JSW Energy’s (JSWEL) Q4 FY11 revenues were higher than our estimate, but PAT was in line. Higher capacity coupled with better utilisation and realisations translated into 82.2% YoY revenue growth. However, firm prices of spot coal and higher depreciation and interest costs (due to commissioning of capacity) resulted into 25% YoY de-growth in PAT. JSWEL plans to import 3.5-4.5mn tons of coal from Indonesia and South Africa during FY12 to rationalise its cost. We continue to maintain SELL given its high exposure to spot coal purchase and merchant market.

Better utilisation and tariffs aid revenue growth

JSWEL’s Q4 FY11 revenues witnessed a strong 82% YoY growth to Rs14.4bn due to 1) higher capacity, 2) improved utilization and 3) better realisations. Generation grew by 68.2% YoY to 3.0BU against 1.8BU in the corresponding period last year. This was higher than our estimate of 2.7BU. Average blended realisation of Rs4.78/ unit (short term rate of Rs4.71/unit) grew by 8.3% YoY. PLF for its Barmer project improved during the quarter to 64.2% from 43.9% in the corresponding period last year.

Higher fuel, depreciation and interest cost lead to 25% de-growth in PAT

Due to low coal production from its South African subsidiary, JSWEL had to rely on consuming expensive spot coal. Also shipments from Indonesia continued to remain muted. Average C&F price of coal for the quarter stood at ~USD110-120/ton. With the commissioning of 735MW during the quarter, depreciation and interest cost grew by 92.5% and 42.2% YoY respectively. As a result, reported PAT declined by 24.6% YoY to Rs2.1bn.