TIDMOPG
RNS Number : 3648X
OPG Power Ventures plc
29 April 2019
29 April 2019
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for the year ended 31 March 2019
OPG (AIM: OPG), the developer and operator of power generation
plants in India, announces its trading update in respect of the
full year ended 31 March 2019 ("FY19").
Summary
For the full year ended 31 March 2019:
-- Profits are expected to be in line with market expectations
-- Total generation (including deemed) of 2.71 billion units, down 2 per cent from FY18
-- Plant Load Factor ("PLF") at Chennai was 75% compared with 77% in FY18
-- Average tariff was Rs5.41, up 10 per cent from FY18 as a
result of tariff increases during the year for captive
customers
-- GBP20.6 million (Rs1.86 billion) of term loan principal
repayments made, reducing term loans balance to GBP69.9 million
(Rs6.31 billion) at 31 March 2019
Arvind Gupta, Executive Chairman of OPG, commented:
"We are pleased to report continued strong operational
performance in FY19 and expect to report profits for our FY19
results to be in line with expectations"
For further information, please visit www.opgpower.com or
contact:
+91 (0) 44 429
OPG Power Ventures PLC 11211
Arvind Gupta / Dmitri Tsvetkov
Cenkos Securities (Nominated Adviser +44 (0) 20 7397
& Broker) 8900
Russell Cook / Stephen Keys
+44 (0) 20 7920
Tavistock (Financial PR) 3150
Simon Hudson / Barney Hayward
Group Operations Summary
FY 19 FY18
Generation (million kWh)
------ ------
414 MW Generation (MU) including auxiliary 2,471 2,493
Additional "deemed" offtake 234 277
-------------------------------------------- ------ ------
Total Generation (MUe)1 2,705 2,770
-------------------------------------------- ------ ------
Reported Average PLF (%)2
------ ------
414 MW 75% 77%
Average Tariff Realized (Rs)
414 MW 5.41 4.92
------ ------
Note:
1. MU - millions units or kWh; Mue - millions units or kWH of
equivalent power
2. Reported Average PLF based on Mue
Generation excluding deemed generation during FY19 was 2.47
billion units, 1 per cent lower than during FY18. This slight
decrease in generation was primarily due to Unit IV (180 MW) being
shut down from early December 2018 to early March 2019 whilst
turbine repairs were undertaken.
Average tariff realised during FY19 were Rs5.41 (FY18: Rs4.92),
10 per cent higher than in FY18, as a result of tariff increases
during the year for captive customers.
Coal and Freight costs
The average landed coal price was GBP49.30 (Rs4,513) per tonne
in FY19 (FY18: GBP49.40 (Rs4,527) at a INR/GBP exchange rate of
91.6 INR/GBP). Following the coal price spike in the first seven
months of calendar 2018, coal prices have since weakened.
Independent forecasts are for international coal prices to reduce
further in FY20 and beyond. We are cautiously optimistic that the
lower coal prices will provide some additional benefits for the
Group in FY20.
The Company started hedging coal costs by purchasing ICI 4 index
swaps trading on the Chicago Mercantile Exchange for 30,000 tonnes
at a fixed price US$39 per tonne with delivery from July 2019 to
September 2019. In addition, the Company has booked forward its
freight requirement for the first half of calendar 2019 at fixed
prices. Taken together, the Company now has greater visibility on
its future financial performance.
Focus on Deleveraging
Total borrowings during FY19 were reduced from GBP93.5 million
(Rs 8.43 billion) to GBP80.3 million (Rs 7.24 billion). This
included term loan interest and principal repayments at Chennai,
amounting in aggregate to GBP29.6 million (Rs2.67 billion),
including GBP20.6 million (Rs1.86 billion) of term loan principal
repayments.
As at 31 March 2019, total borrowings were GBP80.3 million
(Rs7.25 billion), including term loans of GBP69.9 million (Rs6.31
billion) and working capital loans of GBP10.4 million (Rs0.94
billion).
As previously reported, the Company achieved a major milestone
by fully repaying term loans with respect to Unit I of the Chennai
plant (77 MW out of 414 MW) in December 2018. The remainder of the
Chennai plant term loans are scheduled to be fully repaid for Unit
II and III by calendar year 2022 and for Unit IV by Q3 2023.
