JSW Energy Fully Commissions Its Barmer Project

JSW Energy has increased its operating capacity by commissioning the eighth unit of its Barmer plant with a capacity of 135 MW. The Barmer plant has now achieved a full capacity of 1080 MW while the total operating capacity of JSW Energy has touched 3140 MW. This should be positive for the company as it mostly sells energy at the market determined rates. Earlier in this month, the company has commissioned two units of this project with a capacity of 270 MW and hence one can expect good results from the company in the March 2013 quarter.

The Barmer (8X135 MW) project is based on lignite. Lignite as a fuel source is slightly cheaper as compared to coal and is developed by Raj West Power, a 100% owned subsidiary of JSW Energy. The good thing for the company is that it has signed a fuel linkage with Barmer Lignite Mining Company in which Raj West Power holds 49% stake. This means that the company has full access to lignite and hence the issue of fuel shortage will not be experienced in case of JSW Energy.

The company also has long-term power purchase agreements with the state electricity boards for this project. The Rajasthan Electricity Regulatory Commission has also allowed a hike in tariffs on the electricity sourced from the first four units of the Barmer plant which has helped the company in putting up a robust performance in the December 2012 quarter. On this line, one can expect the hike in tariff from the other four units as well, leading to even better financial performance of the company going ahead.

The company has done well in Q3FY12 with 33% growth in its topline. The net profit came in at Rs 312 crore against a loss in the corresponding quarter last fiscal. The operating performance also came in better than expected. With the Barmer project fully operational, we expect further rise in the company’s performance. As the project is based on lignite, there would not be any adverse impact on its financial performance unlike a few other companies.

The stock has underperformed in the last one month but we believe that there is a good scope of improvement from here and hence one should buy the stock at the CMP with about 20% returns expected in one year period.