14 May 2024

OPG Power Ventures Plc

("OPG", the "Group" or the "Company")

Trading update for the year ended 31 March 2024

OPG Power Ventures plc (AIM: OPG), the developer and operator of power generation plants in India, announces a trading update in respect of the full year ended 31 March 2024 ("FY24").

Summary

·   Total generation in FY24 was 2.322 billion units, a 55% increase over the previous year (FY23: 1.5 billion units). The increased generation was due to higher demand for electricity in India and the Company's ability to secure short term profitable contracts. OPG continues to focus on such contracts in the current financial year.

·    Subject to audit, the Company expects to report FY24 revenues and EBITDA of no less than £160 Mn and £16 Mn, respectively, exceeding market expectations.

·    Plant Load Factor ("PLF") was 69.21 per cent in FY24, compared to 42.1 per cent in FY23.

·    Average tariff for FY24 was Rs. 7.52 (FY23: Rs. 8.45) per kwh.

·    During FY24, the Company repaid debt totalling Rs.2.480 billion (equivalent to £23.54 million).

·   The Company issued Non-Convertible Debentures (NCDs) (listed on the Bombay Stock Exchange) equivalent to approximately £3 million in August 2023.

·    Net debt of the company was approximately £12 million as at 31 March 2024 (31 March 2023: £16.1 million).

Indian Economy  

·    India continues to be the fastest growing economy in the world with FY25 GDP growth forecast at 6.8%  due to bullish domestic demand and a rising working-age population (source: IMF).

·    In India, temperatures in most parts of the country are expected to be above average during summer 2024. The Government of India has projected a peak power demand of 260 GW during the summer season in light of an extended heat wave. By 2030, the Government of India estimates peak electricity demand to exceed 400 GW.

·    In addition to the Government of India's focus on attaining 'Power for All', the growing population, increasing urbanisation and industrialisation, growing demand for air conditioning and sustained economic growth, continues to drive electricity demand in India.

·  To reduce dependence on imports and derisk the country from availability and abnormal increases in international coal prices, India has increased coal production and crossed the milestone of 1 billion tonnes in FY24.

·    To meet the growing energy needs of India's booming economy, despite global pressure, India will continue to add new thermal capacity and is expected to add an additional 80 GW by 2032. This long-term view aligns with India's energy security goals and the need to balance its power generation portfolio while it also pursues renewable energy installation.

Power Sector

·   Electricity generation in India saw a year-on-year rise of nearly 7% to 1738.1 billion units (BU) in FY24, compared to 1624.16 BU in FY23 indicating a surge in economic activity. During April 2024, the electricity demand in India surged by 10.5% primarily due to unprecedented heat wave, with peak power demand of 224GW on April 30 as against last year's 216 GW.

·    During FY24, India added 26 GW of new generation capacity and as at 31 March 2024 the total generation capacity reached 442 GW of which 211 GW is from thermal sources. Compared with the 55% share in installed capacity, the thermal sector contributed 76% of India's electricity generated during FY24, primarily on account of the higher load factors that thermal plants can achieve.

N. Kumar, Non Executive Chairman commented:

"During FY24 we continued to demonstrate our resilience and ability to respond to the growing energy needs of the country, by ensuring  a consistent and reliable supply of electricity to our customers. Our strength is derived from our deep industry expertise, sustainable supply chains, robust liquidity position and our operational flexibility. In addition, we have a strong balance sheet with low gearing which has been built over the years through pro-active deleveraging and prudent capital allocation. This provides us the financial strength and latitude to pursue new growth opportunities in energy transition.

With the Company expecting to report revenues and EBITDA exceeding FY24 market expectations, the Company will continue to focus on delivering our strategy and enhancing shareholder value."

