Hydro benefit not likely for JSW Energy

JSW Energy had a net profit of Rs 217 cr for Q2, largely aided by the Rs 9,200 cr of hydropower acquisitions it had made roughly a year ago. Things could be changing, although with merchant rates remaining subdued and the clock ticking in terms of long term agreements for untied power capacity. Analysts say that the December quarter, will be vital for the company in terms of getting its Karnataka PPA – power purchase agreement in place and the fact that the hydro benefit may phase out in the latter half of the financial year.

The September quarter (Q2) net profit was 59% less than the Rs 534 cr in the same period a year ago. In its results statement to the BSE, JSW Energy said that the reduce in turnover was primarily due to lower generation and realization at the Vijaynagar and Ratnagiri units, partially offset by increased generation at its currently acquired hydro power plants in the state of Himachal Pradesh.

It acquired two hydro assets from Jaiprakash Power Ventures in the month of September 2015. The plant load factor had risen to 94% in Q2 for both, from 72% a year before. The hydro effect is most likely to exhaust in the December and March quarters.

The longer-than-expected wait for a long term PPA with Karnataka may soon need to be resolved. The management said that they had seen in the past 3-odd months certain significant changes not planned for or exceptional in nature. What they had observed was that wherever they had participated in bids, the processes had still continued and it had not got translated into firm orders.

In the call, the company added that of its total salable power generated, which was 78 per cent, was from long term arrangements. The management had refused to share any expectation on merchant rates, quoting lack of reasonable visibility.

The bid placed with Karnataka also expires in the month of November, if not extended, making the coming December quarter important. The company had been shortlisted to supply power from its Vijayanagar plant to the Karnataka utility under a PPA in the month of June.

The management itself doesn’t expect much to improve on the realizations in the next coming few quarters. It said recently that international coal prices had seen a sharp uptick in the recent months, and combined with low merchant prices and low utilization of plants, the margins were expected to remain under pressure.

Source  :  https://www.dynamiclevels.com/en/blog/hydro-benefit-not-likely-for-jsw-energy

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