TIDMKSK
RNS Number : 3020D
KSK Power Ventur PLC
30 January 2018
30(th) January 2018
KSK Power Ventur plc
("KSK" or the "Group")
Business Update
KSK Power Ventur plc (KSK.L), the power project company listed
on the London Stock Exchange, with interests in multiple power
plants across India hereby refers to the notification made by its
subsidiary KSK Energy Ventures Limited, the equity shares of which
are listed and traded on the National Stock Exchange of India
Limited ("NSE") and the BSE Limited ("BSE").
COMPANY UPDATE
The Company, with business interest in multiple power plants
across various states of India, over the last few years has been
facing a number of significant challenges, such as securing
suitable fuel supply availability at acceptable costs, continued
failure of state agencies to meet their commitments and non-receipt
of payments for power supplies within contractually stipulated
timelines and non-receipt of refunds from statutory authorities /
state agencies in spite of specific rulings in favour of the
respective projects. While this has been in common with the wider
structural and economic challenges being experienced by various
power projects across the Indian Power sector landscape, the
specific constraints being faced by the Company's various power
plants in enforcing rights against state agencies and achieving
sustainability thereto has been one of the main factors holding
back the Company's anticipated operational performance.
The Company is pleased to report certain developments relating
to the various group power plants as outlined below:
KSK Mahanadi Power (KMPCL)
1. KMPCL has now concluded the execution of necessary amendments
to its power purchase agreements (PPA), aggregating over 2100 MW of
gross capacity, with the Discoms in the respective procuring
entities of the states of Andhra Pradesh, Tamil Nadu, Chhattisgarh
and Uttar Pradesh, in line with the quoted discounts under the
"SHAKTI" (Scheme for Harnessing and Allocating Koyala (Coal)
Transparently in India) Coal Auction conducted by Coal India
Limited (CIL).
2. Therefore over the next few weeks, it is anticipated that
coal supplies under the SHAKTI Linkage auction could commence.
Resultantly, aggregate coal supplies of 6.82 million tons per
annum, of various grades of coal as provided for under the SHAKTI
auction scheme, would be available addressing a significant part of
the aggregate annual coal requirement at KMPCL. The balance of coal
required would be met from open market and imported sources. KMPCL
would shortly commence the procedural aspect of regulatory
concurrence for these PPA amendments that intend to pass on the
tariff discount benefits to the Procuring Discoms under the
respective PPAs, and the necessary coal supply agreements would be
concluded by KMPCL with respective subsidiaries of CIL.
3. The continuous run acceptance test for reliability at full
load conditions with respect to the third 600 MW unit has also been
concluded by the EPC contractor. It is anticipated that, subject to
availability of requisite coal of appropriate quantity and quality,
operations of the 1800 MW at a normal planned PLF of 85% will lead
to approximately 3+billion kwhs of energy supplied, on a quarterly
basis, to the various procuring Discoms by KMPCL. Further, it is
estimated that, while the Central Electricity Regulatory Commission
has been hearing the petitions concerning KMPCL's claim under
change in law provisions under PPA as well as central Government
directives on coal supplies, the delay being experienced in their
realisation coupled with the challenges of providing extended
credit to the Discoms for the power sales, has led to much higher
working capital requirements. The Company is in discussion with the
project lenders on appropriate mechanism to address this
matter.
4. Further, with commissioning completion of the 1800 MW of the
originally planned 3600 MW (50%), the extant regulatory mechanism
of Reserve Bank of India entitles the project to Deemed Date of
Commencement of Commercial operations (DDCCO) status and an
additional one year to achieve progress and completion on the
remaining units envisaged at the project location. The lenders, in
discussion with the company, are also evaluating a number of
potential alternative solutions to address the current situation at
KMPCL.
5. While the above developments are definitively positive and
provide greater certainty towards potential improvement in
operating and financial performance at KMPCL. Further, the growth
in conventional power generation in India along with contrasting
fall in Plant Load Factors of Independent Power Producers from
83.9% to 55.7% between 2010 and 2017 only reflect the nature and
depth of the inherent challenges and contradictions affecting
various power projects including KMPCL and the path to recovery and
timing will continue to be uncertain until all these wider issues
are fully and finally addressed.
Sai Wardha Power (SWPGL)
SWPGL continues to pursue its challenge to the abuse of
dominance by Coal India Limited (CIL) and Western Coal fields
Limited (WCL) seeking appropriate judicial reliefs. While coal
supplies of 3000 tons per day from the mines of UKNI and Bellora
Naigaon are currently being made available by WCL, pursuant to the
interim directions of Hon. Supreme Court of India, the appeal of
CIL and WCL against the order of COMPAT is now listed for final
disposal before Hon. Supreme Court during March 2018. In addition
to the effort to pursue coal price reduction that is vital for
operational profitability and full operations of the total 540 MW,
effort to address PPA issues of the balance 270 MW at SWPGL also
would be pursued. However, in accordance with the current
regulatory measures to strengthen lenders ability to deal with
stressed assets, the project lenders at SWPGL have earlier
exercised decision to acquire equity interest in SWPGL resulting in
reduced equity holding by KSK Group at SWPGL. Further, any
potential collaboration with new investor(s) at SWPGL would need to
address the project's immediate funding requirements before any
long term solutions on fuel and PPA are in accordance with
applicable regulations.
