JSW Energy Limited analyst Q&A

Thank you very much. We will now begin the question -and-answer session. Our first question is from the line of Sumit Kishore from Axis Capital.

My compliments on strong bottom-line performance as well as to build up in the pipeline. The first question is for the pipeline projects of 5.65 GW are the ones where PPA has not been -- I mean what is the general expectation by when do you expect to close PPA signing for these projects? And realistically, in FY27, what portion of this capacity would get commissioned? That's my first question.

Okay. See, when like against the bids which we have won, we have signed PPAs for 2 GW and the rest all like the agencies who have conducted the bids are in touch with the buyers, different discoms, different states, which normally takes a due course of time. And very soon, we expect that these PPAs will get fructified and will be signed. Giving the exact time line may be a challenge, but we expect very soon these PPAs further will be signed . Normally, it takes anything between 30 to 70 days to complete this activity. And by FY27, as I have said that whatever PPAs are signed, the completion from the PPA signing date is normally 18 to 24 months depending on when we sign the PPA based on that, those time lines, definitely will be met and the pr ojects will be executed accordingly. This is over and above that. Whatever the captive requirements are there, keeping in mind whether it's solar or solar, the same time lines of 18 to 24 months, those capacities also will be added.

And this would also include signing PPA with JSW Steel for the group captive capacity?

Yes, exactly. That will be over and above 2 GW, which is 1.3 GW, expected to be signed very soon.

My second question is that with the battery prices evolving rapidly and we have seen stand-alone BESS GUVNL bid discovery. So how do you foresee the load following FDRE rates settling down in coming quarters? We have seen the SECI II FDRE bid that JSW had done a portion. Yesterday or day before, we saw that solar plus battery storage. Could you please give a comment on the direction.

See, exact number, that is -- definitely depends on what kind of requirement. As you said day before yesterday, was a different solut ion, which was there, which is a mix of solar plus and battery energy storage and taking care of only discharge during the evening peak, so it depends on how the project is designed, what is the requirement and how much of energy is to be met it depends so giving the exact tariff for anything. Like someone wants a 80% power, 80% in terms of energy terms will have a different product design. But yes, as you have been seeing, it ranges from like day before yesterday with a single discharge in solar at about m aybe 3.42 to whatever the tariff which has been discovered is a reasonable tariff. And just I would like to reiterate here for us, the tariff is our benchmark returns, whenever, wherever we are getting and we are meeting our benchmark returns. That is wher e only the tariffs we accept and go for winning the bid, not just for the sake of winning the bid. So we are very, very sure about what is our benchmark returns that we are getting or not. So tariffs, whatever being discovered and depending on what kind of product mix which is required in terms of the storage and solar or whether it is FDRE, which is solar , wind and storage. So, it depends on the product design rather than giving a one straight number, which is possible in the plain vanilla solar or plain vanilla wind, here, it depends on what is the product which is required.

Just one follow -up on this. Let us say that FDRE II rate of 5.59 or thereabouts, which was discovered in March, is the same going to happen today? Have battery prices come down from there also? Or has the equipment price corrected so that you discover a price which will be sub ₹5 for the same tender 3, 4 months down the line?

Yes. Very good question. We are seeing the moderation in the battery prices, the cell prices. I think the safe solution, we feel that can be provided in the range of maybe anything between ₹4.6 to ₹4.8 also.

So, if I can also comment here, the challenge is kind of crystal balling something like this and a very important element that we have so far not touched upon is that a relative competitive intensity and what underlying returns is anybody trying to solve for. So , what is the effective project cost based on the negotiation capability that any individual developer can have? And what are the hurdle rates of returns that one is solving for? So, when you do an overlay of this, then it becomes difficult to kind of extrapolate where do you think something like this can normalize because at different points of time in the market for strategic reasons, different people could be driven by various motivations, right? So there could be somebody who's trying to have a tick in the box for multiple strategies for some other reasons. There could be somebody who's building a pipeline for a potential capital raise. So it becomes challenging in that way to extrapolate, right?

Yes. Just last question. Presentation mentioned that in less than a year now we will have your 1 GWh BESS project as well as the green hydrogen project operational. Could you give some color on where you have ordered the battery, the electrolyzers, if something can be shared for better understanding and the project cost.

