SJVN LIMITED
Introduction
Indian Government has a commitment for zero emission and at the same time give power to all. Both of which seems to be contradictory to each other since the major portion of current power generation is from Coal and it is highly polluting. One of the sectors that can help the government achieve this target is hydro power. Today we look at SJVN Ltd which remodeled its business line to go with government commitment.
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SJVN Limited
SJVN Ltd (SJVN) is the largest Hydro Electric Power generation company in India based on installed capacity. The company, formerly known as Satluj Jal Vidyut Nigam, started in 1988 as Nathpa Jhakri Power Corporation, as a joint venture between the Government of India and the state Government of Himachal Pradesh and subsequently its name changed to SJVN Ltd. The Company has the status of ‘Miniratna’, Category -I and Schedule –‘A’ Central Public Sector Entity, under the administrative control of the Ministry of Power. Presently, 81.85% of the company’s stake jointly holding by the Govt of India (55%) and State Govt. of Himachal Pradesh (26.85%). The remaining stake is held with public.
Know the company
SJVN is presently implementing or running power projects in 16 states in India including in Himachal Pradesh, Uttarakhand, Bihar, Maharashtra, Uttar Pradesh, Punjab, Gujarat, Arunachal Pradesh, Rajasthan, Assam, Odisha, Mizoram and Madhya Pradesh. Apart from India, SJVN also has overseas projects in Nepal and Bhutan. The company has successfully diversified into solar, wind and thermal sources for power generation. It is also engaged in the business of providing consultancy services for the power industry. SJVN has already developed 7 power stations which are including two hydro, two wind and three solar projects with installed capacity of 2091.5 MW, spread across the country.
Subsidiaries
SJVN has three wholly owned subsidiary companies as of March, 2023. The details of the subsidiaries are:
- SJVN Thermal Pvt. Ltd: It is a 100% subsidiary company of SJVN Ltd, engaged in the development of 1320MW Coal based Thermal Power Project located in District Buxar of Bihar. The total expenditure incurred for the project is Rs 7446.67 Cr, with paid-up share capital of Rs 2511.68 Cr.
- SJVN Arun-3 Power Development Company Pvt. Ltd: This wholly owned subsidiary of SJVN was incorporated in Nepal to execute the 900 MW Arun-3 Hydro Electric Project in Nepal. The cumulative expenditure incurred up to FY 2023 is Rs 4166.76 Cr.
- SJVN Green Energy Limited (SGEL): SGEL also has been incorporated as a wholly owned subsidiary company of SJVN for power generation from renewable sources such as Solar, Wind & Hybrid Projects, Battery Energy Storage system, Biomass and Green Hydrogen based business ventures.
Joint Ventures
SJVN has one joint venture as of FY2023, named Cross Border Power Transmission Company Limited (CPTC), which is a joint venture of SJVN with IL&FS Energy Development Company Ltd. SJVN has very small equity investment in this JV company.
Power Trading Business and License
SJVN has ventured into power trading business as part of its business expansion and diversification plan and has obtained Category-I license from CERC in the year 2022 for interstate trading of electricity in pan India. SJVN is registered at Discover of Efficient Electricity Price(DEEP), e-bidding portal and has obtained trader membership in Indian Energy Exchange (IEX).
Strengths
Over the past three decades, SJVN has diversified as a power producer with all types of conventional and non-conventional forms of energy portfolio along with Power Transmission capacities. However, the company is dedicated to tap the unutilized hydroelectric potential of India. As a prominent power utility, SJVN is leading the current transformative shift of Indian Power Sector from fossil fuel energy base to renewable energy base. After completion of the projects awarded to the company, it will remain as a green energy company with about 90% of its power generation capacity from renewable sources. This portfolio mix will help the company to maintain an amazing operating margin forever.
SJVN is promoted by the GoI, which provides easy access to funds when the company required it. The ‘Miniratna’ status gives it a greater operational autonomy and discretion to set up projects, without the consent of the government, at least up to Rs 500 crore. SJVN also has an impressive performance history and steady cash flows which makes it capable of funding the pipeline of projects seamlessly.
SJVN has vast experience and expertise in design, construction, operation and maintenance of large hydro power projects. Company’s operational efficiency is also superb. The plant availability factor of both the hydro power plants of the company is utilizing above 100% capacity during past few years, which is well above the industry average.
SJVN has a stable revenue stream through long term power purchase agreements with distribution licensees. This regulated tariff structure allows recovery of the entire cost, including a fixed return on equity based on approved capital and running cost, whereas parameters notified by the Central Electricity Regulatory Commission (CERC) for each plant.
In the next three fiscals, SJVN expects annual revenue of more than Rs.10,000 crores from the operational Power Stations. In addition, as a part of its long-term growth Strategy, company has entered into a series of MoU with various Government and Non-Government agencies for allotment of projects. Such Projects under Allotment include 10 Hydro Projects of 2507 MW, 5 Renewable Project of 21,000 MW and 10 Pumped Storage Projects of 13,190 MW. Company management has the complete blue-print for accomplishing their Vision of achieving 5,000 MW by 2023-24, 12000MW by 2026, 25,000 MW by 2030 and 55,000 MW by 2040 has been elaborately charted out.
