JSW Energy Limited Investor Presentation May 2015 Agenda
Overview Value Proposition Business Appendix Environment
2 JSW Group – presence across the core sectors
JSW Steel*: India’s leading integrated steel producer (Steel Capacity: 14.3MTPA )
JSW Energy*: Engaged across the value chain of power business (Operational Capacity: 3,140MW)
JSW Cement: Slag cement plant of 5.3MTPA capacity
JSW Infrastructure: Engaged in development and operations of ports (Goa, Jaigarh, and Dharamtar Port)
JSoft Solutions: An IT & ITES arm of JSW group
* Listed company 3 JSW Energy – Presence across the value chain
. Currently operational . Operational transmission line – JV with capacity: 3,140MW* MSETCL: two 400KV transmission lines Power Power generation transmission
. JV with Toshiba, Japan for Equipment . Rajasthan (lignite): Kapurdi manufacturing of super- Mining (operational with capacity of critical steam turbines and manufacturing 7MTPA) and Jalipa (under generators development) mines; mineable reserves of 441mn tonnes
Power trading
. Engaged in power trading since June 2006 . Handled trading volume of ~9 bn units in FY15
* Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement 4 pending before the Himachal Pradesh High Court and receipt of other approvals
Established energy company with 3,140 MW operational capacity…. proposed increase to 4,531 MW1
Baspa II (300MW) & Karcham Wangtoo (1,091MW) 1 . Units operating: Baspa II since 2003 and Karcham Wangtoo since 2012 Barmer: 1,080MW . Technology & Fuel Source: Hydro . Power Offtake: Long Term PPA and Merchant . Configuration: 8 X 135MW . Enterprise Value to JSW Energy4: INR 97,000mn/ $1,617mn3 . Units operating: since 20105 . Technology: Sub-critical pithead lignite based TPP . Fuel Source: Captive lignite mines of BLMCL2 . Power Offtake: Long Term PPA . Project Cost4: INR 71,660mn/ $1,194mn
Ratnagiri: 1,200MW . Configuration: 4 X 300MW . Units operating: since 20115 . Technology: Sub-critical TPP . Fuel Source: Imported thermal coal Vijayanagar: 860MW . Power Offtake: Long Term PPA & Merchant . Project Cost4: INR 54,942mn/ $916mn . Configuration: 2 X 130MW and 2 X 300MW . Units operating: since 20005 . Technology: Sub-critical TPP Operational . Fuel Source: Gas & imported thermal coal . Power Offtake: Merchant & Long Term PPA 1 Subject to acquisition of the assets . Project Cost4: INR 30,960mn/ $516mn
Proximity to load centre/fuel source/infrastructural facilities
1) Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals, 2) Long term FSA with BLMCL for supply of lignite from its captive mines; BLMCL is a 49:51 JV between Raj WestPower Ltd (subsidiary of JSW Energy) and Rajasthan government undertaking, 3) 5 Subject to mutually agreed adjustments, 4) USD/ INR = 60, 5) denotes start of first unit in respective fiscal year; TPP – Thermal Power Plant
Proven track record
FY12 FY15
Capacity (MW) 2,600 3,140 . CAGR FY12–15: 6%
Net Generation (MUs) 13,594 20,307 . CAGR FY12–15: 14%
Total Revenue INR 62,654mn / $1,044mn INR 96,103mn / $1,602mn . CAGR FY12–15: 15%
EBITDA INR 15,944mn/ $266mn INR 38,535mn/ $642mn . CAGR FY12–15: 34%
. CAGR FY12–15: 99% PAT INR 1,701mn/ $28mn INR 13,495mn/ $225mn . Profitable and dividend paying since listing
Fuel Type Thermal Coal Thermal Coal & Lignite . Diversifying fuel sources
Power generation, O&M, Power generation, O&M, Business Segment transmission, trading, coal mining transmission, trading, coal mining . Presence across the value chain and equipment manufacturing and equipment manufacturing
Despite turbulent sector dynamics, delivering sustainable growth driven by focused execution and balanced strategy
USD/ INR = 60 6 Corporate strategy
Efficient capital allocation for organic growth Selective Pursue selective inorganic growth opportunities which will enhance cash flows and be Growth RoE accretive
Diversification of Fuel Mix and Off- Increasing proportion of Long Term PPAs – goal to reach over 85% of total take Arrangements Diversify both fuel mix and source – thermal coal, lignite and hydro
Focus on Resource Optimization Committed to robust mix of sustainable eco-friendly technologies Focus on prudent O&M practices and higher plant efficiencies
