JSW Energy

JSW Energy

SBI, Pidilite Industries, JSW Energy

SBI, Pidilite Industries, JSW Energy

JSW Energy falls 5% on weak Q1 results

JSW Energy announced the following unaudited results for the quarter ended June 30, 2011:

Standalone results:

The net profit of the company slipped 42% to Rs190.26 crore for the quarter ended June 30, 2011 as compared to Rs327.20 crore for the quarter ended June 30, 2010.

Total income increased by 30% to Rs1198.85 crore for the quarter ended June 30, 2011 from Rs922.18 crore for the quarter ended June 30, 2010.

Consolidated results:

The net profit of the company down by 62% to Rs136.31 crore for the quarter ended June 30, 2011 as compared to Rs298.64 crore for the quarter ended June 30, 2010.

Total income increased by 34.43% to Rs1294.48 crore for the quarter ended June 30, 2011 from Rs962.87 crore for the quarter ended June 30, 2010.

At 2.24 pm, JSW Energy was trading at Rs71.80, down by 5.59%, with a volume of 10.68 lakh shares on the BSE.

Dish TV, PNB, HCC, JSW Energy

Dish TV, PNB, HCC, JSW Energy

JSW Energy

JSW Energy

JSW Energy

JSW Energy

JSW Energy

JSW Energy

JSW Energy

JSW Energy

DB Corp, JSW Energy Grey Market Premium

Company Name	Offer Price (Rs.)	Premium (Rs.)
D.B. Corp.	212 (For Retail Investor Rs. 210)	26 to 28
JSW Energy Ltd.	100 (For Retail Investor Rs. 95)	4 to 5.50
Godrej Properties	490	23 to 25
MBL Infra	165 to 180	9 to 11

JSW Energy IPO Allotment Status

JSW Energy IPO Allotment Status

JSW Energy IPO, Godrej Properties IPO

JSW Energy IPO, Godrej Properties IPO

JSW Energy IPO Note

JSW Energy IPO Note

JSW Energy IPO oversubscribed

Gets bids for 28.40 crore shares

The initial public offer (IPO) of JSW Energy was subscribed by 1.25 times by 16:00 IST on the first day of the issue, data on NSE showed. The IPO received bids for 28.40 crore shares as against 22.75 crore shares on offer.

JSW Energy, a wholly-owned subsidiary of the JSW Group, has set the price-band for the IPO at between Rs 100 and Rs 115 per share. The issue closes on 9 December 2009.

JSW Energy has decided to issue a total of 4.22 crore shares to 7 anchor investors. Anchor investors are the first set of investors who provide subsequent investors a degree of confidence.

The company has also offered a Rs 5 per share discount to retail investors in the IPO.

The IPO has been graded by rating agency CARE as Grade 4, indicating above-average fundamentals.

Proceeds from the IPO would be used for developing the group's proposed power generation and transmission projects, mining projects and debt repayment.

JSW Energy has a generating capacity of 995 megawatt (MW) and plans to raise it to 3,140 MW by October 2010. The Group's flagship company, JSW Steel, will consume 300 MW once the new capacities come online.

Some of the IPO proceeds would also be used to part-fund its transmission project at Ratnagiri for which a 74:26 joint venture was formed with the Maharashtra State Transmission Company in August 2008.

JSW Energy IPO Review

Strong visibility

Power generation capacity is planned to go up from 860 MW to 3,140 MW in various phases by April 2011

JSW Energy (JSWEL), incorporated in 1994, is part of the JSW group headed by Sajjan Jindal, which is in turn a part of the OP Jindal Group. JSWEL is the holding company for the JSW Group's power business. The company currently owns and operates thermal power plants with an aggregate generation capacity of 860 MW, all in Karnataka.

Currently, the company is augmenting its power generation capacity on its own or through subsidiaries and has about 2790 MW of generation capacity under construction. Of the 2,790 MW under implementation, the 4X300 MW Ratnagiri power project is being developed through its 100% subsidiary JSW Energy (Ratnagiri) (JSWERL). Similarly, the 8X135 MW Phase I and 2X135 MW Phase II of the lignite based Balmer power project is being developed through its wholly owned subsidiary Raj West Power (RWPL). However, the 3X80 MW Kutehr Hydel power project in Himachal is being executed directly by the company.

Over and above this 2,790 MW of generation capacity under implementation, the company also has power projects aggregating to a generation capacity of 7740 MW at early stage of development.

