After 19 years in red zone, Essar Power finally earns some profit

After entering the business two decades ago, Essar Power has finally turned around with a small profit of Rs 39 crore in 2015-16. The management is bullish about remaining healthy in 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 a group of visiting journalists here. He said lower coal prices and other efficiency measures and an average PLF (plant load factor) of over 80 per cent, pushed up the Ebitda by a whopping 168 per cent to Rs 533 crore in 2015-16, from Rs 199 crore the previous year, while margins rose nearly threefold to 28 per cent from 11 per cent 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 per cent in the June quarter from 22 per cent a year ago, income from operations grew 80 per cent to Rs 160 crore in the first quarter of this fiscal year from Rs 89 crore in the same period previous fiscal year. "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 mw of electricity) are under the 5/25 scheme of the Reserve Bank, 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 that 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 that runs Salaya plant. Kumar also said Salaya is only  coal power plant in the country  that uses as many as 27 types of  coal imported from as many  countries.