JSW Energy Ltd

NSE:JSWENERGY

Q2-2026 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the JSW Energy 2Q FY '26 Earnings Conference Call hosted by Motilal Oswal. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Nigam from Motilal Oswal. Thank you, and over to you, sir.

[Abhishek Nigam, analyst]

Thank you, Sagar. Hello, everyone. Good evening and thank you for joining JSW Energy's 2Q FY '26 earnings call. Tonight, we have with us Mr. Sharad Mahendra, Joint MD and CEO; Mr. Pritesh Vinay, Director of Finance and CFO; and Mr. Bikash Chowdhury, Head of Strategic Finance and Investor Relations. And now without any further delay, I will hand it over to Mr. Sharad Mahendra for opening comments. Over to you, sir.

[Sharad Mahendra, executive]

Good evening, everyone, and thank you for joining us today for JSW Energy's Quarter 2 FY '26 Earnings Call. The quarter -- second quarter of this current fiscal has marked a pivotal turnaround for the power sector. We have witnessed a 1.6% decline in quarter 1. We witnessed a significant uptick in power demand in quarter 2, which witnessed 3.3% year-on-year, 449 million units and H1 demand by 0.8% on year. The resurgence was driven by healthy uptick in industrial activity and improving economic sentiment, further supported by a favorable base effect.

Remarkably, this uptick came despite an uptick -- sorry, despite an extended monsoon underscoring the resilience of India's power sector demand. Peak demand during the quarter reached 230 gigawatts in August, remaining consistent with levels seen in corresponding quarters on the previous year.

India's total installed generation -- excuse me, over the past 12 months, 48 gigawatts has been added with 33 gigawatts in 16 gigawatts commissioned in H1 and quarter 2, respectively. Renewable energy continues to lead this expansion during -- contributing 25 gigawatts during the half year, 22 gigawatts from solar and 3 gigawatts from wind.

For thermal, the capacity -- the current installed capacity is 245 gigawatts. Considering the current -- the bidding of 12 -- 15 gigawatts of projects awarded in FY '25 and approximately 35 gigawatts of installed capacity under construction, all these capacities shall be commissioned in next 5 to 7 years. With this, India's total thermal capacity in FY '32 should reach close to 300 gigawatts.

We have witnessed thermal bids from various states totaling to 11.6 gigawatts this half year. As you are aware, we have bagged Salboni 1,600 megawatt last fiscal and have additional optionality of 1,800 megawatt of brownfield expansion at KSK. Recently, we have received an LOA of 400 megawatts for our 700-megawatt Utkal Plant, which is currently an open capacity. Once this LOE -- LOA is converted to PPA, it will further enhance our cash flow predictability and our open capacity from currently at 8% to 5%.

For the country, renewable accounted for 18% of total electricity generated during this quarter, up from 15% in the same period last year. Wind generation saw one of its strongest performance with nation's PLF's rising from 31.7% to 34.9%.

Hydro generation also surged, reaching 68 billion units, a 13% year-on-year increase, thanks to a better hydrology and a favorable monsoon. The merchant market remains soft with the day-ahead prices averaging INR 3.92 per unit on exchanges, declining both sequentially and annually impacted by record capacity additions and muted demand. As shared in previous calls, we have proactively derisked our portfolio by tying portfolio by tying up our imported coal-based Vijayanagar plant with our group company, JSW Steel and others.

This strategic move has significantly reduced our exposure to merchant volatility and ensure stable returns. Further, the recent LOA of 400 megawatts at Utkal will reduce our exposure to the merchant market going forward. Even on our current untied capacity our domestic coal-based exposure is 788-megawatt out of total merchant exposure of approximately 1.1 gigawatts. This ensures feasibility of the plant to generate attractive dark spreads even at lower merchant prices. Coal prices continued to moderate, averaging $91 per tonne during the quarter, down from $110 per tonne in quarter 2 FY '25.

Post quarter end, prices have further softened to around $81 per tonne. This should help us our imported open thermal capacity to record better dark spreads benefiting from the lower fuel cost. On the RE bidding front, the first half of FY '26 saw cumulative generation bids of close to 5 gigawatts and storage bids of approximately 3 gigawatts. On the macro environment, the recent GST rationalization has been a welcome reform. For renewables, it lowers capital costs and will translate into more competitive tariffs.

For thermal power plants using domestic coal, the removal of INR 400 per tonne of compensation cess and the streamlined GST structure will reduce fuel costs and improve overall generation economics. These changes will strengthen the financial health of DISCOMs and support long-term sector sustainability. From a regulatory standpoint, there are some anticipated changes from recent renewable consumption obligations favor a new draft amendments of the Electricity Act, which are sector positives.

At JSW Energy, our strategy -- strategic focus remains on both energy security and energy sustainability with disciplined capital allocation. To share with you the highlights of our performance for the quarter, which has been marked by significant progress across multiple fronts. In the current quarter, our generation saw a robust increase of 52% year-on-year and rising from 9.8 billion units to 14.9 billion units.

