About JSW Energy
1) Today, power is among the most happening sectors as far as long-term growth opportunity is concerned. This is primarily due to the fact that huge investments are required to bridge the country’s power deficit and to meet the constantly growing demand driven by the growth in economy. JSW Energy is among the few players which have plans to make it big with a presence across the sector’s entire valuechain.
2) JSW Energy, which is a part of the Sajjan Jindalled JSW group recently has raised Rs 2700 crore IPO in the month of December 2010 to fund its growth plans in the power sector. The good thing about the IPO was that unlike many start up companies, JSW Energy is an established player with about 995 mw of operational capacity and generating revenues and profits, which have been on an uptrend for the last three fiscals. Even on the operating performance front, its power plants have been running at over 95 per cent plant load factor (PLF) or capacity utilisation.
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JSW Energy Ltd
Posted date - 08 Jan 2010
Revised date - 19 July 2010
3) That apart, the company is generating positive cash flow as well. The company reported revenues of Rs 1,852 crore (including Rs 577 crore from power trading) and net profits of Rs 277 crore in 2008-09. Notably, these numbers do not include the full impact of the recently added capacities equivalent to 300 mw in July 2009 and another 300 mw in September 2009. Taking this into account, the companys revenues in 2009-10 itself should be in the range of about Rs 1,800 crore and net profits at about Rs 650 crore.
Future plans
1) The company is aiming to scale up its capacities to 11,390 mw by 2015. Of this, about 3,140 mw is under advanced stages of implementation and is expected to be commissioned by April 2011. This is also a reason that its revenue will get a boost starting the next fiscal.
2) The company will be commissioning its 945 mw power plant based in Barmer, Rajasthan (by December 2009) and 1,200 mw power plant based in Ratnagiri, Maharashtra (by April 2011). However, for the rest of the planed capacities of about 7,740 mw, these are at still in different development stages.
Company integration strategy
1) Besides the huge capacity expansion, JSW energy’s strategy to create an integrated business model should augur well in the long run. The company has signed a joint venture with Toshiba for manufacturing power equipments. It has also formed a venture with Maharashtra State Electricity Transmission Company to build, own and operate a 169-km transmission network.
2) On the fuel supply side, while the company has already entered into agreements for 3,380 mw for its ongoing projects, it is also eyeing captive mines in India and abroad for future projects.
Some concerns
Of its ongoing projects, its 2,060 mw will be fuelled by imported coal, for which it has tied up with companies like JSW Natural Resources (Mozambique) and Indonesia-based PT Sangai Belati. The imported coal will be purchased from these companies at a rate which is linked to the RB Index (a global coal index). The concern arises from the possible volatility in international coal prices, which could have an impact on the companys performance.
Strong Positive points
In this company its operational capacities, revenue track record, execution capabilities, good management team, fuel linkages and financial closure of its major projects are encouraging.
Returns Expected
Current Price - Rs 125
Price given to buy on 8 Jan 2010 - Near Rs 100
Returns Expected - 70 to 80%
Duration - 2 to 4 years
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