 crore capex.
- All new capacity will go towards long-term PPA.
- Will build projects at low cost, 50% cheaper than industry standards.
- JSW Energy builds power plants at Rs 3.5-4 crore per MW, while the industry average is Rs 8 crore per MW.
- Have reduced receivables even during the pandemic.
Shift From Thermal To Renewable