Good evening. Thank you, everyone, for joining JSW Energy conference call regarding acquisition of O2 Power. We have management of JSW Energy, Mr. Sharad Mahendra, Joint Managing Director and CEO, Mr. Pritesh Vinay, Director of Finance and CFO, and Mr. Vikas Chaudhary, Head of Investor Relations and Strategic Finance. We will have opening remarks from the management, followed by Q&A. I now hand over the call to Mr. Sharad Mahendra. Thank you, and over to you, sir.
Thank you, JSW. Good evening, everyone, and a very special thanks to all of you for joining this call on a very, very short notice. As has been told, today is a landmark milestone which your company has achieved. That was the reason of such a short notice to have this call. I'm pleased to announce that JSW Neo Energy has signed a definitive agreement to acquire O2 Power's renewable portfolio. O2 Power is a 4.7-gigawatt renewable platform jointly established in 2020 by EQT Infrastructure and Temasek. This is our largest acquisition since its inception and marks a significant milestone in our journey towards a driving sustainable future. This acquisition will be immensely value-attractive to our shareholders and is a testament to our commitment to prudent capital allocation. By integrating O2 Power's high-quality renewable energy assets into our portfolio, we are accelerating our growth, leading to a locked-in capacity of 25 GW.
Having said that, I would like to take this opportunity to welcome the experienced management team and employees of O2 Power to JSW Energy. O2 Power's track record of execution is truly commendable, and we are excited to have the O2 team as a part of the JSW family. I'm sure that by combining our strengths, we will continue to deliver exceptional value to our customers and make a positive impact on our stakeholders. To provide a brief overview of the assets, the platform has a total locked-in capacity of 4.7 GW. Of this, 2.3 GW are expected to be operational by June 2025. Additionally, it has 1.5 GW of under-construction capacity, which has secured a power purchase agreement of 974 MW of pipeline projects with letters of awards.
The portfolio spans across various modes of generation, including 1731 MW wind, 475 MW solar of 1731, and wind of 475 MW, and complex solutions such as hybrid of 1580 MW, round-the-clock, and firm-dispatchable renewable energy at 910 MW. It is spread across seven resource-rich states, with JSW already present in five of these states. Regarding off-takers, the portfolio is predominantly tied up with high-quality off-takers, with 87% of the capacity secured by utility-scale off-takers like SECI, SJVN, and NTPC. The remaining 13% of the portfolio, amounting to 596 MW, is tied up with high-credit-rated commercial and industrial customers. Our rationale for acquisition is that it accelerates our growth, increasing our locked-in capacity by 23% to a total of 25 GW.
We are also welcoming and onboarding an experienced management team of 370 employees from O2 Power who have a proven execution record and have been instrumental in the O2 growth journey. Connectivity and land acquisition, as we all know, are significant challenges today in renewable energy project execution. However, O2 Power has secured an additional 1,708 MW of connectivity beyond 4.7 GW locked-in capacity, which can be leveraged for our future projects. Regarding land, 40% of the land required for under-construction and pipeline projects has already been acquired, with very clear visibility for the entire portfolio. Acquiring these resources is part of the price and enables us to increase acquired platform capacity to 4.7 GW by June 27. JSW Energy has hands-on experience in undertaking self-O&M practices at all our locations.
Given our location overlap with the assets being acquired, we can use that to bring O&M cost synergies, leading to better economics. We also intend to integrate O2 Power's portfolio with our existing state-of-the-art integrated digital command center. I want to express my confidence that together we will fully harness the potential of these renewable assets. This will not only enhance our generation capabilities but also create new jobs and stimulate economic growth in the communities where these projects are located. As we have been saying regularly, we at JSW Energy look at cash returns before committing capital. With a blended tariff of INR 3.37 per kilowatt-hour, a strong credit, and lower receivable days, acquisition of O2 Power is highly return-accretive asset for our portfolio.
We expect a steady state EBITDA of approximately INR 1,500 crores on 2.3 GW of portfolio, which will be operational by June 25, and on a fully completed basis of 4.7 GW capacity, the steady state EBITDA of INR 3,750 crores. The transaction values O2 Power at an enterprise value of INR 12,468 crores after adjusting for net working capital. On a fully built-out basis for the entire 4.7 GW, the EV EBITDA multiple will be in the range of 6.8-7.1. Thank you very much, and maybe we'll request for questions if anyone has any. Thank you very much.
