JSW Energy Limited (“JSW Energy” or the “Company”) today reported its results for the first quarter (“Q1FY20” or the “Quarter”) ended June 30, 2019.

Consolidated Operational Performance:

During the quarter, consolidated deemed PLF was 69.0% as against 69.8% in the corresponding quarter of previous year.

PLF achieved during Q1FY20 at various locations/plants are furnished below:

Vijayanagar: The plant achieved an average PLF of 38.2% vis-a-vis 55.4% in the corresponding quarter of previous year due to lower short term power sales.

Ratnagiri: The plant operated at an average deemed PLF of 83.6% as against an average deemed PLF of 85.5% in the corresponding quarter of previous year due to lower short term sales.

Barmer: The plant achieved an average deemed PLF of 80.8% as against 86.2% in the corresponding quarter of previous year.

Himachal Pradesh: The plants achieved an average PLF of 66.3% for the quarter vis-à-vis 51.2% in the corresponding quarter of previous year due to better water availability in Sutlej basin.

Solar: The plants at Nandyal and Salboni achieved average CUF of 22.4% and 18.3% respectively during the quarter.

Consolidated Financial Performance Review and Analysis:

During the quarter, total revenue increased by ~1% on a YoY basis to `2,464 Crore from `2,428 Crore in the corresponding quarter of previous year.

The fuel cost for the quarter decreased by 2% YoY to `1,366 Crore, largely due to moderation in the imported coal prices.

EBITDA for the quarter was `861 Crore as against `844 Crore in the corresponding quarter of the previous year, an increase of ~2%.

Finance costs declined to `270 Crore from `313 Crore in the corresponding quarter of previous year, attributable to proactive debt repayment/prepayment.

The Company’s Net Profit stood at `244 Crore vis-à-vis `229 Crore in the corresponding quarter of previous year. Total Comprehensive Income of the Company for the quarter stood at `104 Crore as against `470 Crore in the corresponding period of previous year.

The Consolidated Net Worth and Consolidated Net Debt^ as on June 30, 2019 were `11,928 Crore and `10,221 Crore respectively, resulting in a Net Debt^ to Equity ratio of 0.86x.

Business Environment:

In Q1FY20, India’s power demand growth improved to 6.7% YoY as compared to 5.1% in Q1FY19 and 1.6% in Q4FY19, majorly attributable to delayed monsoon. Excluding East, all other regions witnessed a sharp uptick in demand YoY.

Commensurate with demand, overall power generation growth was robust at 7.4% in Q1FY20 on a YoY basis, driven by healthy Renewable (+18.5%) and Hydro (+25.3%) generation growth. PLF for Thermal segment was marginally higher at 62.8% in Q1FY20 vis-à-vis 62.2% in the corresponding quarter of last fiscal, primarily due to increase in private sector PLF.

On the supply side, installed capacity stood at 358.3 GW as on June 30, 2019. In Q1FY20, installed capacity increased by 2.2 GW led by Renewable segment (+2.15 GW). Thermal capacity increased by 45 MW during Q1FY20.

During the quarter, the average merchant power prices at IEX stood at ₹3.29/unit. This was ~4% higher on QoQ basis, however, ~20% lower on a YoY basis.

In Q1FY20, average value of INR against USD appreciated ~1% on a QoQ basis and depreciated ~4% YoY. Going forward, the stance of the US Federal Reserve, trends in crude oil prices, global growth and resolution of global trade related concerns will be the driving factors for INR. The average API 4 Coal Index witnessed a sharp decline of 20% on a QoQ basis and of 34% on a YoY basis in Q1FY20.

Outlook:

As per the Monetary Policy Committee of India (MPC), global growth is on a decelerating trend on account of elevated US-China trade tensions and tight global financial conditions. Crude oil prices continue to be volatile reflecting evolving demand-supply conditions and geo-political tensions, and thus remain a key global concern especially for emerging markets like India.

On the domestic front, real Gross Domestic Product (GDP) growth further moderated to 5.8% in the fourth quarter of FY19, the lowest in last six quarters (8.2%/7.1%/6.6% in the first/second/third quarter respectively). This was majorly attributable to subdued growth in the agricultural and manufacturing sectors. However, the decisive mandate to the incumbent Government in the recently held general elections is expected to expedite the implementation of various reforms which should augur well for economic growth, going forward.

The inflation trend continues to be benign, albeit susceptible to volatile crude oil prices. In line with this, MPC further reduced the key policy rate by 25 bps in its second Bi-monthly Monitory Policy in FY20 and changed the monetary policy stance from Neutral to Accommodative. This was the third consecutive rate cut from MPC.

Power demand over the next 3 to 5 years is expected to improve backed by rapid urbanization and various schemes undertaken by the Government such as “Power for All”, “24 x 7 Power”, and SHAKTI. The country almost achieved universal household electrification in FY19 which should unlock the latent power demand from rural India. On the supply side, capacity addition is shedding momentum and with the retirement of old and inefficient thermal plants, demand-supply environment should become more balanced over the medium-term. This bodes well for existing thermal plants wherein we should see the PLFs inching up. The sector is also likely to see increased consolidation with several stressed power assets available at attractive valuations. RBI’s new prudential framework is a positive development, aimed at expeditious resolution process. However, volatility in imported coal prices and merchant prices, and domestic coal availability especially for private sector power plants continue to remain key concerns for the sector.