Trading update for Q3 FY17

28^th February 2017

 

OPG Power Ventures plc

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

 

Trading update for Q3 FY17

Operational resilience, dividend payment and a new debt repayment schedule for Gujarat

 

OPG (AIM: OPG), the developer and operator of power generation plants in India, announces its trading update for the quarter and the nine months ended 31^st December 2016 ("Q3 FY17").

 

Highlights

 

·   Maiden interim dividend paid;

·   New debt repayment schedule for Gujarat - maturity extended by 10 years resulting in a total £67 million reduction in principal repayments through FY17- FY21, interest rate unchanged;

·   Generation 3.4 billion units up 53% on corresponding nine month period in the prior year;

·   Average load factor expectation for FY17 unchanged - Chennai 76% and Gujarat 65%;

·   Average tariff billed for nine months - Rs 5.33/kWh at Chennai and Rs 3.89/kWh at Gujarat; and

·   62 MW Karnataka solar project - debt financing secured for 40 MW, land being acquired, EPC shortlisted - on track for commissioning in 2017.

 

 

Arvind Gupta, Chairman, commented:

 

"Our business model has demonstrated its operational resilience and competitive position and we are particularly pleased to have paid our first interim dividend whilst continuing to make debt repayments and progressing our renewables program.  The new debt schedule at Gujarat should give us further balance sheet flexibility as we continue to focus on maximising our assets."

 

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

 

OPG Power Ventures PLC Arvind Gupta / V Narayan Swami	+91 (0) 44 429 11211
OPG Power Ventures PLC - Investor Relations Ajay Paliwal / Pooja Maru	+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 (Financial PR) Simon Hudson / Barney Hayward / James Collins	+44 (0) 20 7920 3150

 

 

OPG operates and develops power generation related assets in India and at 30^th September 2016 had 750 MW of assets with a further 186 MW under development or in the pipeline.  In the six months ended 30^th September 2016, according to its unaudited results for the period, the Company generated revenues of £118 million, EBITDA of £42 million and profit before tax of £18 million.

 

 

 

 

 

Operations Summary

 

	Q3 FY17	Q3 FY16	Nine months FY17	Nine months FY16	Full Year FY16
Generation (million kWh)
414 MW Chennai	537	537	1,757	1,595	2,236
300 MW Gujarat	428	282	1,359	620	9271
Generation (MU) excluding auxiliary	1,056	819	3,116	2,215	3,163
Additional "deemed" offtake at Chennai	78		269		184
Total Generation (MUe)2	1,143	819	3,385	2,215	3,347
Reported Average PLF (%)3
414 MW Chennai	67%	59%	74%	72%	78%
300 MW Gujarat	64%	N/A	N/A	N/A	52%

 

Note:

1. Includes 704 million units generated until January 2016 from Gujarat for which results were capitalised

2. MU - millions units or kWh; MUe - millions units or kWH of equivalent power

3. Reported Average PLF based on MUe

 

 

Chennai generation 27% ahead of last year notwithstanding one-off events; PLF on track for 76%

 

As reported on 26^th January 2017, the Company was able to limit the financial impact of recent one off events towards the end of last year, which included a cyclone and a near commercial shutdown of the region following the unfortunate death of the Chief Minister, to approximately £6 million in revenues.  Notwithstanding these issues, volumes were steady between Q3 FY17 and the comparable quarter last year, with year to date volumes significantly ahead.  For January 2017, our reportable PLF was 73% and we continue to expect to achieve a reported average load factor of 76% at Chennai for FY17 as a whole.   

 

Gujarat generation 119% higher than last year; PLF on track for 65%

 

The Gujarat plant ramped up, achieving an average PLF of 65% in Q3 FY17.  Generation was 428 million units in the quarter and approximately 1.4 billion units in the period to date.  This is considerably higher than last year and is principally on account of the plant's full commissioning being in January 2016. Due to the demand and supply dynamic in Gujarat, and as referred to in our interim FY17 results, there have been continuing delays in paying over to us amounts collected from customers by state electricity companies. As a result, the Group's strategy has been to focus on procuring additional contracts outside the State with the objective of achieving the right balance between growing our volumes and profitability on each sale.  The Company is still expected to achieve a PLF of 65% for the current year and remains confident of increasing this next year.

 

At both our plants, customer diversity has helped to mitigate any significant impact to date from demonetisation and the general consensus remains for this event to result in significantly more activity and growth across all sectors of the Indian economy in the future. 

 

Coal

 

Benchmark international coal prices continued to soften during Q3 following the spike in H1 FY2017 that the Company previously reported.  With some volatility at the beginning of CY2017, consensus expectations are for a further decline in prices throughout the rest of 2017 and into 2018.  The Company has already completed its coal purchases for FY17.

 

Gujarat new debt repayment schedule

 

The Company has negotiated a new, extended debt repayment schedule with its lenders for its INR 1.5 billion (£179.2 million) project debt at Gujarat to better match operating cash flows.  The total remaining duration of the facility will be extended from 9 to 19.5 years with the final repayment due in 2036 and the following is a summary of the new repayment schedule:

 

 

Period	Previous repayment schedule		New repayment schedule
	£ million	%	£ million	%
FY17 - FY 21	80.64	45	14.01	8
FY22 - FY26	89.60	50	58.35	33
FY27 - FY36	8.96	5	106.84	59
Total	179.20	100	179.20	100

  Note: £1 = INR 83.5

 

Accordingly, the total principal amounts to be repaid between FY17 and FY21 are being reduced by £67 million. 

 

The debt is to remain at an unchanged variable rate of interest and on the existing security.

 

A closer relationship between debt repayments and expected performance of Gujarat

 

 It is expected that the new schedule of repayments will better reflect the cash generation and maximisation of this plant, which is expected to be a function of the following factors:

 

-      continuing to target load factors at or above 80 per cent, rising from the 70-75 per cent that OPG expects to achieve next year, all well above national average;

 

-      continuing to target higher tariff industrial customers, especially outside the state;

 

-      preserving sales relationships that contribute to fixed cost, and re-emphasising  focus on profitability on each sale; and

 

-      Gujarat state electricity board companies paying over to the Company, as referred to in the FY17 interim results, amounts collected from customers located in the state and doing so on time.

 

One year since commissioning, the Gujarat plant is achieving better load factors than many thermal power plants in the country and has already developed a diverse industrial customer base in Gujarat and other states.  The Company believes there is the ability to further diversify the customer base and that the new debt repayment schedule at this plant will facilitate achieving this through the provision of increased financial flexibility over the coming years. 

 

Solar projects

 

62 MW Karnataka  

 

The Company has already secured debt financing for 40 MW of its 62 MW solar project development in Karnataka.  Against the 25 year PPA, debt is to be repayable over 17 years and carry a variable rate of interest. In addition, the Company has received approval for transmission of power from the sites that it is currently in negotiation to secure. The project is on track for commissioning in 2017.

 

124 MW Jharkhand

 

The Company has been issued with a letter of award confirming that OPG has secured a 25 year PPA for this project at the terms we bid.  The land has been identified along with potential debt providers such that when OPG receives the signed PPA from the state government financial closure could be achieved soon afterwards.

 

Outlook

 

The Company expects the current year's results to be in line with consensus expectations.  In addition, a new debt repayment schedule at Gujarat is expected to reduce principal repayments over the next few years from FY18 and better match repayments with asset performance.    

 

The long term proposition remains unchanged - the Group continues to demonstrate its operational resilience and the Board is pursuing its strategy of maximising our assets, paying dividends and investing with a view to growing earnings.