CDM registration to boost PAT by Rs 150cr: JP Power

In an interview to CNBC-TV18, Suren Jain, the managing director of Jaiprakash Power Venture spoke about the latest happenings in his company and sector. Below is an edited transcript of his interview. Watch the accompanying video for more.

Below is an edited transcript of the interview. Watch the accompanying video for more. Q: Why this hurry for offer for sale (OFS). It’s not the best of prices. You didn’t want to wait?
A: We are currently not in compliance of the 75% listing norm so that is something to be done and the size is not a very large size. We thought that let us get done with the event. That’s the call which the promoter took and that is how they decided to come out with this offer for sale. Q: You have reduced the size of your OFS. Now you are planning to issue only 2.9 crore shares versus earlier. You had indicated that perhaps you would do 5 crore. What is the reason for that? Is it because of lower demand when you have spoken to a couple of people and what would promoter stake come down to post this?
A: There has been some confusion. The 2.9 crore is what are mandatorily required to bring it down to 75% and that is what the stock exchanges allow to be done through the offer for sale route. Probably, there was some confusion due to which the 5 crore notice got issued. We can do only 2.9 crore shares through this route and that is what is being done. There is no question of any demand not being there etc. Q: Your Karcham-Wangtoo hydro power facility has been registered by the United Nations Framework Convention on Climate Change (UNFCCC). What benefit does it entail you?
A: That is good news which we want to share. In fact two major events as far as Jaiprakash Power Ventures Limited is concerned have taken place yesterday; first is the UNFCCC registering the Karcham-Wangtoo project for the clean development mechanism (CDM) benefits.
This entails that Karcham-Wangtoo as a project which is also the largest hydroelectric project in the country to commission in the 11th five year plan will be eligible to get almost 3.5 million CERs annually and even at the current prevailing prices of these CERs in the international market – this means that there will be a direct addition of more than Rs 150 crore to the bottomline of Jaiprakash Power Ventures Limited.
The project has been registered with retrospective effect from October 15, 2011 which means that all the power generation which the project has been doing since October 15, 2011 would be eligible for these benefits. It has been registered up to 2012. I am also happy to share that our first unit of 2x250 megawatt Bina Thermal Power plant has been synchronized as of late last evening which is another milestone JP Power Ventures has achieved just before the quarter ends. Q: Could you just give us an update on the current debt on your books because your interest cost has been going up quite a bit. Last quarter it went up by about 140%?
A: That is largely on account of the fact that the Karcham-Wangtoo project which is a 1,000 megawatt project got commissioned last year and all the debt as far as the power projects are concerned are funded on a 70:30 debt equity ratio which is as per the government of India guidelines.
The entire debt in the power projects is self funding because the tariff realizes the part of the debt servicing also, the interest and the loan repayment is actually recovered from the tariff which is going to the consumers every year. So it is not that big a concern as far as Jaiprakash Power is concerned. Q: Are you in danger of any of the coal mines allotted to you getting deallocated because of your inability to develop it? Do you have permission to use your Nigrie mines’ coal for your Bina project?
A: No, none of our mines are in any danger of being taken away because of non-development. We are in very advanced stages of development as far as the first Nigrie mine is concerned. We have all the clearances from the ministry of environment and forest (MoEF) and this Stage I of the Forest clearance. We are just awaiting the final Stage II Forest clearance which we expect to come in very shortly and we are ready to mine immediately thereafter.
As far as your second question is concerned, it is a bit premature. We would first want to begin mining on that block and see what kind of extraction we are able to do and whether it is sufficient, which of course we believe is sufficient to use for the Nigrie project. There is surplus since both the projects are in the same state. I am sure there is a fair chance that coal can be used for Bina as well.