Further, our H1 FY '26 marked a 60% increase in generation year-on-year from 17.7 billion units to 28.4 billion units. This has -- this is at a time when the industry has registered a subdued demand growth of 3.3% year-on-year during the quarter and only 0.8% year-on-year in H1.

Acquisition and integration of KSK and O2 Power, along with organic capacity additions in the areas of solar, wind, hydro, from our Kutehr unit and Ind-Barath Unit 2 has expanded this generation base for us. Over the past 12 months, we have added 5.5 gigawatts of capacity, including 3.3 gigawatts of renewable and 1.8 gigawatts of thermal, which has significantly contributed to our EBITDA growth. This includes inorganic capacity of 1.5 gigawatt renewable and 1.8 gigawatt thermal.

During the current quarter, we successfully added 443 megawatts of new capacity and thus taking our installed capacity to 13.2 gigawatt. This represents a remarkable year-on-year growth, approximately 71%, up from 7.74 gigawatt in the same period last year. Among these additions, I'm proud to highlight the commissioning of our greenfield Kutehr 240-megawatt hydro generation plant, wind capacity commissioning of 148-megawatt and solar of 56 megawatts. Earlier, we had commissioned 5 megawatts of Agrivoltaics in Vijayanagar. And now we commissioned our first 20-megawatt floating solar project again in Vijayanagar. This showcases our ability to deliver long-term sustainable innovative energy solutions. Further, our 240-megawatt Kutehr hydro power plant is one of the fastest greenfield hydro projects to be completed in India.

We'd like to highlight that despite facing challenges such as COVID-19 disruptions lockdowns and extreme weather conditions, we executed this project in under 6 years. The timing of the commissioning allow us to capitalize on the high generation season in quarter 2 resulting in an impressive 58% PLF from this plant for the operational days of the quarter.

Looking ahead, our under-construction portfolio remains robust. We are currently building 12.5 gigawatt of generation projects, all of which are fully tied up under long-term power purchase agreements. Upon completion, our installed capacity will nearly double to approximately 26 gigawatts. This includes new PPA signed during the quarter for 230-megawatt under SECI, FDRE IV and 100-megawatt solar plus 100 megawatt of battery energy storage system. In our hydro portfolio, Karcham Wangtoo and Baspa plants exceeded design energy generation by 16% in quarter 2 and 13% in H1 of FY '26.

As highlighted earlier, our newly commissioned Kutehr plant further strengthens our hydro capabilities and unlocks new synergies. We had earlier guided a capital expenditure of INR 130,000 crores by 2030 to achieve our Strategy 3.0 capacity announced at 30 gigawatts with -- along with 40 gigawatt hours of energy storage. The opportunity of growth in this sector is immense, and we are committed to pursuing it in a calibrated and strategic manner.

To ensure predictability in execution and to reaffirm our unwavering commitment to deliver value to all our stakeholders, we continue to take deliberate steps towards organic growth, both in RE and thermal. This approach aligns with our recent partnership with Semi for wind turbine manufacturing and our decision to pause our solar module manufacturing plan.

I am pleased to share 3 strategic developments during the quarter. First and foremost is the acquisition of GE Power India's boiler manufacturing unit. We have entered into a scheme of arrangement with GE Power India to acquire its boiler manufacturing business. This acquisition significantly enhances our in-house capabilities with both technology and people which is very critical for equipment manufacturing and supports our thermal power expansion plan.

Next is the majority stake in KSK Water Infrastructure. After the acquisition of KSK Mahanadi, we have successfully completed the acquisition of a majority stake in KSK Water Infrastructure. This entity currently supplies raw power to our 1,800-megawatt KSK Mahanadi thermal power plant and is equipped to support an additional 1,800 megawatt ensuring readiness for our future expansion.

The next is the Battery Assembly Plant in Pune. As previously communicated, we are in the process of establishing a Battery Assembly Plant in Pune with a rated capacity of 5-gigawatt hour per annum. This facility dedicated to supporting battery energy storage systems is expected to be operational in the current quarter, that is quarter 3 of FY '26. It will also enable us to meet domestic content requirements for BESS as and when they are mandated by government of India.

As part of our continued strategic growth, I'm pleased to share that we have signed a definitive agreement to acquire 150-megawatt Tidong hydro power plant from Statkraft at an enterprise value of INR 1,728 crores. This plant is an -- at a very advanced stage of completion and expected to be commissioned by October 2026. This plant has a 22-year power purchase agreement with Uttar Pradesh Power Corporation for 75 megawatts, while the remaining capacity offers attractive potential in the merchant power market.

This acquisition will not only strengthen our hydro portfolio but will also bring in a highly skilled team with deep expertise in hydroelectric power. Their experience will be invaluable as we advance our pumped -- hydro storage projects. We are already the largest IPP in the hydro sector, and this acquisition further cements our leadership position. In our Energy products and Services segment, we signed battery energy storage agreements of -- for 680-megawatt hour, taking our total logged-in capacity to 29.4-gigawatt hour.

Also, the trial runs for our 3,800 tonnes per annum green hydrogen project at Vijayanagar are near complete, and we expect the commissioning very soon in the current quarter of FY '26, that is Q3 of FY '26.