62 MW Karnataka solar projects commissioned
The Group's Karnataka solar projects (62MW) are situated north
of Bengaluru. All plants are operational and have met all critical
operating metrics. A Capacity Utilisation Factor for the solar
projects of 17 per cent was achieved in FY 19.
Long Term Incentive Plan ("LTIP")
The Remuneration Committee of the Board of Directors has
approved the introduction of an LTIP for a performance-related
award of 18.5 million new ordinary shares (representing
approximately 4.8 per cent of the Company's issued share capital)
in order to incentivise further the executives and senior
management to deliver its planned strategy.
Approximately 17 million LTIP awards (4.4 per cent of
outstanding shares) were made to three executive directors of the
Company, including approx. 9.9 million awards to Gita Investments
Limited, a company controlled by Arvind Gupta, Executive Chairman,
approx. 4.7 million awards to Dmitri Tsvetkov, CFO and approx. 2.4
million awards to Avantika Gupta, COO. The remaining 1.5 million of
performance shares under the LTIP remain to be awarded later.
The LTIP performance shares will vest in three tranches (one
third on the date of first anniversary, one third on the date of
second anniversary, one third on the date of third anniversary)
subject to continued service with OPG until vesting and meeting
performance targets. Vesting of awards under the LTIP will be
subject to the following shareholder value based performance
targets (overall target is 50% increase in share price from 20.25p,
being the closing price at the date of approval of the LTIP plan,
over the three year period to 24 April 2022):
- A 16.5 per cent (33.3 per cent of 50 per cent) increase in
share price from date of awards grant till the first anniversary
for the first tranche (one third of the total award);
- A 33 per cent (66.6 per cent of 50 per cent) of increase in
share price from date of awards grant till the second anniversary
for the second tranche (one third of the total award);
- A 50 per cent (100 per cent of 50 per cent) of increase in
share price, from date of awards grant till the third anniversary
for the third tranche (one third of the total award).
Indian Economy
India's gross domestic product is expected to reach US$6
trillion by FY27 and India is forecasted to be the third largest
consumer economy in the world, with its consumption predicted by
some to triple to US$4 trillion by 2025, reflecting shifts in
consumer behaviour and expenditure patterns.
With inflation expectations adjusting downwards, many
commentators suggest there could be room for further cuts in
interest rates if inflation durably remains below 4 per cent. The
FY18 annual inflation rate was 4.36 per cent.
India's GDP grew by 6.6 per cent in FY18 and is projected to
strengthen to above 7 per cent in FY19 and just under 7 per cent in
FY20, gradually recovering from the transitory adverse impact of
the rolling out of the Goods and Services Tax ("GST"). In the
longer run, it is expected that the GST will boost corporate
investment, productivity and growth by creating a single market and
reducing the cost of capital equipment.
Power Sector
With electricity production of 1,201.5 billion units in India in
FY18, India is the third largest producer and consumer of power in
the world and the government's goal is to meet the anticipated
growth in demand by doubling the current capacity to provide 24x7
electricity to all users. Multiple drivers such as industrial
expansion and growing per-capita incomes are adding to that growth
in demand, which is set to continue in the coming years as India
seeks to become a global manufacturing hub. India is planning to
derive 40 per cent of its energy output from non-fossil fuel
sources by 2030, thereby raising renewable energy installed
capacity from 57 GW to 175 GW by 2022.
However, the 2015 International Energy Agency's special report
forecasts that in 2040 coal-fired power plants will remain the
backbone of India's power system. Total installed capacity of power
stations in India stood at 350.16 Gigawatt (GW) as of February 2019
(Source: Central Electricity Authority). Coal-based power
generation capacity in India, which currently stands at 191.09 GW
is expected to reach 330-441 GW by 2040.
Outlook
The Company continued to deliver robust operational performance
and repayment of its scheduled term loans during FY19. The Indian
economy is expected to be the fastest growing major economy,
resulting in high GDP growth and higher demand for electricity.
Looking forward to OPG's FY20, the Company expects to benefit from
robust tariffs and the projected lower level of coal prices. The
Company's term loans will continue to be repaid in accordance with
their repayment schedule and the Company expects to prosper as
management seek to deliver a long term, profitable and sustainable
business model.
-ends-
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