See Sumit, when we say that when we design this and whatever it is that our project cost and other things are secondary for us. Primary thing is to ensure that I'm getting my desired returns, which is a mid -teens. In this case, yes, with the moderation in the price s of the equipment, we are quite confident that it will be maybe high -teen returns, which we are going to get on these projects. So rather than what is the project cost , it is important that what the returns I'm getting and I'm absolutely confident that we will be getting the returns higher than what we expected when we planned these projects.

The next question is from the line of Mohit Kumar from ICICI Securities.

Congratulations on a good set of numbers. My first question is just clarification. Are you running the Ratnagiri Unit-1 on a case on basis. Is that right?

Yes, yes. That's right, Mohit.

See, Mohit, definitely, now states have again started looking for the PPAs. For Ind-Barath, today, the advantage with us being close to almost a pit-based plant and the sufficient coal availability, which is there. And overall, our fuel cost is very competitive and low . We see that right now, the opportunity in merchant market is significant, which may not be for a long term, but we see next 1 to 3 years till the time sufficient thermal capacities get added . And, the way we have demand growth is much more than what everyone has been anticipating, we see this as a good opportunity for us in near term. So right now, we will be continuing in the merchant market. But yes, the landscape and what the Government of India also has announced to meet the growing demand the new capacity additions in thermal, which is in excess of 80 GW, which is required by 2032. As and when the opportunity comes and the state comes, we will be definitely looking towards this opportunity going forward also for adding further capacities in thermal space.

Anything in near term or medium term, do you think the next 1 year, you can start a new power plant or commencement of new construction?

No, that will not be. It takes its own due course of time in setting up a new thermal power plant, that time definitely will be there, but that we will be going for any significant investment based on if we have the PPAs in hand.

Understood. My last question, sir, what is the portfolio of RE. Where we are L1 and where the PPA and LoA has not being issued?

So Mohit, if you can check slide number 12 of the presentation that should help you.

The next question is from the line of Anuj Upadhyay from Investec Capital.

So my question belongs to the underperformance across the Vijayanagar station and also the low PLF across the Barmer, which still hangs around in the range of 66%, 67% out year. Can you throw some light on reasoning behind the same?

So Anuj, we also earlier tried to explain that if you look at Vijayanagar for the station out of 860 MW, we have only about 310-odd MW, which is tied under PPAs, right? So the balance is open for sale in the merchant markets, and that is an opportunistic trading tha t has to be done depending on where the dark spreads are, right? And Vijayanagar plant because it is inland, the fuel cost as compared to Ratnagiri is going to be higher because of the inland transportation costs. So from time to time, based on unit economics, the team will go ahead and book for trades in the short -term market. And hence, you're always going to see variability in the PLF for the variability of the Vijayanagar station, right? As far as the Barmer plant is concerned, in the first quarter, we had some planned outages, how some of the units, all of which have got completed. So if you look at the CEA data for the current one, for example, is running at a very high PLF. So the PLF for the first quarter is lower due to planned outages.

Okay. So there's a planned outages. So would there be any under recovery for Q1, which was booked for Barmer?

So the recovery or under recovery is actually is estimated on an annual basis. So yes, for the quarter, there's going to be another recovery, but if we meet up the deemed PLF numbers during the course of the year, there will be makeup for that towards the back end of the year, that's how it is done.

Fair enough. And lastly, on the Vijayanagar again, does -- I mean like initially, we had thought that project may operate under Section 11. But again, as you mentioned about it depends upon the unit economics and the opportunity. So Section 11 kind of a thing.

You're right. Section 11 was there till only, I think, end of May. So April and May there was Section 11. But I think it's not on Section 11 anymore.

The next question is from the line of Ketan Jain from Avendus Spark.

Sir, my first question is a follow-up on the Section 11 thing. So do you expect Section 11 to be extended by the government?

No. So the thing is that it is first and foremost very difficult to forecast or estimate government actions going forward becaus e putting ourselves in the government shoes, I believe the underlying drivers for that decision are going to be the perceived demand supply gap, right? So while on the one hand, demand growth has been pretty strong, but we are off the peak season demand of summers and monsoons are in and you had additional sources of supply like hydro, the Wind season is about to kick in. So I'd be surprised if anybody is estimating a demand -supply mismatch in the next couple of months. But who knows for the second half of the year post monsoon, you will say, October to March period, which is a peak demand period based on the estimated load curve and the supply from various sources at the right time, the government might take that call. But I think there is typically no heads up for these kind of situations.