Though majority of the revenue comes from power generation, the company is one of the early power traders. It also provides operation and maintenance services for power plants of group companies and gets operation & maintenance (O&M) fees for that service. Similarly, it also offers power project management service to group companies over and above the captive requirements. JSWEL has also got into lignite mining and development of transmission network through various joint ventures, primarily to feed its power plant or to facilitate evacuation of power generated from its stations. With the Maharashtra State Electricity Transmission Company (MSETCL), it has set up Jaigad PowerTransco to execute 169 KM of transmission line. The company holds a 74% stake in the JV company. Similarly, it has signed JV with Rajasthan State Mines and Minerals (RSMML) to develop and operate the lignite mines for the supply of lignite to the Balmer Power Project of the company. It has incorporated Barmer Lignite Mining Company, where it holds a 49% stake, with the balance 51% held by RSMML.

The company has supply agreement with JSW Steel for supply of fuel (either coal or corex gas) for its 2X130 MW SBU I at Vijay Nagar. For 2X300 MW SBU II, the company currently gets coal from the open market. But it has signed a long-term coal supply agreement for 25 years with Sungai Belati of Indonesia. Similarly, it has signed a 25-year supply agreement with Sungai Belati for its Ratnagiri power project. However, for the Balmer power project, the company has got captive lignite mines in Rajasthan, which were to be developed and operated by Balmer Lignite Mining Company, a JV company of JSWEL. Moreover, the JSW group has 11% interest in a consortium that has been allotted a coal block from the Utkal A�Gopalprasad West mines near Talcher, Orissa. The coal will be supplied to the Chattisgarh power project of the company.

Of the total issue proceeds, the company proposes to utilize Rs 2142.53 crore to part finance power projects aggregating 2790 MW of generation capacity and the lignite mining as well as the transmission line projects. The company also proposes to retire debts of Rs 470 crore from the issue proceeds and the balance will be used for general corporate purposes.

Strengths

The company has experience and track record in developing and operating power generation plants, with its first power generation unit been commissioned in 2000 and running efficiently since these 9 years.

Currently, the company has 860 MW of operational power generation capacity at Vijaynagar, Karnataka. Further, it has also commissioned the first unit (135 MW) of the 8X135 MW Balmer power plant of RWPL in Rajasthan. Moreover, the company expects to commission another 570 MW of capacity comprising 2X135 MW of RWPL's 1,080-MW Balmer Phase I power plant and the first unit of JSWERL's 1,200-MW power plant in Maharashtra by March 2010. As per the implementation schedule given in the prospectus, all the remaining units of 1,080-MW Balmer power plant of RWPL as well as JSWERL's 1,200-MW projects will be commissioned by April 2011. The management feels it is currently ahead of schedule. Hence, by April 2011, the company will have an operational generation capacity of 3,140 MW. This gives strong revenue visibility for the company.

As of now, of the total 3,140 MW of power generation capacity, to be on stream by April 2011, the company has long-term power off-take agreement of 62-63%. The balance is to be sold through merchant sales. The company is looking for long-term power off-take agreement because, as per projections, the current high merchant power tariff will eventually converge with long-term power tariff, with increased supply over the next five years. It will, therefore, participate in the long-term power supply tenders called by utilities. But, at the moment, the high exposure to merchant power sales will allow the company to capitalize on the high merchant power tariff currently prevailing in the country.

Weaknesses

All the thermal power projects, both commissioned and under implementation (except the lignite linked Balmer power project), are based on imported coal. Given the fact that the merchant power tariff is driven by demand and supply, any surge in price of imported coal will affect the margin of merchant sales. Moreover, the merchant power tariff is also subjected to regulations. In September 2009, CERC capped the merchant power tariff to Rs 8 for a short period of 45 days. The states are now empowered to compulsorily sell the power generated within their boundary to the state utilities in case of severe shortage. The government of Karnataka, during December 2008 to May 2009, asked all the generation companies in Karnataka to sell power only to state utilities at a fixed price. A similar development may affect higher realization in merchant power sales. For instance, the company could not pass fully the rise in fuel cost in FY 2009. Thereby, there was contraction in the overall operating margin of the company for FY 2009.

The BLMC, the JV mining company between the company and Rajasthan State Miner and Minerals, which is to supply lignite to the Balmer Power Project of the company, is yet to commence mining operation pending completion of land acquisition. The company has applied to the government of Rajasthan for alternate fuel source for the project and has got in-principle approval to use imported coals as alternative fuel for a period of one year on the condition of RWPL gets the energy charges and the fuel costs determined by the RERC. Continued delay in land acquisition and mining to full capacity will affect the operation of this plant.

Baring the 260-MW SBU I, all other power projects are developed with Chinese power generation equipment and its long-term operational efficiency has to be seen.

As JSW Steel is expanding its captive power generation capacity, its captive requirement of corex gas is set to increase and its availability for JSW Energy's SBU I will decline, forcing the company to rely on domestic or imported coal for which it is yet to tie-up.

