Chairman and
Managing Director’s Message

Dear Shareholders,

JSW Energy has been committed to the objective of developing our nation and creating value for all stakeholders. By pursuing operational excellence and efficient capital allocation we have been able to successfully turn every challenge into opportunity, thereby building and growing a strong and sustainable energy business.

The year FY2017-18 was marked by a significant pick up in power demand, led by an improvement in the overall economic environment. Going forward, we expect the growth momentum to continue, led by government’s infrastructure push and various structural policy reforms which should augur well for power demand growth. The downside risks to India’s growth to watch out for would be spike in crude oil prices and rising interest rates.

With limited thermal capacity addition, incremental power demand is likely to be fulfilled by rising PLFs in thermal stations and the rapidly growing renewable energy segment, where the size of the opportunity is substantial.

FY2017-18 in perspective

Over the past year, we have substantially deleveraged our balance sheet, improved operational efficiencies and created a platform for future growth.

JSW Energy strengthened its business substantially in FY2017-18. The Company’s long-term PPA proportion in overall offtake mix went up from 64.5% at the beginning of the year to 75% by the end of the year with additional long-term PPAs of 462 MW contracted during the year. This is a commendable achievement considering that very few long-term PPAs have been signed in the power sector over the last few years. As a result, our hydropower business, housed in Himachal Baspa Power Company Limited, is now 100% tied-up in its offtake, joining its fellow subsidiary, Raj WestPower Limited is enjoying this enviable position. The Company also secured group captive contracts of 86 MW for its Ratnagiri plant, enabling the long-term PPA proportion for this plant to reach close to 72%.

The Karcham-Wangtoo hydropower plant clocked its highest ever generation since its commissioning. Operations at the other plants were broadly satisfactory with the exception of Vijayanagar, where the plant generation was affected by erratic schedule. The Company also faced cost pressure due to rising imported coal prices.

Continued innovation, manpower productivity improvement and focus on Total Quality Management helped us reduce our O&M costs by almost 9% while enhancing safety and security of our operations.

JSW Energy has one of the strongest balance sheets in the power sector in India. The Company’s consolidated net debt to equity ratio declined from 1.29x to 1.02x led by proactive prepayments, scheduled repayments and intensive working capital management. The Company also implemented an aggressive plan of receivables collection during the year. Proactive refinancing, upgrade in credit ratings of subsidiaries and a general decline in interest rates, led to the weighted average cost of debt lowering by 114 bps during the year.

Exciting growth plans launched

In its endeavour to become a futuristic organisation with focus on sustainable development, the Company has decided to enter the business of Electric Vehicle (EV) manufacturing including associated businesses of electric battery/storage systems and charging infrastructure.

EVs represent a disruptive trend in the automobile industry and provide a level playing field for a new entrant such as JSW Energy since incumbents, saddled with their legacy business, are stripped of any advantage. Given the concerted push by the government to switch over from internal combustion engine technology to electric battery technology and in line with the ‘Make in India’ vision that the Prime Minister has outlined, the Company intends to launch its own electric vehicles.

The Company has taken various steps in this direction in the past year: A dedicated team has been formed for strategy and product development comprising of several auto industry experts; MOUs have been signed with two State Governments for setting up plant facilities; and discussions are progressing with various technology and design engineering providers and leading global OEMs for suitable partnerships to roll this forward. The Company intends to leverage on this huge and revolutionary growth opportunity – at the same time any capital expenditure shall be done maintaining the JSW Group ethos and principles of prudent capital allocation, risk mitigation and financial discipline.

In its endeavour to become a futuristic organisation with focus on sustainable development, the Company has decided to enter the business of Electric Vehicle (EV) manufacturing including associated businesses of electric battery/storage systems and charging infrastructure.


In its existing business, JSW Energy intends to further increase the longterm PPA proportion in the offtake mix over the next 18 to 24 months. We will continue to look out for value accretive acquisitions whilst being prudent and patient in waiting for the right opportunity.

The Government of India and the power industry are focusing on building and growing the renewable energy segment due to sustainability considerations and climate change obligations. The cost competitiveness of renewable energy has also undergone a sea change and is now at near parity with that of conventional energy. Attracted by this large and growing opportunity, the Company has announced plans to enter this segment based on a calibrated and cautious approach.

Moreover, the introduction of the Insolvency and Bankruptcy Code has been a landmark economic reform for India. The power sector has been one of the largest contributors to the country’s stressed assets in recent years. With a mix of commissioned and underconstruction projects, these assets face a wide gamut of financial, operational and regulatory challenges, including but not limited to cost-overruns, absence of fuel supply arrangements/coal supply shortage, lack of power offtake agreements, inability of promoters to infuse equity and working capital constraints. These circumstances are likely to lead to a consolidation of the sector over the coming months, and JSW Energy will be actively looking for appropriate opportunities in this space.

Considering all these growth initiatives, it is prudent to conserve cash and the Board has thereby recommended not distributing any dividend for FY2017-18.

Outlook

Over the next 3 to 5 years, we expect power demand to grow steadily considering the various measures undertaken by the Government of India, viz. the UDAY scheme, ‘Power for All’ by 2019 initiative and the ‘Saubhaghya’ scheme. Post UDAY scheme, we have seen the financial health and liquidity profile of the discoms recover substantially. The country achieved electrification of all its villages by end of April 2018 which is expected to lay the ground for enhanced power demand from rural India going forward.

With these positive prospects and limited capacity addition going forward, power sector PLFs may firm up over the medium to long-term. We are also likely to see increased consolidation in the power sector which will further aid the demandsupply balancing. However, higher coal prices and constrained domestic coal availability, especially for private sector power plants, continue to remain key concerns for the sector.

In its existing business, JSW Energy intends to further increase the long-term PPA proportion in the offtake mix over the next 18 to 24 months. We will continue to look out for value accretive acquisitions whilst being prudent and patient in waiting for the right opportunity.

We remain fully committed towards contributing to, and empowering, our society. Our purposeful CSR engagements and initiatives are geared, inter alia, towards enabling an inclusive growth and being sensitive towards the environment.

I am grateful to the various State Governments and the Central Government for creating an enabling environment and would also like to thank our investors, regulators, bankers, rating agencies, customers, suppliers, advisors, employees and all other stakeholders for their wholehearted support and co-operation in building the franchise of JSW Energy. I hope to continue to have their support in our journey towards taking your Company to even greater heights.

Best wishes,
Sajjan Jindal
Chairman and Managing Director