TIDMOPG
RNS Number : 5484C
OPG Power Ventures plc
11 February 2020
11 February 2020
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for Nine Months of FY20
Summary
For the nine months to 31 December 2019:
-- Total generation of 2.09 billion units (2.15 billion units for nine months FY19);
-- Plant Load Factor ("PLF") at Chennai was 77% (79% for nine months FY19);
-- Average tariff for nine months FY20 was Rs 5.67 (Rs 5.33 for nine months FY 19);
-- GBP13.3m term loan principal repayment, representing 3.3
pence per share added in value to shareholders' equity;
-- Gross debt reduced by 22 per cent to GBP62.5m (GBP80.4m at 31 March 2019);
-- FY19 full year scrip dividend of 0.6p per share (FY18: 1p per share) paid in January 2020.
Arvind Gupta, Executive Chairman, commented:
"We are pleased to report another strong operational performance
for the first nine months of FY20 and we expect to meet market
profit expectations for our full FY20 results."
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 / Nick
Elwes
Introduction
In 2018, the Board took the decision to focus on our profitable,
long-life assets in Chennai, and to prioritise deleveraging to
enhance and increase the value to shareholders' equity. Given the
strong cash flows generated by the Chennai plant we remain on
target to deliver a debt free business by the end of 2023 with free
cash flows thereafter providing significant returns to our
shareholders.
The increase in equity value, since the adoption of this
strategy is:
FY18 - Expected Expected Expected
FY19 9m FY20* Q4 FY20* FY 20* FY21*
-------------------------- --------- ---------- ---------
Term loan principal GBP42.9m GBP13.3m GBP4.4m GBP17.7m GBP16.7m
repayments
Addition to shareholders
value as a result
of term loan principal
repayments (per
share) 11.1p 3.3p 1.1p 4.4p 4.2p
--------- ---------- ---------
*Based upon INR/GBP closing exchange rate at 31 December 2019 of
93.49 and 400.7 m of Ordinary Shares in issue
The Board believes that the strategy of maintaining operational
excellence and the paying down of borrowings is for the clear long
term benefit of all our stakeholders.
Operations Summary
Chennai - Total generation maintained at 2.09 billion kWh and
PLF of 77%
Nine Months Nine Months FY
FY 20 FY 19 31 Mar 2019
Generation (million kWh)
------------ ------------ -------------
414 MW 1,889 1,969 2,471
Additional "deemed" offtake at
Chennai 204 176 234
-------------------------------- ------------ ------------ -------------
Total Generation (MUe)(1) 2,093 2,145 2,705
-------------------------------- ------------ ------------ -------------
Reported Average PLF (%)
------------ ------------ -------------
414 MW 77% 79% 75%
------------ ------------ -------------
Average Tariff Realized (Rs)
------------ ------------ -------------
414 MW 5.67 5.33 5.41
------------ ------------ -------------
Note:
(1) MU / Mue - millions units or kWh of equivalent power
In Q3 FY20, India's power demand growth witnessed a decline of
6.2% YoY, compared to growth of 6.7% in Q3 FY19, primarily
attributable to subdued economic activity in the country.
In spite of the subdued economic activity and a decline in
thermal generation growth of 11.3% in the country, total generation
at the Chennai plant, excluding deemed generation, in the nine
months of FY20 was 1.89 billion units, 4 per cent less than in the
nine months of FY19. This decrease in generation was primarily due
to decreased demand by automobile and steelmaking industrial
customers as Indian economic growth moderated slightly. Average
tariffs realised in the period were Rs 5.67 per kWh and for FY20
the tariff realization is expected to be similar (nine months of
FY19: Rs5.33; FY19: Rs5.41 per kWh). The higher tariff realisation
is primarily due to an increase of tariff in 2018-19, the full
impact of which will be reflected in FY 2019-20.
Focus on Maximising Asset Performance and Deleveraging
The average landed cost of coal was GBP49.0 (Rs 4,363) per tonne
in the period, (GBP49.3 or Rs 4,517 per tonne in FY19). This
reduction in coal cost is primarily due to moderation in
international coal prices.
As at 31 December 2019, total borrowings were GBP62.5 million,
including term loans of GBP53.9 million and working capital loans
of GBP8.6 million. The remainder of the Chennai plant term loans
are scheduled to be fully repaid by Unit II and III in calendar
year 2022 and Unit IV in Q3 23.
Scrip Dividend and Issue of Equity
As previously reported, the final FY19 scrip dividend of 0.6
pence per share was paid in January 2020 and a total of 12,823,311
new Ordinary Shares were allotted by the Company to shareholders.
Following the issue of the scrip shares the Company has 400,733,511
Ordinary Shares in issue.
62 MW Karnataka Solar projects
All our Karnataka solar projects situated north of Bengaluru are
operational and have met all critical operating metrics. Currently
the projects are receiving a tariff of Rs 4.36 per kWh. We expect
the Capacity Utilisation Factor to be 17-20 per cent during FY20.
As previously announced, the Board has decided to focus on the core
thermal power plants business in Chennai and the Karnataka solar
projects remain in a disposal process.
The Indian Economy and Power Sector
As per the Monetary Policy Committee of India (MPC), global
economic activity remained subdued over the last quarter, though
there are some early signs of recovery. The recent US China trade
deal is expected to boost global sentiment and moderate the trade
war.
The World Bank Group's report 'Global Economic Prospects'
published in January 2020 estimated an annual growth rate of 5 per
cent in GDP for India in FY20, increasing to 5.8 per cent in FY21.
Indian growth has slowed on the back of a decrease in private
consumption, tighter credit conditions and a decline in private
investment due to the global manufacturing downturn and rising
trade barriers. However, as per the MPC, the recent data by banks
and financial institutions suggest some early recovery in
investment activity which should augur well for the economy.
Indian power consumption per capita was only 1,181 kWh in 2019.
It is expected that this will catch up with developed economies
with similar social and economic conditions over time. India has
moved up 14 positions to rank 63 globally, its highest ever, in the
World Bank's annual Ease of Doing Business table in the latest
World Bank, Doing Business 2020 Report. With universal household
electrification nearly complete in the country, the latent power
demand from rural India should get unblocked. The resultant impact
is expected to be increased economic activity and
industrialisation, contributing to increasing power demand. The
sector is also likely to see increased consolidation with several
stressed power assets available for acquisition.
Outlook
The recently announced Government budget of India has a far
reaching impact for power sector of the country including billing
and collection efficiency leading to improvement in the financial
health of distribution companies. Apart from other measures,
Government has proposed to close old thermal power plants which are
around three decades old, in a phased manner. Based on data from
the Central Electricity Authority of India, approximately 10 GW of
thermal power plants could be impacted by this. This will help ease
overcapacity in the sector to an extent.
We will maintain our strategy of maximising operational
performance and deleveraging. Operationally, the Company is
benefitting from the current level of coal prices and we expect
this will allow us to demonstrate good profitability in FY20. We
will continue to repay borrowings and increase value for our
shareholders as debt reduces and profitability increases.
-ends-
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