For the Ratnagiri project, the company had originally entered into an MoU with the government of Maharashtra for 1000 MW. But the company intends to expand the capacity to 1,200 MW and has applied to the Maharashtra government but is yet to get the approval. Similarly for the Rajasthan project, the company wants to develop additional 270 MW as Phase II in addition to the 1,080 MW in Phase I. But it is yet to get the approval of the government of Rajasthan.

Though it has entered into loan agreements or has obtained letters of intent from various banks for Rs 9979.5 crore of debts for its projects under construction, the company has not signed firm agreements with banks for projects under development in Rajasthan and Himachal Pradesh.

Valuation

Consolidated net sales of the company for the fiscal end March 2009 was up by 42% largely on account of improvement in average sales realization from Rs 4.48/ unit to Rs 6/ unit powered by higher merchant power tariff. However, the net profit after minority interest was lower by 14% to Rs 279 crore on the back of contraction in margin as the company could not fully pass on rise in fuel cost as well as absence of CER (certified emission reduction) income in FY 2009 as compared to Rs 327.56 crore of CER income in the corresponding previous year period.

The EPS for FY 2009 works out to Rs 1.7 at both the upper price band (of Rs 115) as well as the lower price band (of Rs 100). Thus, the PE on its FY 2009 earning works out to 58.8 times at the lower price band of Rs 100 and 67.6 times at the upper price band of Rs 115. In comparison, the largest player NTPC quotes at 21.3 times of its FY 2009 earning. Similarly, the NLC and Gujarat Industries Power quote at a PE of 18.7 times and 21.1 times FY 2009 earnings. However, if all goes as per plans, the 265% rise in its generation capacity over the next 15-18 months can power the company's earnings much faster than those of other power generation companies. The company has offered a discount of Rs 5 for retail investors.

via CM

JSW Energy IPO - Good bet for long term investors!

Sajjan Jindal led JSW Energy will enter capital markets on Monday, December 7 with a public issue aggregating to Rs 27 billion. The price band of the issue has been set at Rs 100-115 a share.

The company intends to utilize the issue proceeds to partially finance construction and development of the identified projects aggregating to 2,790 MW in capacity; 400 KV transmission project and mining venture, and for repayment of corporate project.

JM Financial, Kotak Mahindra Capital Co, JPMorgan and Morgan Stanley r are helping the company in the fund raising process.

The issue has been graded by Care as CARE IPO Grade 4, indicating above average fundamentals.

Expansion plans:

The company has chalked out a capex plan of Rs 26.13 billion. It intends to utilize the issue proceeds to partially finance construction and development of the identified projects aggregating to 2,790 mega watt in capacity; 400 kilo watt transmission project and mining venture, and for repayment of corporate project.

Pros in investing:

Demand for Power seen rising: The per capita consumption of electricity is one of the lowest in India. According to the 17th electric power survey, May 2007 (`EPS`), India`s peak demand is expected to grow at a CAGR of 7.6% over a period of 10 years (FY2007 to FY2017) and would require a generating capacity of 300,000 MW by 2017 to cater to this demand compared to an installed capacity of 132,329 MW as on Mar. 31, 2007.

Facilities already operating: JSW Energy is an established energy company with operational capacity of 860 MW with additional 2,790 MW of capacity under construction and implementation stage. The company also has 7,740 MW of capacity under development, thus, making the total capacity of the company at 11,390 MW, with total project outlay of Rs 541.34 billion.

Strong corporate house backup: The company belong`s O.P. Jindal Group of company which has a strong presence in the industry.

Cons - You have to watch out for:

The project is constrained by project implementation risk involving multi-fold leap in capacity compared to present operations, exposure to volatile fuel prices and risk related to foreign exchange commitments.

However, good news for the retail investors is the company is offering discount of Rs 5 a share.


For six months ended September 2009, the total income of the company was at Rs 8.75 billion with net profit being placed at Rs 2.68 billion, against total income of Rs 18.52 billion of FY`09 with net profit at Rs 2.77 billion. In last 4.5 years, the total net profit of the company was at Rs 15.78 billion. Net worth of the company, as at Sep.30, 2009 is at Rs 17.48 billion. With a strong promoter background, rising demand for power and facilities already under operation, the issue is suggestible to subscribe from the long term perspective.

via IRIS

JSW Energy IPO Analysis

JSW Energy's initial public offer is for investors willing to wait for returns in the medium term. The company has been operating a small capacity generating station for the last few years but the bulk of its new projects will be commissioned in stages over the next one year and more. These projects, which will be part-funded from the proceeds of this public offer, will start contributing to the earnings in full measure from 2011-12.

