Ladies and gentlemen, good day, and welcome to JSW Energy Q4 FY 2024 earnings conference call hosted by JM Financial. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sudhanshu Bansal from JM Financial. Thank you, and over to you, Mr. Bansal.
Thank you, Nirav. Good evening, everybody. On behalf of JM Financial, I welcome you all to the conference call of JSW Energy to discuss the fourth quarter and FY 2024 results. We have the best leadership team from the company, including Mr. Sharad Mahendra, Joint MD & CEO; Mr. Pritesh Vinay, Director, Finance and CFO; Mr. Vikas Chaudhary, Head, Investor Relations and Treasury. Thank you so much, sirs, for your kind presence and giving JM Financial the opportunity to host the call. With this, I would like to hand over the call to Mr. Mahendra for opening remarks and taking the call forward. Over to you, sir.
Thank you, Sudhanshu. Good evening, ladies and gentlemen. Thanks for joining us for this quarter four and fiscal 2024 earnings call. I will start with covering the various aspects of the business, starting with the power demand, how it has shaped up, and then in terms of the capacities increase, which we have seen significant capacity addition in the country and various other points. First, when we start with power demand, we have seen a strong demand growth of 7.5% in FY 2024. On a larger base, we have to remember that the growth was in excess of 8% in FY 2023 also. In the quarter ended March, we have seen a demand growth of 7.4%.
Recently, the numbers which have come for April 2024, the demand growth has been close to 11%, implying a strong demand into the summer season, which is we are going through right now. Also interesting to note that in FY 2024, the peak demand reached a level of 243 GW and is expected, as per Ministry of Power, and the way we're seeing the demand growth, to reach 260 GW, maybe in the current summer. In terms of generation in the country, it increased by 7.1% in FY 2024, and we saw an increase of 7.3% in Q4. This is... We all know that the hydrology has not been favorable.
The large hydro generation has been down by 17% in FY 2024, and in Q4, we witnessed a decline of 20% year-on-year. While the RE generation was up by 5% across the quarter and 11% in FY 2024. When we see the capacity installations, the installed capacity in the country has reached 442 GW, with a total capacity addition of 26 GW in FY 2024, versus 16.6 GW in FY 2023. Renewable capacity addition has seen a record addition of 18.5 GW, which is the highest in a year, versus 15.3 in the previous year. The breakup of this is, solar capacity addition has been a record increase addition of 15 GW, and wind is 3.3 GW in full year of FY 2024.
Out of this total capacity of 18.3 GW, 9.8 GW of RE capacity has got added in Q4, out of which solar is 8.5 GW and wind 1.2. So we see a significant increase in the capacity additions which is happening. And when we see the bidding environment also, it is very, very conducive, especially I will feel that for serious players like us. And government's aim of 50 GW bidding per annum, which government has announced, maybe in the previous year beginning, we have seen tenders worth 47.5 GW, which were announced, and auctions were completed for more than 40 GW in FY 2024.
Interesting to note that in quarter four of FY 2024, we witnessed a total auction of 19 GW of RE capacity, and that is the time when we participated, when we found the environment to be conducive. And out of 19 GW, JSW Energy has won 3.4 GW, which is 18% of the total auction which has taken place, in the country during quarter four. And we are seeing a mix of, bids which are coming apart from plain solar, plain wind. There has been, we have been seeing hybrids coming in, RTC, green power and now FDRE. So it is basically the need that are, round the clock and also seeing the patterns of demand patterns, hourly basis.
FDRE is, we are seeing, is going to be there, and very interesting because this is not just a power supply, it's a complete supply of a solution to the required DISCOM or the state, on which our team also is working very closely. And we have been successful in winning the first significant portion of the first FDRE bid, which came up in Q4. When we see the merchant market, merchant market continues to be strong, and volumes in FY 2024 increased by 12%. And also, though the tariffs were average tariff was lower at INR 5.24 as compared to INR 5.94 in the previous year. Because when we see the API 4 coal prices also, on which I will be talking, there is a significant decline in the coal prices also.
So which has resulted in that, that the reduction in tariff is comparatively lower than what the coal prices have come down, which is a positive again for the, sector. Coming to the coal, when we see that in FY 2023, if we talk of a particular index like API 4, which was in FY 2023 at $250 level, was, at $110 in FY 2024. And in April, this index has further slightly come down to $107.