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 touch-tone 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We have a first question from the line of Sumit Kishore from Axis Capital. Please go ahead.
Good evening. My compliments on the O2 Power acquisition. I have a couple of questions. The first one is, what is the operational capacity as of date? And in the enterprise value mentioned, what is it that you have considered as the gross block for 2.3-gigawatt operational capacity, and what part is in CWIP adjusted for net working capital?
Sumit, hi. I'm coming here. Sumit, the operational capacity as we are speaking is over 1,200 MW, which by June 25 will go to 2.3, which means another 1,100 MW approximately will get completed by June 25. Gross block and CWIP numbers, we will not be able to share at this stage because it will be more appropriate to share those numbers at the time of the closing and the consummation of the transactions with a carved-out balance sheet at that point of time. Yeah?
What is the rough timeline for the COD of the 2.4 gigawatt under-construction pipeline capacity?
We expect that to be done by June 2027.
June 2027?
Yes.
Second question is, could you speak about the net debt to EBITDA or net debt to equity on a pro forma basis post-O2 acquisition, and what is the, could you repeat your ceiling levels for these metrics and room to accommodate growth using internal accruals? So just one additional point to this question is, of the 24,708 megawatt total locked-in capacity, would you need any fundraise to carry out this plan?
So again, any of the balance sheet metrics, we will be able to share at the time of the closing. But the way to look at it is that given that these are new assets, right, the remaining plant life for the operational assets is 23 years, and bulk of the assets are actually yet to be completed, right? So you can very well use the standard funding rules of initial 3:1, 75/25 or 80/20 net equity funding, depending on the kind of DSCRs that each individual project can support with very strong counterparty credit risk and interest costs. And you'll be able to come to a ballpark leverage profile, which should be standard for any greenfield capacity of a similar type. That's point number one. Point number two is this, as far as the ability to fund and all that is concerned, yes, we are very, very comfortable.
I think that users don't get into the largest acquisition since your inception without thinking of these optionalities. Suffice to say that currently there is actually additional headroom to load incremental debt on the target SPVs itself, given that the underlying cash flows are stronger and bulk of the capacity build-out is still to be done. However, in all these questions, it is always sensible to come back to the guardrails in terms of protecting the credit ratings on a consolidated basis. And hence, we believe that the guardrails that have been set from a rating agency's point of view will be adhered to. And ballpark the guidance of about four and a half to five times Net Debt to EBITDA, that should be largely on a steady state normalized basis we are adhering to. Yeah?
On the third part of your question, which is linked to any potential fundraise, that at the right time, if there is a need, we will surely consider. Yeah?
Sure. Just one clarification. The four and a half times net debt to EBITDA is after excluding debt for under-construction projects?
So I'm talking on a consolidated basis, Sumit, for the overall portfolio, right? And typically, if you start any new renewable project and go with a 3:1 net equity and you try and fit, say, a 1.25 average debt service coverage ratio, you invariably will land with something in the range of 5 to 5.5 times debt to EBITDA, right? So that is kosher from a rating agency point of view because you have a long-term off-take agreement with strong counterparties, right?
Sure. Thank you, and I wish you all the best.
Thank you.
Thank you. Before we take the next question, we'd like to remind participants to press star and one to ask a question. Next question is from the line of Abhishek Nigam from Motilal Oswal. Please go ahead.
Yeah. Hi. Thank you so much. So just two questions. So one, anything that you will explore about the C&I opportunities? That will be very useful.
There is roughly 600 MW, approximately 600 MW. The details are there in the presentation that has been uploaded with C&I. On C&I, I can just give you a sense that about more than half, about 55%-60% of the C&I portfolio is with AA-rated credit off-takers.
Mr. Nigam?
Okay. Yes. Yes. That's useful. Thank you so much. And any further improvement that you see in the credit rating? Because now this is part of the new, although I understand the credit rating might be on the SPV level. So any benefit that you see over there?
Are you doing the current credit rating of the O2 SPVs, project SPVs?
Oh, these SPVs.
Yes. Yes. So again, it will be a bit premature. We just signed an SPA. We need to go through the CPs and get the requisite approvals before we can consummate the transaction and the deal actually gets contracted. I think it will be more appropriate for us to comment on that once we are in the driving seat. Yeah?
Fair enough. And just last question. I mean, should we expect deal completion in, say, about three-to-six months, or how does it? Is it something that's being guided over there?
