19 June 2019: JSW Energy, the power generation arm of the $13 billion Sajjan Jindal group, is scouting for stressed power plants to boost its thermal generation capacity. But the company will only consider pithead plants for acquisition, that is plants located near coal mines with assured coal supplies, a senior company executive said in an interview.
“We’re focusing on growth in our power portfolio,” Prashant Jain, joint managing director and chief executive, JSW Energy, said. “I see renewable and hydroelectric power as the future, and here we will grow organically. In thermal, we will grow inorganically, because there’s excess capacity in the sector that is stressed. We’re looking at assets that are based on domestic coal supplies and out pithead plants, where there is minimum transportation cost.”
While Jain didn’t name the stressed plants the company is evaluating, The Economic Times reported that JSW Energy is among those bidding for Ind Bharath Energy Utkal, a 700MW coal-fired power plant in Odisha. In June 2018, the company had also submitted an expression of interest in Monnet Power, a pithead coal plant of 1,050 MW in Odisha. The creditors to the plant had, however, decided to temporarily call off the sale process.
Since the Reserve Bank of India’s 12 February, 2018, circular on identifying non-performing assets went public, the banking system has found 34 stressed private sector power projects. These projects, based on both coal and natural gas, have an installed capacity of over 40GW and a combined debt exposure of about ₹1.74 trillion, according to a 7 March, 2018 report by a parliamentary standing committee.
Early this year, the Supreme Court had quashed the 12 February circular and the RBI has, in its place, put in a new notification, allowing lenders more options in dealing with stressed assets on their books.
“We bid for assets in the past but no resolution happened,” Jain said. “The power companies led the challenge against the 12 February circular. Now, we have more clarity on resolution. We’re interested in assets where we can deliver lowest cost power. Our criteria is that in the merit order dispatch (where energy sources are ranked based on tariffs), I should be in the bottom quartile.”
Jain is confident JSW Energy has adequate internal accruals to buy out stressed power plants. “We don’t need (external) capital. We generate ₹1,800-2,000 crore of cash profit every year and have been reducing debt. We are a free cash flow company and our debt-to-Ebitda ratio is at 3.12. We have lots of appetite to grow as long as our equity IRR (internal rate of return) is in the mid-teens.”