Apart from that, power sector outlook, which has been announced, when we see a slightly longer term, say, FY till FY 2032, the National Electricity Plan clearly says that the demand growth on an annualized basis will be 5.5% year-on-year from between 2024 to 2032, which is a very, very positive in terms of the demand. Apart from the average demand, the peak demand, which we saw, 243 GW in FY 2024, and this year already, Ministry of Power has announced and the way the demand growth is happening in the current summer, it is expected to reach 260 GW, the peak demand. And the predictions say that this demand is going to significantly increase in coming years.
FY 2027 numbers announced are to reach approximately 277 GW and by FY 2032, at 366 GW. So this is a significant increase in the peak demand, which is going to be there, which is driven by various factors. The way we are seeing the manufacturing growth, which is happening, the urbanization rate at which should be, is happening. So these are the key drivers, and also the country moving towards green energy in manufacturing also. So these are very positive factors for the sector, which we are seeing. And, when we see that, about JSW Energy performance this year, we reported the highest ever adjusted EBITDA and PAT, driven by RE capacity addition and a strong thermal performance also.
EBITDA for the year was up by 53% at INR 5,837 crore, and during the quarter, EBITDA was up by 47% year-on-year at INR 1,292 crore. PAT also witnessed an increase, and overall net generation also has witnessed a significant increase. Coming to PAT, in FY 2024, the PAT increased year-on-year by 17% at a level of INR 1,723 crore, and in Quarter 4, it grew by 29% at INR 351 crore. So these are the performance in terms of the financial numbers. Overall net generation, if we see, as compared to the growth which I just spoke about, our overall net generation during the year increased by 27% from 21.9 billion units in FY 2023 to 27.9 billion units in FY 2024.
During the quarter, it increased by 26%, and it went from 5.1 billion units in previous year Q4 to 6.4 billion units. The higher generation was driven by contribution from acquired assets and also greenfield RE capacity additions and higher thermal generations. These are the main drivers for this increased generation. Another positive which we are seeing in the sector, and also for us, our receivables, including the acquired RE portfolio, is stood at 54 days, and this we are seeing a very positive action from the DISCOM side also and are very healthy for the sector also. Coming to the balance sheet, our net debt-to-equity at 1.3, net debt-to-EBITDA at 4.5.
If we exclude the CWIP, the work in progress, which is there, our net debt-to-EBITDA, excluding the CWIP, is at 2.9. Which again, clearly enables us for a future growth, which we are have a plan for which I will be speaking in some time. We as you all are aware, that in beginning of April, we successfully completed our QIP, which is in terms of QIP, this is the largest fundraise through the QIP route and the third largest in the power sector including the IPOs, which the sector has witnessed. It saw a very high interest from much global and domestic funds, which has, which also believes in the story of JSW Energy and the way we are planning our growth.
Now, to build our robust pipeline, this has enabled us to build a robust pipeline, and as I said, that we have already participated in the competitive bid space, and we have been declared L1 for three for a total capacity of 3.6 GW, out of which 3.4 GW of LoI and LoA we have already received, and which takes our long-term capacity total, the work in progress, the commissioned capacity, and the order book to 13.2 GW. We have been successful, we have been talking about the Mytrah asset, which we acquired about a year back, that we have successfully turning around the PPA asset performance, and we have increased to generate 12% increase in the generation within one year of transaction.
And we have generated an EBITDA of INR 1,400 crores, to be exact, INR 1,403 crores. And we see, are confident of seeing a further improvement in FY 2025, when we will get a, we will be able to capture the full wind season also. This is in line, if you remember the earlier announcement, what we have made to reach in, 24 months' time, at Mytrah, the EBITDA to be in the range of INR 1,600 crores. We are very well on track to achieve that number. In addition to that, our Ind-Barath Unit One successfully got commissioned in January, and we generated 196 MU during this quarter, and, we were able to ramp up the, capacity.
Also this project execution in itself is a record of a stressed asset which has been non-functional for a very long period, and in a record time we have brought it on stream and we have started the generation also. Apart, another Unit 2, we are looking towards commissioning in the current quarter, the second unit of Ind-Barath also, we plan to commission. Regarding the battery storage, the 1 GWh project, which we have won, we are happy to announce that part capacity already we have signed the PPA, and the site work has already started, ordering has been completed, and we are confident that by quarter 1 of FY 26, which means April to June 2025, we will be in a position to commission this 1 GWh project.
So friends, these are the points from our side. Now I will open the floor for any questions, we'll be happy to answer. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask the question. The first question is from the line of Mohit Kumar, from ICICI Securities. Please go ahead.
