Interview: JSW Energy will invest Rs 10,000 crore on capex every year for next 10 years: CEO

Prashant Jain, joint managing director and chief executive officer, JSW Energy

Sajjan Jindal-led JSW Energy is in the process of reorganising its business into two entities—the parent which will house all the conventional energy projects and a subsidiary for its renewable energy business, with the aim to unlock value going ahead.

The company aims to scale up its capacity to 20 gigawatts (GW) by FY2030 from 4,559 megawatts (MW) now, primarily through the new renewable energy arm, said Joint Managing Director and Chief Executive Officer Prashant Jain.

The company reported profit after tax of Rs 324 crore in the third quarter on January 19, up 162% on year, while its total income rose to 1,984 crore in the quarter from Rs 1,659 crore a year ago. Talking to Moneycontrol after the quarterly result, Jain said that the power utility will invest around Rs 10,000 crore on capital expenditure every year for the next ten years. Edited excerpts:

The company initiated reorganisation in the third quarter of FY22, how was the quarter operationally?

We are in a cyclical business, but this year’s third quarter operational performance has been the highest we have seen in the same quarter in previous five years, despite one of our units being under maintenance for the entire quarter. In fact, the profits we have reported in the nine months of FY22 is more than profit we reported in the whole year in FY21. A major highlight of the quarter was that we managed to reduce our receivable year-on-year by 20% in spite of a challenging environment.

Another achievement for us in the quarter is that in spite of expanding very rapidly and our huge ongoing capex program, our net debt has gone down by Rs 500 crore right. We continue to deleverage our balance sheet and our net debt now stands at Rs 6,000 crore. We have also managed to reduce our weighted average interest cost to 7.2% from 8.04% in the previous quarter. Capital expenditure program is going as per schedule. We are going to commission our first solar project of 225 mw in the current quarter, and our hydropower project and wind projects are moving ahead of the schedule.

The company is reorganising business into two parts—conventional and renewable business. What is the status of this plan and what would the two businesses look like eventually?

We have filed our reorganisation application with NCLT (National Company Law Tribunal). After the reorganisation, the thermal power business will have 3,200 mw under JSW Energy, rest of the 1,400 mw of capacity and another 2,500 mw under construction will be the renewable energy capacity under the subsidiary JSW Neo Energy.

You have earlier stated that JSW Energy will invest Rs 75,000 crore to scale up its capacity to 20 gigawatts (GW) by 2030, how much of that investment will be in the new green energy subsidiary?

All the incremental investment and additional growth would be only in renewable energy under JSW Neo. We already have 1,400 mw of operational hydropower capacity and then we have another 2,500 mw under constructions that be commissioned from the current quarter onwards.

What will be the capex in the current and next fiscal?

We have board approved capex plan of Rs 15,600 crore, which is under construction and we will start commissioning from this quarter. This will be completed by FY24. Subsequently, the capex will keep increasing. We will be adding close to 1,000 – 2000 me capacity every year. Every year, for the next ten years, we will be spending close to Rs 10,000 crore on capital expenditure.

The recast gives you flexibility to unlock value either by getting investors in the business or going for an initial public offer IIPO) of the new subsidiary. What is the plan?

I cannot comment on this right now as it is up to the board to take a call on this. But we are making the structure enabled to unlock the value. Our focus is to reorganize the business and keep the businesses ready. We will certainly unlock value, but how that will be done is yet to be decided. In any case, it is going to take us six-eight months to get the various approvals from NCLT, lenders and various other shareholders to complete the reorganisation.

What is the mix of solar and wind energy that you are aiming for?

We are absolutely agnostic. We have so far been pushing more for wind energy for the simple reason that did not have clarity on the supply side for solar project equipment. People were about the Chinese supplier model, it has been completely disrupted and prices have gone up and there are ties. We had better clarity on the domestic wind supply chain for equipment availability and pricing. But now a lot of capacity will be coming up in the country for solar panel manufacturing, which is good for ecosystem.

You entered into a framework agreement in July last year with Australia’s Fortescue Future Industries to explore production of green hydrogen. How has that plan moved?

The scoping exercise is going on. We are pretty aggressive in terms of scoping, techno economic feasibility study, and the technical and commercial discussions and negotiations. We will be announcing the first project of green hydrogen pretty soon.

What are the other gaps in new technology that you are keen to fill? Would you look at tie-ups or acquisition opportunities?

All the options are on the table at this point of time, we are evaluating each one of them. We want to create a very robust business, we will be taking all necessary decisions.