Debt for firm will rise, but so will Ebitda: JSW Energy's joint MD & CEO

JSW Energy has an ambitious capital expenditure (capex) 2.0 plan of Rs 1.12 trillion by 2030 underway. PRASHANT JAIN, its joint managing director and chief executive officer, discusses the challenges and opportunities for this plan in a freewheeling chat with Amritha Pillay. Edited excerpts:

The company reported a net profit of Rs 289.88 crore for the April-June quarter. The lower profitability was also on account of debt refinancing for the Mytrah project, which is more likely in the current quarter. Any debt reduction plans?

We have done whatever (debt refinancing) was required of us. We are on a growth trajectory, so the debt is going to increase, but so will the earnings before interest, taxation, depreciation, and amortisation.

In our capex plans for 2030, we will be borrowing incrementally to fund the debt component, and equity will come from internal sources.

The capex plan of Rs 1.12 trillion (the balance of Rs 85,000-odd crore to be spent from 2023-24 through 2029-30) is an ambitious number. Do you envisage any challenges?

Sometimes there are difficulties in terms of the right of way, land acquisition, etc. The only challenge could be the execution, which can cause 12-18 months of delays. Beyond that, I don’t see a bigger challenge because the size of opportunities is huge. We are only targeting 3-5 per cent of the Indian market size in terms of growth, and we are also talking about an 18-19 per cent growth in our balance sheet, which is also quite reasonable.

Your latest venture is the green hydrogen project, which will supply to your group company, JSW Steel. Is that on track?

We have signed the power purchase agreement, and we are expecting to complete the project by the January- March quarter of 2025. The process for equipment orders is ongoing.

Other steel companies have indicated that the cost of $2 per kilogram for green hydrogen makes economic sense. What kind of cost and return are you aiming for?

We are doing it on a cost plus return on equity model, which is close to 15 per cent. The price depends on the period of amortisation. We are doing this for a seven-year amortisation period. It is quite a competitive project. The hydrogen cost is between $2.5 and $3.5, depending on the kind of amortisation one is looking at.

Group promoter Sajjan Jindal recently spoke about JSW Group’s interest in lithium mining. Will that be under JSW Energy?
 

At this point, we have not looked at it as JSW Energy, and the company has not been working on lithium either. I cannot comment for the group. But later, as and when this opportunity evolves, JSW Energy will not be averse to the idea.

One opportunity I see is the diversification into the lithium-ion battery segment. We will have to evaluate that opportunity at some point in time, and it could make good sense for us.

The group is looking at electric vehicles, and we will weigh up the battery project. It is a clear synergy for us that if the group sets up this business, we can be a preferred supplier for the group and third parties.

Have you witnessed some easing on the receivables side? How much of an impact will the upcoming state and general elections and free electricity have as a poll promise?

In the country, the overdue amount has gone down dramatically from roughly Rs 1.3 trillion to less than Rs 80,000 crore. For the country, by and large, the overdue situation is improving.

It is an internal matter for a state government to give away any free power. As regards the distribution company (discom) situation, they will have to find a mechanism to source that power and pay on time.

I don’t see that as a concern (on receivables). But yes, there could be some aberrations, and I will not be able to comment on individual discoms. But as a general trend, I think this is a thing of the past.

What is your outlook on coal prices and merchant power rates for the current financial year?

Coal prices should remain subdued for the remainder part of the financial year. As long as gas prices remain low, there is no reason why thermal coal prices should go up.

I am expecting quite a robust merchant (power sales volume) as well as a good price; they are right now in the range of Rs 5-5.5 per unit, and I am expecting it to be in the range for the remainder of the year.

What is the update on plans to bring in a private equity investor or launch an initial public offering for JSW Neo Energy?
 

We have been looking at opportunities for value unlocking, and there is keen interest from strategic investors and there is engagement, but nothing concrete or finalised as yet.

When any opportunity crystallises, we will be talking to shareholders and the stock exchange and informing both.