Good evening, sir, and congratulations on successful fundraise. My first question is on the fact that the board has approved raising of funds worth INR 100 billion. What is the reason for a fundraise? Are you looking to raise this fund in FY 25? Is that right understanding?
See, Mohit, thanks. Mohit, see, one thing what we have said that, if you remember that we have said that, we have announced 20 GW by 2030 from present level of 7.28 GW. In the phase one, we have said that by FY 2025, we'll be reaching a 10 GW capacity, and we are well on track to achieve that on time. Now, as I said about the demand environment and the opportunities which are there, we are sure, and also in, the opportunities for inorganic, opportunities also existing in the market.
So we keep on, we are evaluating, and we are confident that this kind of opportunities which exist, and the environment also is healthy, that we are confident of accelerating that growth of 20 GW, which we have earlier set a timeline of 2030. We are confident of accelerating that growth maybe few years earlier. And so, that we are, we have taken the board approval to, as and when if the opportunity comes, we should be ready to take full advantage of any opportunity which comes. That is the basically reason, and my colleague, Mr. Pritesh Vinay, will like to add on this.
Mohit, you know, just to... I mean, Sharad has clarified it, but just to put things into perspective, you know, we had been having an enabling resolution for a capital raise since 2016. It is just a different matter that, you know, it took us 7-8 years to actually pull the trigger, given, you know, the macro headwinds, et cetera, and the size of the opportunity and the visibility of returns accretive growth. So this is also an enabling resolution, you know, which we are seeking, and we will continue to seek every single year, as we have been doing for the last 8 years. That's point number one.
Point number two, just to add to what, Sharad said, while he did talk about the bidding environment and the demand growth, et cetera, there's also a lot of inorganic play available. You know, as we are speaking, there are a few, you know, platforms, where the fund lives of the financial sponsors are, coming to an end, and a number of, processes are underway. So who knows? You know, I mean, if we get a right, opportunity, it will always be good to not be constrained by necessary approvals in place, you know, from a capital raise flex point of view. So that's, that's the whole context.
Understood. I said, given the pipeline which you have right now, what would be the CapEx in FY 25 and FY 26? And can you also give us some color on the capacity addition for the next two years?
Yes, regarding capacity addition, Mohit, as we have said earlier, that we'll be reaching 10 GW by FY 2025. We are well, well on track, and we are confident that, we will be, reaching the 10 GW number, by, in FY 2025.
As a CapEx expenditure, if you can, if you can give us a number for next two years?
Yeah. So next year is easier to give, next two years, because if it's, suppose, for example, we participate in more bids-
... and we won both the returns, the greater bids, that number will move basis that, right? So, for the roughly 2.7 GW that we need to complete to hit the 10 GW mark, plus the storage, the battery storage project, we are looking at a total capital expenditure of about INR 15,000 crore in the coming fiscal year. For the year beyond that, we think that, you know, by the end of the current fiscal year, we will be in the right position to guide for the following year. And to just complete the argument, for the year that just ended, the numbers that we are discussing, we spent about INR 8,000 crore.
8,000-15,000. I understand.
Yes.
My last question is on the, what is the reason for looking into setting up a green manufacturing capacity, and what is the timeline you're looking at?
So on that, Mohit, you know, we are evaluating the battery cell manufacturing optionality. You know, because, as Sharad was mentioning in his opening comments, you know, there's a to address the intermittency situation from a grid stability point of view, India is going to need a large amount of storage solutions. Secondly, more and more we are going to see complex bids, which will inherently have a battery storage solution built in, for you know, an FDRE type of tenders. And hence we see that, you know, there's a long road for you know, stationary storage point of view. So we are seriously evaluating, you know, and doing a detailed work on that side.
At the right time, we will take the suitable call, and if we choose to pull the trigger on that one, we will come ahead and share all the details with the market.
Yes. And Mohit, to further add to the number, if you see presently, as I said sometime back, the storage is going to play a key role. And today in the country, from battery point of view, if you see, there is hardly, there is, almost nil, battery storage capacity which is there. It is only pumped storage of 4 GW which is running as available. And the projections which are there, it clearly shows that by FY 2027, the storage capacity total required will be in excess of, close to 16 GW. Out of which about 8 GW is expected to be 8-9 GW of battery, and balance is in terms of the pumped storage. So this is a huge opportunity which we see ongoing.
As Vinay said, we are evaluating that, and rather than depending on the procurement, whether it makes a real if there is a benefit, we'll be moving ahead.
Understood. Thank you, and all the best. Thank you.
Thank you.
Thank you. Next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.
Hi, good evening... For the opportunity.
