JSW Energy Ltd (JSWENERGY) Q4 FY22 Earnings Concall Transcript

JSW Energy Ltd  (NSE:JSWENERGY) Q4 FY22 Earnings Concall dated May. 03,2022

Corporate Participants:

Ashwin Shivkumar Bajaj — Group Head of Investor Relations

Prashant Jain — Joint Managing Director and Chief Executive Officer

Pritesh Vinay — Director of Finance

Analysts:

Suresh Mashra — Edelweiss Securities — Analyst

Mohit — DAM Capital Advisors — Analyst

Vivek — DSP Mutual Fund — Analyst

Rahul Modi — ICICI Securities — Analyst

LaSer — Lombard Odier Investment Management — Analyst

Apoorva Bahadur — Investec India — Analyst

Sam Gu — Nivesh — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to JSW Energy Limited Q4 FY ’22 Earnings Conference Call hosted by Edelweiss Securities Limited. [Operator Instructions]

I now hand the conference over to Mr. Suresh Mashra from Edelweiss Securities. Thank you, and over to you, sir.

Suresh Mashra — Edelweiss Securities — Analyst

Good evening, everyone. On behalf of Edelweiss, I welcome you all to JSW Energy’s Q4 and FY ’22 Annual Results Conference Call. From the management today, we have with us Mr. Prashant Jain, Joint Managing Director and CEO; Mr. Pritesh Vinay, Director of Finance; and Mr. Ashwin Bajaj, Group Head IR. I would now hand over the call to Mr. Ashwin Bajaj for the opening remarks, post which we will have a Question and Answer session.

Over to you, Mr. Bajaj.

Ashwin Shivkumar Bajaj — Group Head of Investor Relations

Yes. Thanks, Swarnim, and thanks for having the call today. So good evening, everyone. This is Ashwin Bajaj, and welcome to JSW Energy’s results call for Q4 FY ’22 and also an update on our renewable rate growth strategy. We have our CEO and CFO, as Suresh introduced.

So with that, let me hand it over to Mr. Jain for opening remarks, and then we can open it up for questions.

Prashant Jain — Joint Managing Director and Chief Executive Officer

Good evening, everybody, and have a lot of to each one of you. The power sector has been in focus after a long time. And if you look at the power demand per se, the quarter four power demand grew 3.1%. And for the entire year, it was up by 7.9%. And the total demand was 1,375 billion units for the entire year. In the current financial year, in the month of April, we have seen power demand growing at the rate of 12.26%. And in the month of May, for the past four days, the power demand is up by 18.8%. Similarly, in terms of the generation, we have seen quarter four power generation was up by 3.4%. In FY ’22, it was up by 7.8%. We have seen the renewable energy generation up by 15% in the last year and thermal generation up by 8%. If you look at the total mix per se, then the thermal generation was constant at 74.8% in the last year, and hydro percentage was lower at 10.2% as compared to the previous year of 10.9%, whereas the renewable component went up from 10.6% to 11.4%.

The total installed capacity was at 399.5 gigawatt. We saw the capacity addition of 17.3 gigawatts primarily from renewable, which was 15.5 gigawatt. And the majority was solar, which was 13.9 gigawatt. And we saw a capacity retirement of 1.6 gigawatt. The interesting trend came in the merchant volume. We saw the merchant volume at 65 billion units out of the total demand of 1,375 billion units, and which was up by 7.8% during the entire year. But in the month of March, this volume came down drastically. And now this volume came down to 28% at 4.1 billion units. But if you look at last week of April onwards, this volume is down by 60%. Typically, we have been seeing 200 million to 230 million units every day being sold in the merchant market. But in — since the last week of April, this volume is as at 40 million to 50 million units. On an average, it is 70 million, 75 million units, whereas the purchase bids are in the range of 700 million units. So that’s the kind of a contract which is coming up, which is because that enough capacity is not available, which is having cool to supply in this particular market. Because of which, you are seeing the power prices are at a constant rate of INR12 at which the regulator has already captured. API coal prices are at a very highly — high elevated level. If you look at quarter four averages, $238. Here, as a gold is $161. If you see the highest price we have seen was $427 in the month of March, on 11th March. Post that, it has corrected.

