Essar Power finally turns around with Rs39 crore net in fiscal 2016

Essar Power executive vice-chairman Sushil Maroo says this is the first time since the firm entered the sector in 1997 that it has turned around


Essar Power management is bullish about remaining healthy in the current year and expects to close the year with over Rs550 crore net income.
Essar Power management is bullish about remaining healthy in the current year and expects to close the year with over Rs550 crore net income.

Salaya (Gujarat): After entering the business two decades ago, Essar Power Ltd has finally turned around with a small profit of Rs.39 crore in 2015-16. The management is bullish about remaining healthy in the current year as well and expects to close the year with over Rs.550 crore net income.

“This is the first time since we entered the sector in 1997 that we have turned around. Against a net loss of Rs.684 crore in 2014-15, we closed 2015-16 with a net profit of Rs.39 crore. And from the improvement in the margins in the first quarter of the current fiscal year, I am hopeful of a net profit of over Rs.550 crore if coal prices and other variables remain more or less stable,” Essar Power executive vice-chairman Sushil Maroo told reporters.

He said lower coal prices and other efficiency measures and an average PLF (plant load factor) of over 80%, pushed up the Ebitda (earnings before interest, taxes, depreciation and amortization) by a whopping 168% to Rs.533 crore in 2015-16, from Rs.199 crore the previous year, while margins rose nearly threefold to 28% from 11% during the reporting period.

Coupled with this, net sales rose to Rs.1,905 crore from Rs.1,867 crore, he said. Maroo said that while the Ebitda margins jumped to 21% in the June quarter from 22% a year ago, income from operations grew 80% to Rs.160 crore in the first quarter of this fiscal from Rs.89 crore in the same period the previous fiscal.

“Another reason for the turnaround has been the reverse e-auction of coal, which helped us lower our input cost due to larger supplier base arising from increased competition,” Maroo said.

He said since all operational assets—five plants out of the total seven generating over 3,500 megawatt (MW) of electricity—are under the 5/25 scheme of the Reserve Bank of India, the interest burden has also come down to some extent. Still, the company at the consolidated level paid over Rs.2,000 crore in interest to its creditors.

On debt obligations, Maroo said while at the standalone level, Essar Power Holding, which is the parent company, will be debt free over the next two years, the consolidated debt is Rs.20,369 crore, out of which Rs.2,050 crore is the standalone debt of the parent company.

“We hope to lower the standalone debt by almost half this fiscal as we have more than Rs.1,400 crore which are stuck in various litigations. As and when these locked up funds are with us we will use that fund to retire out debt,” he said.

He also based his optimism of a better year as he expects to restart the 1,200 MW Mahan power plant in Madhya Pradesh over the next three months which has been shut since the past three years after the company lost its captive coal mines following the Supreme Court order to cancel the mine.

The commissioning of the 600 MW second unit of the Salaya plant also helped in the turnaround, said Ramesh Kumar, managing director, Essar Power Gujarat, which runs Salaya plant.

Kumar also said Salaya is the only coal power plant in the country that uses as many as 27 types of coal imported from as many countries. Because of the judicious mix of these many varieties of coal, the company saves 7%—3% by way of coal pricing and 4% by logistics and planning.

Essar Power is able to operate only 3,600 MW as it has not been able to run gas-based 515 MW Hazira I and the 500 MW Bhande plant in Gujarat for the past three years due to non-availability of the fuel.

Maroo said the company hopes to resume these plants as well over the next few months.

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