JSW Energy Limited Investor Presentation May 2015
2
Agenda
Overview Value Proposition Business Environment
Appendix
3 * Listed company
JSW Group – presence across the core sectors
JSW Steel*: India’s leading integrated steel producer (Steel Capacity: 14.3MTPA )
JSW Energy*: Engaged across the value chain of power business (Operational Capacity: 3,140MW)
JSW Cement: Slag cement plant of 5.3MTPA capacity
JSW Infrastructure: Engaged in development and operations of ports (Goa, Jaigarh, and Dharamtar Port)
JSoft Solutions: An IT & ITES arm of JSW group
4 * Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals
JSW Energy – Presence across the value chain
Power generation
Power transmission
Power trading
Equipment
manufacturing Mining
Engaged in power trading since June 2006
Handled trading volume of ~9 bn units in FY15
Operational transmission line – JV with MSETCL: two 400KV transmission lines
Currently operational capacity: 3,140MW*
JV with Toshiba, Japan for manufacturing of super-critical steam turbines and generators
Rajasthan (lignite): Kapurdi (operational with capacity of 7MTPA) and Jalipa (under development) mines; mineable reserves of 441mn tonnes
5 1) Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals, 2) Long term FSA with BLMCL for supply of lignite from its captive mines; BLMCL is a 49:51 JV between Raj WestPower Ltd (subsidiary of JSW Energy) and Rajasthan government undertaking, 3) Subject to mutually agreed adjustments, 4) USD/ INR = 60, 5) denotes start of first unit in respective fiscal year; TPP – Thermal Power Plant
Established energy company with 3,140 MW operational capacity…. proposed increase to 4,531 MW1
Proximity to load centre/fuel source/infrastructural facilities
Vijayanagar: 860MW
Configuration: 2 X 130MW and 2 X 300MW Units operating: since 20005
Technology: Sub-critical TPP Fuel Source: Gas & imported thermal coal Power Offtake: Merchant & Long Term PPA Project Cost4: INR 30,960mn/ $516mn
Ratnagiri: 1,200MW
Configuration: 4 X 300MW Units operating: since 20115
Technology: Sub-critical TPP Fuel Source: Imported thermal coal Power Offtake: Long Term PPA & Merchant Project Cost4: INR 54,942mn/ $916mn
Barmer: 1,080MW
Configuration: 8 X 135MW Units operating: since 20105
Technology: Sub-critical pithead lignite based TPP Fuel Source: Captive lignite mines of BLMCL2
Power Offtake: Long Term PPA Project Cost4: INR 71,660mn/ $1,194mn
Operational
Subject to acquisition of the assets1
Baspa II (300MW) & Karcham Wangtoo (1,091MW) 1
Units operating: Baspa II since 2003 and Karcham Wangtoo since 2012
Technology & Fuel Source: Hydro Power Offtake: Long Term PPA and Merchant Enterprise Value to JSW Energy4: INR 97,000mn/ $1,617mn3
6 USD/ INR = 60
Proven track record
Despite turbulent sector dynamics, delivering sustainable growth driven by focused execution and balanced strategy
FY12 FY15
CAGR FY12–15: 15% Total Revenue INR 62,654mn / $1,044mn INR 96,103mn / $1,602mn
CAGR FY12–15: 34% EBITDA INR 15,944mn/ $266mn INR 38,535mn/ $642mn
CAGR FY12–15: 6% Capacity (MW) 2,600 3,140
Diversifying fuel sources Fuel Type Thermal Coal Thermal Coal & Lignite
CAGR FY12–15: 14% Net Generation (MUs) 13,594 20,307
Presence across the value chain Business Segment Power generation, O&M,
transmission, trading, coal mining and equipment manufacturing
Power generation, O&M, transmission, trading, coal mining
and equipment manufacturing
CAGR FY12–15: 99%
Profitable and dividend paying since listing PAT INR 1,701mn/ $28mn INR 13,495mn/ $225mn
7
Corporate strategy
Selective
Growth
Diversification of Fuel Mix and Off-
take Arrangements
Focus on Resource Optimization
Strengthening Presence Across the Value Chain
Prudent Balance Sheet Management
Efficient capital allocation for organic growth
Pursue selective inorganic growth opportunities which will enhance cash flows and be RoE accretive
Increasing proportion of Long Term PPAs – goal to reach over 85% of total
Diversify both fuel mix and source – thermal coal, lignite and hydro
Committed to robust mix of sustainable eco-friendly technologies