In the entire April month, average was $294, and now it is moving in the 10 — plus/minus $10, $15 since the month of April. If you look at the full India production, which was up 6.3% in the entire year, including on its subsidiaries, and dispatch was up by 16.8%. Captive coal production was up by 34%, and dispatches were also up by 36%, whereas the imported coal is down by 12% at 191 million ton. And further in the current financial year, it is further going down. So I’m giving all this data to give the part is that there is a higher price of the thermal coal in the international market. Because of which, the fuel price at which the power can be produced at the international prices are north of INR eight to INR9. That’s the price at which you can produce power, only I’m talking about the variable cost. Because of which, that power generation based on imported coal is consistently coming down. In spite of higher production and dispatch by Coal India and [Indecipherable] as well as the captive mines, there is not enough capacity available which can feed the demand, which is growing at 11%, 12%. So this kind of a trend for the time being is going to continue. In terms of the JSW Energy performance, for the quarter, our generation was up by 15% and for the year, it was up by 4%. Hydro generation grew 15% during the quarter and for the year, it was down 2%.

The thermal generation for the quarter was up by 15% and for the year, it was up by 6%. For our long-term thermal power generation was up by 20% during the quarter and 7% for the entire year. And short-term generation was lower, 34% during the quarter and up 6% during the year. In terms of the financials, our EBITDA was INR4,030 — INR4,138 crore, which was up 32% for the year. And PAT was INR1,739 crore, which was up by 117% year-on-year. There is a one-off item of INR594 crore for the year due to the true-up of our consume asset. Adjusted for that, our EBITDA for the year is up by 15% at INR3,542 crore, and PAT is up 48% at INR1,180 crores. One good news is our receivables are lowest point of what we have seen in the last 3, four years at 59 days in spite of higher generation, and the quality of receivables is at its best where overdues are at its minimum.

We recovered close to INR220 crore in late payment surcharge, which is shown away other income during the year. Including the states like Maharashtra or Rajasthan or other states where we find it difficulties, we have recovered all our late payment surcharges. Our net debt stood at INR6,963 crores with a weighted average debt cost, which is lower to what we have seen in the history of the country at 7.74%. We have filed all the PPAs for 2.5-gigawatt capacity for renewable, which we had undertaken. We commissioned 225 megawatt of the solar capacity and rest of the capacity is on track, and we will be commissioning within time. We have also secured 15 gigawatt of resources for solar and wind, and 5-gigawatt resources we have tied up for hydrocomputer storage. And we are on track to achieve what we have guided for achieving 10 gigawatts by FY ’25 [Technical Issues] Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Mohit from DAM Capital Advisors. Please go ahead.

Mohit — DAM Capital Advisors — Analyst

Hi, good afternoon. for 2014-’19 or is it something else? Secondly, there is also a reversal of carrying cost of INR59 crore. Is it related to sharing of the financial gains because of lower increase — lower refinancing costs is the right assessment?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Pritesh, I would like…

Pritesh Vinay — Director of Finance

Yes. So Mohit, the truing up orders that we got for Katamati is for the control period 2014-’19 as well as for 2019-’24 period, meaning that the effective implications on the boxes for a [7-year] period, starting from 2014-’15 and 2021-’22, right? That is number one. Number two is this that, yes, and in fact, order is in the public domain on the ERC website, so you all can access that. But effectively, what has happened is that if I were to summarize the implication of that is that has been an additional INR180 crore capital cost which has been approved based on what was petitioned by the erstwhile owners of the handset as well as there are certain adjustments on the tax side. So a combination of these two is what has led to the whole reversal of the provisions. We are carrying close to INR1,260 crores of provisions, and of which around total — in total INR665 crores have been reversed. Now on the second part of your question, the carrying cost. So what we are doing is from the end of last year onwards, part of this provision was — basically are carrying costs that we were recognizing in our books for these regulatory liabilities. And now that this has been reversed, so that carrying cost has also been reversed.