Looking ahead, we continue to integrate the recent acquisitions of KSK Mahanadi and O2 Power into our operations, significantly strengthening our capabilities. With 2.3 gigawatt of capacity already added in H1 of FY '26, we are well positioned to achieve our generation capacity target in excess of 15 gigawatt by end of current fiscal.

Lastly, I want to reiterate our focus on execution excellence, efficient capital allocation and stakeholder value creation. With a high-quality, largely tied up under construction portfolio, we are confident in our ability to sustain this growth trajectory and deliver superior returns.

Thank you. And with this, now I pass on to Pritesh to talk about the financial performance for the quarter. Thank you.

[Pritesh Vinay, executive]

Thank you very much, Sharad, and a very good evening to all of you. As Sharad mentioned, there's been a significant addition in our installed capacity on a year-on-year basis, September last year, we were at 7.7 gigawatts of operational capacity, whereas we ended September '25 at 13.2 gigawatt. And all of this has led to the next generation for the quarter being up by 52% year-on-year, which translated to total revenue, which was up by 55% at over INR 5,300 crores.

And the EBITDA for the quarter went up by 67% to just under INR 3,200 crores. The -- with the additional capitalization of newer assets that have come on the balance sheet, there's a higher interest and depreciation commensurately, which has led to the profit before tax being down by 35% for the current quarter compared to the last year -- I'm sorry, the profit after tax actually being down by 17% compared to last year at about INR 705 crores. But more importantly for us, the cash profit generation was up by 27% year-on-year at over INR 1,500 crores. From a half year performance point of view, the -- for the first half of this year, we have already crossed the EBITDA that we generated in the entire last fiscal year. And the EBITDA for the half year stood at over INR 6,200 crores.

Our profit after tax for the half year was up by almost 5% to close to INR 1,450 crores and the cash profit after tax was stood at more than INR 3,000 crores. From a balance sheet point of view, the net debt at the end of September quarter, stood at close to INR 62,000 crores. It has sequentially gone up by about INR 2,500 crores compared to June end. The total amount of CapEx that we have spent in this quarter is about INR 3,500 crores. We've also capitalized some amount of ongoing projects like Kutehr and some RE projects because of which the total net debt, which is stuck in capital work in progress, has marginally come down by about INR 400 crores during the quarter, and it stood at about INR 1,250 crores. So if you look at the operational assets, the total debt to the total EBITDA on a TTM basis stood at just under 5x.

The weighted average cost of debt has marginally come down with a reset of some of the current facilities and went up by close to 10 basis points sequentially. We expect this trajectory to continue in the next couple of quarters as more facilities reach their reset date. So the easing up of interest rates that we've seen in the market will start translating into our borrowing cost as well. The receivables trend continue to be very healthy. The total amount of outstanding receivables at the end of September was INR 3,500 crores, which translated to a days sales outstanding of 64 days. This was an improvement compared to 70 days at the same time last year.

With that, I'll stop here. And operator, if you can take -- we can open the floor for Q&A, please. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Mohit Kumar from ICICI Securities.

[Mohit Kumar, analyst]

My first question is on the financials. Is it possible to explain the lower EBITDA and Karcham and Baspa during the quarter, plus -- EBITDA came at [ INR 3.8 billion ]. However, we believe the generation was better compared to last year?

[Pritesh Vinay, executive]

So Mohit, you must be aware and there's a Supreme Court on the order -- on the Karcham side, on the free power. So on a Y-o-Y basis, the incremental amount of free power, which earlier last year, we were selling in the merchant market is now being supplied to Government of Himachal Pradesh under the implementation agreement, right? So that is the primary reason why from an EBITDA point of view at the hydro business, you are seeing a lower Y-o-Y trend, yes.

[Mohit Kumar, analyst]

And on the Ind-Barath EBITDA, is it lower Q-o-Q. Is it primarily due merger impact? Or is there any one-off?

[Sharad Mahendra, executive]

See, in case of Ind-Barath, there is a scheduled shutdown of the units, keeping in mind the same that, that is the only reason. There is no other reason. All the annual maintenance and our overhauling is complete.

So second half of the year to keeping in mind to take care of the seasonal demand, which is better normally in H2, so it was a seasonal annual shutdown only, which is a planned shutdown.

[Mohit Kumar, analyst]

Understood, sir. My last question, what is the purpose of acquiring GE Power assets. Is it possible to manufacture the complete boiler or only pressure part of the boiler. How do you want to -- what is the strategy to utilize this asset to build our own Thermal Power Plant?

[Pritesh Vinay, executive]

Yes. See, one thing we have to understand is the way we have seen in last maybe about 18 months, the amount of thermal bids which are coming in and the PPAs with the way it is getting signed, there definitely is -- has been a constraint in terms of timely supplies to meet the PPA time lines from the existing suppliers for boiler turbine generator. So keeping that thing in mind, this is a facility which has been -- which is a technology which is very well established and presently running facility, though not making new pressure like the pressure parts or the parts for the new boiler, but servicing the existing customers, which has the full facility to produce a new.

