Q3 Results: JSW Energy’s Profit Trebles On Improved Realisation, Expects Greater Consolidation

JSW Energy Ltd.’s profit for the December-ended quarter jumped threefold as it was able to realise greater returns on the electricity it generated.

Net profit rose to Rs 146 crore year-on-year. That, according to Prashant Jain, the company’s joint managing director and chief executive officer, was due to a surge in production and an improvement in the dark spread—the difference between the returns on electricity generated and the cost of coal needed to produce it.

“Dark spread improved primarily due to internal efficiencies because we reduced our auxiliary power consumption also,” Jain said in an interaction with BloombergQuint. “We reduced specific heat rate (of the power plants) and that improved our dark spread… We have also been deleveraging our balance sheet consistently.”

Jain said the company will continue to reduce debt as they haven’t found “growth opportunities”. The private power producer’s debt-to-equity ratio for the quarter was 0.9 as it reduced its net debt by Rs 296 crore to Rs 10,686 crore. “I am more confident that in the next twelve months, there will be more consolidation in the industry than what we have seen in the last twelve months.”

The company said in its filings that merchant prices had been improving along with its dark spread in the merchant market. “We have been consistently improving in our plants… Therefore, our dark spread in the merchant market is improving. This dark spread, as well as our merchant volume, will improve in time to come.”

Jain said that he expects an additional power demand of 15-16 gigawatts in India—though he didn’t specify when—leading to increased coal imports. “If additional coal isn’t available, then demand must be met by imports... distribution companies are getting into the merchant market, where volume is going up.”

Earnings Highlights (YoY):

• Revenue grew 20 percent to Rs 2,492 crore.
• Fuel costs rose 24 percent to Rs 1,447 crore due to a weaker rupee and costly imported coal.
• Ebitda increased 20 percent to Rs 809 crore.
• Finance costs declined to Rs 295 crore from Rs 341 crore.
• Consolidated deemed plan load factor was 60.1 percent versus 58.2 percent.

Watch the full interaction here: