Following the steep fall in power demand during the nationwide lockdown to stop the spread of the novel coronavirus, thermal power producer JSW Energy has rebalanced its risks across segments to manage cash flows. In the latest interview for Mint’s Pivot or Perish series, Prashant Jain, joint managing director and chief executive officer, JSW Energy, said that the company has learnt from the covid-19 experience, and has emerged stronger to meet future challenges. Edited excerpts:
How has JSW Energy pivoted amid the covid-19 crisis?
The overall power demand in India went down by 24% in April, and 19 % in May, but demand for the current month is down by only 11% till 25 June.
Covid-19 has been an unprecedented event that has significantly impacted people and organizations across the globe.
A multi-pronged organizational response is necessary to address all major levels—human, operational, financial and strategic—from a business continuity point of view.
At JSW Energy, we have been quick to adapt, and was proactive in responding to the situation by adopting various measures such as adopting best safety and hygiene practices, realigning mobility and enhancing digital working capabilities at the human level; monitoring operations better, managing plants efficiently and optimizing supply chains; implementing cost control, strengthening our balance sheet and improving liquidity position; and revamping risk mitigation, rebasing business strategy and communicating proactively with stakeholders at the strategic level.
What do you think of the stimulus package announced by the government? Are there any problems with the implementation of the package?
Everyone in the industry had been looking forward to this, and many will get some comfort for future.
It is a major push to revive the financial health of ailing power distribution companies (discoms).
Liquidity infusion will breathe fresh life into the power sector and protect the cash flow of discoms.
This money will help them to repay most of the outstanding payments that they owe to power generators and transmission companies.
Unconditional and irrevocable state government guarantees and certain performance obligations are a prerequisite under the scheme.
The execution is taking a lot of time, but we expect it to materialize by August.
Have you extended the timelines for any of the projects or reworked capital expenditure programmes? Are you keen to enter the power distribution business?
We have put the GMR Kamalanga(a thermal power project in Odisha’s Dhenkanal district) transaction on hold and are going slow on our capital expenditure plan.
The power demand recovery is going to be contingent on the recovery of the economy.
On the distribution business, we may like to evaluate, as and when such opportunities emerge.
However, our focus area is limited to power generation.
Given the bearish outlook on the GDP and the economy, how does JSW see electricity demand panning out? What are the new areas of growth?
Power demand in the near term will be subdued and will reflect the ongoing trend in GDP.
However, over the medium to long term, the outlook of the power sector is intact, aided by population growth, rapid urbanization and stabilization of various schemes undertaken by the government, such as ‘Power for All’ and ‘24×7 Power’.
On the growth aspects, we expect our incremental growth from the renewable segment, which is the future.
What is your outlook for the energy sector? Do you see large shifts in how India will respond?
Over the next few years, we expect more demand-supply balancing, with a declining pace of thermal capacity addition, and retirement of old and inefficient thermal plants.
The share of renewable energy in the overall power generation mix will be slowly inching up, and increasing capacity additions in this segment attributable to strong government impetus and reduction in the capital cost due to technological improvements.
Further, 100% FDI (foreign direct investment) approval under the automatic route in coal mining will encourage large foreign players to have a meaningful say in the domestic coal market. This will promote healthy competition, and help the country to get access to cutting-edge mining technology, and reduce fuel supply shortages.
Further, higher availability of domestic coal can help reduce the reliance on coal imports.
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