JSW Energy Ltd (NSE:JSWENERGY) Q2 FY23 Earnings Concall dated Oct. 28, 2022
Corporate Participants:
Ashwin Bajaj — Group Head, Investor Relations
Prashant Jain — Joint Managing Director and CEO
Pritesh Vinay — Director, Finance
Analysts:
Mohit Kumar — DAM Capital Advisors Limited — Analyst
Anuj Upadhyay — HDFC Securities — Analyst
Nikhil Abhyankar — DAM Capital — Analyst
Rahul Modi — ICICI Securities — Analyst
Anshuman Ashit — ICICI Securities — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the JSW’s Energy Limited Q2 FY ’23 earnings conference call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Kumar from DAM Capital Advisors Limited. Thank you and over to you, sir.
Mohit Kumar — DAM Capital Advisors Limited — Analyst
Thank you, Faizan. On behalf of DAM Capital, I welcome you all to the Q2 FY ’23 earnings call of JSW Energy. From the management, we have Mr. Prashant Jain, Joint Managing Director and CEO; Mr. Pritesh Vinay, Director, Finance and Mr. Ashwin Bajaj, Group Head, Investor Relations; Mr. Vikas Choudhary, Investor Relations and Treasury Head. We will start with a brief opening remarks followed by Q&A. I will now hand over the call to Ashwin Bajaj. Over to you, sir.
Ashwin Bajaj — Group Head, Investor Relations
Thank you, Mohit, for hosting the call and a very good evening, ladies and gentlemen. So welcome to JSW Energy’s Q2 results call where we will detail our result as well as other renewable led growth strategy. We have our management team as Mohit introduced. So, let me hand it over to Mr. Jain for opening remarks and then we will take questions. Mr. Jain?
Prashant Jain — Joint Managing Director and CEO
Thank you, Ashwin. Good evening ladies and gentlemen. The quarter gone by, we have seen a power demand growth of 5.7% which has moderated from 18% power demand growth which we saw in Q1 in the current financial year and for the H1 the power demand growth stood at 11.8%. The current quarter also the power demand is growing at a good pace but we are expecting that this year should be ending something at around 8% to 8.5% power demand growth. The total installed capacity for the sector is now at 408 gigawatt with a net capacity addition of 4 gigawatt in quarter 2 and total 8.3 gigawatt capacity addition in H1. All this capacity which was added up during the quarter was renewable capacity, 3.1 gigawatt coming from solar and 0.9 gigawatt coming from wind. This total installed renewable capacity stood at 165 gigawatt which is in excess of 40% of the installed capacity.
The merchant volume went down by 18% during the quarter at 20 billion units with the average tariff at 5.4 rupees per kilowatt-hour which is lower than previous quarter and now the weighted average for the H1 stood at 6.59 rupees. The current quarter prices are also running quite low close to an average of 4.5 rupees to 5 rupees because of better availability of thermal power at this point of time and moderate power demand growth. In terms of the company, the net generation was 6.7 billion units, it 2% lower than the last year which was primarily due to the weak merchant market during the quarter as well as the Ratnagiri 300 MW unit was under maintenance.
The EBITDA was at INR1098 crores which was up by 2%. Profit after tax was up by 37% at INR466 crores, cash profit was INR681 crores, up by 12%. We maintained our trajectory of receivables. It was down 19% at 66 days during the end of the quarter and the current quarter also we had — we are doing pretty good in terms of to the receivable metrics, so we are maintaining a healthy receivable metrics. In terms of the projects now our committed pipeline is 10 gigawatt and which is going to be completed ahead of our earlier guidance of FY ’25, and this is without the new domain which we have started which is the battery storage and pump storage vertical. So one gigawatt hour of battery storage project which we have recently, we were the winning bidder in the SECI tender is over and above this 10 gigawatt of the pipeline. Now, the projects are also moving as planned ahead of the schedule and starting from the current quarter, the commissioning of the SECI 10 projects will start and then month-on-month we will be seeing the incremental capacities which are coming up. We are also doing pretty good in terms of the hydro pump storage pipeline and which is moving.
