Trading update for Nine Months of FY21

29 January 2021

OPG Power Ventures plc

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

Trading update for Nine Months of FY21

Summary

For the nine months to 31 December 2020:

·   Total generation of 1.47 billion units (2.09 billion units for nine months FY20);

·   Plant Load Factor ("PLF") for the period at Chennai was 54% (77% for nine months FY20); for the month of December 2020 PLF was 71%;

·   Average tariff for nine months FY21 was Rs 5.52 (Rs 5.67 for nine months FY 20);

·   £8.2m term loan principal repayment, representing 2.04 pence per share added in value to shareholders' equity;

·   Net debt, including NCDs, reduced by 64.6% to £18.9m (£53.4m at 31 March 2020);

·   The Company plans to undertake a number of initiatives to gradually reduce and offset carbon emissions from operations;

·   Indian economy is steadily recovering from COVID-19 pandemic and lockdown; IMF has projected a rebound in the Indian economy with 11.5% growth rate in FY22.

Arvind Gupta, Chairman, commented: "We are pleased to report continued improvement in the Company's operations as a result of the recovery of the Indian economy post the COVID-19 pandemic and the lockdown. Despite the disruption caused by COVID-19, OPG delivered very strong cash generation during the reporting period and has also continued its strategy of deleveraging the business. 

"Based on the performance in the first nine months of FY21 we expect to meet the market expectations for our FY21 results and to provide returns to our shareholders by resuming dividends based on FY21 results."

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

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

Deleveraging

In 2018, the Board took the decision to focus on our profitable, long-life assets in Chennai, and to prioritise deleveraging the business to enhance and increase the value to shareholders' equity. This strategy, we believe, will deliver value to shareholders with free cash flows providing significant returns to our shareholders and opportunities to grow the business further.

The increase in equity value, since the adoption of this strategy is:

*Based upon INR/GBP closing exchange rate at 30 September 2020 of £1 = INR94.74

The Board believes that the strategy of maintaining operational excellence and the paying down of borrowings is for the clear long term benefit of all our stakeholders.

Operations Summary

Chennai - Total generation maintained at 1.47 billion kWh and PLF of 54%

Note:

¹ MU / Mue - millions units or kWh of equivalent power

Total generation at the Chennai plant, including deemed generation, in the nine months of FY21 was 1.47 billion units, 29.9% less than in the nine months of FY20. This decrease in generation was primarily due to decreased demand by commercial and industrial (C&I) clients, as worldwide economic activities slowed down due to the COVID-19 induced lockdown. Average tariffs realised in the period were Rs 5.52 per kWh (nine months of FY20: Rs5.67). The decrease in tariff realisation is primarily due to the COVID-19 impact.

Focus on Maximising Asset Performance and Deleveraging

The average landed cost of coal was £40.6 (Rs 3,874) per tonne in the period, (£47.9 or Rs 4,305 per tonne in FY20). This reduction in coal cost is primarily due to moderation in international coal prices during the first half of FY21.

Net debt (total borrowings (£43.8 million) minus unrestricted cash and cash equivalents (£24.9 million), reduced by 64.6% to £18.9 million (£53.4 million at 31 March 2020). The remainder of the Chennai plant term loans are scheduled to be fully repaid by Q2 2024.

Environmental, Social and Governance ("ESG") strategy development

OPG has begun the development of an ESG strategy which, among other matters, will include objectives towards reducing its carbon footprint. OPG recognises that a comprehensive decarbonisation strategy is critical. The Company aims to identify and undertake various initiatives that will reduce and offset carbon emissions from its operations and to be aligned with the UN Sustainable Development Goals.

As part of this strategy the Company is evaluating various options to increase its renewable energy assets base and to establish joint ventures to roll out various energy transition technologies whilst also evaluating participating in an innovative blockchain based carbon credits platform.  These initiatives will ensure that OPG delivers year-on-year improvements to reach the Company's emissions reduction targets in the near and longer-term and should generate attractive returns for shareholders.

The Company is planning to present its ESG strategy along with its FY21 annual results.

Board changes

The Company announces that it intends to re-appoint Mr Michael Grasby as a non-executive director subject to completion of the required due diligence.

Mr Grasby previously served on the Board of OPG from May 2008 to November 2019.  During that time he supported the Company through a period of immense change and progress providing guidance and contributing to the implementation of the Company's technical, organisational and health and safety systems.

The Board believes that Mr Grasby's experience will be invaluable for the Company during this exciting period of recovery, as we look to reposition our business to benefit from decarbonisation and energy transition diversification.

The Global, Indian Economy and Indian Power Sector

The COVID-19 pandemic has hit economic growth across the globe.  A recent IMF report, estimates global growth contracted by 3.9% in 2020 and will bounce back to 5.5% in 2021. 

The IMF has projected a strong rebound in the Indian economy with 11.5% growth rate in FY22, making the country the only major economy of the world to register double digit growth this year amidst the COVID-19 pandemic. Revising its figures, the IMF said that in FY21, the Indian economy is now projected to contract by 8%.

Indian power consumption per capita was 1,208 kWh in FY20. It is expected that this will catch up with developed economies with similar social and economic conditions over time, providing significant demand and growth potential to the sector. As per ICRA FY22 Power Sector Outlook, dated January 2021, Indian electricity demand is likely to grow by 6.0% to 7.0% in FY2022 supported by a favourable base effect and the expected recovery in demand from the commercial and industrial (C&I) segments. India has moved up 14 positions to rank 63 globally, its highest ever, in the World Bank's annual Ease of Doing Business table in the latest World Bank, Doing Business 2020 Report.

Outlook

Despite the disruption caused by COVID-19, and as a result of our strategy of maximising operational performance and deleveraging we expect that the Company will demonstrate good profitability in FY21 and meet market expectations for our FY21 results.

This Board anticipates that OPG will provide returns to the Company's shareholders in near term by resuming dividend payments in accordance with the Company's dividend policy based on the FY21 results.

Medium-term and long-term fundamentals remain unchanged and following a post-COVID-19 recovery, the Company expects to prosper as management seeks to deliver its long-term, profitable and sustainable business model.

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