Sumit, sorry to interrupt you, but your voice is breaking.
Better?
Yes, if you can speak something.
Yes. Is this, is this better?
Yes. Yes, go ahead.
Okay. Thank you. My first question is a follow-up on what Mohit asked. If your CapEx guidance for FY 2025 is around INR 150 billion, I'm just referring to slide 13 of the presentation, which mentions that of your total committed CapEx of INR 186.5 billion, about INR 150 billion has already been spent. And in addition, there is a SECI XII of INR 22 billion CapEx. So INR 150 billion seems to include CapEx that you would do for the 3.3, 3.6 GW committed capacities as well. Is that right?
Yeah.
Yes.
Yes, that's right. Correct.
Yeah. So could you also-
Expenditure will happen on this pipeline-
Yes.
-which will be spread out over 2-3 years. And, you know, the storage CapEx will also happen, so it's a sum total. Plus, there will be maintenance CapEx also for the existing running plant.
And all-
Sum total of CapEx.
Also, of the ongoing projects which are already there, that also will be balance CapEx, which is pending.
Correct.
That also will be done in the current year, so it's a total of all.
Would it be fair to say that of this 3.6 GW which you have won recently, we should be looking at a post FY 2026 commissioning timeline?
Yeah, a significant portion, yes, you're right.
Yeah. The question is on Ind-Barath. 196 million units were sold in Q4. The EBITDA was about INR 300 million. The spread appears to be a bit thin. You know, is this owing to upfront O&M costs being higher, and given that this is the early stage of stabilizing the unit?
Participants, please stay connected. The line for the management dropped. Ladies and gentlemen, please stay connected. The line for the management dropped. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, please go ahead.
Yes, I was asking a question regarding the Ind-Barath project, where 196 million units were sold in Q4, and the corresponding EBITDA was about INR 300 million. You know, is the spread that you're making right on a per unit basis thin because of the upfront O&M cost, which would have been higher in the stabilization of the unit? Or, you know, could you comment on that?
Whenever a new unit is getting established, there is, there are lots of, the unit comes down, again comes back, there is frequent.
Yes.
So that is one of the reasons wherein it impacts definitely. But now the unit has reached almost close to, I will say, a high level of stabilization, so it will be better. But yes, definitely when the unit commences, this is a normal feature which happens.
Thank you. Sorry to interrupt you, Sumit. I'll request to come back for a follow-up question. I request all the participants, please restrict to two questions per participant, and kindly join the queue again for a follow-up question. The next question is from Atul Tiwari from Citi. Please go ahead.
Yes, sir, thanks a lot, and congratulations on successful capital raising. So my question is on JSW Neo Energy. Could you share the FY 2024 consolidated numbers for JSW Neo Energy? Just revenue with the fact, how much was that?
Atul, I request if you can connect with the IR team. They will be able to help you on the numbers, yeah?
Okay. Okay, and the second one is on the breakup of the CapEx of INR 150. So how much of that is for the battery storage?
So, you know, once we have signed out the contractual, you know, we are in very advanced stages of finalizing the negotiations with the suppliers. So probably by next quarter, will be the right time when we should be in a position, having got the approval of the board, when we would come and share with the markets what is the final project cost for this one. Yeah?
Yeah.
But it is going to be lower-
Yeah
than what it would have been a year ago. Yes.
Oh, okay. Great. Thanks.
Thank you. The next question is from the line of Koundinya, from Jefferies India. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. Sir, my first question is on the capacity front. So 9.8 GW by end of the current year, that looks fine. If I were to look, go back and see, you know, when will this 3.6 GW be, and what would that day be like, you know? Or if I were to ask it a different, in different way, you know, FY 2027, where, where do you see your capacity ending at?
See, when we see the capacity, what 3.6 GW, what we have won, maybe it is, it has been just recently, it has been won. Now, the PPA signing process will start. Once the PPA signing process starts, depending on the PPA terms, it's on an average, you can say about two years is the time period which is there, within, within that, from the date of signing of PPA, this entire capacity will get commissioned. And if we are at 10 GW, very small quantity, as I said earlier, will be a part of this. But then you know can add that, and let's take a two-year timeline from the sign of PPA. So that is how we will be well, as we said, the total locked-in capacity of 13.2.
From the signing date of PPA, within two years, we will be definitely reaching 13.2 GW.
Understood, sir. You also spoke of advancing your FY 2030 targets. Any time frame you are looking at, or it's too early to comment on those lines?