In addition to that, we have also secured some new projects in hydro projects which are run-of-the river in Himachal Pradesh. So one project we have already got the, awarded NOI. There are some more projects which are in pipeline across the country which we are looking because we see that given the new hydro power purchase obligation, there will be a incremental demand which will be coming up going forward and after we complete our Kutehr project next financial year, we will be deploying that execution team to undertake new hydro projects going foward.
With this, I end my opening remarks. We are happy to take question and answer. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Anuj Upadhyay from HDFC Securities.
Anuj Upadhyay — HDFC Securities — Analyst
Thanks for the opportunity, sir. My question relates to the status on the Mytrah acquisition, sir. If you can provide some update on that. Secondly, anything on the Utkal Ind-Bharat project. I mean, last call, we had mentioned probably we are relooking to acquire that project and also, if you can provide some kind of a timeline in tying up the untied capacity of the Vijaynagar for our captive group plans. That’s it, sir.
Prashant Jain — Joint Managing Director and CEO
Thank you. So with regards to Mytrah, the necessary condition precedents are being implemented and we are expecting that we will be completing the transaction within the current quarter. And with regards to the Ind-Bharat Utkal, the NCLT had already given its judgment by approving the plan and we are working with the lenders to implement the plan as a part of our decarbonization strategy. We are working on this plant to do the vertical integration to enter into the polysilicon market. And that is our strategy, and we will be based on this 700 megawatt power capacity, we will be working to do the vertical integration to manufacturer of polysilicon. The third part is with respect to the untied capacity. JSW Steel is already — has already undertaken 5 million ton capacity expansion at Vijaynagar and their scheduled commissioning is some time in calendar year ’25. And so accordingly, our untied capacity will be looked into the group capital model going forward.
Anuj Upadhyay — HDFC Securities — Analyst
Sir, can you mention what quantum of untied capacity can be parked for this 5 million ton of extended capacity at Vijaynagar. Just a clarification on the Ind-Bharat you mentioned about the vertical integration. So are you saying that project will probably serve the need — the purpose of captive development. It’s my understanding correct?
Prashant Jain — Joint Managing Director and CEO
Absolutely. Quantum, we are still working out. But a majority of untied capacity will be looped into capacity expansion.
Anuj Upadhyay — HDFC Securities — Analyst
Okay, fine sir. Thank you.
Operator
The next question is from the line of Mohit Kumar from DAM Capital Advisors. Please go ahead.
Mohit Kumar — DAM Capital Advisors Limited — Analyst
Good evening, sir. First question is on the battery storage win. So what is the status of the LOI? And can you please throw your strategy or give some light on how do you want to schedule your — the market capacity? I believe there is a 40% which you opened to the market. And how do you see this open capacity to be tied up or you want to participate in the SLB market?
Prashant Jain — Joint Managing Director and CEO
So we are yet to receive the LOI from SECI and we are given to understand some time in the current quarter we will be receiving that LOI and at this point of time, we are absolutely open to work both on ancillary market as well as to tie up this capacity with some of the discoms. We have already been — we have received some interest both on discoms as well as from some corporates who want to take up this open capacity which is available with us and we have factored both the opportunities with this. And I can give you one color that ancillary market is also equally exciting opportunity and in some cases, what we are seeing is more remunerative as compared to what we do with the tied up capacity.
Mohit Kumar — DAM Capital Advisors Limited — Analyst
Understood. And on the pump storage plant side, of course, you built a large pipeline. When do you think will we be ready to execute something? Is it contingent on getting some PPA or getting some hydrogen or hydrogen order?
Prashant Jain — Joint Managing Director and CEO
No, it’s not contingent on that. It’s primarily at this point of time the regulatory approvals which are being undertaken. But to give you some color, the first project will be a captive project which will be used for our Vijaynagar plant and which we are taking the necessary regulatory approval and we are expecting that we will start that construction sometime in next calendar year once we secure the necessary regulatory approval, which is predominantly done by [Indecipherable].
Mohit Kumar — DAM Capital Advisors Limited — Analyst
And sir, how is the debt to EBITDA or debt to equity after the Mytrah acquisition and are we looking to raise some — do you think we’ll need to accumulate some capital to — for the further growth?
