TIDMOPG
RNS Number : 0562K
OPG Power Ventures plc
03 May 2022
3 May 2022
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for the year ended 31 March 2022 and CFO
Appointment
OPG Power Ventures plc (AIM: OPG), the developer and operator of
power generation plants in India, announces a trading update in
respect of the full year ended 31 March 2022 ("FY22").
Summary
For the year ended 31 March 2022:
-- India has been experiencing power shortages recently due to
recovery of the Indian economy and coal shortages;
-- Coal is expected to remain the most significant contributor
in the energy sector at 22-23 per cent according to International
Energy Association's projections for 2040;
-- India is projected to remain the world's fastest-growing
major economy despite the global economy being severely affected by
Russia's invasion of Ukraine. The IMF has projected a 8.2 per cent
growth for the Indian economy in FY23 against a global growth
projection of 3.6 per cent for CY22 and CY23;
-- Total generation (including deemed) of 1.87 billion units
(FY21: 2.11 billion units) - the reduction is primarily due to the
spike in coal prices and freight costs in international
markets;
-- Plant Load Factor ("PLF") was 52 per cent, compared with 58 per cent in FY21;
-- Average tariff for the year was Rs 5.60 (FY21: Rs5.52);
-- Net debt was GBP10.2 million (GBP16.2 million at 31 March
2021), a 37 per cent reduction during the year;
-- Investment in Atsuya Technologies Private Limited in line
with the strategy to diversify into ESG compliant opportunities and
to reduce and offset carbon emissions;
-- Current CFO, Dmitri Tsvetkov, to step down from the Board and
be replaced by Ajit Pratap Singh, currently an Executive Director
of OPG's Chennai operating company.
N. Kumar, Non-Executive Chairman of OPG, commented:
"Given the current business climate, OPG has delivered solid
operational results and has been able to continue deleveraging the
business. Coal prices were impacted by the disruptions caused by
geopolitical issues. It is expected that power prices are likely to
increase due to the coal shortages. We expect to meet market
expectations for FY22 earnings.
We would like to thank all of our employees, investors, vendors,
banks, and all stakeholders for the incredible support we have
received during these unprecedented and extraordinary times.
On behalf of the Board I would like to thank Dmitri for his
services over the last five years and his contribution to OPG and
we wish him well in his future career. Ajit brings considerable
financial, commercial, and operational expertise of working in
India and internationally and I look forward to working with him as
we continue to deliver our strategy."
For further information, please visit www.opgpower.com or
contact:
+44 (0) 782 734
OPG Power Ventures PLC 1323
Dmitri Tsvetkov
Cenkos Securities plc (Nominated Adviser +44 (0) 20 7397
& Broker) 8900
Stephen Keys / Katy Birkin
+44 (0) 20 7920
Tavistock (Financial PR) 3150
Simon Hudson / Nick Elwes
Group Operations Summary
FY22 FY21
Generation (million kWh)
414 MW Generation (MU) including
auxiliary 1,330 1,701
Additional "deemed" offtake 538 406
Total Generation (MUe)(1) 1,868 2,107
Reported Average PLF (%)(2) 52% 58%
Average Tariff Realised (Rs) 5.60 5.52
------ ------
Note:
1. MU - millions units or kWh; Mue - millions units or kWh of
equivalent power
2. Reported Average PLF based on Mue
Total generation at the Chennai plant, including deemed
generation, in FY22 was 1.87 billion units, 11.3 per cent less than
in FY21. This decrease in generation was primarily due to the spike
in coal prices and freight costs in international markets, recently
exacerbated by the crisis in Ukraine.
The average tariff realised during FY22 was Rs5.60 (FY21:
Rs5.52). The increase in tariff realisation is primarily due to the
increase in raw material prices.
Coal and freight
Over the last several months the prices of thermal coal and
freight have surged primarily due to geopolitical issues and the
increased requirement for coal as a result of post COVID-19
economic recovery and the war in Ukraine. The current year average
coal price is almost double in comparison to the average price for
Indonesian coal over the last ten years.
Whilst OPG was partially covered from increases in prices with
fixed price agreements for coal and freight, the Company remains
exposed to market fluctuations for the unhedged portion of coal
consumption and freight.