Strengthening Presence Across the Value Continue to evaluate opportunities across the value chain – Chain from mining, equipment manufacturing, generation, transmission and distribution for creating long term value
Retain prudent financial profile Prudent Balance Sheet Management Manage growth and debt profile to capture market opportunities without excessive risk
7 Business challenges and mitigation strategies
Barmer: Received environmental clearance from Ministry of Environment, Fuel availability, PLF Forests & Climate Change (MoEFCC) for Kapurdi mine to increase Final tariff order the mining capacity from 3.75 MTPA to 7 MTPA until FY18 Expect to operationalize Jalipa mine in FY16 Barmer plant consistently operating above normative PLF Expect final tariff order by FY16, current provisional tariff order covers ~96%1 of fixed cost petitoned Ratnagiri: FY15 PLF – 73% (versus 71% in FY14) – Lower demand impacting • LT PPA proportion improved to 773 MW on CERC norms scheduling and PLF Filed petition for compensatory tariff with MERC under “force- Under-recovery on PPA mejure” clause of the PPA with state Discom
Vijayanagar: While demand for merchant power remains strong, opportunity to Reliance on merchant tie up long term PPA looks promising over the next two years sales
Exposure to imported coal Thermal coal price corrected in sync with global energy prices prices and currency volatility Prudent Hedging policy for coal imports
1) Calculated as INR 2.38/unit as per the interim tariff order against our tariff petition of INR 2.48/ unit 8 Sound Corporate Governance
Ensures regular review of audit plans, significant audit findings, adequacy of internal audit system, Audit Committee compliance with regulations by the Company and its subsidiaries Comprises of four Non-Executive Directors Identifies qualified persons and recommends to the Board the appointment, removal and evaluation of Directors Nomination and Responsible for drafting policy on specific remuneration packages for Executive Directors and Remuneration approving the payment of remuneration to managerial personnel Committee Formulate criteria for independence of Director, evaluation of Independent Directors, policy on Board diversity Comprises of three Non-Executive Directors Stakeholders Responsible for the functioning of the investor grievances redressal system Relationship Comprises of two Non-Executive Directors Committee Risk Management Periodically reviews risk assessment and minimization procedures Committee Corporate Social Formulates and recommends to the Board a CSR Policy including list of projects and programs Responsibility Strong commitment towards CSR (CSR) Committee Comprises of four Non-Executive Directors All key committees in place, having adequate independent director representation
9 Agenda
Overview Value Proposition Business Appendix Environment
10 Value proposition
1 Efficient Capital Allocation and Execution Capabilities
2 Portfolio of Efficient Operating Assets
3 Diversified Fuel Tie-up
4 Balanced Mix of Off-take Arrangements
5 Robust Financial Profile
11 1 Efficient Capital Allocation and Execution Capabilities
Barmer (2010-2013): Ratnagiri 1,080 MW @ (2011-2012): INR 66.36mn1 /MW 1,200 MW @ (~$1.11mn/MW) Vijayanagar INR 45.78mn/MW (2010): (~$0.76mn/MW) 600 MW @ INR 32.78mn/MW (~$0.55mn/MW) Vijayanagar (2000-2001): 260 MW @ INR 43.42mn/MW (~$0.72mn/MW)
Leveraging upon strong project execution and project management expertise, and infrastructure
1) High capital cost due to CFBC boilers for lignite based power plant USD/ INR = 60 12
2 Portfolio of Efficient Operating Assets
4 4 JSW Energy Standalone PLF All India private sector thermal power plants' PLF*
93% Among the best run thermal power plants in 81% 81% 83% India on a consistent basis 70% 64% 62% 61% Vijayanagar plant has been consistently recognised as a top performing operating power plant by the Ministry of Power for 7 consecutive years2
FY12 FY13 FY14 FY15
JSW Energy Energy Stand alone JSW
1 87% 92% 88% 87% Benchmark O&M practice resulting in 78% 73% 77% consistently higher PLFs
34%3
Raj West Power PLF Power West Raj