Prashant Jain — Joint Managing Director and CEO
We have explained in our last call. With this existing pipeline both for 3.2 gigawatts and of the under construction projects as well as Mytrah acquisition plus the new acquired pipeline, all put together, we will be below the 4.5, 4.6x debt to EBITDA level. And so we are quite comfortable, and we will be still throwing a lot of cash because right now we are generating in excess of around INR2,400 crores to INR2,500 crores of cash profit, which is very, very healthy, which will be also going to increase with this commissioning of these projects as well as the acquisition, which will have a sufficient — which will be sufficient to grow our pipeline. However, if we get any kind of a great opportunity where we feel there is a good transaction which can be value-accretive for all the shareholders as well as there is an opportunity to deploy that particular capital by making substantial growth strides, we will not be averse to raising the capital but at the current deployment requirement and the projects which are under pipeline, we do not need any capital.
Mohit Kumar — DAM Capital Advisors Limited — Analyst
Lastly, on our bidding appetite on the solar and wind, I think we are not participating in solar as of now. Is it a no-go area for us?
Prashant Jain — Joint Managing Director and CEO
My question is other way around. The people who are bidding, why they are not building. So we are not doing anything which we cannot build.
Operator
[Operator Instructions] Next is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.
Nikhil Abhyankar — DAM Capital — Analyst
Thanks for the opportunity. I just wanted to ask you whether you are looking at adding some capacity.
Prashant Jain — Joint Managing Director and CEO
So yes, we will do an additional pipeline after we complete this project. There are further opportunities which have been already outlined and so we are looking to that. And at some point of time, next calendar year, we will be announcing that pipeline and in addition to that, we are also working to do further C&I business with the third parties. So of course, beyond the 10 gigawatt, there will be additional pipeline which will be announced next calendar year.
Nikhil Abhyankar — DAM Capital — Analyst
Understood. Sir, also after Q1 in the annual report last year, you had booked certain revenue through sale of carbon credits. So I just wanted to know, at that time, you mentioned that the inventory is somewhere around INR20 million. So have we booked any revenue through it in H1? And what is the inventory right now that we’re having?
Prashant Jain — Joint Managing Director and CEO
So after the Ukraine war, the carbon credit prices have dropped dramatically. The carbon credits which were trading more than $7.5, $8 have come down to $2.5 at this point of time, which we also believe is transitory in nature and which will once again go up. So at this point of time, we are holding the inventory. We have not sold any more incremental or whatever we have sold is also very insignificant. And so, Pritesh, what is the inventory right now. Is it the same what we were having? Rather, it will be increased with the [Indecipherable] also.
Nikhil Abhyankar — DAM Capital — Analyst
Sir, and how are the reserves [Phonetic] looking like, have they increased and has the Rajasthan government participated in government liquidity scheme?
Pritesh Vinay — Director, Finance
Repeat your question once again.
Nikhil Abhyankar — DAM Capital — Analyst
Sir, has the Rajasthan government participated in the government liquidity scheme?
Pritesh Vinay — Director, Finance
So Nikhil, let me comment here. We may not be privy to state-wise participation in the liquidity scheme of the government but what we can do comment on is that if you look at our receivables trend as Prashant mentioned at the opening, on a year-on-year basis, the overall receivables have come down by 19% from a DSO equivalent point of view but more interesting is that within that, the amount of overdues has actually come down by 23%. And as we are speaking right now, subsequent to the end of the quarter, there are actually no overdues that we have from the Rajasthan discoms
Prashant Jain — Joint Managing Director and CEO
Or any other discom.
Pritesh Vinay — Director, Finance
Yeah, or any other discom. So therefore, whether it is on account of their participation in liquidity scheme of government or not, we may not be able to exactly conform to that. But as far as our overdues are concerned, we don’t have any overdues at this point of time.
Nikhil Abhyankar — DAM Capital — Analyst
Understood, sir. And previously, you also mentioned about our plans to get into polysilicon. So when will we be able to announce anything specifically regarding that? Or is it contingent on any PLI scheme coming from the government?
Prashant Jain — Joint Managing Director and CEO
We are on the contents of the project because this is absolutely new area for the country. There are various barriers. There are the technology barriers, there are the talent barriers. And there are various other challenges in terms of engineering and other things which are building all those blocks. And so in due course, we will be announcing as and when we are ready with that. And of course, we will be certainly participating in the PLI scheme as and when the final scheme is — the bidding is started.