Five months. If you look at the stock exchange disclosure, which has gone out, it is mentioned there. So the notional date for consummation is about five months from the date of SPA signing. But of course, both parties would be interested to consummate it at the earliest. So let's see. Yeah? We'll keep you updated on how that is progressing.
Perfect. Thank you so much. That's it from me.
Thank you. We have a next question from the line of Murtuza Arsiwalla from Kotak Securities. Please go ahead.
Hi, gentlemen. Congratulations on a good acquisition. Would it be possible to share the details? The 4.7, I would assume, is AC capacity. Would you be able to share what the underlying sort of DC solar capacity and the wind and battery storage that would be supporting the hybrid and FDRE assets as well?
So Murtuza, slide number six of the presentation gives a pie chart of the breakup of wind and solar and FDRE and hybrid. But I don't think it will be possible to get project-by-project DC overloading on the solar part and the breakup of the FDRE/hybrid project because the sizing will also depend on the two factors, which is the location where it is coming and the technology or the equipment that is in use, right? So I think that kind of detail will be premature at this stage. Yeah?
Okay. If I could put an alternate question, you're looking at an overall acquisition where you're putting this 4.7 gigawatt at about INR 25,000 crores of enterprise value, taking into consideration the incremental CapEx. Any ballpark estimate? If you had to put all of this capacity from scratch together, what would be sort of the cost it would have taken? So definitely put how much would this come?
Yes.
I mean, yeah.
Yeah. I will definitely say this is a very, very valid question because whenever we are evaluating any asset, we also the basic comparison is build or buy. We all know today if any greenfield project is being benchmarked with maybe on a fully built portfolio, if we talk, you can say that it's solar. A reasonable assumption of taking INR 4.2-INR 4.25 crore per megawatt on an AC basis is normally the project cost, which has been prevailing. And wind, as we all know, that is in the range of INR 8.5 crore per megawatt. Even if I take JSW, as we are known for our own efficiencies, then also maybe with this kind of portfolio of 4.7 GW, we benchmark this with these numbers which I just shared, then we can easily arrive at that what will be the build value and at what we are buying.
It definitely and, as we all know, on a fully completed basis, if you see the EV/EBITDA between 6.8-7.1, the way the incremental is being taken.
Yeah. Yeah. All right. Thank you.
Yeah.
Thank you. Ladies and gentlemen, to ask a question, please press star and one on your phone. We'll take a next question from the line of Mahesh Patel from ICICI Securities. Please go ahead.
Yeah. Hello sir. First of all, congratulations on the acquisition. So my first question is on the comment that you made on the 1,708 megawatt of connectivity that is present outside this 4.7 GW. Is it right?
Yes. Yes. That's correct.
Okay, and 40% land acquisition you have mentioned, this is for under-construction plus under-planning projects, right?
Exactly. Yes.
Okay. And sir, the question is, so out of this 2.25 gigawatt that is expected to be operational by June 25, can you just give us a rough breakup of the solar and wind mix in this?
You see, the total capacity, when we talk of 4.7 GW, out of this, close to about, you can say, ballpark number, about 3 GW is solar, and the rest is wind. Of course, a part of the solar in the presentation, when you see in our slide, it is pure solar is 1,731, and then balance of the solar is a part of FDRE and the hybrid also. So if you have to divide purely the total portfolio of 4.7 into wind and solar, so that will come to close to about 2.9-3 GW solar, and the rest is the wind capacity which is there.
Okay. Okay, sir. And by June 2025, we are expecting around 2.25 capacity. And any estimate for the March 2026 figure? Do you have any capacity in mind in terms of operation?
Not at this stage because this will be all when we will be going into the details, we will do that.
Okay. Okay. Thank you. Thank you.
Thank you. We have a next question from the line of Vishal Periwal from Antique Stockbroking. Please go ahead.
Yes, sir. Congratulations on the news. A couple of questions. One, I mean, again, if one look at the net working capital of roughly INR 2,700 crores, which is in the PPT, so does this also include advances or anything? Because our revenue is hardly anything on operational assets as of now.
No, bulk of that, Vishal, is actually cash.
Okay. Okay. Got it. And second, is it possible to give a breakup of operational capacity, that 1.2 GW which you mentioned? A ballpark number.
1.2 GW, which is operational. About maybe ballpark number of around 400 odd is no, no, no. About close to 970 MW is solar, and 275 is wind. That's yeah.
