JSW Energy - 2QFY11 Weighed Down By Weak Merchant Prices:: Citi

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JSW Energy Ltd (JSWE.BO)
2QFY11 Weighed Down By Weak Merchant Prices


 2QFY11 PAT 19% below estimates — 2QFY11 PAT at Rs1.85bn was 19% below
CIRA estimates due to lower than expected ASPs, lower generation, and higher
fuel costs. ASP in 2QFY11 at Rs4.34/kWh and net generation at 1.78 bnkWh was
was 14% and 3% below CIRA estimates respectively. Fuel costs at Rs2.6/kWh
were 11% higher than CIRA estimate of Rs2.35/kwh.



 2QFY11 PAT boosted by project management income — 2QFY11 PAT included
Rs370mn profit from project management services provided to JSW Steel. JSWEL
expects to book project management revenues form JSWSL for few more quarters.

 Operationally weak quarter — Vijaynagar (860MW) operated at 91% PLF due to
maintenance shutdown. RWPL (135MW) was shutdown for ~2months due to
problems in refractory lining of the boiler. The unit is operating at 100% PLF now.

 Project execution remains on track — JSWEL will set up additional 660MW
supercritical unit at Vijaynagar based on imported and domestic coal. Kutehr
(240MW) has received CEA clearance in the quarter. Kapurdi mine development is
60% complete and mining will start in 4QFY11E. JSWEL expects to complete
Jalipa land acquisition by December 2010.

 Though RWPL (1080MW) is facing some delays — JSWEL now expects to
commission all units of RWPL by July 2011 (CIRA est. March 2011) due to
difficult site conditions. The total project capex has been increased to Rs60.85bn
(CIRA estimate Rs50bn) due to delays in execution that resulted in higher IDC

 Maintain Hold (2L) — JSWEL has strong execution track record and execution of
most of the projects remains broadly on track. However risk reward remains
evenly balanced given high proportion of merchant prices and reliance on
imported coal.