TIDMOPG
RNS Number : 5215H
OPG Power Ventures plc
13 March 2018
13 March 2018
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for Q3, FY18
Record Generation Volumes and Solar Commissioning
Highlights
-- 1.3 billion units in Q3 FY18, up 23% on prior year - highest ever quarterly generation
-- Nine months FY18 production 3.7 billion units, up 9% on the corresponding period
-- Q3 FY18 Plant Load Factor ("PLF") at Chennai was 80% and at
Gujarat was 84% - highest ever combined average
-- 22 MW solar commissioned; 40 MW in pre-commissioning
-- Strong cash collections from TANGEDCO - 86% of old receivables cleared, and
-- Gujarat - No Cross Subsidy withheld from our tariff by the
DISCOMs in February 2018 for the first time
Arvind Gupta, Executive Chairman, commented:
"We continue to pursue our strategy of asset maximisation and
delivering responsible growth. In the last quarter we have
established a new record for our operational performance, with load
factors well above industry averages and we have augmented our
renewable projects which are steadily being commissioned as
planned. I am pleased that following the reconfirmation of our
group captive status in December 2017, the DISCOMs in Gujarat have
finally made no cross-subsidy deductions from our tariffs in
February 2018. We have persevered and managed our balance sheet
with care given the continued delays by the Gujarat state in acting
on its confirmation of our group captive status and releasing the
amounts due to us. We believe our continued focus on operations and
responsible growth to be the best strategy for the Company and from
FY19 and beyond we expect to benefit from better spreads."
For further information, please visit www.opgpower.com or
contact:
+91 (0) 44
OPG Power Ventures PLC 429 11211
Arvind Gupta / Dmitri Tsvetkov
Cenkos Securities (Nominated +44 (0) 20
Adviser & Broker) 7397 8900
Stephen Keys / Camilla Hume
+44 (0) 20
Tavistock (Financial PR) 7920 3150
Simon Hudson / Barney Hayward
/ James Collins
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation (EU) No. 596/2014 ('MAR')
Group Operations Summary
Q3 Q3 Nine Nine
Months Months
---------------------- ------
FY18 FY17 FY18 FY17 FY17
---------------------- ------ ------ -------- -------- ------
Generation (million
kWh)
---------------------- ------ ------ -------- -------- ------
414 MW Chennai 670 537 1,817 1,757 2,346
300 MW Gujarat 560 428 1,626 1,359 1,657
---------------------- ------ ------ -------- -------- ------
Generation (MU)
excluding auxiliary 1,230 965 3,443 3,116 4,003
---------------------- ------ ------ -------- -------- ------
Additional "deemed"
offtake at Chennai 59 78 236 269 364
---------------------- ------ ------ -------- -------- ------
Total Generation
(MUe)1 1,289 1,043 3,679 3,385 4,367
---------------------- ------ ------ -------- -------- ------
Reported Average
PLF (%)2
---------------------- ------ ------ -------- -------- ------
414 MW Chennai 80% 67% 76% 74% 76%
---------------------- ------ ------ -------- -------- ------
300 MW Gujarat 84% 64% 82% 68% 63%
---------------------- ------ ------ -------- -------- ------
Note:
1. MU - million units or kWh; Mue - millions units or kWh of
equivalent power
2. Reported Average PLF based on Mue
Chennai - 19% more units generated in Q3, FY18
Chennai 414 MW Nine months
FY18
------------------------------------- ------------
Generation (Million kWh) 1,817
------------------------------------- ------------
Additional "deemed" offtake(1)
(Million kWh) 236
------------------------------------- ------------
Total Generation (including deemed)
(MUe) 2,053
------------------------------------- ------------
Average Tariff (Rs/kWh) 4.96
------------------------------------- ------------
Clean Dark Spreads (Rs/kWh) 1.42
------------------------------------- ------------
Gross Debt (Rs billion) 9.7
------------------------------------- ------------
(1) Deemed offtake is billed at fixed capacity charge of
Rs1.5/kWh
Strong generation in the third quarter, with a load factor of
80%, meant that the Chennai plants' generation during nine months
FY18 was 1% higher than the equivalent period in FY17. We expect
full year PLF to be approximately 75%, including "deemed" offtake
at Chennai and expect the average tariff for full FY18 to be around
Rs5.00 per kWh.