It is a bit early. At the right time, we will definitely communicate, as I told you, but, we are quite confident with the kind of order book we have in a short span we have built. That is one of the major reason and the opportunities which are there, in the coming year also. In the current year, we are quite confident that we'll be accelerating significantly, and at the right time we will inform. It is a bit early to give an exact timeline of that.
Understood, sir. Sir, secondly, my second question is on the merchant market. I think about last week there was a CERC paper that caps the tariffs for merchant power at about 1.2 times the variable cost on average, or 1.6 times for any particular time frame. Any... How do you look at that? Any specific comments that you would like to make on the kind of impact?
Again, as I told you, that this is something which is a bit too early to comment, because this has come just maybe 24, 36 hours back. And also we have to see that this is a staff paper, and that too, a draft, on which as an industry we have to study, and then see the impact. I can only say that the staff paper, what it says, it is unlikely what is mentioned it will go through. But from our perspective, when we see that, it is only total 15% of the power, which is open power for us, which we sell in merchant. And out of that, also a significant portion is through the bilateral trade on the short term, what we sell.
So we feel even if, if this happens, which is highly unlikely, I think the impact is not going to be there for us at least to, to see that, because our majority is tied up power in the long-term PPs.
Understood, sir. If I may ask one bookkeeping question: What is the average merchant tariff that you released in the quarter, sir, or for FY 2024?
I think, if you can connect with the IR team, you know, they should be able to, you know. But, I think if I remember correctly, the average day-ahead market price on the exchanges for the quarter was about INR 4.3. Is that about 4.69.
4.69.
Our realization is significantly higher than that. Significantly higher than that.
Sure, sir. Thank you very much, and all the best.
Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Rajesh Majumdar from B&K Securities. Please go ahead.
Yeah, good morning, thanks for the opportunity.
Rajesh, your voice is coming muffled. Can you please speak through the handset?
... Am I audible now?
Yes.
Yeah.
So is it possible to share the EBITDA numbers for Mytrah, for the year, quarter and year?
Yeah. Mytrah annual number was 1403. This is for the full year-
Mm-hmm.
the EBITDA numbers for Mytrah. And for the quarter, I'll just,
Two forty-four.
244 for the quarter. You know, if you go to our presentation, Rajesh,
Yeah.
Which is slide number 38. Slide 38 will give you-
Ah, okay, okay. Okay, okay, fine. Sorry, sorry, sorry, I missed that. Yeah. Yeah.
No problem.
Yeah, and my second question was, sir, when you mentioned INR 15,000 crore CapEx, this is excluding the impact of any acquisition, right?
Yes. Yes. Yes, sir. We are still to, you know, be in a situation where we can have a firm CapEx number without a firm target in sight and-
Yeah. Yeah, yeah.
We cannot give any number, CapEx number for that.
In this kind of a market where there are so many distressed assets, it could be like the number could be more than that, right?
Yeah, if the possibility is there and we are getting the desired returns, what we expect, definitely we keep exploring any opportunity which comes in the market. Definitely.
You're right, Rajesh.
Yeah.
So in that case, could you give us some ballpark guidance from net debt to EBITDA? Like, what is the outside it can go to in case we get into some kind of an acquisition like that? What is the... You know, like, it's 4.5 now, and maybe EBITDA will increase this year a little bit. So how much can we go up to, in order to fund our growth as well as keep the thing under kind of, some kind of limits? Is there any kind of ballpark figure to give on that, a range?
Yeah, yeah. No, no, ballpark figure is the right question because that's also, I would say, the most important, you know, metric to look at, you know, what is the leverage profile going to go is going to pan out like, right?
Yeah.
So if you, if you go back and look at all our commentaries in the past couple of years, what we have consistently maintained is this, that, you know, we have three competitive advantages that we believe, you know, that we enjoy over majority of our peers. One is our, typically our specific investment cost or our CapEx per MW tends to be lower than peers. Our OPEX per MW tends to be lower than peers. And we enjoy one of the strongest balance sheet, because of which we enjoy one of the highest credit ratings in the private sector. Because of which the financing cost that we enjoy for our growth projects is one of the most competitive in the industry.
So it is very, very imperative for us to retain all these moats, from a business, from a strategy point of view. So we will go by what is the rating agency guard rail, right? So that it is very important to understand that the high credit rating that we enjoy, what are the guard rails for that? So the way the rating agencies look at, you know, because typically when you start a 3:1 debt to equity project with a 25-year, you know, visibility of, revenue and cash flows, and you solve for a certain debt service coverage ratio, it translates to a net debt to EBITDA of about 5-5.5 times. And that is what the rating agencies are comfortable with.
