Synopsis:
JSW Energy is in focus after the Supreme Court ruled against its subsidiary, JSW Hydro Energy, in a free power supply dispute with the Himachal Pradesh government.
A large-cap energy company is in focus after its subsidiary received an adverse Supreme Court ruling in a power supply dispute with the Himachal Pradesh government, impacting its future revenue from key hydroelectric projects.
With the market capitalization of Rs. 92,020 crores, the shares of JSW Energy Ltd were trading at Rs. 526, down by 1 percent from its previous day’s close price of Rs. 531.75 per equity share.
What’s the News
In a lawsuit against the Himachal Pradesh government over the provision of free electricity, the Supreme Court has decided against JSW Hydro Energy, a subsidiary of JSW Energy ltd. The problem started when the state asked the JSW Hydro to supply 18 percent of its electricity for free beginning in September 2023. JSW Hydro challenged this demand, arguing that the Central Electricity Regulatory Commission’s (CERC) Tariff Regulations cap the amount of free power supplied to the home state at 13 percent. Additionally, the business argued that these rules ought to take precedence over any Power Supply Agreements (PSAs) that have already been signed.
At first, the Himachal Pradesh High Court upheld the 13 percent cap and decided in favor of JSW Hydro. The Supreme Court, however, reversed that judgment, ruling that Himachal Pradesh is not prohibited by the CERC regulations from requesting more than 13 percent free power.
The court made it clear that CERC regulations do not bypass the terms of the PSA. Consequently, JSW Hydro Energy, which runs the state’s two largest hydro projects (Karcham Wangtoo and Baspa II, which together have a capacity of 1391 MW), will now have to meet the state’s requirement for 18 percent free power. This decision is a heavy setback to JSW Energy’s subsidiary and establishes a standard for these kinds of contractual versus regulatory disputes.
About the Company & Others
JSW Energy Ltd. is one of India’s top power generation companies. Its diversified energy portfolio consists of thermal, hydro, wind, and solar power. It currently generates a total of 8400 MW of power, comprising 675 MW from solar, 2,826 MW from wind, 1,391 MW from hydro, and 3,508 MW from thermal sources. The business operates in several Indian states and owns shares in South African companies that deal in natural resources.
JSW Energy is a power generation, transmission, and trading company that operates with modern, effective procedures and structured planning. Its diverse fuel sources and extensive geographic reach help lower business risks and guarantee consistent growth.
The company’s revenue for FY2024–2025 saw a slight increase by 2.25 percent year over year from Rs. 11,486 crores to Rs. 11,745 crores, whereas net profit saw a rise of 14.96 percent, from Rs. 1,725 crores to Rs. 1,983 crores.
At the moment, the company’s P/E ratio is 51.6x as compared to its industry P/E of 41.7x, and its ROE and ROCE are 7.41 percent and 6.49 percent, respectively. The D/E ratio of the company stands at 1.83.
Coming to JSW Hydro Energy Limited (JSWHEL) is a fully-owned subsidiary of JSW Neo Energy Limited. In the Himachal Pradesh district of Kinnaur, it runs two hydroelectric power plants: the 300 MW Baspa II project and the 1,091 MW Karcham Wangtoo project.
The company’s revenue for FY2024–2025 saw a decrease of 16.42 percent year over year from Rs. 1,370 crores to Rs. 1,145 crores, whereas EBITDA saw a drop of 18.4 percent, from Rs. 1,304 crores to Rs. 1,064 crores.
Written by Akshay Sanghavi
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