In the March quarter, our receivables came down by another 3 per cent compared to the December quarter, says Prashant Jain, Joint MD & CEO
There was a sharp decline in power demand in Q3 and because of that spot power tariffs went down as well. Q4 started off strong but then started tapering off significantly. Talk to us about the generation trends and the tariff trends that you saw in the quarter gone by.
So, two things with respect to the demand for the quarter gone by. Power demand went up by 1.9 per cent and this precisely happened because we saw good demand growth in the month of January, which was 3.8 per cent and in February, it was 11.8 per cent. But in March, the power demand fell by 8.4 per cent and subsequently in the month of April, we saw the power demand decline by 43 per cent. In the first 15 days in the month of May, power demand has gone down by 19 per cent. So we have been seeing an improving trend since the lockdown has been easing and now we need to really see how it pans out in the future.
As you see, our company per se was not impacted primarily because we are selling the majority of our power under the long-term power purchase agreement (PPA) contracts. So close to 87 per cent of our sales come from the long-term PPAs and balance 13 per cent comes from the merchant sales and that is precisely why our EBITDA is also insulated close to 94 per cent to 95 per cent.
Talk to us about collection and demand trends as well.
Power sector has been having its own integral challenges for a long period of time and then we were having poor discom health because of obvious reasons and that is where the reforms are very necessary. Now the announcements made by the Government of India recently are a step in the right direction. I think we are seeing the worst time for the power sector in terms of its crisis per se and that is why the government has taken up the infusion of 90,000 crore into the power sector by giving specific loans to the distribution companies. They have also come up with privatisation of discoms in union territories, digital activities in discoms, new Electricity Act amendments; all these things will go a long way to improve the health of the power sector. But at this point of time, there are quite a bit of challenges but those challenges will be overcome in due course of time.
Talk to us about the issues and worries amidst power generation companies due to further delay in payment. Will they be compensated sufficiently?
As far as JSW Energy is concerned, we have been doing pretty well. I will give you some numbers. In the December quarter, our receivable came down by 4 per cent as compared to the September quarter. In the March quarter, it further came down by another 3 per cent as compared to the December quarter. And in the current quarter, they have further come down compared to the March quarter. So we are doing pretty good as far as the receivable position is concerned. This is primarily because we are in the bottom quartile of the purchase basket of the distribution companies and we enjoy the merit order dispatch and because of that we get payments also on priority.
Also, we are not at all impacted in terms of the receivable and also for the scheduling of the power. All our long-term PPA power is being scheduled; whatever we are generating in case of hydro, we are 100 per cent scheduling. In the case of our Maharashtra plant, we are running 100 per cent plant load factor (PLF). In the case of Rajasthan, the PLFs have improved as compared to last year. So we are not per se facing those kinds of challenges.
However, there is speculation which has been going on in the market because the Government of India has been talking about it. But recently, the Ministry of Power has very well clarified that in the month of April as well as in the month of May, all the fixed costs have to be paid in full for the unscheduled power. In fact, in the recent clarification, they have given a clarification, only for the central sector generators, there will be a deferment of the fixed cost for the unscheduled power and there will be no reduction in the ROE. So this matter has been put to rest and I think this is only a speculation and there will not be any kind of cohesive measures which will be taken by any of the discoms.
Thermal PLFs and hydro PLFs both have obviously taken a sharp knock due to the lockdown. What levels do you see them returning to post the lockdown?
In FY20, the thermal generation came down by 2.8 per cent whereas the hydro generation went up by close to 15 per cent and that is because there was a lot of excess water which was available in the hydropower plants. So all in all, all hydropower plants in the country did very well and same was the case for the JSW Energy. Overall PLF for the thermal sector came down from 61 per cent to 56 per cent all over India. This came down primarily because of the central and the state sectors. As far as the high PPEs are concerned, their PLF was the same as 55 per cent as compared to last year. So I do not see that as a challenge. But right now the new capacity additions are taking place in the renewable sector, both renewable as well as the hydropower plants, and they are in the must-run status in the country. When such a pandemic situation or a crisis situation comes up, sudden demand deterioration takes place at that point of time. The power back down happens only in the thermal generation and that is precisely the reason the thermal PLF went down. What we are seeing in the month of May is that the thermal PLFs are going up. So that is what we are going to see. It needs to be seen in that context and because of the must run status of the hydro and renewable, there was no back down in that part.
Talk to us on the rationale behind putting on hold the GMR Kamalanga energy transaction. Are you still keen on acquiring it at a later date or at more attractive valuations? How does it fit into your portfolio?
We need to look at the context. Primarily why we have put the transaction on hold is because of the uncertainty we are experiencing at this point of time. There are a couple of things which are going to impact the power demand in the near future. One is how the migrant labour situation is panning out and how well the MSME sector is going to do. So the economic recovery is going to be contingent on the recovery in the power demand. That is the primary reason that we have put the discussions on hold at this point of time. We would like to evaluate the situation as and when it normalises and at that point of time, we would like to take a call.