Focus on prudent O&M practices and higher plant efficiencies
Continue to evaluate opportunities across the value chain – from mining, equipment manufacturing, generation, transmission and distribution for creating long term value
Retain prudent financial profile
Manage growth and debt profile to capture market opportunities without excessive risk
8 1) Calculated as INR 2.38/unit as per the interim tariff order against our tariff petition of INR 2.48/ unit
Business challenges and mitigation strategies
Barmer:
Fuel availability, PLF
Final tariff order
Received environmental clearance from Ministry of Environment, Forests & Climate Change (MoEFCC) for Kapurdi mine to increase the mining capacity from 3.75 MTPA to 7 MTPA until FY18
Expect to operationalize Jalipa mine in FY16
Barmer plant consistently operating above normative PLF
Expect final tariff order by FY16, current provisional tariff order covers ~96%1 of fixed cost petitoned
Ratnagiri:
Lower demand impacting scheduling and PLF
Under-recovery on PPA with state Discom
FY15 PLF – 73% (versus 71% in FY14) –
• LT PPA proportion improved to 773 MW on CERC norms
Filed petition for compensatory tariff with MERC under “force-mejure” clause of the PPA
Vijayanagar:
Reliance on merchant sales
While demand for merchant power remains strong, opportunity to tie up long term PPA looks promising over the next two years
Exposure to imported coal prices and currency volatility
Thermal coal price corrected in sync with global energy prices
Prudent Hedging policy for coal imports
9
Audit Committee Ensures regular review of audit plans, significant audit findings, adequacy of internal audit system,
compliance with regulations by the Company and its subsidiaries
Comprises of four Non-Executive Directors
Nomination and Remuneration Committee
Identifies qualified persons and recommends to the Board the appointment, removal and evaluation of Directors
Responsible for drafting policy on specific remuneration packages for Executive Directors and approving the payment of remuneration to managerial personnel
Formulate criteria for independence of Director, evaluation of Independent Directors, policy on Board diversity
Comprises of three Non-Executive Directors
Stakeholders Relationship Committee
Responsible for the functioning of the investor grievances redressal system
Comprises of two Non-Executive Directors
Risk Management Committee
Periodically reviews risk assessment and minimization procedures
Corporate Social Responsibility (CSR) Committee
Formulates and recommends to the Board a CSR Policy including list of projects and programs
Strong commitment towards CSR
Comprises of four Non-Executive Directors
Sound Corporate Governance
All key committees in place, having adequate independent director representation
10
Agenda
Overview Value Proposition Business Environment
Appendix
11
Value proposition
Efficient Capital Allocation and Execution Capabilities
Portfolio of Efficient Operating Assets
Diversified Fuel Tie-up
Balanced Mix of Off-take Arrangements
Robust Financial Profile
1
2
3
4
5
12 1) High capital cost due to CFBC boilers for lignite based power plant
USD/ INR = 60
Efficient Capital Allocation and Execution Capabilities
Vijayanagar (2000-2001): 260 MW @ INR 43.42mn/MW (~$0.72mn/MW)
Vijayanagar (2010): 600 MW @ INR 32.78mn/MW (~$0.55mn/MW)
Ratnagiri (2011-2012): 1,200 MW @ INR 45.78mn/MW (~$0.76mn/MW)
Barmer (2010-2013): 1,080 MW @ INR 66.36mn1 /MW (~$1.11mn/MW)
Leveraging upon strong project execution and project management expertise, and infrastructure
1
13
JSW
En
erg
y St
and
alo
ne
4
81%
93%
81% 83%
70% 64% 62% 61%
FY12 FY13 FY14 FY15
JSW Energy Standalone PLF All India private sector thermal power plants' PLF*
*Source-CEA
1) Deemed PLF, 2) Vijaynagar’s SBU I (260MW) or SBU II (600MW) received either the Bronze Shield or the Silver Shield in the category of ‘Performance of Thermal Power Stations’ for FY07/FY08/ FY09/ FY10/ FY11 and the Gold Shield for FY12 and FY13, 3) 4QFY14 PLF was lower due to fuel availability related back-down during Feb-Mar’2014, 4) Includes Vijaynagar (860MW) and Ratnagiri (1,200MW) plants