1QFY14 2QFY14 3QFY14 4QFY14 1QFY15 2QFY15 3QFY15 4QFY15
Industry leading PLFs driven by O&M and execution expertise
*Source-CEA 1) Deemed PLF, 2) Vijaynagar’s SBU I (260MW) or SBU II (600MW) received either the Bronze Shield or the Silver Shield in the category of ‘Performance of Thermal Power Stations’ for FY07/FY08/ FY09/ FY10/ FY11 and the Gold Shield for FY12 and FY13, 3) 4QFY14 PLF was lower due to fuel availability related back-down during Feb-Mar’2014, 4) Includes Vijaynagar (860MW) and Ratnagiri (1,200MW) plants 13
Diversified Fuel Tie-up and balanced Mix of Off- 3 4 take Arrangements
Fuel sources – Power off-take arrangements – optimal mix of long term o Thermal coal contracts & merchant power sales (return optimization) …. o Lignite, and Short term: o Hydro 41% Ability to capitalise on better 34% realisations Ability to respond to demand fluctuations and shortages 34% 31% 66% 59% Long term: Stable cashflows, pre-defined 66% 24% returns Insulated from inflation and 45% fuel price movement, declining 3,140 MW 4,531 MW^ tariff Long Term Short Term1
3,140MW* 4,531MW^ …. with aim to tie-up over 85% of capacity under long term PPAs Imported coal Lignite Hydro Lower fuel risk, resilience to sector dynamics
^ Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals 1) short-term arrangements also includes other arrangements 14 5 Robust Financial Profile
FY14 EBITDA Margin (%1) FY14 Return on Capital Employed (%2)
70.79% 15.60%
11.46% 10.85% 9.96% 38.77% 37.02% 8.99% 30.45% 26.01% 24.94% 5.70% 5.65% 19.91%
JSW Energy JPVL R Power Adani Power CESC NTPC Tata Power JSW Energy CESC NTPC Tata Power R Power Adani Power JPVL Standalone Standalone
FY14 Return on Net Worth (%) 13.11% Dividend paying track-record since 11.49% listing in 2010 9.26%
5.27%
0.96%
-2.43% -4.44% JSW Energy NTPC CESC R Power JPVL Tata Power Adani Power Standalone Sector leading margins and return ratios
Source: Other company data from CARE research 1) EBITDA Margin = EBITDA/ Net Revenue, 2) RoCE = EBIT/ Average Capital Employed 15
5 Robust Financial Profile
FY14 Net Debt/Equity (x) FY14 Net Debt/EBITDA (x) 13.09 7.00 11.72 5.95
8.01
3.14 4.71 2.99 1.36 2.58 1.29 1.81 0.37 0.68
JSW Energy CESC NTPC R Power Tata Power Adani Power JPVL JSW Energy CESC NTPC Tata Power Adani Power JPVL R Power Standalone Standalone
Free cash positive for last three years, despite sector specific challenges
Well capitalised balance sheet, best positioned to tap growth opportunities
Source: Other company data from CARE research 16 Well poised to capitalise on improving sector fundamentals
JSW Energy’s Advantage / Approach
Increase share of long term PPAs to over 85% Stability of cash flows takes Regulated sector precedence over growth Leverage low fixed cost advantage for upcoming Case 1 Bids
Put on-hold growth projects when sector Prudence as key to fundamentals were uncertain Capital allocation sustainable value creation All existing long term PPAs with pass-through of energy/fuel cost as per applicable regulations
Coal auctions may provide potential to enhance our Coal block auctions Opportunity to secure fuel organic growth
Well positioned to: Policy environment Sector looking ripe for consolidation and growth – . capitalise on strong balance sheet /Inorganic growth projects with low risk to . capitalize on expected consolidation of the opportunity cash flow power sector
17 Agenda
Overview Value Proposition Business Appendix Environment
18 India – installed power capacity
Sector-wise Installed Capacity – 267.6 GW Mode-wise Installed Capacity (as on Mar 31, 2015) (as on Mar 31, 2015)
Nuclear RES Central 31,692 State 5,780 72,521 2% 12% 27% 96,963 36% Hydro 41,267 15% Coal Diesel 1,64,636 Private 1,200 62% 98,153 0% Gas 37% 23,062 9%
. Private sector contributes 37% of the total installed capacity . Coal based capacities contributes 62% of the total installed capacity
Source: CEA 19 Demand-supply scenario
Southern states to remain in deficit...albeit deficit Western states remain surplus...with
expected to come down in AP marginally Maharashtra remaining in marginal deficit
FY17E FY15E FY16E
FY09 FY10 FY11 FY12 FY13 FY14
FY08 80%
60% GUJ MP 0% MAHA CHG 40% -4% 20% -8% 0% -12% -20% -16%