In the near term, especially in the immediate period post-listing, the stock may not deliver major returns mainly because of the market's saturation with power IPOs in the last few months; the price performance of some these recent listings tell the tale.

Therefore, while investors looking for listing gains may not find this offer attractive, those seeking a good power exposure in their portfolios over the medium-term can invest.

Valuation

By conventional valuation parameters based on historical earnings such as price-earnings multiple (33 on fully diluted equity at Rs 115) or price-to-book-value (4.3 at Rs 115, compared to industry average of less than 3), the offer does appear expensive. Yet, it is important to note that earnings from almost the entire generating capacity to be part-funded by this offer will kick in only in the medium-term.

Current earnings are based on a capacity of 260 MW; against this, the company will have a generating capacity of 3,140 MW by 2011. By the end of this fiscal, JSW's capacity will have risen to 1,295 MW. What is important is that fuel supply and offtake of power have been fully tied up for the entire capacity that will go on stream by 2011 and the projects will be commissioned in stages gradually, adding to earnings.

The finances for the projects under implementation have been fully secured, including debt from banks. Transmission infrastructure for one of the major projects in Ratnagiri is being implemented by a joint venture with the State utility. With all major aspects of the projects taken care of, the uncertainties in implementation appear limited.

Project profile

JSW owns a 260 MW plant at Vijayanagar, Karnataka, part of whose generation is sold to group company, JSW Steel, and the remaining on short-term basis to other buyers. To this was added 600 MW in two stages in June and September this year. While half the power produced here is again being sold to JSW Steel, the other half, save a small 6 MW, will be sold on short-term basis through the power-trading subsidiary, JSW Power Trading Company.

The two big generation projects that are under construction now are the 1,200 MW plant at Ratnagiri, Maharashtra, and the 1,080 MW station at Barmer in Rajasthan. Both of these are being executed by wholly-owned subsidiaries.

The Ratnagiri project is based on imported coal for which JSW has signed contracts with an Indonesian company, PT Sungai Belati and an affiliate company of JSW Steel in Mozambique to supply coal. In fact, coal from the 25-year supply deal with the two companies will fuel some of JSW's other projects on the drawing board now.

The Rajasthan project will use lignite mined by a joint venture with a State government company and will also supply its entire electricity to the state utility. The first 135 MW unit of this project will be commercialised shortly with the remaining seven units to be commissioned in stages over the next one year.

The first of four units at Ratnagiri will be commissioned by January 2010 with the remaining ones scheduled to go on stream in stages over the next one year. Half the power produced here will be sold on long-term PPAs to the Maharashtra state utility (300 MW) and Adani Enterprises (270 MW); the other half will be sold on short-term basis through the power trading subsidiary.

Eventually when all the projects are commissioned by 2011, JSW's sales will be shared equally between long-term PPAs with State utilities and short-term merchant buyers. Even in the unlikely event of merchant power prices falling, as some fear, JSW's balanced exposure to that market will help the company.

JSW is also planning a 240 MW hydroelectric plant in Himachal Pradesh but several approvals are yet to be received for this project including the crucial environmental approval. The company has included this project among those that will be part-financed by the public offer though it is not set for commissioning till the end of 2015.

We have not considered this project, as also others adding up to 7,740 MW on the drawing board, while valuing the offer. These projects, all of them coal-based, are projected for commissioning in 2014-15.

Risks to our recommendation

All the projects under construction now will be equipped with Chinese boilers and turbines. There have been misgivings on Chinese equipment following the failure of a turbine installed by a state utility. Yet, a number of private power projects under implementation in the country now use Chinese equipment to save on cost and time.

Indeed, JSW's original 260 MW plant uses Chinese equipment and the company appears to have been encouraged by the experience to follow suit with its other projects. However, group company JSW Steel is in the process of setting up a boiler and turbine manufacturing plant in joint venture with Toshiba Corporation near Chennai. This venture should be able to supply to JSW's future projects.

With the company adopting a 75:25 debt:equity ratio for funding its projects, as much as Rs 9,979 crore of the total Rs 14,055 crore capital outlay for the ongoing projects will have to be funded by bank loans. While these have been tied up, they have not been fully disbursed yet. Some of these loans are also contracted on a variable rate basis. These, along with the undisbursed part of the loans which will take prevailing higher rates, could exert some pressure on the internal accruals of the company. A lot will depend on realisations from short-term power sales to cover up for higher debt servicing costs.

JSW Energy IPO Analysis

JSW Energy IPO Analysis

Grey Market - MBL Infrastructures, Cox and Kings, JSW Energy

Company Name	Offer Price (Rs.)	Premium (Rs.)
Cox & Kings India	330	4 to 5
MBL Infra	165 to 180	5 to 5.50
JSW Energy Ltd.	--	2.50 to 3.00