The "Clean Dark Spread", was Rs1.42 per kWh for Chennai in the
nine months of FY18 (FY17: Rs2.63) or GBP16.93 (FY17: GBP30.03) on
a GBP per MWh basis.
The Company is pleased to report that approximately GBP24.8
million has been collected from TANGEDCO in the nine months FY18,
including collection of 86% of TANGEDCO receivables outstanding as
at 31 March 2016.
All scheduled interest and principal repayments at Chennai,
amounting in aggregate to Rs2.3 billion (GBP27 million) were made
during the nine months ended 31 December 2017.
Gujarat - 31% more units generated in Q3, FY18
Gujarat 300 MW Nine months
FY18
----------------------------- -------------
Total Generation (Million
kWh) 1,626
----------------------------- -------------
Average Tariff (Rs/kWh) 3.99
----------------------------- -------------
Clean Dark Spreads (Rs/kWh) 0.95
----------------------------- -------------
Gross Debt (Rs billion) 17.3
----------------------------- -------------
Q3 FY18 plant load factor at Gujarat was 84%. Generation at the
Gujarat plant in the nine months of FY18 was 20% higher, at 1.63
billion units, compared to 1.36 billion units in the nine months of
FY17. The plant has performed consistently well throughout the year
to date in just its second full year of operation and it achieved
238 days of continued operations without any outages. For FY18, the
Company expects the PLF to be approximately 78% and to achieve an
average tariff of around Rs4.00 per kWh.
The "Clean Dark Spread" was Rs0.95 per kWh for Gujarat in the
nine months of FY18 (FY17: Rs1.37) or GBP11.27 (FY17: GBP15.70) on
a GBP per MWh basis.
Interest and principal repayments totalling Rs1.3 billion (GBP16
million) have been made during the nine months ended 31 December
2017 at Gujarat.
Gujarat Cross Subsidy ("CSS") - withholding by DISCOMs ceased in
February 2018
Gujarat state DISCOMs continue to hold approximately GBP40
million in cross-subsidies which are due to the Company. As
previously reported, in December 2017 OPGS Power Gujarat ("OPG
Gujarat") received confirmation from the relevant Gujarat
authorities as to the plant's Group Captive status for FY18 and in
February 2018 the Gujarat DISCOMs stopped withholding CSS from OPG
Gujarat's invoices to its customers. We continue to pursue the
Gujarat DISCOMs through firm and constructive dialogue for the
speedy recovery of FY18 CSS amounts due (approximately GBP13.3
million as at 31 December 2017) and confirmation of Group Captive
status for FY16 and FY17.
In the interim results, the Company reported that it had
withheld a payment of GBP3.9 million of quarterly interest in
respect of the period ended 30 September 2017. In December 2017,
OPG Gujarat entered into discussions with its lenders regarding a
Corrective Action Plan set out by the Reserve Bank of India ("RBI",
Central Bank). A further one year loan of approximately GBP4
million was obtained and the outstanding interest of GBP3.9 million
was paid before the end of December 2017, which allowed discussions
to continue with the lenders regarding loan restructuring
options.
Whilst the Company had commenced discussions with the banks, the
RBI has recently issued a circular ("Circular") setting out a
revised framework for resolution of situations such as those at OPG
Gujarat. Discussions between OPG Gujarat and its lenders continue
and all parties are evaluating the impact of the Circular on the
process but, under the provisions of this Circular we expect a
Resolution Plan ("RP") to be established by the lenders to OPG
Gujarat before 31 August 2018. The Company anticipates that the
outcome of the RP process should enable OPG Gujarat to better match
the cash flows from the Gujarat plant with its debt obligations and
to facilitate its self-sufficiency but, the Company does not expect
OPG Gujarat to pay any further principal or interest to its lenders
until such time as the RP is in place or another solution is
implemented. The Company believes that, if and when the DISCOMs
remit the sums due to OPG Gujarat, the Company would be in a
position to repay deferred interest and principal amounts.
