Rising demand, green plan JSW Energy’s power shares

Rising power demand in India has improved the earnings outlook of JSW, thereby boosting investor confidence. In addition, a steady increase in the number of Power Purchase Agreements (PPAs) has improved the company’s long-term outlook, which has outlined major expansion plans in the renewable energy sector.

Power demand in the country continues to improve, surpassing even pre-Covid levels. The August data showed that domestic electricity demand grew by 4% month-on-month and 18% year-on-year. Encouragingly, thermal PLF or plant load factor increased by up to 59%, while thermal output increased by 4%.

This is positive for JSW’s installed capacity of 4,600 megawatts (MW), which is dominated by thermal power. The firm now has PPAs for 90% of its capacity. Meanwhile, the firm plans to ramp up renewable energy capacity. JSW’s renewable-led growth is expected to reach 10 gigawatts (GW) by FY25 and 20GW by FY30. The creation of 2.5GW capacity is progressing rapidly and the PPA space is falling. PPAs exist for its entire 810MW solar capacity (SECI-IX), while the 450MW (SECI-X) project also has PPAs to be completed in the current quarter.

Note that 958MW is for captive consumption in JSW Steel and the company has directed that soon another 240MW of hydro capacity will be added with the power distribution company in Haryana.

JSW has been in the news recently for signing a preliminary agreement with the Government of Maharashtra ₹35,500 crore investment in renewable energy sector. These include setting up of 1.5GW hydro-based power and 5GW wind power projects in the state.

Undoubtedly, these initiatives are positive. Green hydrogen production plans have boosted investor confidence. Analysts at Motilal Oswal Financial Services, however, said green hydrogen plans are at an early stage and there is little clarity on capital commitment and production. Furthermore, the current stock price adequately captures this optimism, even if the successful commissioning of the 2.2GW renewable projects takes place over the next 2-3 years.