JSW Energy puts Ratnagiri plans on hold due to high coal prices

July23, 2011

ByJohn Satish Kumar Livemint

The rising price of coal has forced JSW Energy Ltd to put a 2,000 megawatts (MW) capacity expansion plan at Ratnagiri on hold.

The power producer will plan future projects on assured domestic coal linkages, vice-chairman and managing director Sajjan Jindal said on the sidelines of its annual shareholder meeting.

“Long-term contracts are not a solution as prices have to be renegotiated all the time,” Jindal said. “The only way forward is for the government to give coal linkages and we expect to hear something on this front shortly.”

Even owning coal mines abroad doesn’t help as coal has to be brought into the country at benchmark prices, he said.

Over the past year, ICE Rotterdam coal price has risen more than 26% to $124.35 per tonne, according to Bloomberg data. JSW Energy needs about 10 million tonnes of coal each year and imports all its requirement.

The company has two units producing 300MW each at Ratnagiri. A third 300MW unit started production in May, while a fourth unit of similar capacity is close to commissioning. JSW Energy had planned to add another 2,000MW.

The company declared a 42% fall in stand-alone net profit for the June quarter compared with a year earlier despite growing sales, mainly owing to rising expenses.

Stand-alone net profit for the three months ended 30 June fell to 190.26 crore from 327.20 crore, while net sales rose 27% to 1,119.26 crore.

Total expenses soared 84% to 856.07 crore, with a 77% rise in fuel costs doing most of the damage.

Other expenses also more than doubled to 65.04 crore from 25.50 crore.

The company’s stock fell 6.6% to 71 on the Bombay Stock Exchange, while the benchmark Sensex index fell 0.4%.

JSW Energy said it plans to take various measures to mitigate the impact of rising imported coal prices and reduce fuel costs in the coming quarters, without elaborating.