-40%
FY15E FY16E FY17E
FY09 FY10 FY11 FY12 FY13 FY14 -20% FY08
AP KTK TN
Source: CARE Research 20 Indian demand growth and thermal coal prices
Demand growth at multi-year low…demand to grow at 5.7% CAGR during FY14-17 with gradual pick-up in International thermal coal prices expected to economy.. remain subdued in the next 1-2 years
1,400 % growth 14% 130 Richard Bay
HBA
1,200 12%
Newcastle
1,273 1,273 110
1,000 10%
1,195 1,195
1,122 1,122
995 995
1,049 1,049
800 8%
937 937
90
831 831
777 777
600 6%
739 739
691 691
400 4%
70 Power Demand (BUs) Demand Power 200 2% (US$/tonne) price Coal
0 0% 50
FY08 FY09 FY10 FY11 FY12 FY13 FY14
FY15E FY16E FY17E
Sep'12 Sep'09 Sep'10 Sep'11 Sep'13 Sep'14
Mar'09 Mar'10 Mar'11 Mar'12 Mar'13 Mar'14
Source: CARE Research 21 Agenda
Overview Value Proposition Business Appendix Environment
22 Kutehr hydro project – under implementation
Project Details Status Update
Gross capacity 240 MW (3 x 80) . Techno-economic clearance from CEA received . MOEF accorded Forest stage-I & II clearance & Technology Run-of-the-river Hydropower environment clearance . Implementation agreement signed with HP Water allocation Ravi river government . Consent to Establish obtained from HP State pollution Free power to HP state government: control board 12% to 30% of delivered energy for . Commenced enabling works related to the project Power Off take 40 years, balance through long term arrangements
Total: INR17,980mn . Initiated process for award of EPC contracts Project Cost Amount spent till Mar 31, 2015: . Majority land is acquired INR2,380mn
23 Opportunity for organic growth
Chhattisgarh: 1,320 MW Land Available Water Available EC Available Kutehr: 240 MW* Land Available Water Available EC Available
Ratnagiri: 3200 MW Vijayanagar: 660 MW* Land Available Land Available Water Available Water Available EC Available EC Pending
Ratnagiri and Chattisgarh projects on hold, which can be revived with low gestation offering geographical diversification
* Under implementation 24 Recent acquisition of Hydro Assets - Rationale
Enhanced Scale of operation - Capacity increase from 3140 MW to 4531 MW*
Portfolio diversification with operational hydro assets - Thermal – 3140 MW & Hydro – 1391 MW*
Balanced Mix of PPA Basket
- LT PPA – 2,988 MW (66%) and Merchant – 1,543 MW (34%)
All projects commissioned, have PPAs on regulated two-part tariff
- Cash flow and earnings accretive immediately
Well built hydro power plant with low execution risk - Stable hydrology, proven operational track record, high plant availability, low O&M costs
Value enhancing strategic fit with high quality assets
* Capacity would increase to 4,531MW upon completion of Baspa II & Karcham Wangtoo Hydro Assets’ acquisition under the scheme of arrangement pending before the Himachal Pradesh High Court and receipt of other approvals 25
Strong financial track record
Total Revenue (INR mn) EBITDA (INR mn, RHS) Net Debt (INR mn) Net Debt to Equity 96,103 1,00,000 91,477 89,076 40,000 1,00,000 1.90 38,535 94,049 80,000 32,000 91,191 1.70 62,654 89,205 30,066 34,536 90,000 60,000 24,000 1.60 1.50 1.52 40,000 16,000 1.30 80,000 1.36 15,944 75,739 20,000 8,000 1.10
- 0 70,000 1.01 0.90 FY12 FY13 FY14 FY15 FY12 FY13 FY14 FY15
Key financial parameters FY13 FY14 FY15 Profit making entity since inception EBITDA Margin (%) 32.9 38.8 40.1 Dividend paying track-record since listing Return on Net Worth (%) 14.6 11.5 18.6 Free cash positive EPS (INR Per Share) 5.51 4.60 8.23 Well capitalised balance sheet/ low gearing ratios DPS (INR Per Share) 2.00 2.00 2.00^
Robust financial profile in a challenging environment
^ Subject to approval of shareholders 26 Forward looking and cautionary statement
