Jan plant load factor 100%, likely to improve further: JSPL

Jindal Steel and Power Limited (JSPL) reported week numbers on Wednesday. Ravi Uppal, MD of the company sites adverse impact from the power business as one of the main reasons. "In the power business the net realisation in power went down by more than Rs 200 crore. The first factor was plant load factor (PLF)," said Uppal in an interview to CNBC-TV18.

However, Uppal feels that the January despatches have been good and hope to sustain current levels. "In the months to follow, we will be able to maintain high PLF and high dispatches. The plant availability has remained very good. It has been close to 100 percent, so it is only a matter of how much we can dispatch," added Uppal.
For the December quarter, JSPL's profit declined 14 percent year-on-year to Rs 870 crore on higher interest cost and lower sales in power segment. However, the sales of the company was up 10 percent to Rs 4802 crore, YoY. Below is the verbatim transcript of Ravi Uppal's interview on CNBC-TV18 Q: The power business result was a bit short of investor expectations both because your PLF was around 80 percent and merchant realisations have also come off. What is happening there and do you expect performance to be subdued in the next couple of quarters as well?
A: It is true that the power business had an adverse impact on the result. The result of JSPL as a whole was quite good and if you consider our peer groups we have done the best among all of them. The total turnover was up for the third quarter by 16 percent and the profit after tax (PAT) was up by 13 percent.
However, in the power business the net realisation in power went down by more than Rs 200 crore. The first factor was PLF. In the third quarter of last year, the PLF was close to 100 percent and now it plummeted to nearly 81 percent. This largely happened because of the poor dispatches. There were serious transmission constraints.
We did have the orders from different utilities to dispatch power but we simply couldn't because we did not get the transmission corridor. However, now these problems have been somewhat sorted out. The limitation on transmission came because of the consequence of the big grid collapse that happened in July last year so the authorities there went to the other extreme of limiting the transmission capacity.
We have spoken to them and told them that the rating should be restored to the original. They haven’t done that to the full extent but it is coming up now. The dispatches in the month of January have been quite good. I hope that in the months to follow we will be able to maintain high PLF and high dispatches. The plant availability has remained very good. It has been close to 100 percent, so it is only a matter of how much we can dispatch. Q: The biggest uncertainty or hangover over JSPL from an investor point of view has been the signing of the Utkal coal block. Do you have any visibility that you can share with investors on that front because that is a big trigger if it comes through but a delay on that front is keeping people on edge?
A: We are anxious to get the Utkal mines operational. All the formalities which are required to get the mine operational have been achieved, all clearances are in place. We are just waiting for the execution lease to get operational. We like to believe that it is around the corner, it might just be a matter of a few weeks before we get the lease in place and thereafter we will start our commercial operation of the mines.
Even the user plants which are going to use this coal, are ready to receive coal and get operational. So the things are very close to the finishing line, just a few weeks before we get going with it.

Q: What do you foresee in terms of where PLFs will be for the rest of the calendar year and how much recovery in realisations because the fear seems to be that PLFs will again revert to a much lower performance ratio?
A: PLF has improved, in the month of January we had it close to 100 percent and the demand is going to increase as we move towards summer. So the PLF will improve but as far as rates are concerned, I cannot make any conjecture on that. It depends on the demand and supply situation but in summer months the rates also improve. Let us hope that in Q4 that will have good news from the power side. Q: Steel volumes were quite strong but realisations were lower this time around. For steel what do you foresee both in terms of how much volume growth you can keep intact and whether you expect any improvement in realisations through the course of this year?
A: It is no secret that the steel market has been quite subdued and that is a global phenomenon. However, in India we have still done better than what it is globally including China and JSPL has done better than all the peers in terms of growth of steel business. Our total sales have gone up in Q3 by nearly 16 percent which nobody has been able to achieve. We are going to maintain that kind of buoyancy on the volumes.
In Q4, the dispatches increase because this is the last quarter of the year and everybody tries to order things and procure them, so we see an upsurge in demand. We have seen some movement in the market during the month of January and even until now.
As per prices are concerned, price is a result of demand and supply. In the early part of January, there was an upward trend on the prices but they seem to be fluctuating again at an average level which we have seen towards the end of January.
I have not seen any further movement in prices although we are looking for the demand to come up whereby we have the opportunity to raise prices still further. However, I will still keep my figures crossed as far as prices are concerned. We will try to improve our price realisation to the maximum possible extent.