JSW Energy gets a shock from short-term power pain
Subscribe to enjoy similar stories. JSW Energy Ltd’s stock fell by over 6% on Wednesday after its December-quarter results came as a big disappointment even as power generation by the company shot up 10% year-on-year to 6.8 billion units. JSW Energy’s consolidated Ebitda fell as much as 18% year-on-year to ₹914 crore, with its margin slipping to 37.5% from 43.7% a year ago.
The primary villain in this story was short-term power realizations, which fell sharply. Short-term power rates are volatile and impact profitability, even though most of JSW Energy’s capacity is locked in with long-term power purchase agreements. Average merchant power rates in the third quarter at the power exchanges declined 26% year-on-year to ₹3.71 per unit owing to better availability of hydro power and firm power.
As such, JSW Energy has not disclosed its own merchant power realization per unit. Adding to its profitability woes was an 18% rise in employee costs and 26% in other expenses. For the thermal capacity segment, operating revenue makes little sense because fuel cost is pass-through in nature due to the fluctuations in coal price.
Simply put, higher coal prices means higher power rates (boosting sales) and vice versa. Thus, power generation volume and Ebitda are key numbers to track. While long-term thermal power generation volume was up 4%, short-term thermal power generation grew by a robust 23% to 1 billion units.
JSW Energy had additional volumes from unit 1 of the Utkal plant with a capacity of 350 MW. Still, thermal segment Ebitda fell 25% to ₹513 crore as the impact of higher volumes was offset by lower realization. Thermal power generation volume should pick up in the fourth quarter as unit 2 of Utkal with 350 MW capacity was
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