JSW Energy expects revenues to grow 22% on a CAGR basis by FY26 on the back of capacity additions and new ventures like green hydrogen. The company also expects Ebitda margins to almost double during this period. Director-finance Pritesh Vinay, shared the company’s plans with Raghavendra Kamath. Excerpts:

What is your capital expenditure for the next three years?

What about the debt?

Power projects are capital intensive and usually financed with 75% debt and 25% equity. Our capex plan is based on financing equity portion through internal accruals while maintaining net debt /Ebitda in the range of 3.5-4 times on normalised/sustainable basis. Our current and targeted net debt/Ebitda is much below the industry average of more than 5 times. In addition, we have one of the highest credit rating among the independent private power plant operators, and therefore we don’t see any concern in raising debt for our capex plans.

You had plans to diversify into lithium-ion batteries. Now that the JSW group is getting to electric vehicles, are you fast-tracking the plan?

We are currently pursuing a battery energy storage solution (BESS) project of 1GWh for SECI (Spolar Energy Corporation of India) where we expect to sign the PPA (power purchase agreement ) in next few months and complete the project by FY25. For this, we intend to procure lithium ion battery from global suppliers. There is no plan for manufacturing Li-Ion Batteries currently. However, if a suitable opportunity comes up going forward, where risks and return expectations stack up, we would evaluate it.

What is the plan on unlocking value in some of the subsidiaries?

To deliver our Strategy 2.0 targets, we do not need any external equity capital and are adequately capitalised. However, if there is an opportunity to accelerate this growth in a return accretive manner, we would be open to do some value unlocking with some like-minded partners.

According to analysts your Ebitda is expected to grow 3.5x to Rs 10,667 crore with the optimisation of acquired RE assets (Mytrah) and an increased mix of high-margin merchant demand. As a result, Ebitda margins are expected to enhance to 57.1 % by FY26 from 31.8% in FY23. Please share your views

Directionally, we expect our Ebitda margins to increase as the share of higher margin renewable capacity increases in our total capacity. In FY23, renewable accounted for 34% of our total capacity which is expected to increase to over 60% by FY25. In terms of merchant market, we expect it to remain strong due to a power deficit scenario in the country, which is expected to sustain for the next few years. However, 85% of our capacity is tied up under long term PPAs which generates 90% of our Ebitda.

Despite the rise of RE, coal based thermal power remains the mainstay of India’s power generation. How do you look at this scenario?

India’s base load demand has increased to 200 GW (on an average) which is growing at a healthy pace — last 3 years power demand has grown more than 8% per annum. Assuming a 6% per annum sustainable growth in demand, we need 12 GW of incremental generation every year to meet this organic demand. Over and above this, decarbonisation aspirations of commercial and industrial consumers and energy transition related investments will need further RE capacity growth. This translates to 30-40 GW of nameplate installed capacity on renewables that the country will need to build annually. There is a challenge in scaling this up rapidly from the current annual capacity add of 15 GW. Hence, coal based thermal power will continue to be the mainstay to support the base load requirements. Recently, the ministry of power stated that the country would need 80 GW of thermal capacity additions by 2031-32.

How’s the company placed to take advantage of increased power demand?

JSW Energy currently has an open capacity of around 700 MW from imported coal based plants, which is opportunistically used to cater to the demand in the short-term or bilateral markets. Additionally, by end of FY24 we will have another 700 MW of domestic coal based capacity getting operationalised. So as we head into a tighter power markets with peak deficit shortages, we will have about 1400 MW of capacity — 15% of total operational capacity of 9.8GW by FY25 — available to cater to the spot markets.