Eyeing 6-7K operational capacity in two-years: JSW Energy

Sanjay Sagar, Joint MD & CEO, JSW Energy said the power demand remains subdued and there has been no significant change in demand unless the restructuring package for discoms comes through.Talking to CNBC-TV18 about the business outlook going forward, he said the company is looking at various acquisitions and would be around 6000-7000 MW operational capacity in two years time.Currently the operational capacity of the company is of 3140 MW thermal and 1391 of hydro, said Sagar.He also does not expect the power discom issues to be resolved at least in the next six to eight months.JSW Energy Limited is a division of JSW Group in India. JSW Energy is in various areas of power: Generation, Transmission and Trading. Below is the verbatim transcript of Sanjay Sagar’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: Can you just tell us what kind of plant load factor (PLF’s) have you seen in the quarter gone by just to get a sense of what the quarter may throw up?A: As I told you we are heading into the announcement of our results on October 28th so I don’t think it would be appropriate for me to talk about the Q2 at this stage. Sonia: Can you just give us some qualitative statements then on what the power demand has looked like in the last couple of months?A: The power demand continues to be subdued. There has not been any significant change over the last five-six months, we continue to see to be beaten down. I don’t see the power demand picking up unless the restructuring package of the discoms that the government is pursuing very hard comes through and gets implemented. Latha: What are you hearing though from the discom or from the government circles? We were told that the cabinet note will be ready and placed before the cabinet by the month end. So, do you think second half could see some power purchase agreements (PPAs) at least being put on the notice?A: I have also heard exactly what you have heard that the cabinet note is ready and to be put up before the cabinet for its consideration. However, we really can’t expect magic to happen but if cabinet approves the package then certainly state starts shooting PPAs out. It will take some time for it to sort of have its impact on the ground. May be I would give an about anything between six to eight months after the package has been approved and put into place the impact will start coming after that. Latha: Through March, April and May we saw the IIP electricity numbers showing negative 1 percent rather dismal numbers. However, at least when they last came out in August it showed 5.6 percent. Is it that things are at least marginally improving on the demand front?A: I really don’t know if we can call that an improvement because the August data would have probably reflected the July numbers and in July the PLF had submitted an all time low of about 58.7 percent or something. So, they continue to be dismally low. Latha: There was a tariff order on Barmer, if you can translate it in terms of profit and loss impact or balance sheet impact? A: The tariff order for Barmer has been reserved by the regulator. It has closed hearings. Latha: You got some interim relief I thought? A: Interim relief has been in place for the last year and a half, so there has been no change on that. Sonia: What about on the Jalipa coal mines. Can you give us a status update on that as well? A: The Jalipa Coal mine will become operational. It will start its operation in February and by the end of calendar 2016 we should see actual coal production. Sonia: What is the total operational capacity currently? A: The operational capacity of the company today is 3,140 megawatts of thermal and 1,391 megawatts of hydro. Sonia: What is the growth that you are expecting in the next say one to two years? A: I have been maintaining, we are looking at various acquisitions. We could be anywhere near about 6,000-7,000 megawatts by the end of next couple of years. Latha: Are our margins improving at least? I mean imported coal prices as well as domestic coal should be at least better than what it was six months ago. A: We do not use any domestic coal as of now. You are absolutely right the international coal prices have also been under lot of pressure. However, I suppose the impact of this should get reflected over the next two quarters because we book our coal in advance. So, the impact there of should be visible on our results probably in couple of years. Latha: What is the excess capacity in the system? How many PPAs before the merchant cost rises? A: That is a very tricky question. We keep hearing various numbers ranging from say about 16,000 megawatts to about 32,000-33,000 megawatts. Latha: That is the overcapacity? A: Yes, that is the overcapacity as of now. That is the kind of power which has not tied up in to any kind of long-term or medium-term PPA.