JSW Energy

Green expansion plans

JSW Energy Limited is the energy arm of the JSW Group and is one of the leading private players in the power sector. The company has projects across the generation, transmission, manufacturing, and trading segments. In recent years, the company has been making the switch to developing renewable energy projects in light of the government’s push for zero-emission fuels. Currently, it has a strong pipeline of green energy projects, and has set out a plan to expand its footprint in India’s green energy sector.

History

JSW Energy was originally incorporated in 1994 as Jindal Tractebel Power Company Limited, a joint venture between JSW Steel Limited and Tractebel, S.A., Belgium. Starting as a developer of thermal power, the company, in 2000, set up two units of its first coal-fired plant in Toranagallu, Karnataka. The name of the company was changed to Jindal Thermal Power Company Limited on January 17, 2002, after Tractebel, S.A., Belgium sold its holdings to JSW Group companies and financial institutions. Three years on, the name of the company was further changed to JSW Energy Limited and a fresh certificate of incorporation was issued by the Registrar of Companies, Maharashtra, upon this change of name.

In 2006, JSW Energy launched JSW Power Trading Company Limited to trade in power across India. The exchange obtained a category “I” licence to trade in power, which is the highest power trading licence issued by the Central Electricity Regulatory Commission. It is also a member of both the Indian Energy Exchange and Power Exchange of India Limited.

In the years following, the company acquired Raj West Power Limited (RWPL) under a share purchase agreement between the company and the erstwhile individual shareholders/promoters of RWPL. It has since also acquired South African Coal Mining Holding Limited, Himachal Baspa Power Company, and PT Param Utama Jaya.

Current operations

JSW Energy currently has an energy portfolio comprising 3,158 MW of thermal power. This includes the 1,200 MW Ratnagiri plant, the 1,080 MW Barmer plant, the 860 MW Vijayanagar plant, and an 18 MW plant in Nandyal. Additionally, the company operates 1,391 MW of hydropower projects in Himachal Pradesh. These are the 1,091 MW Karcham Wangtoo hydropower plant and the 300 MW Baspa II plant. Both these plants are operated by Himachal Baspa Power Company Limited, a subsidiary of JSW Energy.

Since 2017, JSW Energy has been gradually entering the clean energy space. Initially, the energy giant diversified operations by setting up manufacturing for electric vehicles (EVs). Further, it entered into an MoU with the Gujarat government to set up a facility in the state for manufacturing EVs, electrical battery/energy storage solutions, and EV charging infrastructure. Later, in 2018, the company incorporated its wholly owned subsidiary, JSW Future Energy (formerly JSW Solar) to pursue projects in renewable energy, energy storage, microgrids, etc.

In the solar power space, JSW Energy’s portfolio so far comprises captive plants, 1.77 MW of solar rooftop systems and 10.46 MW of ground-mounted solar systems. These are located in the company’s cement, thermal and hydel plants, spread across various states in the country.

Upcoming renewable energy projects

So far, JSW Energy’s journey to increase its renewable energy portfolio has been driven by hydropower projects. In addition to its two operating projects, JSW was awarded an implementation agreement by the Himachal Pradesh government for the 240 MW Kuther hydropower plant on a build-own-operate-transfer basis. Development has now begun of the run-of-the-river project, which will be set up on the Ravi river in Chamba district of Himachal Pradesh. It is expected to generate 955 GWh of electrical energy annually, 12 per cent of which will be supplied free of cost to the Himachal Pradesh State Electricity Board. For the remaining contracted capacity, a power purchase agreement (PPA) is currently at the finalisation stage with the Haryana Electricity Regulatory Commission. In August 2020, it was announced that Andritz had won a contract from JSW Energy Limited to supply the electromechanical package for the upcoming project in Himachal Pradesh.