Nikhil Abhyankar — DAM Capital — Analyst
Understood, sir. That’s all from my side. I’ll get back in the queue. Thank you.
Operator
[Operator Instructions] The next question is from the line of Anuj Upadjyay from HDFC Securities.
Anuj Upadhyay — HDFC Securities — Analyst
Thanks for the opportunity again, sir. Just a follow-up on the first question which was related to the polysilicon thing. Maybe one clarity, sir. I mean, are we planning to come out with a complete integrated model manufacturing theme right from policysilicon to the model manufacturing? And if yes, then what is the quantum which we are eyeing basically out here? And are we waiting for the PLI schemes to get launched so that we can decide upon the quantum? Or we are still, I mean like we are fine enough to go ahead with respective of the PLI benefits.
Prashant Jain — Joint Managing Director and CEO
So there are a number of factors which will be deciding all these. That’s why we said that we will be talking in a due course. So we need to understand that PI is having a large ambitious plan for renewable energy growth, which will be not only used for the power generation but also electron to molecule business and for that, there will be a large requirement of polysilicon and also the ingots and wafers and there are huge export opportunities going forward because after the new Inflation Reduction Act which has been announced in the United States as well as the decarbonization strategy of Europe, there will be a huge requirement of polysilicon going forward, both in Europe as well as American market. So we are working out the contours in terms of our own requirement, also to meet the domestic requirement as well as through the export opportunities. And also, there are various PLI contours, which all will be the determining factor, then we will figure out that how much is the polysilicon capacity and how much is the ingot and wafer capacity and how much is the cell and module capacity. Of course, there will be a certain capacity which will be end-to-end, and there will be some capacity which will be only polysilicon or only ingot and wafer. So even we are freezing that with various variables and then we will be announcing once we are — we have participated in PLI scheme.
Anuj Upadhyay — HDFC Securities — Analyst
Got it, sir.
Operator
Thank you. The next question is from the line of Rahul Modi from ICICI Securities. Please go ahead.
Rahul Modi — ICICI Securities — Analyst
Thank you for the opportunity, sir. Sir, pardon me if I am repetitive if I have missed this. Can you throw some light on the plans that we are having in terms of the pump hydro storage for the next 3 to 5 years? And the capex that we have earmarked and when are we expecting this capex to start? Thank you.
Prashant Jain — Joint Managing Director and CEO
So we are already having right now a portfolio of 50 gigawatt hour of pump storage. And as I mentioned sometime in the next calendar year, first project will start where we do not have any issues with respect to lineup, it’s only the or the PPA, it is the regulatory approval which we will complete in that — during this time. And then we will start and then it will be the first project will take 3 years to commission. And similarly, all other projects we have our final DPR is under preparation. So it needs to be approved by CEA before we start the project. Second part is that you have to acquire the land, whatever is the private land, if there is a forest clearance, then you need to take forest clearance but majority of our projects there is lot of implication of projects but you have to acquire the land, you have to take environment clearance. So all these projects are going to take anything between 12 months to 24 months before we — you hit the ground. So first project we see to hit the ground in the calendar year ’23. And thereafter, calendar year ’24 onwards, there will be various projects which will be hitting the ground. So it’s going to be exciting. Simultaneously we will be building more portfolio of pump hydro projects.So as we explained last time that the grid will be require large portfolio of the pump hydro projects. So going forward, this deal will be very big intermittency solution for the grid, which we will be deploying over a period of time.
Rahul Modi — ICICI Securities — Analyst
Sir, this is very helpful. So the first project that you are suggesting that we’ll be starting in CY ’23 that is what capacity and if you could suggest what will be the total cost? And you mentioned that the PPA is not needed. Is this already signed with a particular house? How does the mechanism work?
Prashant Jain — Joint Managing Director and CEO
So basically, it is an integrated solution which are going to do for the group captive requirement and so — and it will be close to 1 gigawatt hour.
Rahul Modi — ICICI Securities — Analyst
Okay. And what would be the cost of this?