So yes, always whichever boiler plant whether if it is of any other company or GE, it is a mix of like pressure parts mostly are being made within the plant. The noncritical and other things, normally, there are -- it is outsourced also. This is the way other companies like BHEL, or others also operate. So all the critical parts, pressure parts will be manufactured here.

And lastly, our strategy was to ensure the timely supplies of the boiler for our -- especially the Salboni plant, which we have PPA, which we have signed. So it is -- the technology is there. The skill set to do the people are there. The engineering team is there. So these are the prime reasons strategic reasons that we are going -- we have gone for this.

[Operator]

Our next question comes from the line of Sumit Kishore from Axis Capital.

[Sumit Kishore, analyst]

Good evening, my compliments on a strong operating performance in Q2. My first question is, over the past 1 year, there have been a fairly strong additions to the installed capacity led by solar, as you mentioned in your opening remarks, a company with relatively muted power demand growth. So in this backdrop, are you seeing any instances of grid curtailment or RE capacities during solar hours. And is this likely to be a risk for the sector in coming times? That's my first question.

[Sharad Mahendra, executive]

See, Sumit, one is, of course, this phenomena with this -- [Foreign Language] so much of capacity addition, which is happening, especially in solar during solar hours, there is a capacity evacuation challenges grid has started facing. But we have to remember what the regulations says based on the connectivity, one is the PG&A, which is a temporary connectivity and one is the G&A. So I think it is -- if the scheduling system is proper, agile, vigilant and the timely scheduling and proper scheduling is happening. This can be minimized or avoided. Till now, at least, we have not faced any such challenge in terms of curtailments. And we will keep, but yes that -- this is one phenomenon. A watch needs to be come, but not, I will say, on a permanent basis, temporarily, maybe for next 1 year, 2 years, 3 years till the time the new connectivity, the work in progress, which is there comes and the evacuation is there.

But it is protected in terms of if there's a PPA with an entity. And if the scheduling is within the PPA terms, even if there is a curtailment in the grid, the regulation protects the developers and they get the money, there is a process, which can be explained by the IR team in case that those details can be shared with you separately.

[Sumit Kishore, analyst]

Okay. So your payments would not be affected as the must run status of that RE plant would remains.

[Pritesh Vinay, executive]

Provided, the only -- sorry, I'll come in here. So just for the sake of clarity, what Sharad was trying to say is provided your asset is already operating under G&A, right? But if there is any asset which is operating under TG&A, if there is a curtailment, there is no revenue protection mechanism.

[Sumit Kishore, analyst]

And your capacities are under G&A?

[Pritesh Vinay, executive]

Yes, yes. The -- operating capacity, you will typically have PG&A for part commissioning of capacities. So conceptually, the way to understand this is that if suppose I'm building a 100-megawatt plant, right, and only 30-megawatt or 40-megawatt or 50-megawatt is commissioned. The evacuation of that power is allowed under PG&A, right? But your project SCOD will only be achieved when the entire 100-megawatt is completed. Once the 100-megawatt achieves SCOD, you move to G&A, the PG&A goes away. And that is when your, so to say, the meter of counting your 25-year PPA starts, right? So effectively, under PG&A, one was earning excess revenues even before the start of the PPA, so there is no compensation mechanism for that, right? I hope that is clear.

[Sumit Kishore, analyst]

Yes, that is very clear. My second question is, in the first half of the fiscal, you have added more than 1 gigawatt of organic capacity addition. And you had talked about a 3- to 4-gigawatt addition target on an organic basis in FY '26. We've also shown photographs in your presentation of 3.4 gigawatt solar, 2.3-gigawatt wind, which is under construction at various sites.

So I mean, are there any impediments to achieving this target? Because when I see your CapEx incurred in first half, it seems that there should be a decent pickup in second half if you were to achieve these targets? I mean, how should we think about CapEx and your capacity addition.

[Sharad Mahendra, executive]

Yes. So Sumit, one is, of course, the -- whatever the project work in progress is there, there are no impedence to complete and commission this because connectivity, land, which are the 2 major challenges in execution, all are well in place, then only the work on the projects have started. And of course, in terms of we normally see lesser -- lower activity and especially in the current year in first half with the extended monsoons. The project pace, execution pace was much slower.

And now in second half of the year, the projects, what the capacities, which as I've indicated also that in excess of 15 gigawatts, we'll be closing the year. So maybe close to about 2 gigawatts further is to be added. So definitely, in terms of CapEx also, as compared to what has been witnessed in H1, it will be more than that.

[Operator]

Our next question comes from the line of Ketan Jain from Avendus Spark.

[Ketan Jain, analyst]

My first question is on the Karnataka LOA for Ind-Barath. What would be the terms of realization for this? Or was it a competitive bid? And how is the tariff decided for this LOS?

[Sharad Mahendra, executive]

See, this tariff, again, this is a bidding, and this is in public domain. The tariff is for this -- it is at the regional periphery at CTU -- at you can say at plant -- it is INR 5.78 is the tariff for this. So you can do the calculation in terms of the fuel cost, our Ind-Barath, Utkal Plant is very close to the mine. NCL, it is just a few kilometers only from there, from where we are getting bulk of the fuel. So it is quite attractive pricing.

