JSW Energy says no decision on Monnet Power acquisition yet

JSW Energy has not yet taken a decision on whether it wants to acquire 74 percent stake in Monnet Power, Chief Executive Officer Sanjay Sagar has told CNBC-TV18.In an interview, Sagar said the company is still evaluating the company -- with which it signed a non-binding memorandum of understanding in July last year -- and added that a deal was unlikely to consummate this fiscal.The JSW Energy chief also discussed the company's business outlook going forward, given the weak demand and supply issues the industry faces, particularly in South India.The company has three coal-based power plants: Ratnagiri, Maharashtra (1,200 MW); Barmer, Rajasthan (1,080 MW); and Vijayanagar, Karnataka (860 MW) apart from two hydro projects it acquired last year.Below is the verbatim transcript of Sanjay Sagar's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: I wanted to ask you about the merchant sales that you do through your Ratnagiri and Vijayanagar plants. I understand that 10 gigawatts of capacity is likely to come up online in Southern India in the next 12-18 months and that could perhaps impact your merchant sale rates. Is that a concern for you? A: It is not an immediate concern for us. However, in the long run it is likely to be a concern and therefore we are now concentrating our efforts to try and tie-up our power into long-term contracts, especially in the southern region Ratnagiri is almost tied up to very great extent into long-term contracts. However, the southern power does remain tied up in short-term contracts and now we are concentrating on tying it up into longer term contract. Latha: What has been the generation and sale utilisation percentage? A: As of now our plant in Bellary in Karnataka is being utilised 100 percent. Latha: What were the plant load factor (PLFs) in the quarter gone by? A: They were in the range of 90 odd however; I will not be able to give you very specific numbers today because we have got our board meeting scheduled very shortly. I don’t think I am in a position to give you lot of numbers. Latha: I was only wondering if there is hesitation for off-take or whether the PLFs were even below than 80 percent, nothing of that kind in Ratnagiri or in the south? A: No, neither of the places, not in the quarter gone by. Sonia: The merchant sale rates that you generally see are around Rs 4 per unit, is that correct? A: They are in the range of about 4-4.5 in the southern region however, in the rest of the country they have soften considerably. They have come down to Rs 2.50 - 3 levels. Sonia: Do you expect more pressure? A: I expect them to remain in the same range. I don’t see any further pressure coming on these in the near future. I expect them to be range bound in this, because beyond a certain point it doesn’t remain viable to generate power. Latha: Can you just give us the exact breakup- it is Rs 2.50-3 in which regions and is it Rs 4 or 4.5 in the south? A: Well it is in the range of Rs 4-4.5 in the south and in the range of Rs 250-3 in the rest of the country. Latha: Is it likely that there can be further downward pressure in the south because more plants are coming up? A: Not in the immediate future because most of those plants which are coming up, which the capacities are tied-up in to long-term contracts, so it is not likely to impact the merchant market to a very great extent. However, with so much capacity getting added and demand not picking up at the same pace there is likely to be a certain amount of pressure but to a very great degree, not in the immediate future. Latha: So, it will average Rs 4 in the south you think in 2016? A: Well, I don’t want to get pin down to specific number. I would still like to remain in the range of Rs 4 to 4.50. Sonia: Can you give us an update on the deal that you signed with Monnet Ispat in the month of July? What is the latest on that? A: The status is still the same; we have not taken a final call on the deal. It was a non-binding Memorandum of Understanding (MoU) that we have signed with Monnet in July. We have not so far taken a final call on whether we are going ahead with the deal or not. Sonia: So, before the end of this fiscal there is no expectation of the deal closing? A: I don’t think so. Latha: When you took over the Baspa and Karcham plants you went for a debt restructuring there, right? A: Yes, we did. Latha: Now they have become 25 year loans? A: Yes, they have. Latha: With respect to Monnet also that would be the plan? A: That is something that we will decide after we decide whether we are taking over the plant or not. We are yet decide whether we are going ahead. Latha: What is your total debt now? A: Total debt is in the range of about Rs 15,000. Latha: Any other debt restructuring that you will have to do? A: At the moment we are not looking at any debt restructuring but I can’t give you a commitment on future. May be we do have a look at it later, but at the moment we are not looking at any debt restructuring. Sonia: Is there any reason why you may not go for the Monnet Ispat deal eventually? Has there any road block that has come up? A: No, there is no specific road block. When you analyse an asset there are various aspects that you consider. We are still not satisfied everything that we have seen. So, we are yet to take a final call on it. Latha: Is it more likely that you will go ahead with the deal? A: I can’t give you a commitment on that at this moment. Latha: What is the likely interest outgo that you will face? Is it likely that in the current year it will be much more than what around Rs 600 crore interest out go you saw last year? A: Well having added the debt of the Baspa and Karcham projects the interest out go is certainly likely to go up. I would not be able to give you an exact number on that at the moment. It should be in the range of about Rs 600 crore.