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JSW Energy - 3QFY11 result
JSW Energy 3Q results were marred by high fuel costs (Rs2.7/kWh) and
high interest expenses (includes one time charge of Rs290m). The
company continues to face issues in stabilization of units at both Barmer
and Ratnagiri power projects. With 50% of its coal to be purchased on
spot market in FY12 the company remains vulnerable to the volatility in
thermal coal prices. We are cutting FY11 estimates by 31% to factor in
poor 3Q results and management guidance of further 15% increase in
fuel costs in 4Q. Maintain negative call on the stock.
High fuel costs/ interest expenses result in 25% y/y profit decline
JSW Energy’s 3Q net profit at Rs1.5bn, down 25% YoY, was impacted by
higher fuel costs (up 58% YoY) and high interest expenses. The fuel cost at
Rs2.66/kWh in 3Q was the highest in the last seven quarters. The interest
expenses included Rs290m charge for refinancing related costs – the
company refinanced Rs18bn debt in 3Q resulting in 1.6% reduction in interest
costs.
Barmer and Ratnagiri still not stabilized
Two units at Barmer (135MW each) registered a PLF of 61.5% in 3Q. The
generation was impacted due to the breakdown of the material handing plant
and logistical constraints faced by the company for moving imported coal to
the site. The company has not received any coal from Coal India for Barmer
project as of yet even though it has been awarded a tapering linkage.
Ratnagiri units (300MW each) are still not stabilized and there were back
downs by the procurers which also lead to poor PLF.
Fuel supply will continue to rely on spot purchases predominantly
The company expects to meet 50% of its requirements (3mt) of coal in FY12
via spot market purchases while the balance would be met by its long term
coal tie-ups from Indonesia and mines (owned by JSW Energy) in S Africa.
The recent acquisition of CIC Energy would translate in coal supplies only 5-7
years from now.
FY11 earnings cut by 31%. Maintain Sell.
We are cutting FY11 earnings for the company by 31% to factor in lower than
expected 3Q results and the management guidance of further 15% increase
in fuel costs in 4Q. The company is hopeful for Rs4.5-5/kWh merchant tariff
for FY12 which we believe is quite optimistic (our assumption is Rs4/kWh)
given large scale capacity addition over the next 12 months and the states
reluctance in buying power at very high tariffs. We maintain our negative call
on the stock.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
JSW Energy - 3QFY11 result
JSW Energy 3Q results were marred by high fuel costs (Rs2.7/kWh) and
high interest expenses (includes one time charge of Rs290m). The
company continues to face issues in stabilization of units at both Barmer
and Ratnagiri power projects. With 50% of its coal to be purchased on
spot market in FY12 the company remains vulnerable to the volatility in
thermal coal prices. We are cutting FY11 estimates by 31% to factor in
poor 3Q results and management guidance of further 15% increase in
fuel costs in 4Q. Maintain negative call on the stock.
High fuel costs/ interest expenses result in 25% y/y profit decline
JSW Energy’s 3Q net profit at Rs1.5bn, down 25% YoY, was impacted by
higher fuel costs (up 58% YoY) and high interest expenses. The fuel cost at
Rs2.66/kWh in 3Q was the highest in the last seven quarters. The interest
expenses included Rs290m charge for refinancing related costs – the
company refinanced Rs18bn debt in 3Q resulting in 1.6% reduction in interest
costs.
Barmer and Ratnagiri still not stabilized
Two units at Barmer (135MW each) registered a PLF of 61.5% in 3Q. The
generation was impacted due to the breakdown of the material handing plant
and logistical constraints faced by the company for moving imported coal to
the site. The company has not received any coal from Coal India for Barmer
project as of yet even though it has been awarded a tapering linkage.
Ratnagiri units (300MW each) are still not stabilized and there were back
downs by the procurers which also lead to poor PLF.
Fuel supply will continue to rely on spot purchases predominantly
The company expects to meet 50% of its requirements (3mt) of coal in FY12
via spot market purchases while the balance would be met by its long term
coal tie-ups from Indonesia and mines (owned by JSW Energy) in S Africa.
The recent acquisition of CIC Energy would translate in coal supplies only 5-7
years from now.
FY11 earnings cut by 31%. Maintain Sell.
We are cutting FY11 earnings for the company by 31% to factor in lower than
expected 3Q results and the management guidance of further 15% increase
in fuel costs in 4Q. The company is hopeful for Rs4.5-5/kWh merchant tariff
for FY12 which we believe is quite optimistic (our assumption is Rs4/kWh)
given large scale capacity addition over the next 12 months and the states
reluctance in buying power at very high tariffs. We maintain our negative call
on the stock.
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