[Ketan Jain, analyst]

Understood. Also, I just wanted to check, did we have any one-off in our renewable EBITDA from either of the SECI projects? Or is it all of the organic EBITDA?

[Pritesh Vinay, executive]

Yes, hopefully, organic. No, nothing -- nothing significant -- nothing one-off significant anything worth to be reported, nothing.

[Operator]

Our next question comes from the line of Atul Tiwari from JPMorgan.

[Atul Tiwari, analyst]

Sir, my first question is an industry-level question. So we have just seen 5 gigawatts of RE bids in the first half. And obviously, we have been hearing about news of curtailment, et cetera, and slow power demand is now a reality. So do you think that this is a new normal, like 5, 10 gigawatt more in the second half? Or do -- can we still achieve the ambitious target of 40, 50 gigawatts RE bidding on an annual basis?

[Sharad Mahendra, executive]

See, it's a very -- like, I will say, a very, very pertinent question, which is being said. We have to understand 2 things. I don't see this is very, very temporary, I'm seeing. Two things which have been witnessed is what we have seen in the last 2 years, the amount of bidding, which is close to 100 gigawatts, which has happened. So the pilots as close to 40 gigawatts of bids for which the PPAs are still pending, and in which there are significant portion of plain solar and plain wind also with the grid challenges, which are being faced, we have seen one big significant change in the current year H1 is that plain vanilla solar or vanilla wind bids are hardly any. They're not there.

More it is coming is either hybrid, hybrid also is much lesser. It is FDRE or other majority is solar plus battery energy storage to the charge during the evening hours. So we are seeing this temporarily to pull down because there is enough in the country to be executed going forward in the next 3 years, the PPAs which have been signed or the unsigned bids which are there. So we see that current year, we expect the overall bidding volume what we have witnessed in last 2 fiscal is expected to be lower in the current year.

But as I again said, this is temporary. Again, once the backlog starts coming down and the connectivity visibility is there, I think this will gain pace maybe from next financial year is what is expected.

[Atul Tiwari, analyst]

Okay. And my second question is on Salboni project. So fair to assume now that the boiler will be done in-house with the acquisition of GE Power boiler assets, right?

[Sharad Mahendra, executive]

Yes.

[Atul Tiwari, analyst]

Okay. And just to kind of -- obviously, you will be hopefully bidding for the new coal-based capacity as well. So what is the maximum capacity of boilers you can do in-house in this facility?

[Pritesh Vinay, executive]

See, as I said that clearly, when you see that the boiler plant doesn't work that we say that, okay, 2 or 1 boiler. It's not that it is one. It is a single unit. And it delivers one in a year. See, this has a capacity of almost 1.5 boiler worth of component manufacturing. And it doesn't mean that it will give 1.5 in 1 year. It is to expand to complete 1 boiler is almost 18 months in terms of supplies from the 0 date. So it is the cycle, which is there, and we have time, it is meeting the time lines. My commissionings are in 2030 for -- as per the PPA terms in Salboni.

So effectively, you can say once the plant is fully functional, it will give a material worth 1.5 boilers, you can say, per annum. This will be giving.

[Atul Tiwari, analyst]

Okay. And sir, the turbine generator will be with JSW Toshiba, the plant...

[Sharad Mahendra, executive]

We have a joint venture with Toshiba, which is the whole joint venture, and they have already made and supplied had this 800-megawatt TG in India beforehand also to NTPC and others. So yes, the turbine generator will be from Toshiba JSW, the joint venture company.

[Atul Tiwari, analyst]

And sir, what is the annual capacity of JSW Toshiba as of now?

[Sharad Mahendra, executive]

JSW Toshiba can produce comfortably 2 turbine generators in a year. Again, as I said, because last few years, they have not been producing turbine generators, though the technology equipment is every -- is there with them. The year -- start year to deliver will be 3 years from now, which again matches absolutely with our schedule. And then after that, from third year onwards, once they deliver the first, every year, they can deliver 2 TVs.

[Atul Tiwari, analyst]

2 TVs of 800-megawatt each?

[Sharad Mahendra, executive]

800-megawatt means 1.66 gigawatt every year with a potential to go to 2.4 also.

[Operator]

Our next question comes from the line of Karan P. Gupta from CAVI Capital.

[Karan Gupta, analyst]

Two quick questions. Can you maybe just talk about the alignment of the depreciation expense that is booked and the economic life of the underlying assets. So in other words, can these assets continue to generate cash flows even after their depreciated to 0? And secondly, you've always spoken about mid-teen ROEs. So are those on a cash basis or a net basis that you're looking at?

[Pritesh Vinay, executive]

Can you repeat the second part of your question, please?

[Karan Gupta, analyst]

Yes. So in past calls, also management has always guided that capital allocation decisions are based on mid-teen ROEs. So are those mid-teen ROEs on a cash basis? Or are those on net of depreciation expense?