Understood. My next question is what type of realizations and input costs are you seeing Ind - Barath and Vijayanagar plants?

So what will probably help you understand is that we will not be discl osing station by unit cost details, but it's also important to help you think about these things, right? So for example, let's take one by one, let's take Ind-Barath, because we don't have a PPA, so there is no FFA, so the only source of coal is through th e auction route, right? Now it is either the spot e-auctions or through the shakti auction schemes under the Ministry of Power. And there we, from time to time, participate and we've guided in the past that we have looked at average cost of between say ₹2.75 to ₹3.0 on an average for Ind-Barath. On the imported coal-based stations we source everything from the seaborne market. So you'll see how the API 4 indices are moving and then you will be able to make a good estimate for both Ratnagiri. I also said in a response to an earlier question that Vijayanagar is inland, so there's an additional Indian transportation cost. So there will be a higher spread between Ratnagiri to Vijayanagar.

Understood. Just one last question, sir, on the merchant capacity. Sir, is the demand more in the merchant capacity in the non -solar or in solar? Like what type of PLF does say maybe Ind - Barath operate in a non-solar hour?

See, Ind-Barath I'd just like to tell that definitely, as we are seeing that the demand during the daytime is definitely very good, but it is due to a large availability of solar during the day time , the thermal power is not there. But in our case, if you see how we have moved is that we have tied up our capacities on an RTC basis with various DISCOMS in short term, maybe 3 months period, or 4 months period. So we are insulated from what is happening during the daytime at Ind-Barath, and we have tied up our power on an RTC basis for a 3-month period. That is how we have moved.

The next question is from the line of Vishal Periwal from Antique Limited.

Sir, on your project capacity addition, the slide number 12, which do give some brief on it. In terms of FY26 addition, is it fair to say the 2.6 GW PPA, which is already signed, that will at least see a commissioning?

Yes. all solar projects which are there, wherein the time lines are 18 to 24 months that I think within the time lines, we will be adding that, yes. But yes, as you have said, we are sure that this capacity addition will be there during that time period.

Okay. Okay. And then in terms of our addition, I mean, from FY25 to FY30 I mean like in FY30, taking from 10 GW to 20 GW, is there any midterm target also for FY27 or FY28 for us as of now?

No. See, Vishal, as I told in my statement also, that we are confident that we are definitely about 1.5 years back when we said that 10 GW by FY25 which was the Phase I and 20 GW by FY30. But with the changed landscape and the opportunities which have come up and the amount of pipeline which we have in h and now, we are confident that this 20 GW will be achieved significantly earlier than FY30, and we are evaluating that what will be the number. That is a work in progress with the opportunities and our returns what we have benchmarked are protected and the opportunities which are going to be there in the bidding space. So FY30, there will be a definitely different number. But the 20 GW will be happening significantly earlier, that I can at least maintain.

Sure, sir. Sure, sure. And one last thing from my side. In terms of our capex, we did mention in the previous call, ₹15,000 odd crores we'll be doing it in FY25. Any number that we are targeting for FY26 or it's still open?

It's pretty premature now, Vishal, because one quarter of the new year has finished. And you are aware that there are more and more bids that are lined up for the remaining period. So I think for FY26, it will be a bit premature, maybe towards the end of this year will be the right time for this guidance falling in. Can we take the last question, please, Moderator?

The follow-up question is from the line of Ketan Jain from Avendus Spark.

Sir, my last question is, sir, are we taking or are we expected to face any transmission evacuation capacity problem in the under-construction wind projects?

No, under construction wind projects or all capacities in terms of transmission are tied up with all projects which are under construction.

Understood. And also are you seeing any transmission supply chain tightness in the substations or transformers?

No. See, definitely, everythin g has been lined up. Of course, with the kind of bidding environment with the increased quantum of bidding. Going forward, definitely, this is going to be one area, but we have already lined up knowing that what is going to be my FY25, FY26, FY27, we are a lready taking care of the entire supply chain, not only the transformers, but in terms of execution or any other aspects in terms of completing the project well in time.

There are no further questions, I would now like to hand the conference over to the management for closing comments.

Okay. Thank you, everyone, for joining today's call. And as I have told you, I've covered most of the points. But yes, my IR team is there in case there is any other follow-up questions later or any other information required, we request you to kindly write to our IR team, we will definitely be responding on that. Thank you very much, once again.

Thank you very much.

Thank you. On behalf of JSW Energy, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.