Coal news and updates

JSW Energy to bid for blocks via debt, internal accruals

JSW EnergyBSE 1.39 % plans to bid for coal blocks in the upcoming auctions and is upbeat about the fall in the dry fuel's price in the international market as it helps boost the company's financials, Chief Executive Sanjay Sagar said.

But the company is concerned about subdued demand for power in the country. "It's one of the biggest anomalies in the Indian power sector, that power demand continues to be depressed despite the fact that large sections of the country's population do not have access to electricity," Sagar told ET.

Barring the southern states where there is still some demand growth given the acute power crisis there, power demand across the country is sluggish and could remain like that for at least the next two fiscal years. In this scenario, what will happen to the close to 18,000 MW of power that will be produced after 90 MTPA (million tonnes per annum) of coal is auctioned in the upcoming coal auctions," he asked.

Still, he said, the company will bid in the upcoming first round of coal block auctions. If it wins, it will finance the purchase of the block with "a combination of debt and internal accruals". Mines are being auctioned after the Supreme Court cancelled previous allocations which it found "arbitrary and illegal". Experts say that merchant power rates are also low, in the range of Rs 3 per unit, down from Rs 5-6 in the past. This adds to the woes of power producers.
"Due to the overall economic slowdown and bad financial condition of distribution utilities, there are very few longterm power procurement bids that have come up in last couple of year. Short-term power rates are also depressed," said Debasish Mishra, senior director, energy practice, at Deloitte Touche Tohmatsu. "Promoters will not initiate new power projects till the existing untied capacities and under-development capacities are fully absorbed." Sagar said depressed global coal prices, lower exposure to merchant power market and a relatively stable rupee are helping his company.

JSW Energy meets 65% of its fuel requirement with imported coal. Its plants at Vijayanagar in Karnataka and Ratnagiri in Maharashtra are run on imported coal, while the one at Barmer in Rajasthan is fuelled by its captive Kapurdi lignite mines.

JSW Energy sells about half its power produced under long-term power purchase agreements and the other half on the spot market. JSW Energy's power sales rose in the half year through September -by 23% in the merchant market and 34% under long-term agreements. The company has been reducing the share of sales in the merchant market, which now 50% compared with 64% in 2011-12.

Source: The Economic Times