[Pritesh Vinay, executive]

So the first part of the question is the depreciation is a straight-line method, right? So yes, the economic life of the assets are typically longer than the depreciation with a very big caveat that provided your operation and maintenance, and upkeep and overhauls are proper, right? So there are a lot of cases in India across different kinds of asset bases, where the asset life with some nominal R&M, which is renovation and modernization CapEx can be elongated. The economic life can be elongated beyond the depreciation, right? So that's the first part of the question.

The second part of the question is the capital allocation decision does not change. It is a levered equity IRR, right? Because we are allocating capital for the cash flows for the life of the asset, right? And therefore, when you're talking about a levered equity IRR, you will be able to do when you do the FCFE calculation, you will be able to arrive at that, right?

So ROE is, I think, easily understood. It's more backward looking or at a certain point of time. But given the -- where you are in the stage of your CapEx cycle or where you are in the life of the asset, your ROE trajectory typically for an [ REE ] business, for example, in the initial years will be lower because the debt is still to be repaid. And typically, once you hit the 10-, 11-, 12-year mark is when the debt is getting paid faster than -- so the accrual at the numerator, which is your reported profit after tax is higher, right? So the ROE starts bunching up in the back end of the economic life of the asset. Whereas capital allocation decisions are on a long-term cash flow forecasting. So it's a mid-teen equity IRR on a levered basis. I hope I am clear.

[Operator]

Our next question comes from the line of Amit Bhinde from Morgan Stanley.

[Amit Bhinde, analyst]

I just wanted to understand your thought process on the 1,800 KSK Mahanadi Plant. Would that be operationalized by 2031?

[Operator]

Sorry to interrupt. Amit, sir, may we request you please repeat your question once again. Apologies for saying...

[Amit Bhinde, analyst]

Sure. Sir, I wanted to understand whether we'll be aiming to start the remaining 1,800 megawatts of KSK Mahanadi by 2031. Would that be in your plan?

[Sharad Mahendra, executive]

See, yes, we have been maintaining that this is an 1,800-megawatt operational plant and 1,800 megawatts of which the balance of plant is fully ready and maybe the fourth unit, 40% of the work is complete and also fifth and sixth units, some minor work has already been completed. So definitely, we have plans to complete this before 2031.

[Operator]

Our next question comes from the line of Shrinidhi Karlekar from ASK Investment Managers Private Limited.

[Shrinidhi Karlekar, analyst]

Sir, I wanted your perspective on what is really driving uptick on state PPAs from various different states? And how is the pipeline looking like?

[Sharad Mahendra, executive]

See, state PPAs, if you see one thing, what we have witnessed in some of the states is in thermal space, states are looking for setting signing PPAs for fresh capacities in thermal space and giving a preference of setting up the plant within the state, promoting like encouraging investment and employment in the state is one of the strategic shift, which we are seeing in the states, whether in the recent bids that we see, whether it is in the state of Bihar, Madya Pradesh or West Bengal or even the recent bid in Assam or in UP. These are the 5 major states in Maharashtra, this -- these have seen the states barring Maharashtra, every state has asked for the setting up the unit in the respective state only, which, in a way, we feel is good in terms of grid challenges what we are witnessing till the time, and this will support. So this is what we are witnessing that states are encouraging this.

In RE space also for 2 reasons which are driving some of the states, which are friendly in terms of setting up solar or wind capacities in -- where in Karnataka is one of the leaders and Maharashtra that setting up within the same state, it insulates them from the ISTS connectivity, which is a challenge. And also the ROP of -- the obligations in terms of the connectivity charges, which is -- which has been free, which we have started implementing in the current year from first June, every year, there will be incremental transmission charges. So these 2 factors are driving in the states which are RE-friendly to set up the capacities within the state.

[Shrinidhi Karlekar, analyst]

Right. And sir, is the pipeline still strong? Or it was just a patch of a year or 2 where we saw a lot of bids in terms of thermal PPAs?

[Pritesh Vinay, executive]

So if I can comment here, see, typically, the way it works is you have to look at it from a procurer's point of view, right? So every distribution utility is -- does what is called their demand curve forecasting, right? And then commensurate with their demand curve forecasting, which is typically on a medium to long period average basis, they will do a resource adequacy plan that where will this curve, what different modes of generation will it be met with, right?

And then based on their internal analysis and decisions, they decided, okay, X percent from this mode and Y percent from that mode and all that. And that is how -- then what is the typical gestation period for each of the mode and then that is how they do it, right? So in the last 18 months, most of us who have been in the power market have been surprised with the greenfield long-term PPAs for thermal projects, those bids coming back.

So clearly, you are now asking us to crystal ball will this trend continue or not. We have a very poor track record of calling something like this out. We would not trust our views on this, right, on a lighter note. But I would believe that the pace at which we've seen the bids. So at least it is less likely that the current states should call for -- the states which have already done a bid maybe some brownfield or some additional from those. But the states which have not may come back 1 year or 2 years from now, right? So there is no visibility. Nobody gives out these kind of guidances, right? You pay it by the year. That is how it works.

[Shrinidhi Karlekar, analyst]

Right, sir. Understood. Quite clear. And one last one, if I may. Sir, you're putting up this BESS assembly plant in Pune. Wondering, is it for largely captive needs or you plan to service external demand as well?