Portfolio of Efficient Operating Assets
Among the best run thermal power plants in India on a consistent basis
Vijayanagar plant has been consistently recognised as a top performing operating power plant by the Ministry of Power for 7 consecutive years2
Benchmark O&M practice resulting in consistently higher PLFs
2
Industry leading PLFs driven by O&M and execution expertise
Raj
We
st P
ow
er
PLF
1
73% 78% 87%
34%3
92% 88% 77%
87%
1Q
FY1
4
2Q
FY1
4
3Q
FY1
4
4Q
FY1
4
1Q
FY1
5
2Q
FY1
5
3Q
FY1
5
4Q
FY1
5
4
14
Diversified Fuel Tie-up and balanced Mix of Off-take Arrangements
^ Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals
1) short-term arrangements also includes other arrangements
Lower fuel risk, resilience to sector dynamics
Fuel sources –
o Thermal coal
o Lignite, and
o Hydro
4
66%
45%
34%
24%
31%
3,140MW* 4,531MW^
Imported coal Lignite Hydro
Power off-take arrangements – optimal mix of long term contracts & merchant power sales (return optimization) ….
Short term:
Ability to capitalise on better realisations
Ability to respond to demand fluctuations and shortages
Long term:
Stable cashflows, pre-defined returns
Insulated from inflation and fuel price movement, declining tariff
…. with aim to tie-up over 85% of capacity under long term PPAs
59% 66%
41% 34%
3,140 MW 4,531 MW^
Long Term Short Term 1
3
15
FY14 Return on Capital Employed (%2)
15.60%
11.46% 10.85% 9.96%
8.99%
5.70% 5.65%
JSW Energy CESC Standalone
NTPC Tata Power R Power Adani Power JPVL
FY14 EBITDA Margin (%1)
38.77%
70.79%
37.02% 30.45%
26.01% 24.94% 19.91%
JSW Energy JPVL R Power Adani Power CESC Standalone
NTPC Tata Power
FY14 Return on Net Worth (%)
11.49% 13.11%
9.26%
5.27%
0.96%
-2.43%
-4.44% JSW Energy NTPC CESC
Standalone R Power JPVL Tata Power Adani Power
Source: Other company data from CARE research
1) EBITDA Margin = EBITDA/ Net Revenue, 2) RoCE = EBIT/ Average Capital Employed
Robust Financial Profile
Sector leading margins and return ratios
Dividend paying track-record since listing in 2010
5
16
FY14 Net Debt/Equity (x)
1.36
0.37 0.68 1.29
3.14
5.95
7.00
JSW Energy CESC Standalone
NTPC R Power Tata Power Adani Power JPVL
Source: Other company data from CARE research
Robust Financial Profile
FY14 Net Debt/EBITDA (x)
2.58 1.81
2.99
4.71
8.01
11.72 13.09
JSW Energy CESC Standalone
NTPC Tata Power Adani Power JPVL R Power
Well capitalised balance sheet, best positioned to tap growth opportunities
Free cash positive for last three years, despite sector specific challenges
5
17
Well poised to capitalise on improving sector fundamentals
Regulated sector Stability of cash flows takes precedence over growth
Increase share of long term PPAs to over 85%
Leverage low fixed cost advantage for upcoming Case 1 Bids
Capital allocation Prudence as key to sustainable value creation
Put on-hold growth projects when sector fundamentals were uncertain
All existing long term PPAs with pass-through of energy/fuel cost as per applicable regulations
Coal block auctions Opportunity to secure fuel Coal auctions may provide potential to enhance our
organic growth
Policy environment /Inorganic growth opportunity
Sector looking ripe for consolidation and growth –projects with low risk to cash flow
Well positioned to:
capitalise on strong balance sheet
capitalize on expected consolidation of the power sector
JSW Energy’s Advantage / Approach
18
Agenda
Overview Value Proposition Business Environment
Appendix
19
Coal 1,64,636
62%
Gas 23,062
9%
Diesel 1,200
0%
Hydro 41,267
15%
Nuclear 5,780
2%
RES 31,692
12%
India – installed power capacity
Source: CEA
Private sector contributes 37% of the total installed capacity
Coal based capacities contributes 62% of the total installed capacity
Sector-wise Installed Capacity – 267.6 GW (as on Mar 31, 2015)
Mode-wise Installed Capacity (as on Mar 31, 2015)
State 96,963
36%
Private 98,153
37%
Central 72,521
27%
20 Source: CARE Research
Demand-supply scenario
-40%