This presentation has been prepared by JSW Energy Limited (the “Company”) based upon information available in the public domain solely for information purposes without regard to any specific objectives, financial situations or informational needs of any particular person. This presentation should not be construed as legal, tax, investment or other advice. This presentation is confidential, being given solely for your information and for your use, and may not be copied, distributed or disseminated, directly or indirectly, in any manner. Furthermore, no person is authorized to give any information or make any representation which is not contained in, or is inconsistent with, this presentation. Any such extraneous or inconsistent information or representation, if given or made, should not be relied upon as having been authorized by or on behalf of the Company. The distribution of this presentation in certain jurisdictions may be restricted by law. Accordingly, any persons in possession of this presentation should inform themselves about and observe any such restrictions. Furthermore, by reviewing this presentation, you agree to be bound by the trailing restrictions regarding the information disclosed in these materials. This presentation contains statements that constitute forward-looking statements. These statements include descriptions regarding the intent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financial condition of the Company. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those specified in such forward-looking statements as a result of various factors and assumptions. The risks and uncertainties relating to these statements include, but are not limited to, (i) fluctuations in earnings, (ii) the Company’s ability to manage growth, (iii) competition, (iv) (v) government policies and regulations, and (vi) political, economic, legal and social conditions in India. The Company does not undertake any obligation to revise or update any forward-looking statement that may be made from time to time by or on behalf of the Company. Given these risks, uncertainties and other factors, viewers of this presentation are cautioned not to place undue reliance on these forward-looking statements. The information contained in this presentation is only current as of its date and has not been independently verified. The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or changes. No representation, warranty, guarantee or undertaking, express or implied, is or will be made as to, and no reliance should be placed on, the accuracy, completeness, correctness or fairness of the information, estimates, projections and opinions contained in this presentation. None of the Company or any of its affiliates, advisers or representatives accept any liability whatsoever for any loss howsoever arising from any information presented or contained in this presentation. Please note that the past performance of the Company is not, and should not be considered as, indicative of future results. Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information contained in this presentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. Such information and opinions are in all events not current after the date of this presentation. None of the Company, any placement agent or any other persons that may participate in the offering of any securities of the Company shall have any responsibility or liability whatsoever for any loss howsoever arising from this presentation or its contents or otherwise arising in connection therewith. This presentation does not constitute or form part of and should not be construed as, directly or indirectly, any offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company by any person in any jurisdiction, including in India or the United States, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any investment decision or any contract or commitment therefore. Securities of the Company may not be offered, sold or transferred in to or within the United States absent registration under the United States Securities Act of 1933, as amended (the “Securities Act”), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state of other jurisdiction of the United States. The Company’s securities have not been and will not be registered under the Securities Act. This presentation is not a prospectus, a statement in lieu of a prospectus, an offering circular, an advertisement or an offer document under the Companies Act, 2013, as amended, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, as amended, or any other applicable law in India.
27 Thank you
28