[Sharad Mahendra, executive]

See, our captive portfolio is also significant. It is for captive, but the kind of capacity which we have put a 5-gigawatt hour per annum and it takes time to ramp up this capacity, maybe this -- maybe by a second year, we will -- operation we should be reaching the full capacity. So we'll be open to because the way MNRE has been focusing in terms of ALM for solar modules and then sells also, which is in discussion and also for wind also, which is there.

So ultimately, there is a focus to -- for make in India even in this area. So we feel that there will be opportunities even to cater to the requirements of outside also. So we'll be open to both for our captive definitely and also if there is any requirement then we can cater to the outside requirements.

[Operator]

Our next question comes from the line of [ Darshan ] from Jefferies.

[Unknown Analyst]

Congratulations on a good set of numbers. Just wanted a small clarification. If we look at the Page 35 of our presentation, the utilization for solar and wind is 19% and 41%, respectively. However, it was the same for 2Q FY '25?

[Pritesh Vinay, executive]

Sorry, what's the question?

[Unknown Analyst]

Am I audible?

[Pritesh Vinay, executive]

Yes. What was your question?

[Unknown Analyst]

So if you look at the CUF for solar and wind, for 2Q FY '26, it's 19 and 41 percentage versus 24% and 26%, as mentioned in this PPT. But if you look at that...

[Pritesh Vinay, executive]

No, no, if you seeing the roles, 99% and 91% is the total of hydro. Solar is 24% versus 19% and wind is 26% versus 41%, yes.

[Sharad Mahendra, executive]

So basically what you like you are asking for? You want to understand the change which is there over last year quarter 2?

[Unknown Analyst]

No, sir, for the current quarter, it's 19% and 41%, right, solar and wind?

[Sharad Mahendra, executive]

Yes, yes.

[Unknown Analyst]

All right. Because if I look at the last year quarter 2 presentation...

[Sharad Mahendra, executive]

It was 24% and 26%.

[Operator]

Our next question comes from the line of Aniket Mittal from SBI Mutual Fund.

[Aniket Mittal, analyst]

Just 2 small questions. One is while we've seen a recovery in wind PLF so if I look at the EBITDA number from Mytrah, it's actually fallen on a Y-o-Y basis, given that Mytrah is a fairly wind-heavy portfolio. Just for you to understand the reason for that?

[Sharad Mahendra, executive]

Can you repeat Mytrah, you say that despite the increase in the PLF?

[Aniket Mittal, analyst]

Yes. So wind PLFs are higher, Mytrah is a very heavy portfolio, but the EBITDA number on a Y-o-Y basis is actually showing a decline in how much -- by how much?

I think it's slightly down, down about INR 51 crores or INR 50 crores.

[Sharad Mahendra, executive]

I'll tell you, INR 5 crores. See, wind speed is better. We have to understand the Mytrah portfolio by design. It's an old portfolio, which has machines starting from 850 kilowatt. So even with the higher wind speed, they've also demonstrated wind portfolio has performed better. But the amount of benefit of a higher wind speed and higher -- what we get in larger machines, whether say 2.7 or 3-point gigawatt as compared to that, the incremental EBITDA from wind portfolio in Mytrah is limited.

But solar, we understand that solar because of the extended monsoon, the solar CUF, in general, has been lower. But if you see H1, H1 EBITDA of Mytrah if you compare over H1 of last year, when H1 solar was performing well, it's INR 1,021 as compared to INR 892 last year. So -- very marginal, and it is primarily though solar is only 422 megawatts, it is wind nominated, but the impact of solar lower -- because of the lower radiations and the extended monsoons. Solar, in general, in the country has not performed well in this quarter. So that impact is only this minor change in quarter.

[Aniket Mittal, analyst]

And just on Barmer, there's been a fall in EBITDA in Barmer on a Y-o-Y basis.

[Pritesh Vinay, executive]

So Barmer, if you recall, Aniket, the same thing was happening last year with hydro, I mean, regulated return businesses at the end of 12 years, your rate of depreciation changes and correspondingly, your capacity charge goes down, right? Because debt repayments have happened and all that, right? So Barmer completed its 12 years last year. So this year onwards, there's a step down under the regulatory trajectory of the capacity charge recovery because of the change in the rate of depreciation.

You would have seen this in Q1 also -- compared to Q1 of last year, right? So this will happen in all 4 quarters of this year, and then this becomes the base for the next year onwards.

[Aniket Mittal, analyst]

Understood. I think the difference in 1Q was slightly lower than this? And that's what you can...

[Pritesh Vinay, executive]

So there would be backdowns, there will be PLF changes. There would be impact of station heat rates, SOx consumption, all of that. Those plus minuses will happen. But fundamentally, the step change is because of this, yes.

[Operator]

Our next question comes from the line of Nikhil Jain from [ CRISIL ].