Okay. Got it. And then just the last part of the acquisition amount that we have paid, the EV of INR 12,500 crores, so that is fair to say it's largely for the 2.3 gigawatt of capacity in terms of the actual money which has gone out? I know we have PPA, land, and other things also, but probably from CWIP point of view, large part is for 2.3 GW?
Yeah. So we are looking at it as a platform, right? We leave it to you to break it under which side you want to park what amount because one is looking at you're getting an operational capacity and a bolt-on ability with incremental both operational capacity at least and as well as EBITDA and cash flows coming in. You're getting an optionality to accelerate growth with a high-quality portfolio of assets where a significant amount of imponderables like land, connectivity, PPA, etc., are already in place. You're getting access to a very high-quality, skilled, and talented management team and workforce which has that execution capability, and you are looking at the optionality of future growth because of additional connectivity that is available, so there are multiple moving parts.
I think it will not be fair to isolate that this is what we are paying only for this because you're also assuming debt which is there at the target SPVs at this point of time. There will be adjustments related to net working capital, and if there's an additional equity that is going in to ensure that the projects get completed on time and some closing adjustments which are customary for deals of this kind. So I hope I'm able to give you a picture of why it is difficult to pinpoint under which exact head how much of value is housed.
Okay. No, that's fair enough because, I mean, what I was trying to say is incremental capital expenditure which is required. It's almost like 5.5 crores for the balance capacity. But anyways, I mean, your point is very taken. So maybe one last thing. Yeah. So in terms of our EBITDA per gigawatt number, if one looks at it like 1,500 crore EBITDA for the first, the 2.3 gigawatt, which is almost like 650 crores per gigawatt. And incrementally, this is moving towards, if you combine everything together, 4.7, it moves to almost like 750 or maybe plus that. So I mean, is it like the initial capacity has, I mean, the tariffs are a little lower vis-à-vis the part or maybe the other part has FDRE? That's why it is moving higher?
No, we have to see that maybe on 2.3 when we start talking of this EBITDA on an annualized basis, if you see this part capacity which is coming normalized to 300, and then the mix changes, if you see today's solar and wind ratio, overall portfolio on a fully built basis, if you see the wind portfolio is going to be increasing in the overall as compared to what it is in 2.3, and where the tariffs are higher, but normally we all know that wind tariffs are higher as compared to solar, and the complex solutions of FDRE and round-the-clock power and the hybrids are a significant part in the capacities beyond 2.3 GW, so tariffs are higher in the capacities to be built. That is the reason resulting in per gigawatt of EBITDA or per megawatt that you are seeing increasing on a fully built basis.
And if I may add to that, look, ultimately, whichever way you slice and dice, the way we look at it as allocators of capital is that eventually from an equity IRR point of view, are my hurdle rates going to be met or not, regardless of the fuel type, right?
So on these valuations, our mid-teen equity IRR is very comfortably being met. And hence, we are excited about this opportunity.
Okay. Got it, sir. That's all from my side. Thank you very much.
Thank you. Can we take the last one question, please?
Sure, sir. We'll take a last question from the line of Vishal Biraia from Bandhan AMC. Please go ahead.
Of the receivers that are there, are there any that are delayed by more than six months or any that are stuck?
No, no, no, no. In fact, these are the receivables here in this platform are a very healthy 43 days on our total receivables with nothing over six months or anything which are a concern. Everything are all regular receivables with 43 days receivables days, which is very, very good as compared to what is prevailing on an overall basis in the industry.
Okay. And what portion of 1.2 gigawatt that is operational is tied up with the states?
Tied up with the states will be a smaller portion.
Okay. I mean, okay. What portion would be that? What quantum?
It will not be more than 20%, 15%-20%, in fact. Yeah?
Okay. Okay. Okay. That's fair. Thank you.
Thank you. So that was the last question. Any closing comments?
Yeah. Thank you very much. Once again, thanks for being with us at such a short notice, especially on a weekend and the time of festive time. And it is really good interacting with you all. And any other queries which come up, our investor relations team will be available to answer any queries which can come later. They can be approached. And wishing you all and everyone in your family and near and dear ones a very, very happy and prosperous 2025, and look forward to meeting you, interacting with you again in the new year. Thank you very much.
Thank you, members of the management team. On behalf of JSW Energy, that concludes this conference. Thank you for joining us, and you may now disconnect.