Recently, JSW Energy also forayed into developing stand-alone and blended wind energy projects. Most notably, in August 2020, the company’s subsidiary, JSW Future Energy, emerged as a winner in the Solar Energy Corporation of India’s (SECI) 2.5 GW auction for interstate transmission system (ISTS)-connected blended wind power projects (Tranche IX). The subsidiary won 810 MW of blended wind power capacity at a tariff of Rs 3 per kWh, and within a month, JSW Future Energy received the letter of award for the project. The project is currently being developed in Tuticorin, Tamil Nadu, at an estimated cost of Rs 47 billion-Rs 48 billion. It was announced that the developer will supply 540 MW of the contracted capacity to SECI under a PPA. Following this, in March 2021, JSW Future Energy won 450 MW of standalone wind capacity at SECI’s auction for ISTS-connected wind projects (Tranche X) at a tariff of Rs 2.77 per kWh. Both projects are expected to be commissioned within 30 months.

In May 2018, JSW Energy announced that it would be setting up a 1 GW solar panel manufacturing facility, as well as 200 MW of solar power systems. However, the company later stated that these plans are currently on hold due to policy uncertainty in the solar market. Nevertheless, the company is still planning to build another captive solar plant at its thermal power facility in Barmer, Rajasthan, the capacity has not been announced yet.

Other recent developments

Within a month of the new calendar year, JSW Energy released its road map for sustainability and renewable energy, announcing its intentions to double its power generation capacity, primarily driven by renewable energy. Under the plan, the company aims to reduce its carbon footprint by 50 per cent by 2030 and achieve carbon neutrality by 2050, in line with many other players in the infrastructure sectors. Further, it plans to reduce its water consumption per unit of energy produced by 50 per cent.

To meet these targets, the company will need to bring its renewable power capacity up to two-thirds of its total installed capacity while reducing energy intensity and auxiliary consumption. A large part of this capacity addition will take place over the next two years, with about 2,300 MW of installations planned. In addition to the utility-scale wind projects that are currently under development, 1,100 MW of renewable projects are under development to meet the company’s group captive requirements.

In May 2021, JSW Hydro Energy, a wholly owned subsidiary of JSW Energy, raised $707 million through the issue of green bonds. These notes are set to accrue an interest rate of 4.125 per cent per annum from the date of settlement to maturity.

Further, the proceeds from the sale will go towards repaying the company’s existing loans for its two operating hydropower projects. The announcement represents the largest bond sale by a domestic issuer this financial year. It is also the first-ever issuance by a hydropower company in Asia. Deutsche Bank was the left lead and structuring agent for the issuance while JP Morgan, Citigroup, Barclays, Standard Chartered and the Societe Generale

Group were among the other participants.

Key challenges and outlook

Over the past four years, JSW Energy, like many other thermal developers in the market, has forayed into renewable energy. It must be noted that the company has been hesitant to enter the solar manufacturing and utility-scale solar market due to policy uncertainties. Since 2018, these uncertainties have been linked to the imposition of safeguard duties and customs duties on the import of solar cells and modules. These policy changes could potentially hamper project development margins for companies such as JSW Energy and raise import costs of raw materials.

Further, in 2021, the government announced a 40 per cent and a 25 per cent basic customs duty on imported solar modules and solar cells respectively. With this, the government also launched the Rs 45 billion production-linked incentive scheme to encourage companies to enter the manufacturing business. However, there are still concerns regarding how the country will set up a wafer and cell manufacturing base, as it is highly capital intensive. Thus, despite the “solar boom” in India in recent years, the company has not made much headway in this space.

Another big challenge for JSW Energy, as well as other developers in the market, is the lack of availability of land for development. The problem is amplified for wind projects due to a shortage in Class 1 wind sites. JMK Research reports that the process of procuring land to set up a renewable energy project can take around six to nine months. Central scheme tenders mandate a commissioning time of 12-18 months, but two-thirds of the time is sometimes lost in obtaining approvals and procurement. The launch of a single-window clearance system, exemptions on stamp duties and digitalisation of processes can all go a long way towards overcoming this hurdle.

Overall, taking advantage of its strong presence in the energy sector, JSW Energy is set to make a smooth transition into becoming a prominent player in renewables, especially with its diversified energy portfolio. The company has set up almost 1.5 GW of renewable power and has set its sights on driving further developments through renewable energy. In the years to come, the company’s renewable portfolio is expected to increase at a faster pace, especially as it expands its operations to other renewable segments.

By Rithvik Kumar

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