Mohit — DAM Capital Advisors — Analyst

What is the total impact of culture? Is it five 90 plus 64 is the right…

Pritesh Vinay — Director of Finance

Yes. So above EBITDA. I mean if you look at the load number six of the semi-consolidated results, that has an exact breakup where there is part in revenue, there is part in other income, and there is part which was under the finance cost.

Mohit — DAM Capital Advisors — Analyst

Understood. Sir, the third question, our target is to reach 10 gigawatt of renewable capacity by FY ’25, and we are already in the beginning of FY ’23. So when can you expect to see this pipeline going up under construction project?

Prashant Jain — Joint Managing Director and Chief Executive Officer

So the 2.5 gigawatt, which is under construction, we will be closing — we will be completing our seven gigawatt of capacity, and the three gigawatt is under development at this point of time. So we are going to start and start talking about those projects in — pretty soon. So we are on course to achieve 10 gigawatt, and maybe we can do better than that.

Mohit — DAM Capital Advisors — Analyst

Understood. Thank you and all the best.

Operator

The next question is from the line of Vivek from DSP Mutual Fund.

Vivek — DSP Mutual Fund — Analyst

Good evening and happy to you all too. I had two questions. The ROE on renewable power, would that get affected by the high capital cost because all raw material costs have gone up? And in that context, let’s say, you were a bit and then Mitra, is it better to buy rather than build at this point of time is the first question. Should I also ask the second question?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Yes. Yes.

Vivek — DSP Mutual Fund — Analyst

Okay. In terms of merchant power, if I hear you correctly, at the current coal prices, the INR12 is — is it low? Or is it still profitable for you? That’s the second question. That’s all for me.

Prashant Jain — Joint Managing Director and Chief Executive Officer

Okay. So the first question, which — as far as the projects which we are building, we have been — we have secured and finalized all the contracts based on whatever we had planned. And so there is an impact of some component, which is primarily the steel, which we have been open because we have to purchase the steel for making the foundation as well as the power as and when it is required. Otherwise, all our contracts for the fixed price contracts [Indecipherable] no implication. But on an overall basis, there is very marginal impact on our capital costs, which we had already built in the majority of our projects as part of the contingencies. So we will be achieving what we have planned, which is mid-teen IRRs will be certainly achieved in all of our 2.5 gigawatt of the capacity. So with our efficient planning of the project management, we will be doing that.

And in fact, if you see what we build our solar project, which is the fastest-ever project build in the country 11-month short, including the COVID day. And then in case of over nine and 10 projects, people are not even SECI-VII and VIII. People have not done the financial closure and PPA, and we are on a part of commissioning the first organ in the month of July. And we have also shared the photographs of the foundation as well as the substation. So we are on course of commissioning very expeditiously and much before the time in the project. As regards to taking over the assets versus the building, every year, we need to see that the returns are there or not. So it is case-to-case basis. It cannot be generalized. I don’t think the transactions which are being done in the in the secondary market, which we are seeing like you might have seen the asset at which spring energy has got a valuation at which the spring energy has been sold.

There is enough return a level or some of the transactions which are being done. So it is — one needs to be really prudent about what you are going to do and what you are going to get. And we are very, very mindful about that part, and we have been maintaining. And that is why we have been chasing growth at a stipulated return, and we are getting enough of it. So we are pretty sure. The second question which you are asking about, INR12, whether it is profitable. Yes, it is profitable, but it is not as profitable as when the cap was at INR20. And I think the CERC has also come out with this cap on the basis that there is no — not enough margin available for the ITPs to make money at this point of time. If you look at the domestic pool at which the options are being done, the fuel cost will be in the north of INR10 even for the ones. And similar in the situation is for the imported coal-based plant, but fuel prices are in the range of INR nine to INR10. So you will be recovering anything between INR two to INR four at these prices, not more than that.

Vivek — DSP Mutual Fund — Analyst

Okay. That’s great. And congratulations on the execution and good luck, sir.