VS Lignite (VSLP)
VSLP initially operated as a captive power plant until March
2015, wherein under a specific direction by the Rajasthan
Government, necessary amendments to the mining lease have been
carried out in January 2015 incorporating the restrictive condition
of sale of power to state Discoms / state designated agencies.
However, pending execution of requisite long term PPA, the
operating and financial performance of VSLP has since suffered due
to transition challenges thereto as well as the litigations that
VSLP has been subjected to by the earlier captive industrial
customers. To address the situation in the interim, the project
lenders at VSLP have initiated the process under the current
regulatory measures available to project lenders to strengthen
lenders ability to deal with stressed assets, while simultaneously
seeking to address the immediate project funding requirements
before any long term resolution on PPA could be achieved.
Sitapuram Power (SPL)
SPL operates the 43 MW power plant with captive power supplies
to the cement units owned and operated by Zuari Cement Limited
(ZCL), which also owns 51% of SPL. ZCL has now taken over the
remaining 49% of SPL currently held by KSK Group, in line with the
completion of initial term of 10 year under the PPA of this captive
power plant.
Sai Lilagar Power (SLPL)
SLPL has concluded the execution of necessary amendments to
power purchase agreements (PPA) with the Chhattisgarh State Power
Trading Company Limited and upon necessary regulatory concurrence,
coal supply agreements would be concluded with South Eastern Coal
Fields Limited for an aggregate annual coal supply of 0.376 MTPA as
provided for under the SHAKTI auction scheme. The path to recovery
and timing of the 86 MW power plant continues to be uncertain until
the fuel issue is fully addressed and necessary PPA continuity
issues as required for continued supplies to Chhattisgarh are also
ensured.
Sai Regency Power (SRPCPL)
SRPCPL operates the 58 MW natural gas fired power plant of the
KSK Group with captive power supplies to various captive consumers
in the state of Tamil Nadu. The PLF has stabilised around 81% for
the last three quarters up to end December 2017 in line with the
new gas supply position of predominant supplies by ONGC under the
new auction mechanism and balance gas supplies from GAIL.
Sai Maithili Power (SMPCPL)
SMPCPL operates 10 MW PV solar power generation plant in the
state of Rajasthan, operating under a long term PPA with NTPC
Vidyut Vyapar Nigam Limited, the nodal agency for purchase and sale
of grid connected solar PV power under the National Solar Mission
of Government of India.
Business Strategy and Outlook
The Company's business strategy is to focus on consolidation of
the operations of the power generation capacity while evaluating
and concluding proposals for any further strategic funding and
equity collaboration that could be achieved at the asset levels.
Work continues on a number of major discussions in this regard and
with appropriate equity collaboration. The focus of the Company has
also been to reduce the debt leverage within the various asset
holding companies of the Group, dependent upon any such potential
realisations for equity stake divestment at project company level.
However, actual achievement in these situations is contingent upon
a number of factors, many of them outside the control of the
Company.
For example, obtaining the right fuel at the right price and
supplying power to customers at reasonable PPAs with timely
payments by the government counter parties thereto continues to be
the main challenge in the Indian power sector. But the majority of
these are external issues and not directly within the Company's
control to resolve. Further, the recent Government of India's
initiative in the form of The Companies (Amendment) Act, 2017,
enabling an additional provision of debt conversion into equity and
issuance of shares at a discount to its creditors, pursuant to any
guidelines or directions or regulations of the Reserve Bank of
India, bring an additional dimension to the debt reorganisation
plan by the project lenders at various project companies.
However, the Company estimates that demand for power generation
in India is ultimately expected to grow over the next decade,
albeit with sporadic surprises and uncertainties with Government
counterparties. Therefore, against this current difficult Indian
policy environment, the Company continues to work tirelessly with
the Government, the authorities at all levels and other project
stakeholders seeking their support to address these issues in the
best manner possible. It is believed that these Industry wide
issues which, once resolved, and could significantly improve the
Company's financial performance over time. Therefore, a continued
engagement with project stakeholders is envisaged to pursue all
reasonable efforts to address the situation, with the ultimate
objective to produce sustainable power generation on the best
possible commercial terms.
Finally, this performance would not have been possible without
the continued support of our shareholders, who have enabled us to
pursue business opportunities against a background of challenging
market conditions across the Indian power sector.
For further information, please contact:
KSK Power Ventur plc
Mr. S. Kishore, Executive Director, +91 40 23559922
Arden Partners plc
Steve Douglas / Paul Shackleton +44 (0)20 7614 5900
This information is provided by RNS
The company news service from the London Stock Exchange
END
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