For further information, please visit www.opgpower.com or contact:

Trading Update for the Year to 31 March 2024

Enhancing shareholder value

In 2018, the Board took the conscious decision to focus on profitable, long-life assets in Chennai, and to prioritise deleveraging in order to grow shareholder equity. With a reduction in debt, a significant portion of the Group's free cash flows will be earmarked to enhance shareholder value and to capitalise on future growth opportunities. 

As at 31 March 2024, total borrowings were £25.44 million comprising term loans and NCDs of £22.46 million and ECGLS of £2.97 million. This represents a 22% reduction in gross debt from £32.54 million as at 31 March 2023.

The Company repaid NCDs of approximately £19.6 million in May 2023 through a mix of internal accruals and new debt comprising both term loans and a new tranche of NCDs. This refinancing pares down the debt as well as elongates the tenure, providing more flexibility in managing cash flows and to pursue growth opportunities.

Operations

Total generation in FY24 at the Chennai plant was 2.322 billion units. The generation was higher due to an increased demand for electricity in India and the Company's ability to secure profitable short term contracts at attractive tariffs.

Coal Market

·   The global coal market has seen a turbulent period during the last four years due to the Covid pandemic and the Russia/Ukraine conflict with availability and pricing stabilising recently.

·    Coal remains the largest source of electricity generation, steelmaking and cement production and is maintaining its key position in the world economy.

·    Coal indices have decreased in FY24 as expected.

·   The Company is consciously focusing on using a mix of domestic and international coal with the ultimate objective of generating electricity at optimum cost. Accordingly, the Group continues to participate in various auctions to secure coal in order to reduce the generation cost per unit.

ESG

From an environmental perspective, our technological leadership and the application of standards such as ISO 14001:2015 ensures our path towards sustainability. OPG consistently meets and often surpasses the benchmarks established by the Government of India. The Group's operations continue to aim to achieve this and have the required wastewater treatment systems and air pollution control mechanisms in place.

Nitrogen Oxide (NOx) emission control initiatives were implemented in two of the Group's units during FY23 and a NOx system in the third unit will be implemented in FY25.

The Group is committed to maintaining a safe and healthy workplace whilst promoting a positive health and safety culture through effective communication, participation and consultation with employees and business partners. The Group has also been certified for ISO 45001:2018 which underlines OPG's commitment to the latest safety compliance procedures and our proactive approach to prevention of safety incidents.

The Group has also successfully started biomass co-firing with coal in our plant to reduce carbon emissions which will also be a sustainable replacement for coal as a fuel for the power plants going forward.

To further reduce the Group's carbon footprint and enhance biodiversity, OPG has embarked on a 'Bamboo Plantation'. This project spans 20 acres with 15,000 saplings planted, and once commercialised, this will not only reduce the Group's carbon footprint by replacing coal with bamboo but will also ensure sustainable supplies and reduce our cost of generating electricity.

Through OPG's CSR programmes, the Group has undertaken numerous initiatives to address pressing social needs. Our dedicated efforts have focused on improving education and ecological balance, enhancing healthcare access and eradicating hunger.

Outlook

During FY24, with profitable generation and continued deleveraging, the Company has significantly strengthened its balance sheet and liquidity position which provides OPG with the financial strength and latitude to pursue new growth opportunities in energy transition.

India is on track to become the world's third largest economy in the years to come and the Country's rapid economic growth and burgeoning population have continued to create a significant demand for energy, prompting the country to undergo a transformative shift in its power sector. Currently, while India ranks third in total power consumption globally, it is significantly lagging in per capita consumption. The demand for energy will continue to increase not only in the industrial sector but also in the retail sector where the retail customer will have an increased reliance on energy due to a rise in temperature, improved lifestyle and increasing purchasing power. The Government of India's initiatives have improved the state utilities financial health, thus enhancing the investment climate for power generation and transmission. 

The increase in electricity demand and transformation in the power sector in India provides a prime opportunity for OPG to continue to generate profitable revenues through its sustainable operations.

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The Company will continue to generate strong cash flows from operations and deleverage its balance sheet to maximise returns to its shareholders.