-20%
0%
20%
40%
60%
80%
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5E
FY1
6E
FY1
7E
GUJ MP
MAHA CHG
Western states remain surplus...with Maharashtra remaining in marginal deficit
Southern states to remain in deficit...albeit deficit expected to come down in AP marginally
-20%
-16%
-12%
-8%
-4%
0%
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5E
FY1
6E
FY1
7E
AP KTK TN
21 Source: CARE Research
Indian demand growth and thermal coal prices
International thermal coal prices expected to remain subdued in the next 1-2 years
Demand growth at multi-year low…demand to grow at 5.7% CAGR during FY14-17 with gradual pick-up in
economy..
50
70
90
110
130
Mar
'09
Sep
'09
Mar
'10
Sep
'10
Mar
'11
Sep
'11
Mar
'12
Sep
'12
Mar
'13
Sep
'13
Mar
'14
Sep
'14
Co
al p
rice
(U
S$/t
on
ne
)
Richard Bay
HBA
Newcastle
69
1
73
9
77
7
83
1
93
7
99
5
1,0
49
1,1
22
1,1
95
1,2
73
0%
2%
4%
6%
8%
10%
12%
14%
0
200
400
600
800
1,000
1,200
1,400
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
FY1
4
FY1
5E
FY1
6E
FY1
7E
Po
we
r D
em
and
(B
Us)
% growth
22
Agenda
Overview Value Proposition Business Environment
Appendix
23
Kutehr hydro project – under implementation
Gross capacity 240 MW (3 x 80)
Technology Run-of-the-river Hydropower
Water allocation Ravi river
Power Off take
Free power to HP state government: 12% to 30% of delivered energy for 40 years, balance through long term arrangements
Project Cost
Total: INR17,980mn Amount spent till Mar 31, 2015: INR2,380mn
Project Details
Techno-economic clearance from CEA received MOEF accorded Forest stage-I & II clearance &
environment clearance Implementation agreement signed with HP
government Consent to Establish obtained from HP State pollution
control board Commenced enabling works related to the project
Initiated process for award of EPC contracts Majority land is acquired
Status Update
24 * Under implementation
Opportunity for organic growth
Ratnagiri and Chattisgarh projects on hold, which can be revived with low gestation offering geographical diversification
Ratnagiri: 3200 MW
Land Available
Water Available
EC Pending
Vijayanagar: 660 MW*
Land Available
Water Available
EC Available
Kutehr: 240 MW*
Land Available
Water Available
EC Available
Chhattisgarh: 1,320 MW
Land Available
Water Available
EC Available
25 * Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals
Recent acquisition of Hydro Assets - Rationale
Enhanced Scale of operation
- Capacity increase from 3140 MW to 4531 MW*
Portfolio diversification with operational hydro assets
- Thermal – 3140 MW & Hydro – 1391 MW*
Balanced Mix of PPA Basket
- LT PPA – 2,988 MW (66%) and Merchant – 1,543 MW (34%)
All projects commissioned, have PPAs on regulated two-part tariff
- Cash flow and earnings accretive immediately
Well built hydro power plant with low execution risk
- Stable hydrology, proven operational track record, high plant availability, low O&M costs
Value enhancing strategic fit with high quality assets
26
Strong financial track record
^ Subject to approval of shareholders
Key financial parameters FY13 FY14 FY15
EBITDA Margin (%) 32.9 38.8 40.1
Return on Net Worth (%) 14.6 11.5 18.6
EPS (INR Per Share) 5.51 4.60 8.23
DPS (INR Per Share) 2.00 2.00 2.00^
Profit making entity since inception
Dividend paying track-record since listing
Free cash positive
Well capitalised balance sheet/ low gearing ratios
Robust financial profile in a challenging environment
62,654
91,477 89,076 96,103
15,944
30,066 34,536
38,535
0
8,000
16,000
24,000
32,000
40,000
-
20,000
40,000
60,000
80,000
1,00,000
FY12 FY13 FY14 FY15
Total Revenue (INR mn) EBITDA (INR mn, RHS)
91,191 94,049
89,205
75,739
1.60 1.52
1.36
1.01 0.90
1.10
1.30
1.50
1.70
1.90
70,000
80,000
90,000
1,00,000
FY12 FY13 FY14 FY15
Net Debt (INR mn) Net Debt to Equity
27