OPG Gujarat pre-commissioning transmission agreement charge
As disclosed in the Company's 2017 annual report, OPG Gujarat
had entered into a Bulk Power Transmission Agreement ("BPTA") with
Gujarat Energy Transmission Corporation Limited ("GETCO") for
availing the transmission network for power generated from its
plants. Pursuant to the BPTA, GETCO had raised demand for
transmission charges of approximately GBP11 million (Rs0.9 bn) for
the period from April 2013 to December 2015 of which half had been
paid. Following legal advice, OPG Gujarat had challenged this in
the Honourable Supreme Court of India but has learnt that its
appeal has been dismissed, meaning that an outstanding amount of
approximately GBP5.5 million plus accrued interest of approximately
GBP1.8 million is payable to GETCO. OPG Gujarat is applying for
this outstanding amount to be repaid in instalments.
Coal Costs and Freight Hedging - Developments in progress
The average landed cost of coal was Rs4,328 per tonne in the
nine months ended 31 Dec 17 (FY17: Rs3,552 per tonne). Based on the
current market price and as set out in the Company's interim
results, we continue to expect the full year FY18 average landed
cost of coal to be in a range of Rs4,300 to Rs4,500 per ton, albeit
near the top end of that range. The Company is in dialogue with its
customers regarding revision in tariffs for FY19 on account of
increased coal costs.
The Company has booked forward around half of its freight
requirement for the calendar 2018 year at fixed prices. In
addition, the Company continued to make its scheduled contributions
of equity to jointly acquire two vessels in FY19 in order to better
hedge against increases in freight costs for around half of its
imports.
Solar: 22 MW Commissioned; 40 MW in pre-commissioning
Two solar sites for 22MW have been commissioned. Civil work for
another 20 MW solar site was completed. For the remaining 20 MW
solar site civil work is in progress. Government inspections are
being done at sites and synchronization for connectivity to the
DISCOMS is on-going and on track for commissioning in the next few
weeks.
Macro Outlook - Improvements continue
The IMF has projected India's GDP growth rate at 7.4% in 2018
and 7.8% in 2019, which makes the country the world's
fastest-growing economy. This reflects the recovery following the
impact of reforms such as GST and demonetisation and growth is
expected to be driven largely by increased domestic
consumption.
The Union Budget for FY19 is expected to be positive for the
power sector with a focus on moving towards expanding electricity
access and intensity through the Government's flagship schemes
leading to increased demand. This year's budget has also increased
the capital expenditure by Indian Railways, particularly for
electrification - a move that is likely to create additional power
demand for the sector. Niti Aayog (the Government of India's policy
"Think tank") has projected a 8.1% CAGR growth in electricity
consumption until 2022 from approx. 6% in the current year. A
further long-term boost to participants in the thermal power sector
is anticipated in the form of private companies being permitted to
engage in commercial coal mining and this provides an opportunity
for power companies to purchase coal from other commercial miners
other than state owned Coal India Ltd. The commercial coal mining
auctions are expected to be held in next quarter.
A reduction in tax rate to 25% from 30% for entities with
turnover of Rs2.5 bn is positive for renewable IPPs. This is
expected to be positive for OPG as the four solar projects in
Karnataka will qualify for the reduced tax rates.
More widely the reforms and changes taking place in India have
resulted in a Moody's Sovereign Rating upgrade to Baa2 the first in
13 years. India's ranking in World Bank's ease of doing business
also moved up 30 notches to the top 100 countries.
Outlook
Notwithstanding the effect of high level of coal price referred
to earlier, the Company expects generation to remain strong and
cash flows from operating activities to remain resilient. As
previously identified, while FY18 is expected to be a transitional
year for the Company, as a result of the Company's operational
performance, anticipated revision in tariffs and addition of 62 MW
of new solar capacity in Karnataka plus progress at Gujarat, the
Board remains positive about the Company's prospects for FY19.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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