Q3 FY2016 Trading Update

26 February 2016

 

OPG Power Ventures Plc

 

Trading update for the quarter ended 31^st December 2015

 

750 MW operational, cumulative production up 60%

 

OPG Power Ventures Plc ("OPG", the "Group" or the "Company"), (AIM: OPG), the developer and operator of power generation plants in India, announces the following trading update for Q3, FY16.  

 

Company Highlights:

·   Power off-take and operating levels back to normal post Chennai floods

·   Second 150 MW unit of Gujarat plant commissioned - total operating capacity of 750 MW

·   YTD energy output over 2 billion units, up 60% on prior year

·   Diverse industrial customer base in Chennai resulting in faster cash collection

·   Even after the impact of the Chennai floods FY16 trading remains within the range of market expectations

·   Focus on ramp-up of 300 MW Gujarat

·   Proposed Investor day - H1 FY17

 

Macro Highlights:

·   India GDP growth of over 7% p.a

·   Central Government implements key long term reforms to optimise the operations of State Utilities (the "UDAY" scheme)

 

Arvind Gupta, OPG's CEO commented: "I congratulate our team in Gujarat where both of our 150 MW units are now in production.  All of our assets are now operating.  Even after the impact of the Chennai floods, trading for FY16 remains within the range of market expectations.

 

"I stated at the interim results that our priorities were led by the maximisation of our assets and this continues to be the case. With the Indian economic outlook improving, with subdued fuel costs and key sector reforms being implemented, we remain positive about our long term growth outlook."

 

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

 

OPG Power Ventures PLC	+91 (0) 44 429 11 211
Arvind Gupta / V Narayan Swami / Ajay Paliwal
Cenkos Securities (Nominated Adviser & Broker)
Stephen Keys / Camilla Hume	+44 (0) 20 7397 8900
Tavistock
Simon Hudson / James Collins	+44 (0) 20 7920 3150

 

Operations Summary

The following table summarises the operations of our plants during the period under review:

 

	Quarter ended			Nine months ended		Year ended
	31 Dec 15 (Q3 FY16)	30 Sep 15 (Q2 FY16)	31 Dec 14 (Q2 FY15)	31 Dec 15	31 Dec 14	31 Mar 15 (FY15)
Generation (million kWh)
414 MW Chennai plant	537	589	484	1,595	1,387	1,861
300 MW Gujarat plant	282	182	NA	620	NA	NA
Total (million kWh)	819	771	484	2,215	1,387	1,861

1. kWh =1 unit

 

750 MW operational

The second 150 MW unit at Gujarat commenced operations on 30 January 2016, concluding a near tripling of our operating capacity from 270 MW just a year ago.   

 

Production Volumes - Cumulative YTD Generation up 60% at Dec 15 v Dec 14

The Company generated 70% more units than in the same quarter of the preceding year.  For the nine months in total, volumes were 60% higher due to the new capacity introduced at both locations.  These increases reflect the ongoing step change in the scale of our operations.

 

Energy generation was 6% higher than the immediately preceding quarter.  This variation was made up of a 9% fall in generation at Chennai due to the impact of heavy rainfall in December 2015 upon the grid and upon regional demand, offset by a 54% increase in volumes in Gujarat as the first 150 MW unit there was being ramped up.  While we estimate the Chennai floods cost us approximately £1.7 million in pre-tax profitability, offtake has now almost returned to seasonal norms and most importantly none of our people were hurt and our assets remained fully available throughout. Even after the impact of December's flood, the Company continues to trade within the range of market expectations.

 

Commenced supply under diverse contracts - improved revenue visibility and cash collections at Chennai  

From October 2015, the Company commenced supplies directly to industrial customers under the multi-year contracts established at Chennai.  In addition, the Company entered into an arrangement with TANGEDCO, the Tamil Nadu State utility, for 80 MW at a tariff of INR 5.05 per kWh until May 2016.  The weighted average tenure of our sales contracts at Chennai is now approximately four years, giving us improved visibility over revenues there.  Our strategy of switching supply directly to industrial customers has led to a significant acceleration of our cash collections.   

 

Gujarat revenues to grow steadily

As stated in our interim results, the revenues and costs of the Gujarat plant were capitalised in pre-operating costs until the commissioning of the second unit of 150 MW, which occurred on 30 January 2016.

 

Power sales from the Gujarat plant have been to industrial customers on short term contracts.  In our efforts to secure further diverse and attractive tariff arrangements, the Company has sought and received permission to access customers in certain states outside Gujarat.  This gives the Company the opportunity to invest time and effort in marketing to maximise the tariff achieved on its sales from Gujarat, hand in hand with stepping up the plant's production over FY17, a strategy designed to help us mitigate lower prevailing tariffs in Gujarat. 

 

Coal costs subdued

The Indian Rupee has moved in the range of 64 to 67 to the USD during the period while the delivered unit cost of imported coal during the same period fell more or less in line with the relevant coal index.

 

UDAY

At our interim results, we briefly referred to the introduction of a new financial restructuring scheme for State utilities introduced by the Indian government and called "UDAY".  The reduction in finance costs that UDAY would bring about to the large number of states that have signed up for the optional arrangement so far is potentially formidable and could greatly improve the bankability of new projects in the sector.  We welcome the initiative itself as well as the overall direction of travel which is focused on enabling new power capacity to yield economic growth.  

 

Investor Day - H1FY17

While global volatility persists, an economic resurgence and much positive change is being targeted by the current Indian government to position the country as a stronger, more resourceful participant in a changing world.  The business environment has become more positive, interest rates and inflation have fallen as commodity prices have eased while the sector's ills are being addressed with reforms such as UDAY.  Alongside these changes, our business has completed the transformation we set out to achieve in 2008.  During this time, we have increased the profitability, sustainability and transparency of everything we do - despite many challenges.  It is fitting then that at this juncture the board has decided to conduct its first investor day to be held in London during the first half of FY17, soon after our year end results anticipated in  June 2016.  As well as presenting our wider management and operations team, we propose to take shareholders 'under the hood' of the work we have done and the outlook for the power industry in the longer term, given India's exciting growth prospects. 

 

 

About OPG

OPG operates and develops power generation related assets in India, principally under the group captive model, and currently has 750 MW of assets in operation.  In the six months ended 30^th September 2015, according to its unaudited results for the period, the Company generated revenues of approximately £56 million, EBITDA of £23.25 million and earnings per share of 3.41 pence. 

 

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