5 July 2016
This announcement contains inside information.
OPG Power Ventures Plc
Renewable Growth Projects Pursued
OPG Power Ventures Plc ("OPG", the "Group" or the "Company"), (AIM: OPG), the developer and operator of power generation facilities in India, is pleased to announce an investment in 62 MW of solar projects as part of the Group's ongoing growth strategy.
62 MW Solar Projects in Karnataka (India) - 25 year PPA - expected commissioning in 2017
The Board has approved the Company's investment of £45 million in four new solar projects across various locations in Karnataka, one of the most industrialised states in India. This investment is to be funded from a combination of internal cash generation and debt and the Directors expect all four of these new projects to be generating cash flow by June 2017.
The projects were secured in a competitive bidding process and the Company has signed long term (25 year) power purchase agreements (PPAs) at an average tariff of Rs 5 with Karnataka Power Corporation. The targeted return levels are expected to be met without any subsidies being available.
Maiden dividend expectations unchanged - longer term expectations enhanced
The Board announced its initial expectations with regards to dividends on 24 May 2016 and that expectation remains unaffected by this approved investment. The Company's dividend objective is to attain a pay out of 15 per cent of full year net earnings, subject to the level of free cash flow generated calculated after scheduled debt repayments and expected capital expenditure and progress to a long term dividend strategy that pays out a third of the Company's total net earnings in any year. The solar energy business is expected to make a significant contribution towards this target while keeping the Group on a growth trajectory.
Projects consistent with OPG's Aims and Strategy
OPG's aim is to be a sector leader by reference to:
- Quality of earnings
- Growth it delivers; and
- Performance against its own stringent safety and environment management standards.
To meet these objectives, the Company's strategy is established to continually maximise the performance of its existing assets, reduce the cost of its capital and to deliver accretive growth projects within its core areas of expertise. At present, attractive growth projects in renewable energy bring with them strong potential for the Company to replicate the nation's energy generation mix and add to the quality of its earnings and are consequently believed to offer the Company excellent organic growth potential.
OPG's Renewable Energy Strategy
As outlined in June 2015 we have been increasing our focus on renewable energy as a result of the improved attractiveness of projects, in particular in the solar energy segment. With solar panel costs falling, their performance improving and an improving project financing environment, we have continued to prioritise projects that can be funded through a combination of debt and internal resources and that can be expected to generate visible long term revenues which meet our targeted return levels without any subsidies being made available.
We will continue to evaluate projects consistent with our stated strategy of adding accretive growth projects that replicate the national energy mix, enable debt to be paid down and dividends to be paid.
India and solar power
The Government of India, recognising the role of both thermal and renewable energy to power the country's growth and climate change commitments, has set out a target to achieve 100 GW of solar capacity by 2022 with the individual states setting out capacity targets and long term PPA's. Capital costs for solar plants have come down significantly both globally and even further in India and, set within the backdrop of India's high irradiation, solar power has become economically viable without subsidies in India. Further, with declining interest rates and project finance terms of 15-20 years combined with banking and sector reforms, the Directors consider the backdrop to India's energy sector to be favourable.
CEO Arvind Gupta commented:
"We have started our next phase of growth with a clear strategy that we believe could be a significant contributor to the growth in OPG's future earnings. In fact, I believe adding low risk solar generation capacity that is sold forward into the long term is significantly beneficial to the quality and robustness of our asset base and earnings. Such quality of growth reflects OPG's continued commitment to being a leading developer and operator in the growing Indian energy sector."
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 |
+44 (0) 20 7850 7070 |
Cenkos Securities (Nominated Adviser & Broker) |
|
Stephen Keys / Camilla Hume |
+44 (0) 20 7397 8900 |
Macquarie Capital (Europe) Limited (Joint Broker) Raj Khatri / Nick Stamp |
+44 (0) 20 3037 2000 |
Tavistock |
|
Simon Hudson / James Collins |
+44 (0) 20 7920 3150 |
About OPG
OPG operates and develops power generation related assets in India, principally under the group captive model, and currently has 750 MW of recently built thermal power generation assets in operation. It aims to be recognised as a sector leader for the quality of its earnings, the growth it delivers and its performance against its own safety and environment management standards. For growth OPG has set its target to build at least 300 MW solar energy projects in India in the next three years and correspondingly, its asset base is increasingly expected to better replicate India's energy generation mix.
In the six months ended 30th 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. OPG is listed on the Alternative Investment Market ("AIM") of the London Stock Exchange and trades with symbol "OPG.L"
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