But what is most important here is, the phrase they use is a sustained normalized net debt to EBITDA. Which means what? That if you have debt sitting on the balance sheet, which is sitting in capital work in progress, they adjust for that because the EBITDA from that is going to be coming in a forward-looking manner, right?
Right.
So from a headline point of view, what we are seeing is a 4.5x, adjusted for, you know, the debt of, if you look at slide, you know, we have a slide on the, on the investor presentation deck, where we, we break it up, the net debt, bridge. There is, you know, adjusted for the capital work in progress, slide number 12, it is 2.9x, right?
Right. Mm.
And mind you, all of these numbers that you are seeing, and the results are as of 31st March. The INR 5,000 crore equity raise happened in the first week of April, right?
Mm-hmm, mm, mm.
That has not been accounted for yet, right? So if I were just theoretically to account for that, what you are seeing as 4.5 is actually well below 4. It is about 3.7 times. And what you are seeing as 2.9 is about 2 times, right? So we have a very comfortable, I would say, headroom from a balance sheet point of view, to kind of, you know, pursue our growth aspirations.
Right. And sir, my last question is on Vijayanagar. Why are we still generating an average PLF of only 59%, considering the fall in the coal prices? Are we not able to get the merchant capacity we are running as per our, you know, what we need to? And any guidance for that for the coming year?
No. See, as and when the capacities, the requirements are there, we are, we- the state is looking for the power we are generating. There are some issues which are there, related to water supply and all, but that has been taken care. So as and when there is a requirement, we are giving that power. But, we are- See, if, if I can add to that, you know, there's a Section 11 that has been imposed by State of Karnataka also, right?
Right.
The Vijayanagar plant-
Mm.
Whatever untied capacity is there, we will sell to the state, you know, at a certain tariff that has been agreed. So, the Section 11 is in place, and therefore, as and when we are able to have excess generation, we are able to feed back into the grid.
...So do you think the PLF of 59% can improve significantly, even Section 11 or merchant, wherever we sell? I mean, I think it's more to do with Section 11 now than merchant, but can this improve significantly in the coming year?
We would want to be conservative and not guide aggressively, because honestly speaking, you know, if you go back and look at our commentary, at least a year and a half ago, we used to say that, "Look, merchant is something which is so volatile, it's not predictable," and hence, you know, 85% of my capacity, which is tied up under long-term PPA, accounts for 95% of EBITDA, right? The needle has chosen to move now. So while we are very bullish on the underlying power demand growth and the sustained power demand supply deficit situation, we would expect the firm merchant markets to continue at least over the medium term.
But I would not want to, as a management team, want to guide aggressively and say that, "No, no, please take your base case as a much higher PLF." We are happy if you work with a 58%-59% PLF. That's not bad at all.
Thank you. Rajesh, I'll request you to come back for a follow-up question. Thank you. The next question is from the line of Aniket Mittal from SBI Mutual Fund. Please go ahead.
Thank you for the opportunity. So firstly, on the 6.2 GW MOU that we have with JSW, how does one think of structurizing of that MOU into, let's say, a PPA going forward?
Aniket, you know, you're right. This 6.2 GW MOU is, you know, for the additional RE capacities that they need for their decarbonization targets. This will happen in phases because this is 6.2 till 2030, not in one go. In one of the earnings calls before this, we had said that we are in discussions with JSW Steel, you know, for the phase one of this 6.2 GW. And we believe that, this quarter, we should be in a position to conclude the discussions, and have, you know, the board approvals of both the companies in place, and then sign the PPA, and at the right time, we will make the necessary disclosures to the markets.
But, we are reasonably confident that during the current quarter, which is the June quarter, we should be in a position to conclude this, the phase one of the 6.2.
Okay. That's it. The second question was just on the bidding that we've been doing in the utility tenders. Traditionally, we've been averse to bidding for, you know, plain vanilla solar projects, but I think over the past few months, we won certain tenders within those frame as well, which are pure solar projects. Just trying to understand the thought process over here. Are you seeing the equity IRRs or the competition intensity change in the market? And what sort of equity IRRs do you expect for these projects that you recently won?
See, Aniket, you are right, that in past we have not been present in this competitive bidding, bid space. But as we have been saying, for quite some time in various calls, that, we are targeting at least mid-teen IRRs, which, were not there. But now, at the current tariffs which are being discovered and, the CapEx which is involved, we will be definitely, that is one of the reasons which we have participated. And going forward also with wherever, at least the mid-teen IRR, are achievable, we are getting, we will definitely be looking towards in this, in this space also.
