Friday, May 13, 2022

How will Miniratna PSU SJVN fund its aggressive capacity expansion?

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  • SJVN will rely on a variety of sources for funding, like debt-free cash flow from other projects, the bond market, ECB, etc for funding of its capacity expansion, said the CMD
  • The CMD also told investors that the company is targeting capex of Rs 8,000 crore in FY23

New Delhi: A week after SJVN Ltd doubled its capacity expansion targets for short-term, medium-term and long-term, investors at an earnings call conference for Q3 placed a series of pertinent questions before the Chairman and Managing Director (CMD) on Friday as to how a Miniratna PSU with a small balance sheet hopes to fund such an aggressive capacity expansion plan. In response, SJVN CMD Nand Lal Sharma assured investors that there will be no problem of cash flow for funding these projects, both on the equity and the debt side.

SJVN Ltd recently doubled its installed power generation capacity target for 2023 to 5,000 MW, for 2030 to 25,000 MW and for 2040 to 50,000 MW. 

How does SJVN intend to fund its capacity expansion?

Investors pointed out that given the small balance sheet of the company, the PSU will not only have to increase its net profit at least three times but will also have to find creative ways of raising debt. So what does the PSU plan on doing, they asked. In response to the question, the SJVN CMD said that the PSU will rely on a variety of sources for funding, like debt-free cash flow from other projects, the bond market, External Commercial Borrowings (ECB), securitisation of existing assets and loans. “Definitely, the requirement for funds and equity for this kind of an expansion plan is huge. The cash flow from the 3,500 MW capacity projects will come into operation in the next two years. Similarly, we are also exploring the options of funds from various sources, like we have raised Rs 1,000 crore from the bond market, we also have External Commercial Borrowings (ECB) of USD500 million. Similarly, we will also go for securitisation of existing assets, like Nathpa Jakhri and some other projects. There will be no problem of cash flow, equity portion as well as the debt portion for these projects,” Sharma told investors.

SJVN plans Rs 8,000 crore capex for FY23

The CMD also told investors that the company is targeting capex of Rs 8,000 crore in FY23. He exuded confidence that the company will be able to achieve the capacity expansion target of 5,000 MW for 2023 and the other targets that have been planned for 2030 and 2040. Sharma also said that by the end of 2023-24, SJVN’s debt will be around Rs 10,000 crore. On being asked about how does the PSU plan to service these debts given the small size of the balance sheet, the CMD said, “We have taken risk mitigation measures like moratorium period, cash flow lying from other projects which is debt-free. By the end of FY23, the capacity addition will be around 205 MW… 60 MW hydro project and 145 MW solar projects in UP and Gujarat will be in place.”

Out of 5,000 MW planned for 2023, around 2,900 MW will be hydro power, 1,320 MW will be thermal power and 800-900 MW will comprise of solar power

‘SJVN encouraged to revise targets due to speedy implementation’

Explaining the rationale behind the aggressive revision in the capacity expansion targets, Sharma said, “Prime Minister Narendra Modi has already announced a target of 500 GW of non-fossil fuel by 2030. We are encouraged by our speed of executing projects that are in the pipeline and we have aligned our targets with that of the government. We are going aggressively in the solar sector, but at the same time, we are also playing on our core strength of hydropower. So, for 2030, our target has been revised from 12,000 MW to 25,000 MW. And out of these 25,000 MW, 15,000-18,000 MW will come from solar. And the rest 8,000-10,000 MW will come from hydro, thermal and wind. By 2040, the target is to reach 50 GW of installed capacity.”

“We will not restrict ourselves to wind, solar, thermal and hydro power, we will also aim to foray into green hydrogen and battery storage. We are keeping all these options open,” added Sharma

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