Prashant Jain — Joint Managing Director and CEO
So once we are signing the PPAs and everything, we will be announcing everything. But typically, I can give you a color. The pump hydro projects are in the range of INR4 crores per megawatt to INR6.5 crores per megawatt. And pump storage projects are typically between 5-hour storage to 8-hour storage. Depending on the type of project and everything it is there. So you can do the math on your own to arrive at it.
Rahul Modi — ICICI Securities — Analyst
Sure. And sir, you will be using your own renewable for the power injection? Or this will be primarily for from the grid to — or your captive coal plants to begin with.
Prashant Jain — Joint Managing Director and CEO
The first project will be integrated for our own requirements.
Rahul Modi — ICICI Securities — Analyst
Okay, perfect. Thank you.
Prashant Jain — Joint Managing Director and CEO
We are working our own microgrid in the future where we will be coming out with a solution where there will be a solar park, there will be a wind park, there will be our own transmission corridor integrated well with the pump storage and then we come out with a large IDC [Phonetic] solution.
Rahul Modi — ICICI Securities — Analyst
Okay, perfect sir. Thank you very much.
Operator
Thank you. The next question is from the line of Anshuman Ashit from ICICI Securities. Please go ahead.
Anshuman Ashit — ICICI Securities — Analyst
Thank you, sir, for the opportunity. Sorry if I may have missed this but sir, you have recently also received a letter of intent for Chhatru hydroelectric power plant. So could you please give us some details on that on the time lines, DPR preparation and the cost which we can expect?
Prashant Jain — Joint Managing Director and CEO
This is one project where already it was earlier allocated to some private parties where the DPR is already in place. Also, there is the environment clearance which was in place. Now we are going to do the working and we have to revalidate the DPR. We have to reinstate the environment clearance, and post that we will be participating in various bids or kind of the PPA with this DISCOMs who are interested to source hydropower. And as I said, there are couple of more projects which are already in pipeline which will be also coming up and so being the largest private sector hydro power producer in the country, we are building these kind of a portfolio which will be going into a PPA and then construction going forward. We have already built a very good capability to execute the project in a most efficient way after operating the plants in a most efficient way. Our Kutehr project, which we started the groundbreaking in October 2019, in spite of pre Covid days, we are going ahead of schedule. We’ve completed nearly 5% of the tunneling. We are expecting this will be the fastest-ever project made in the country in the recent times by any hydropower plant developer. So with those kind of a capability and hydro power purchase obligation, we are quite upbeat about various opportunities and that’s why we are doing all this.
Anshuman Ashit — ICICI Securities — Analyst
So is there any portion of the generation which we’ll have to share it with or give for free to the Himachal Pradesh discom?
Prashant Jain — Joint Managing Director and CEO
Government of India has already come out with a regulation that now the free power to the state is fixed at 12% throughout the life of the project and project life is also now decided by the Government of India under the policy at 40 years. So it’s a single norm for all old and the future power projects.
Anshuman Ashit — ICICI Securities — Analyst
Okay. And sir, I just wanted to know your view on the coal prices going forward for FY ’23. And based on that, what do you — do you believe that the merchant prices will be favorable for us to sell on the exchanges? If you could throw some light on that.
Prashant Jain — Joint Managing Director and CEO
Sorry, I will not be able to give you any kind of a guidance on the coal prices because these are the unprecedented times with a lot of variables and factors.
So during the current situation, it is very tough to make a call but the way the natural gas prices are coming down now, if that trend continues then thermal coal prices will immediately drop. So if — naturally if that price will remain elevated then thermal coal prices will remain elevated. So everything is contingent upon geopolitical situation at Europe and also natural gas prices. Otherwise demand and supply perspective on a normalized business environment case, the thermal coal price should not be more than a dollar [Phonetic].
Anshuman Ashit — ICICI Securities — Analyst
Sir, are the currently merchant prices favorable for us to sell on the exchanges?
Prashant Jain — Joint Managing Director and CEO
No.
Anshuman Ashit — ICICI Securities — Analyst
Okay, understood sir. Thank you so much.
Operator
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.
Ashwin Bajaj — Group Head, Investor Relations
Thanks, operator. And thanks, everyone, for joining us today. Please reach out to us if you have any further questions. Good evening.
Operator
[Operator Closing Remarks]