Okay. So mid-teen IRR and, and plain vanilla solar as well. Just one last question was, you briefly mentioned about, you know, spinning the FDRE project. I think we've won about 180 MW. So could you give us an idea of how the scaling up will happen for that project in terms of wind, solar, battery? And I'm just trying to understand how much of that is being built in, in this, in this pipeline of, 3.4 GW that you have.
You see, Aniket, if I have understood correctly, you, you want that how this FDRE space, bids will come up? Or, the nature of the combination of how this FDRE, what we have won, 180 MW, will be structured?
The nature. How that 180 MW will be structured.
See, normally you can say it's a mix. Depending on the FDRE, it is; it differs from.... It cannot be a standard, this thing, because each state or each DISCOM, whoever wants to buy, what is their hourly pattern, which we have to cater to. So it is a project is designed like that. It is a mix of wind, solar, and it maybe it is also a storage. So that is how it is designed. But on an average, you can say it is normally two times in terms of the capacity if you see. How much is wind, how much is solar, how much is the storage, depends on, but this is normally wind heavy. FDRE is normally wind heavy. Solar portion is lesser, but on an average, overall capacities, you can say average two times.
Thank you. Aniket, I'll request you to come back for a follow-up question. I request to all the participants, kindly restrict to two questions per participant. Next question is from the line of Nikhil Abhyankar from ICICI Securities. Please go ahead.
Yeah. Thank you, sir. Thanks for the opportunity. Just a continuation on the previous question. So, do we have any guidance on the BESS project as to, have we tied up the remaining 40%, and are we looking to tie it up with our own FDRE bids?
... See, Nikhil, 40% right now, we are, we have not tied up, and we have designed the project in such a way that we are seeing the opportunities as we see that, during the in the merchant, the peak, our demand and also the price which is being discovered, and the demand growth, what we talk, I spoke about during in my opening remarks. We see this as, so I think in peak demand, we will be using this in the merchant, the, the, in the morning and evening peak. That is what we see. And the gap, when we I said that the peak demand is likely from 243 GW are going to be 260 GW.
This is maybe a particular moment, but during the year, between off-peak and peak, the gap is increasing significantly in terms of the demand also, availability and also the prices. So I think 40% of that, we will be keeping it open and selling during the peak hours. Because if you see the off-peak prices as low as INR 2 and peak as high as INR 10, so there is a significant room to take advantage of this situation. So we'll be keeping this 40% of the capacity open for merchant.
Understood.
Because we have the flexibility that when we have to give, so we'll be giving during the peak hours only.
Okay. Sir, in the previous call, you mentioned that we might even think of adding greenfield thermal capacity. Do we have any update on that?
Can you repeat, Nikhil? We just-
Previously, we also mentioned in the previous calls that we might look to add greenfield thermal capacity. So are there any updates on that?
Yeah. See, Nikhil, if you see till now also, there is hardly any requirements are coming for the PPAs from anywhere, any of the states. So, but we are open to that, as and when the opportunity is there, we will look into, but presently, we are, we cannot give an exact quantity or exact timelines for this. And also when we see that, we are right now, our main focus is at the neo level in the renewable energy space.
Understood. So sir, just a final question, why exactly are we entering into wind manufacturing?
See, Nikhil, we have to see that how the wind capacity additions in India have happened, if you see, and what are, we have identified the various challenges which have been there. Wind capacity, which we have added to in excess of 3 GW, is, I think, a high number if you see previous years. One of the major challenges which has come is the supply chain bottlenecks.
Mm-hmm.
So, it is basically not that we are looking towards this as a business, but we are looking to de-risk our plans of, the execution, what we have made, to reach 20 GW. It is basically the de-risking and also it's possible to take the advantage of, the cost benefits when we are import-dependent highly on the imports. So it is purely a de-risking of the supply chain to ensure that whatever we are planning, we are able to execute on time.
Thank you, Nikhil. I'll request you to come back for a follow-up. Next question is on the line of Sumit Kishore from Axis Capital. Please go ahead.
Thanks for the follow-up opportunity. One more question on Ind-Barath. Now that the unit one has stabilized, at present the auction price is roughly, what is the variable cost per unit that you are able to secure in Ind-Barath?
Sumit, you know, there are two modes of sourcing coal for Ind-Barath.
Yeah.
One is the SHAKTI auctions.
Mm-hmm.