Prashant Jain — Joint Managing Director and Chief Executive Officer

Thank you.

Operator

Next question is from the line of Rahul Modi from ICICI Securities.

Rahul Modi — ICICI Securities — Analyst

Hi. Good evening. Congratulations with this set of results. I believe what we’ve been talking since the last one year about we’re getting into a power deficit situation has not panned out. So just further to this, just a couple of understanding on the numbers. Sir, you just make this reconciling. You mentioned INR665 crores of the center impact. I believe Pritesh was mentioning, there is something on the EBITDA and below EBITDA impact on other income and interest as well. If you could just give me a breakup of that to understand that better. And what is the LTA late payment product components, which can extract this quarter?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Pritesh?

Pritesh Vinay — Director of Finance

Yes. Rahul, if you — I don’t know if you have access to the presentation that we have put up on the website as well as the results that were uploaded a study. So you have access to that, then it will be easier for me to walk you through what I was trying to explain.

Rahul Modi — ICICI Securities — Analyst

Yes. So I’ve seen the press release. I just misstated to you.

Pritesh Vinay — Director of Finance

So if you look at slide 26, which gives the EBITDA bridge right, so there’s an element of INR596 crores bump-up, which is clearly been mentioned as due to the certain one to two order impact. Now what you have to do is that you have to look at steady most numbers big of the consolidated financial results. There, there are three items mentioned: revenue of INR553 crores and other income of about INR43 crores. So this total is INR596. This comes a lot better, right? Then the reserve write-back of tariff cost of INR69 crores, which is — which was used to be part of the interest cost, and that is below EBITDA. The sum total of all these three items is INR665 crores is what I was explaining.

Rahul Modi — ICICI Securities — Analyst

Okay. Perfect. This is very helpful. So secondly, if you could just…

Pritesh Vinay — Director of Finance

Sorry, can you please speak up a bit? We are — it’s a bit muffled, your voice.

Rahul Modi — ICICI Securities — Analyst

Is it better now?

Pritesh Vinay — Director of Finance

Yes. Yes, this is better.

Rahul Modi — ICICI Securities — Analyst

Okay. Okay. Just we read in the papers that there was a — on the exchanges also you had given an update on the issue with regard to Barmer, the lignite mining. Sir, any thoughts on exactly what happened? And what is the course of action going forward?

Pritesh Vinay — Director of Finance

So Rahul, again, with Barmer, what had happened was this that you — just to put things into context, Energy Partners Limited, which is a bit lignite is power plant, [1,080] megawatt. This has 100% uptake from the Rajasthan DISCOMs. And this is a regulated return project under the part of the ERC. Now this project was built as part of the implementation agreement signed way back in 2006 with the Government of Rajasthan, by way of which, this is an integrated project. There is a mining part, which is a 51-49 JV, where 51% shareholding is by the government of Rajasthan’s mining entity called, and 49% is based on the Energy Partners Limited, right? So this is an integrated project. Now there is a technical issue with respect to the mining lease transfer that was done by RFMMM to BLMCL under the provisions of the law.

So if you look at Note number 5 that we have put up, this kind of gives people context in our script today that in 2014, the Ministry of Coal Government of India had granted an approval for the transfer of mining lease. But in 2016, they wrote back to the government of Rajasthan saying that this transfer of mining lease from RSLM to BLMC was without the previous approval of Government of India and advised the government of Rajasthan to make a fresh proposal for transfer of the mining lease. Thereafter, there have been multiple deliberations between the government of Rajasthan and the government of India on this particular matter. And in that context, we received this notice in the first week of April, for which we had made suitable disclosure saying that RFMM on direction by government of Rajasthan, BLMCL you stop mining activities in 15 days.