Business Expansion and Future Projects
Since the past financial year, SJVN has added 24 Projects aggregating 23,909 MW to its portfolio, which is the historic high Portfolio addition of the Company. As of September, 2023 the Project Portfolio of SJVN and its associate company’s stands with 79 Projects aggregating 55814 MW and 3 Transmission lines totaling 340 Kms spread across 13 States and 2 countries of Indian sub-continent. Summary of these projects are includes 2 Hydro Plants of 1912 MW & 5 Renewable Plants of 179.5 MW and 1 Transmission line of 86 km are Operational; 5 Hydro Projects of 1618 MW, 1 Thermal Project of 1320 MW, 8 Renewable Projects of 1500 MW and 2 Transmission lines of 254 kms are under Construction; 2 Hydro Projects of 713 MW and 10 Renewable Projects of 2478 MW are in the Pre-Construction stage; 16 Hydro Projects of 8231.9 MW, 1 Thermal Unit of 660 MW and 4 Renewable Projects of 505 MW are under Survey and Investigation. For the current financial year, projects of 1455 MW and a Transmission Line of 37 km are in pipeline for commissioning. (Source: company AR)
SJVN going to add about 10,000 MW of energy generation capacity within the next three years and portfolio of its installed project will rise to about 12,000 megawatts through more than 50 projects of hydro, thermal, solar and wind projects. Some of these projects are in construction, as of now 16 projects are under construction and more than 20 projects are in the pipeline. So, some of these projects will be commissioned in the next three years and the capacity will increase from the present 2,092 megawatts to 12,000 by 2026.
Capex Target
SJVN has set a historic high Capex target of Rs.10,000 crore for the FY 2023-24 and the Company almost achieved the financial closure for the same. In the current FY, Company is expected to commission nine projects totaling 1455 MW of capacity which are included by Thermal, Hydro, Wind and Solar projects. By the FY2026, company to be added 10,000MW and the equity allocation has been already infused for 4,500MW capacity. It is estimated that around Rs 7,000- 8,000 crore equity, ( ie, almost 20% of the project cost) allocation required for the rest of the 5,500-MW projects. The upcoming Capex will be funded through a debt-to-equity ratio of 70:30 or 80:20 and the equity contribution will be funded through internal accruals. As a ‘Miniratna’ company with steady cash flow, SJVN is confident to achieve the debt portion without any issue. SJVN has already signed MoUs with REC Limited for financing the debt portion of the projects of the Company and its subsidiaries to the extent of Rs 50,000 crores. Part of the debt funding contains a foreign currency loan for its Rampur Bushahr hydro power plant, which is guaranteed by the central Govt.
The company’s debt to equity ratio stood at almost 1:1 for the FY2023 from 0.5:1 as of FY2022, mainly on debt funded Capex of Rs. 8,240 crore during the FY2023. However, leverage is expected to increase further, but, should remain comfortable level even though massive capital expenditure planned over the next few years. Company’s Cash and cash equivalents stood at around Rs 2,195 crore as on June 30, 2023.
Financial Performance
SJVN has clocked the Highest ever Income from Operations of Rs 2938 crores during the financial year 2022-23 which is an increase of Rs 522 crores over the earnings of previous fiscal. Profit after Tax for the period increased by Rs 369 crores to Rs 1359 crores against Rs 990 crores for the previous year. For the Q2FY24, company’s revenue stood almost flat at Rs 878 crore YoY and net profit marginally declined to Rs 440 crore. Company’s profit declined on plant shut down for few days due to flood at its Hydro power plant area.
Outlook
Outlook of the Indian power sector looks promising on expected increase in industrial production and Government of India’s commitment to provide ‘power to all’. Climate change, especially high temperature also increases power demand for the country. This scenario indicates that there is huge opportunity for consistent growth in power consumption in future.
SJVN has an important role to supply power to achieve Govt’s aim to provide electricity to all. Prime Minister Shri Modi targets of 50% energy from non-fossil fuel-based energy resources by 2030. Government already made several policy announcements to attain this target. In the Union Budget 2023 also announced some big bang announcements for net-zero emission by 2070. Government has permitted 100% FDI under automatic approval in renewable sector. It also allocate Rs.35,000 crores for energy transition and net-zero carbon emission. In addition to this, Rs.19,700 crores have been earmarked for the National Green Hydrogen Mission. SJVN has re-organized its Business Model in line with the commitment of the PM.
SJVN has the most diversified portfolio consisting of Hydro, wind, solar and thermal energy projects. Company also committed to expand its portfolio with all available sources. Since the announcement of Green Hydrogen Policy by Govt of India, SJVN has also started taking up preliminary actions to set up an R&D for Pilot Green Hydrogen Project in Himachal Pradesh. It is estimated that hydro electricity (HE) potential of about 1,50,000 MW in India, we have only commissioned about one-third capacity only so far. This industry scenario signifies that there is a huge untapped HE generation potential is available here.
With fourteen projects under construction, SJVN is going to add 3765 MW during the current financial year and 1598 MW in the next FY. It also having almost 20 other projects are in the pipeline. Commissioning of these projects will help the company to emerge a larger company with strong financials.
Risk
SJVN’s major portion of the power portfolio belongs to Hydro power sector, which are largely depends on climatic factors. Sometimes it may squeezes with abnormal floods and some other times it may need to deal with exceptionally low water flows. Difficulties faced with any reasons in the operation of the plants will result in total loss of revenue.
Hydro electric projects needs large amount of land. Because of its impact on the environment on the construction of such projects, company must comply with stringent norms to getting approval from various authorities, which may subject to delays and cost overruns.
Sector: Power Generation
Market Price: Rs. 88.55 as on today
Stock Name: SJVN Ltd
BSE Code: 533206, NSE Code: SJVN
Market Cap.: Rs 32100 Crore
Book Value: Rs. 36.50
Incorporation: 1988
Headquarters: Mumbai