[Unknown Analyst]

My question is with regards to unit economics for battery energy storage system. So as a point number one, what is the current CapEx per megawatt hour in BESS. So since we have read in multiple media articles that it has come down from 105-kilowatt hours to 55-kilowatt hour. So what is the current cost, which we are incurring in the other landed cost for 1 megawatt hour of BESS. And the second question is with regard to the tariffs, which we charge for our stand-alone BESS and storage plus solar tariffs?

[Pritesh Vinay, executive]

So I'm struggling how to respond to this because when there is a sourcing on a procurement decision, a lot also depends on, a, what is the prevailing price at that point of time? What is your negotiating strategy vis-a-vis multiple suppliers? What kind of framework agreements, if at all, or volume commitments, if at all you can give and hence, your -- every player's negotiation ability will be very different. I'm afraid there is one size is...

[Sharad Mahendra, executive]

Yes. And also, we have to understand that when you are asking for in terms of when the BESS supply and also in terms of BESS project, saying that this is the tariff -- standard tariff is not possible because solar plus BESS, which geography it is being put whether it is a 2-hour discharge or a 4-hour single discharge or 2-hour discharge morning and 2-hour evening. So it is -- the project is to be designed, the battery container solution has to be designed that way.

Apart from that, if my energy plant at what price, I'm procuring the cell pack. So there are a lot of many factors. So maybe saying that 110 to 55 or giving any straight-line number will not be possible. There are many variables which need to be closed before arriving at a number.

[Pritesh Vinay, executive]

And just to complete the second part of your question, it's a competitive bidding process, right? So it is like they say, beauty lies in the eyes of the beholder. I'm sure the prices that are being discovered for the stand-alone battery energy storage systems, where we are now seeing 15, 20, 25 bidders in a single auction. I'm sure some -- for some of those players, those numbers are making sense, right? So that number is publicly known. So you know what it is, right? But it also depends on the risk appetite and the return...

[Sharad Mahendra, executive]

And Sumit, what to -- just to end with what Pritesh said, that we have been maintaining from the very beginning and still maintaining very clear our benchmark hurdle rate. Any bid if it is not giving, we are just for the sake of building a portfolio, we are not bid -- we are not -- we have to build the portfolio mid- to high-teen IRR is our hurdle rate that has to be maintained then only we go ahead.

[Unknown Analyst]

Okay. Sir, just one thing if you can give us just upper and lower band of the CapEx per megawatt hour so because we needed to check whether now -- whether the tariffs for BESS have been lower than PSP or it is still in the similar ranges or PSP is a little cheaper than BESS. So broadly, your view on this.

[Pritesh Vinay, executive]

No, I'm sorry, we'll not be able to do that, yes. It's a competitive market. And it is not in our interest to speak publicly about these things, yes.

[Sharad Mahendra, executive]

Nikhil, but what I will suggest is, in case you need any discussion, any more information you can approach IR team. They will definitely be happy to provide whatever more information or any guidance which needs to be given.

[Operator]

The next question comes from the line of Mahesh Patel from ICICI Securities.

[Mahesh Patil, analyst]

Sir, my question is on the our renewable LOA. So out of the 2.6 gigawatt that is still pending for PPA signing, can we expect over the next 6 months that is, by the end of this year, we'll be able to sign those PPAs? How do you see that?

[Sharad Mahendra, executive]

See, the thing is, as we discussed some time back also and I replied in one of the questions, that there is a pendency of 40 gigawatts of bids which are LOA issued. And PPA pending for signing. So we are not -- we cannot give any time line for this, whether it is 3 months, 6 months, 1 year. It is -- we are just waiting for the right time if the opportunity comes. But without that also, we are well on track of our -- reaching the 30-gigawatt capacity, we are absolutely confident. So we don't see and for us, it is the total capacity for which we have received pure solar, which we see as a challenge is only 900-megawatt out of our total -- sorry, total 4 gigawatts, which is there, which is a mix of many -- but total solar, if you see, is 900 megawatts of capacity, which is pending, which is contracted and not signed.

[Mahesh Patil, analyst]

Okay, sir. And -- but have you seen the situation or the overall scenario here, any improvement in that compared to last quarter?

[Pritesh Vinay, executive]

Sorry, can you repeat that question?

[Mahesh Patil, analyst]

Sir, I was asking, have you seen any improvement in the overall scenario. The situation that was -- it with also dealers in PPA planning last quarter. Have you seen any improvement over the last, let's say 4, 5 months?

[Sharad Mahendra, executive]

We are not seeing any specific improvement. It is the same what has been observed in the last 6 months slowdown in signing of PPAs. Thermal, there is uptick we all are seeing and also there is more keenness on solar plus battery energy storage, both in the C&I segment as well as in the utility as scale.

[Pritesh Vinay, executive]

Operator, that was the time we had, if we can wrap it up, please.

[Operator]

Certainly, sir. We will take that as a last question for today. I now hand the conference over to the management for closing comments.

[Sharad Mahendra, executive]

Thank you, everyone, for being with us today. And from our side, from JSW Energy side, I wish you and all your family members and close ones are very, very happy and prosperous Deepavali and New Year, and thank you once again for being with us.

[Operator]

Thank you. On behalf of Motilal Oswal, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.