-which is for power plants with no PPAs. And the second is the spot auctions by Coal India, right? These are the two primary modes. There's a third mode which is happening, where some of the people in the neighboring region have a captive mine, and they have a permission to sell about half of that to the commercial group, right? So these are the, I would say, the three primary modes. Now, in the first batch of auctions which we had participated in, which was, say, sometime in the second quarter of fiscal 2024, second and third quarter, you know, the premiums on the base price used to be higher, right?
And therefore, I would say that the landed cost of that batch of fuel was, I would say, close to INR 3, you know, between INR 2.7-INR 2.9, in that range. But, there was a SHAKTI, the next batch of SHAKTI auctions, which happened a couple of months ago, right? And, this is valid for the current fiscal year, you know. And here, we, in most of the cases, you got it at the base price, with no premium to the base price in those auctions. So but that coal is going to come in future during the year, right? So that coal is going to be much cheaper than that. I would say that is going to be less than INR 2.5, you know.
One good new thing which is started for the first time under SHAKTI, apart from the quarterly and the spot auctions which were happening, this time the Coal India came up with bids which are valid, the offtake is for full 1 year. So a significant percentage of our total requirement for Unit 1, we have been successful in getting at the nil premium. So that will start coming maybe from June onwards. Every month, the quantity will start coming, which will take care of a large portion of our requirement. So, and that is at nil premium. So as Pritesh said, there the fuel cost will be definitely under INR 2.50.
Got it. Unit 2 stabilization would happen in Q1 or Q2 now?
No, no. Q1, we are expecting the startup, and sometime maybe in early part of Q2, we are confident that we'll be able to stabilize the unit.
Ah, Q3.
Yes, you have to give it at least one quarter for stabilization.
One quarter stabilization, maybe mid, by mid-Q2, we should start reaching towards the stabilization.
Thank you, Sumit.
Can we take the last question, please, operator?
Yes, sir. We'll take the last question from the line of Nikhil from AB Bernstein. Please go ahead.
Thanks for taking my question. My first question is regarding the bid for battery storage in Gujarat, where JSW had quoted very competitively. So given the battery prices and those kind of bids, do you see your strategy shift back from, you know, pumped storage more towards battery going forward? Or do you see a need for both?
Yes, Nikhil, now with the battery prices moderating what it was till about a year, year and a half or two years back, and also the execution of the project, the gestation pumped storage is normally higher. Battery percentage will improve, but seeing that it will be that both have their own benefits, so I think both will exist. And battery, that is the reason, as I told you, by FY FY27, it is projected that between 8-9 GW of battery storage will commission and about 7-8 GW of pumped storage. But when we see this percentage by FY32, the percentage of pumped storage will increase as compared to battery storage. Capacity additions will happen in both the spaces. It is because of long period required to complete the project.
So both are required. It is not that battery alone can replace this. And we already have MOUs for pumped storage also in place, on which we are working for PHC also.
Understood. My second question is on if I wanted to ask you to highlight, you know, the single biggest challenge that you see in achieving your FY 2025-2026 renewable capacity addition plan, what could it be? Would it be wind turbine availability? Would it be modules, land or transmission?
No. See, the thing is, these are the three key areas when you see we have already, the team, operational team and also at the management level, these three are very, very clear, areas where we need to focus. And I will tell you how we have seen these areas and what we have done is, of course, land definitely is a must. That is the starting point on which we have already started building the land, required land bank. And when we see that the two years completion from the signing of the PPA, we will be ready from that aspect.
Second is also to add, along with land, which we have not mentioned, is the evacuation and the connectivity of the substation on which the CTU is also working and we are also working. We have applied for the connectivities to match it with the completion of the project, that connectivity should be there. Now, coming to solar and wind turbine, WTG, availability, we don't see that as a challenge, especially from the wind space. There are enough capacities right now, not in India, but the opportunities which are there in outside India, maybe in China also. So we have already locked in significant capacities, what we need for wind turbine already, and which will take care of our maybe next year requirement also.
In terms of solar modules, when we say enough capacities are now there in India, and the new capacities which are going to get added in the current fiscal by December, there will not be any challenge we see in terms of module availability for us at least, and also for wind turbine availability. We have taken these three areas as the identified areas to focus on, and the team is, and the management is, definitely working on that.
Great. Thank you. That's all from my side. Thank you for answering the questions.
Thank you very much. I now hand the conference over to the management for closing comments. Yes.
Thank you. Thank you, everyone, for joining this call, and in case there are any follow-ups, please feel free to reach out to the investor relations team, and they'll be happy to answer all your queries. Thank you very much.
Thank you. Thank you, all. Thank you very much.
Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.