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CHAIRMAN &MANAGING DIRECTOR'S MESSAGE
After years of recession and slow growth, the global economy seems to be on a path to recovery. The US economy, driven by improvements in the housing and manufacturing sectors, is resorting to fiscal consolidation. Significant liquidity infusion by the European Central Bank has also helped tame the Eurozone's debt crisis to a certain extent. Japan too appears to have reached an inflection point, relative to the trajectory of its growth over the past two decades. Developing economies, such as China, India and the nations of Latin America, are expected to return to higher rates of economic growth over the medium term.
India's power sector, a critical component of the economy, was also buffeted by headwinds, emanating from the adverse economic conditions and sector–specific challenges. Various issues, such as the poor financial health of state distribution companies, domestic fuel shortages, issues related to Power Purchase Agreements (PPAs) and project clearance issues impacted the sector's profitability and consequently, investor sentiment.
At the end of March 2013, India's power deficit stood at 8.7%. Given the long term structural growth outlook of industrialisation and urbanisation, India's power demand is expected to grow significantly. The Working Group on Power has estimated a capacity addition requirement of 75,785 MW, corresponding to 9% GDP growth, during the Twelfth Five Year Plan period. To address this demand, all efforts must, therefore, be made to carve out a policy regime, which encourages a sustainable development of the power sector.
FY 2012–13 IN REVIEW
JSW Energy has been resilient through the turmoil in the power sector and has benefited from its business model and pricing dynamics of markets for power and coal. The location of the plants, a blend of short term and long term PPAs, and diverse fuel sourcing have helped insulate us during these times of policy uncertainty, especially with merchant realisations remaining firm (due to cost pressures and grid congestion) and imported coal prices easing.
Our achievements during the year included:
Commissioning of the entire power plant at Barmer
The highest net power generation since inception at 18,780 Million Units, a growth of 38% since last year
Achieved a consolidated PLF of 88.97% across the three units
Achieved transmission facility availability of 98.43%
Consolidated revenues grew by 46% y–o–y to Rs. 9,148 crore Sajjan Jindal
Consolidated EBIDTA (before exceptional items) surged 89% y–o–y to Rs. 3,007 crore
Consolidated Profit After Tax recorded a 431% increase y–o–y to Rs. 904 crore
The year marked the end of our current phase of capex cycle. With the commissioning of the last four units at our Barmer plant, our total installed and operational capacity aggregates to 3,140 MW. As the newly commissioned units ramp up operations, they will start contributing additional volumes and boost cash flows.
During the year, pending clarity on policy and regulatory issues, we decided to consolidate our operations and have put most of our expansion projects, with the exception of our Kutehr hydro project, on hold.
Our focus remains on strengthening the balance sheet and keeping ourselves ready for growth opportunities. Further, as the regulatory scenario eases and an opportunity to participate in competitive bids opens up, we plan to grow organically, while reducing the exposure to merchant capacities. We believe as the sector matures and consolidates, there will be inorganic growth opportunities for evaluation with a strategic fit to your company.
BUILDING OUR RESILIENCE
Our people form the core of our organisation. They contribute to our capabilities in project execution and operations. Their commitment and motivation is what drives us to set industry benchmarks in productivity and efficiency. We continuously invest to develop our employees through internal training platforms. Additionally, the JSW Energy Centre of Excellence (JSWECE) creates a pipeline of highly motivated leaders across managerial and operational levels, thereby bolstering our vision to become India's leading player in the power sector.
We focus on minimising our environmental footprints. We have implemented superior technologies across our locations, which reduce emissions and effluents. Our Kutehr project also underscores our commitment to develop renewable energy. During the year, we successfully registered the project for CDM benefits.
Our belief in inclusive growth drives our activities in communities surrounding our plants. As such, the JSW Foundation invests in the areas of education, health, livelihood creation, environment, local sports, and the conservation and development of arts and cultural heritage.
PREPARING FOR THE FUTURE
The power sector will remain an integral contributor to India's growth story. The issues plaguing the sector need to be resolved prudently to realise the sector's full potential. India must also capitalise on the opportunities to gainfully utilise vast tracts of mineral deposits, which are currently inaccessible or out–of–bounds, as they lie deep in forest areas. With rapid advances in technology, the window of opportunity to utilise these minerals gainfully is only over the next few decades. As technology for renewable energy advances rapidly, fossil fuel usage is likely to decline sharply over the next few decades. The government must therefore encourage opening up of these mineral deposits in an environment–friendly manner – followed by efforts to regenerate the forest cover, once mining is completed.
The formation of a task force, at the behest of the Prime Minister in January 2012, has helped start the process of resolving the sector specific challenges and is progressively gaining momentum. An expeditious resolution is, however, awaited to revive the power sector's performance.
The need of the hour is to focus on reforms in the distribution sector with an aim to cut down distribution losses. Effective metering and tariff determination is the backbone for sustainability of the sector and its ability to provide power for all at reasonable costs.
At JSW Energy, we have leveraged our internal resilience to weather the power sector's challenges and believe we are ready to capitalise on the opportunities to unfold.
As India emerges as a major driver of global economic growth, the country's power requirements are expected to increase. JSW Energy intends to be a key participant in the Indian power sector and contribute to help in the country's economic progress.
I am pleased with the progress made by our company so far and commend not only the employees of JSW Energy but also other valued stakeholders for their continued effort and support.
Finally, I would like to thank all stakeholders, the Board of Directors and various state and central governments for their support and contribution to the company's performance.
Chairman & Managing Director