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Power company JSW Energy plans to increase its power capacity up to 11,390MW by 2016. However, officials from the company agree that the risk factor involved in coal imports needs to be addressed

JSW Energy plans to increase its total power capacity up to 11,390MW by 2016, from its current operational capacity of 995MW. While the fuel requirement would be met by a mix of domestic coal sources and imported coal, officials agree that important issues need to be addressed for ensuring uninterrupted coal supply.

“Domestic coal has its own challenge. If we want to ramp up capacity, there are issues. We have tried to enter this space very differently with a mix of domestic coal and imported coal. We have around three to five years to explore various sources for coal allocation. A lot of capacity is coming in, but we have to keep an eye on the challenges which we will face in procuring domestic coal. The reason for this is that we are not seeing a huge amount of coal capacity actually coming on stream,” said Pramod Menon, chief financial officer, JSW Energy Ltd.

 “We believe it is ideal to have a (supply) mix of domestic and imported coal. We have most of our projects dependent on imported coal located near ports, so we have the infrastructure in place,” added Mr Menon.

Currently, JSW Energy imports coal from Indonesia and Mozambique. It owns two coal blocks in Mozambique. Coal sourced from this country will fuel JSW’s power plants dependent on this source in about three to four years.
On being questioned whether a single source like Indonesia would be able to produce and supply the huge amount of coal that will be required for future power projects, Mr Menon said, “We need to de-risk the dependence on a single source by working out arrangements with multiple parties. Over time, you will find us addressing these risks.”
Moneylife had earlier reported on how modifications in Indonesia’s mining policies could affect Indian coal imports. India is one of the major importers of coal from Indonesia. “Indonesia does not have the facility to export the amount of coal that India is expecting,” an analyst had told Moneylife. Indonesia plans to cap its annual coal exports at 150 million tonnes, post-2010.

Out of JSW’s total planned capacity of 11,390MW, 240MW would be generated by hydro power; the balance will be met by thermal power. Financial closure for 3,140MW of the planned capacity expansion has already been completed, said the company.

The investment for the expected capacity expansion would carry a 3:1 debt-equity ratio. The company has also finalised 100% of its fuel requirement needs for 3140MW of its planned capacity expansion. For its projects under development, JSW said that it has tied up 60% of its fuel requirements.

As per company officials, to achieve a robust GDP growth, India requires a growth of 8% to 10% in the power sector. To fuel this growth, total power capacity in the country has to increase by 20,000 MW every year.

JSW plans to open its Initial Public Offering (IPO) on 7th December. The issue will close on 9th December. The company is targeting an equity mop-up of Rs2,700 crore through this IPO.
— Amritha Pillay