JSW Energy acquires 1.75 GW Renewable Energy Assets

Target Date - November 15, 2022

JSW Energy last year had demerged it’s green business into a separate wholly owned subsidiary JSW Energy Neo.

The step was keeping in line with group’s increased focus on the renewables (like everyone else).

JSW had announced aggressive expansion plans –

  • From 4.8 GW of current capacity to 10 GW by 2025
    • Currently 2/3 rd is thermal and 1/3rd renewable
    • Target was to reverse this
  • Further increase total capacity to 20 GW by 2030
    • of which 85% was targeted to be renewable

Both these targets effectively meant that all expansion over current was targeted towards the renewables i.e., 5.2 GW by 2025 and 15.2 GW by 2030.

  • 2.5GW of this is already under construction

The Company has now announced a significant further step towards meeting these targets – it’s acquiring 1.75 GW of renewable portfolio of Mytrah Energy , comprising of 18 SPVs.

  • This acquisition will immediately double it’s existing renewable capacity. Including the under construction, total capacity becomes 9.1 GW, i.e., close to the 10 GW target of FY 25 (remember we are in FY23).
  • Transaction is for cash consideration of Rs 11,934 crore. It implies an Enterprise Value of Rs 10,531 crores, after adjusting for net current assets.
  • Acquired assets reported following revenues
    • FY20 – Rs 1,563 crores
    • FY21 – Rs 1,380 crores
    • FY2022 – Rs 1,467 crores
  • As per JSW – normalised EBITDA of the acquired assets itself is estimated at Rs 1,650 crore implying an EV/ EBITDA of 6.4x. Comparable projects if built afresh are estimated to be more costly and time consuming with lower cash generation.
    • It’s important to note here that normalised EBITDA is what is estimated by JSW after it’s able to bring in the operational and financial efficiencies into the acquired assets. Time period for the same is indicated to be 12-24 months. (please note normalised EBITDA is more than last year’s revenues !)

Is it exciting?

For someone interested in this sector – definitely yes.

It’s a significant transaction speeding up JSW’s renewable ambitions.

As one would expect, the transaction of this size is surely going to put pressure on Company’s financials in the near term. However, that is something unavoidable in such capital intensive segments.

Along with the sector, it’s also a call on JSW’s execution capabilities – that I think one would be broadly comfortable with.

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