But at the same time, RSL was asked by government of Rajasthan to ensure that uninterrupted lignite supply was continued for the power rodent. Thereafter, rebate representations because there are a lot of nuances involved in this. There was an implementation agreement. There was a JV agreement. There’s a pure supply agreement. There are PPAs, the whole works. And we also — there were legal records are also available. So based on the representations we had, etc., on 28th of April, we received a communication saying that the government of Rajasthan has kept its order of the first week of April in deferment for the next period of three months. And therefore, lignite mining has continued since then. So this is the whole issue, what had happened. Prashant, you would like to add anything?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Yes. So basically, as Pritesh explained that this is just a governed by an implementation agreement, wherein government of Rajasthan is going to secure the 100% of the power supply and they were responsible to provide us the lignite for this particular power plant. And because of this technical issue, there is an approval, which is again being sought from the government of India by government of Rajasthan. And government of India has been actively working upon it, and they are going to — they are taking necessary steps. But as far as JSW Energy is concerned, we are — we have been assured of the full lignite supply, and that is what we are getting the return on the — our fixed cost, what we have made into the power plant. So that is what — we continue to receive that. And we are quite confident that, that will continue to happen.

Rahul Modi — ICICI Securities — Analyst

Perfect. This is very helpful. Sir, can you give us some update on the five gigawatt of some hydro projects that we signed with various states? Any time line, what can be the tariffs like and some economics around this? That would be very helpful.

Prashant Jain — Joint Managing Director and Chief Executive Officer

We are at this point of time acquiring the land and as well as we have applied for the environment clearances at various locations. We have already received the worker approval at some of the power — some of the hydrocomputer storage locations also. And we expect that in the current financial year at least one hydropump project we will be starting, which will be an integrated project for our green hydrogen project in Karnataka. So we will be making — we have not talked anything about the Karnataka these project, but we have — we will be in the last stage of getting the approval from government of Karnataka, and that will be the first project which we are going to start construction, which will be an integrated project, wind, solar and then which will be used for production of green hydrogen and green ammonia. So eventually, there are various policies which will be coming up. But at this point of time, there are no policies. But we believe that this will be the lead or power for renewable energy going forward, and that’s why we are building all these locations and sites. And in next couple of months when we start the project, we will be sharing with you a lot of economics and data about it.

Rahul Modi — ICICI Securities — Analyst

Sir, what is the capacity which we are targeting in Karnataka?

Prashant Jain — Joint Managing Director and Chief Executive Officer

So you can say that in all states put together, we are talking about close to 10 gigawatt of the capacity, and it is absolute. This is the megawatt hour — this is the actual turbine capacity. But typically, all these plants will be adding six to eight hours of storage. So 10 gigawatt will be become 60 to 80 gigawatt hour kind of storage capacity. So that’s the kind of capacity. In Karnataka also, there are the three projects which we are contemplating or to put together the combined capacity will be one gigawatt.

Pritesh Vinay — Director of Finance

So Rahul, if I may add to that, in terms of the exact configuration once we have firmed up the proposals and presented and sought Board’s approval, we will make appropriate disclosures at that point of time.

Rahul Modi — ICICI Securities — Analyst

Sure. Perfect. Any just last question from my side, any bids that you are expecting, either from [Indecipherable] or any other agencies have any stake in both either solar or wind or the book in the near term?

Prashant Jain — Joint Managing Director and Chief Executive Officer

So given the commodity prices and then where the prevailing power prices and the kind of a big which people have done it, on sense now whether they will be happening or not. And that’s why the point which we have been making all the time that there is a difference between securing the bid and creating a pipeline and actually executing it. That’s what has been differentiated in JSW Energy and rest of the players. We are executing and building the project which we have secured the bid and signed the PPA a couple of months ago, and we are in a phase of commissioning. So we don’t believe that at the prevailing power prices, prevailing commodity prices and project costs correlate each other. And also the non-enablity of the solar panel and only dependence on the domestic capacity, you will be seeing any kind of a renewable capacity addition in the next two years’ time frame. It will be some time away before the — you start seeing these kind of effects as well as the projects.

Rahul Modi — ICICI Securities — Analyst

Noted. Thank you very much and all the best.

Operator

The next question is from the line of LaSer from Lombard Odier Investment Management.