This presentation has been prepared by JSW Energy Limited (the “Company”) based upon information available in the public domain solely for information purposes without regard to any specific objectives, financial situations or informational needs of any particular person. This presentation should not be construed as legal, tax, investment or other advice. This presentation is confidential, being given solely for your information and for your use, and may not be copied, distributed or disseminated, directly or indirectly, in any manner. Furthermore, no person is authorized to give any information or make any representation which is not contained in, or is inconsistent with, this presentation. Any such extraneous or inconsistent information or representation, if given or made, should not be relied upon as having been authorized by or on behalf of the Company. The distribution of this presentation in certain jurisdictions may be restricted by law. Accordingly, any persons in possession of this presentation should inform themselves about and observe any such restrictions. Furthermore, by reviewing this presentation, you agree to be bound by the trailing restrictions regarding the information disclosed in these materials.
This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those specified in such forward-looking statements as a result of various factors and assumptions. The risks and uncertainties relating to these statements include, but are not limited to, (i) fluctuations in earnings, (ii) the Company’s ability to manage growth, (iii) competition, (iv) (v) government policies and regulations, and (vi) political, economic, legal and social conditions in India. The Company does not undertake any obligation to revise or update any forward-looking statement that may be made from time to time by or on behalf of the Company. Given these risks, uncertainties and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements.
The information contained in this presentation is only current as of its date and has not been independently verified. The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or changes. No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, the accuracy, completeness, correctness or fairness of the information, estimates, projections and opinions contained in this presentation. None of the Company or any of its affiliates, advisers or representatives accept any liability whatsoever for any loss howsoever arising from any information presented or contained in this presentation. Please note that the past performance of the Company is not, and should not be considered as, indicative of future results. Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information contained in this presentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. Such information and opinions are in all events not current after the date of this presentation.
None of the Company, any placement agent or any other persons that may participate in the offering of any securities of the Company shall have any responsibility or liability whatsoever for any loss howsoever arising from this presentation or its contents or otherwise arising in connection therewith.
This presentation does not constitute or form part of and should not be construed as, directly or indirectly, any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company by any person in any jurisdiction, including in India or the United States, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any investment decision or any contract or commitment therefore.
Securities of the Company may not be offered, sold or transferred in to or within the United States absent registration under the United States Securities Act of 1933, as amended (the “Securities Act”), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state of other jurisdiction of the United States. The Company’s securities have not been and will not be registered under the Securities Act.
This presentation is not a prospectus, a statement in lieu of a prospectus, an offering circular, an advertisement or an offer document under the Companies Act, 2013, as amended, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended, or any other applicable law in India.
Forward looking and cautionary statement
28
Thank you