 "The southern grid will not help us: Sanjay Sagar")
JSW Energy’s net profit fell 33 per cent year-on-year to Rs 210 crore from Rs 312 crore on a 15.4 per cent drop in net power generation. Chief executive Sanjay Sagar tells Katya B Naidu the drop was due to depressed demand for power, which might continue. Edited excerpts:
Will general elections revive power demand?
There should be a slight improvement in the realisation due to the elections. But I don’t see a major impact; nothing happened during the state elections. There was absolutely no impact on the merchant market in power. however, after the elections, we are hoping, like everyone else, there will be a turnaround in the economy. Then power demand will certainly go up.
I can frankly tell you that this (Q4) will be a tough quarter, because demand is not picking up. It will be similar to the third quarter, which was very tough. But JSW is the only company other than NTPC posting profits.
As much as half of your generation is sold to merchant users via short-term contracts. How are merchant power realisations now? What is the outlook?
So far, we have been managing the realisations on merchant sales...I would still keep the outlook at Rs 4-4.50 a unit. It is Rs 4.70- 4.80 a unit now. At the moment, realisations are good but volumes have gone down. This is good because the southern region is holding up and majority of the sales are from there.
Will the formation of the southern grid, which will give more power to the four South states, help you?
It will not help us. The grid will take 10-12 months to stabilise and will be allocated primarily to long-term contracts. The merchant market will not be impacted and we can’t push our western region power into the south.
Will you look at long-term contracts if they open?
If long-term contracts open, we will try to participate. But till then, our current market is doing well.
What is your outlook on new projects?
We are not looking at these. But we are taking a re-look at the 660-Mw West Bengal project and talking to the state government. We are hopeful it will come through.
JSW posted forex losses in the first two quarters. Have you hedged all your payouts?
No. We have no losses this time. We have completely hedged these (forex payout).
Interest rates are high even as power demand remains low. How do you think power assets will hold up?
The Reserve Bank of India, in its wisdom, decided that we need higher interest rates and I am sure there is logic behind it. I wish to God that the logic works. I really don't see the logic of continuously increasing interest rates in this environment, where there are huge percentage of stressed assets across the country and across sectors. Banks already have a lot of non-performing assets (unpaid loans).
Will general elections revive power demand?
There should be a slight improvement in the realisation due to the elections. But I don’t see a major impact; nothing happened during the state elections. There was absolutely no impact on the merchant market in power. however, after the elections, we are hoping, like everyone else, there will be a turnaround in the economy. Then power demand will certainly go up.
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Will the fourth quarter be equally tough for the sector?
I can frankly tell you that this (Q4) will be a tough quarter, because demand is not picking up. It will be similar to the third quarter, which was very tough. But JSW is the only company other than NTPC posting profits.
As much as half of your generation is sold to merchant users via short-term contracts. How are merchant power realisations now? What is the outlook?
So far, we have been managing the realisations on merchant sales...I would still keep the outlook at Rs 4-4.50 a unit. It is Rs 4.70- 4.80 a unit now. At the moment, realisations are good but volumes have gone down. This is good because the southern region is holding up and majority of the sales are from there.
Will the formation of the southern grid, which will give more power to the four South states, help you?
It will not help us. The grid will take 10-12 months to stabilise and will be allocated primarily to long-term contracts. The merchant market will not be impacted and we can’t push our western region power into the south.
Will you look at long-term contracts if they open?
If long-term contracts open, we will try to participate. But till then, our current market is doing well.
What is your outlook on new projects?
We are not looking at these. But we are taking a re-look at the 660-Mw West Bengal project and talking to the state government. We are hopeful it will come through.
JSW posted forex losses in the first two quarters. Have you hedged all your payouts?
No. We have no losses this time. We have completely hedged these (forex payout).
Interest rates are high even as power demand remains low. How do you think power assets will hold up?
The Reserve Bank of India, in its wisdom, decided that we need higher interest rates and I am sure there is logic behind it. I wish to God that the logic works. I really don't see the logic of continuously increasing interest rates in this environment, where there are huge percentage of stressed assets across the country and across sectors. Banks already have a lot of non-performing assets (unpaid loans).