LaSer — Lombard Odier Investment Management — Analyst

Hi. Thank you. Just one question. We saw TSM hydro. Just wanted to understand, given these small we can see, which is also the counterpart for the project there, any concerns you have seen? I noticed, of course, in the results there, the retable position remains quite strong. But just from your perspective, have you seen any change, any kind of concern?

Pritesh Vinay — Director of Finance

Look, I mean, I think in a way, you answered your question yourself. 29 days of receivables at hydro at the end of March compared to 38 days same time last year, that tells me about the quality of receivables, collections, etc. So yes, as far as we are concerned, then there’s absolutely no issue with PTC as a counterparty. This — I think this is our 10th year that this asset post COD has been operating with CPC an counterparty, and they’re absolutely no short that.

LaSer — Lombard Odier Investment Management — Analyst

Okay. So no changes of any kind of thing? Of course, they come the issues there are more financial in nature, but optionally the things remain as timely?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Any change in there is a positive not negative.

LaSer — Lombard Odier Investment Management — Analyst

Okay. And can you explain why is that?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Because of the quality of receivable what we are having and because all the overdues have been paid, and we have actually covered all of our late payments are charged from all the discounts. And also whatever was pending in terms of regulatory order, that matter have been also tried.

LaSer — Lombard Odier Investment Management — Analyst

Perfect. Thank you.

Operator

The next question is from the line of Apoorva Bahadur from Investec India.

Apoorva Bahadur — Investec India — Analyst

Hi. Thank you so much for the opportunity. Congratulations on a good set of numbers. Sir, I wanted to understand more on your pump hydro plants, I mean you had a plant. I know you are yet to disclose them formally the Board approval. But do you then shed some light. But typically, we understand that — it takes around three to four years to develop a pump hydro project. So are we looking at around the same time frame by when our hybrid and mention will begin? Or is there a possibility to sort of track the time lines that we are looking at something solo?

Prashant Jain — Joint Managing Director and Chief Executive Officer

So typically, it takes that much of time, but not typically — like any hydro project also takes five to seven years’ time frame. But we are on course of commissioning our Kutehr hydro power plant in less than four years’ time frame. We start building the foundation of that project in October 2019, and we are expecting that we will commission the project in flat 44 months’ time frame. And similar activities we have done in other project areas. So we are quite confident we will be doing in a much shorter time as far as the pump hydro projects. And so we are not that much of concern in terms of the timing-wise. We are — at this point of time, we want to just integrate the things.

And we are so upbeat about this particular opportunity because we know that this will put us into the product and services business as compared to the only power generation business because it is more and more competitive. And then sometimes, we find it very tough to compete with our competitors, too. In order to build a large book, they become unrealistic, and then that becomes quite a big challenge. That’s why we want to produce power for our own consumption, and we want to offer products and services. And this is one area which will catapult this company to a product and services company. So I think as we start building this project, you will see that this is putting into this company into a different orbit.

Apoorva Bahadur — Investec India — Analyst

Interesting. Sir, you said that the green hydrogen is probably same business model of the company. Can you share what costs are you estimating at which reducing green hydrogen, whenever you do that? And what type of ROCE business this will be? So will it be like a 20% less ROCE business? Or you are expecting something even better?

Prashant Jain — Joint Managing Director and Chief Executive Officer

What I can tell you is this is something which is going to change the way that we do business in the fossil fuel industry and then how the is going to be changed. The size of opportunity is quite big. And right now, there are a lot of numbers which are there into the public domain, which has been disclosed right from $4 to $6 of the current production cost of the green hydrogen and is a road map of people going to $1 per kg by 2030 and beyond, including Miton and various other corporates. What I can tell you is that we will be quite competitive as compared to what people are talking about and much are — what people are talking in terms of the road map.

And so just give us some more time because why we are talking about little more time. We are absolutely at a point where we can start placing the order immediately and start the project and could have taken the Board approval in the — today’s Board meeting also. But as you know, the world is right now moving through a lot of supply disruption — demand and supply disruption in terms of a lot of commodities and because of which, the visibility on the prices is not firm. And that is what is happening with our suppliers, and that is what we are in final stage of discussion. And as soon as we are seeing some visibility, we will be able to concretize these plans, and then we will be in a position to discuss with you.

Apoorva Bahadur — Investec India — Analyst

Sure, sir. Sir, last question from my side is in — or further like if I can make you post that. And as I think Rahul mentioned earlier that your prediction of power shortage has come true. Actually, it is realizing. So now do we intend to reenter into thermal generation again, sir, probably Barmer second pace?

Prashant Jain — Joint Managing Director and Chief Executive Officer

So we have a stated policy. We have talked about it. And I think we — it’s — if we want to — for example, if I want to talk to you about the Barmer project, it was never contemplated based on the nutshell power. And as a stated approach, what we will be setting up the power capacity, if we are supplying, either we are going to supply to the DISCOMs or we are going to consume on our own. But we are not keen to look at any capacity based on the merchant generation. So these are the transitory situations, which will last for a couple of quarters or maybe a couple of years because there has not been enough capacity addition in the sector.

And where the economic growth has been happening and that has been resulting into the power shortage. That does not mean that one should add up a lot of capacity immediately, but I think the energy transition is here to stay. And of course, there will be some more life which will happen to the thermal generation like you have seen the life which has been given back to oil because everybody has written off oil six months ago. Now everybody is talking very, very positive about oil. These are transitory volatility. But we see that the energy transition is here to stay. So we are pretty focused at this point of time. We will continue to work in the trajectory where we are.

Operator

[Operator Instructions] The next question is from the line of Sam Gu from Nivesh.

Sam Gu — Nivesh — Analyst

Hello Sir. Congratulations. I have a question regarding the current power pricing. So as you can see that currently, in testing or power prices. And what are your outlooks on the [Indecipherable]…

Operator

Voice is not coming very clear. May I request that you speak through the handset?

Sam Gu — Nivesh — Analyst

Okay, sir. Hello?

Operator

Sir, go ahead.

Sam Gu — Nivesh — Analyst

Am I audible?

Operator

Yes, you are.

Sam Gu — Nivesh — Analyst

So my question is regarding the current power prices that you can see that the coal and is rising power is rising. And due to the coal shortage supply of poorer, we are facing this crisis. So what are your outlooks with regard to naming power crisis impact on our business and also on the — for the coming months and season?

Prashant Jain — Joint Managing Director and Chief Executive Officer

Okay. So I think it’s a function of demand and supply and then input cost. These are the two things which are changing the power prices because thermal coal prices internationally are pretty elevated level. And India imposed close to 200 million tons of coal. And that price at the current price of $300, that variable cost to produce power itself is INR nine to INR10. So as long as thermal coal prices are higher, there will be enough capacity available to produce power and give it to the grid. And secondly, right now, the power demand is elevated. If the power demand comes down, in that situation, there will be a moderation on the power prices. As long as these two conditions are in favor of higher prices, power prices will remain at any rate level. So if it is on a general basis, I can see that the power prices will continue to remain elevated, but it will keep on fluctuating depending upon the monthly or daily demand and supply situation.

Sam Gu — Nivesh — Analyst

Okay, sir. Sir, I have an additional question.

Prashant Jain — Joint Managing Director and Chief Executive Officer

Go ahead.

Sam Gu — Nivesh — Analyst

There is a cap of INR12 per unit on the power. And so sir, what — so we get our basic raw materials or in Camacari coals some government from Colonia or be imported from outside?

Prashant Jain — Joint Managing Director and Chief Executive Officer

We only import. We don’t source coal from the domestic forces.

Operator

Ladies and gentlemen, we will take that as the last question. I now hand the conference over to the management for closing comments.

Ashwin Shivkumar Bajaj — Group Head of Investor Relations

Yes. Thank you, operator, and thanks, everyone, for joining us today. Please do contact us if you have any further questions. Thanks and good evening.

Operator

[Operator Closing Remarks]