In light of this, the Company has explored various options
including sourcing coal from other geographies as well as domestic
sources to reduce the per unit cost of electricity. The Company
sourced 0.4 million tons of Indian coal at auction during the
period in order to replace higher cost Indonesian coal. In
addition, OPG procured 0.13 million tons per year from Indian mines
under a five year contract which can be converted into a
longer-term fuel supply agreement for ten years, at the option of
the Company. The price is fixed and is significantly lower than the
imported coal prices. The quantity of domestic coal secured at
fixed prices will meet approximately 25-30 per cent of the
Company's requirement for the first year and 8-10 per cent of
annual coal requirements from the second year onwards.
Deleveraging
In 2018 the Board took the decision to focus on the Company's
profitable, long-life assets in Chennai, and to prioritise the
deleveraging of the business to enhance and increase the value of
shareholders' equity. The Board continues to believe that this
strategy will deliver value to shareholders with free cash flows
providing significant returns and opportunities to grow the
business further.
Net debt comprising total borrowings of GBP42.2 million less
unrestricted cash and cash equivalents of GBP32.0 million was
GBP10.2 million at the end of the financial year (31 March 2021:
GBP16.2 million) representing a 37 per cent reduction in net debt
during the year. The balance of the term loans and non-convertible
debentures are scheduled to be fully repaid by Q2 2024.
62 MW Karnataka solar projects
A Capacity Utilization Factor ("CUF") for the solar projects of
19.9 per cent was achieved in FY22 (FY21: 19.2 per cent). OPG owns
a 31 per cent equity interest in the 62 MW Karnataka solar
projects. As previously announced, the Board has decided to sell
OPG's interest and these assets remain in a disposal process.
Environmental, Social and Governance ("ESG") - strategic
Investment in Atsuya Technologies
OPG continues to develop its ESG strategy. 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 ("SDGs").
As previously reported, as part of OPG's strategy to diversify
into energy savings/ESG compliant opportunities, the Company made
an investment to acquire an equity stake in Chennai-based
sustainability solutions provider, Atsuya Technologies Private
Limited ("Atsuya") (www.atsuyatech.com).
Independent of this investment, OPG continues to evaluate
various options to increase its renewable energy asset base and to
establish joint-ventures to roll out various energy transition
technologies, including energy efficiency improvements, smart
meters and green hydrogen production. These initiatives will ensure
that OPG delivers its emissions reduction targets in the medium and
long-term.
The Global and Indian Economy and Indian Power Sector
The COVID-19 pandemic followed by the war in Ukraine and
breakdown of supply chains has impacted economic growth across the
globe. In its latest World Economic Report, IMF has projected the
world economy will grow at 3.6 per cent in CY 2022 and CY 2023. The
IMF has projected a growth rate for the Indian economy at 8.2 per
cent in FY23 and 6.9 per cent in FY24.
During the initial lockdown, the total power consumption in
India reduced by approximately 25 per cent primarily due to a
decrease in industrial demand for electricity resulting from
COVID-19 restrictions. As the restrictions were eased, power
consumption has gradually increased. Following the gradual recovery
of the Indian economy, power demand in the country is expected to
grow, driven by rising industrial demand. India's power generation
rose by 7.8 per cent in FY22 to 1,490 billion units ("BU")
(provisional data as per CEA) compared with 1,382 BU in FY21.
India has been experiencing power shortages recently due to
improvements in Indian economy and coal shortages, exacerbated by
the war in Ukraine and high global coal prices, causing blackouts
across the country. The situation was amplified by a
record-breaking heatwave across north-west India in March and April
2022 with May 2022 expected to see similar temperatures. As a
result of these factors spot power prices doubled in India.
The World Coal Association recently stated that with the current
confluence of energy events there is a future for coal in order to
address energy affordability, security and reliability. According
to the International Energy Association's projections for 2040,
coal would remain the most significant contributor in the energy
sector at about 22-23 per cent of the total energy mix.
Appointment of Chief Financial Officer
The Company announces today that, after 5 years as Chief
Financial Officer, Mr Dmitri Tsvetkov is stepping down and retiring
from the Board with effect from 31 May 2022. Dmitri will support
the Company with the finalisation of the FY22 audited financial
statements and ensure a smooth transition.
The Company has appointed Mr Ajit Pratap Singh initially as a
non-Board Chief Financial Officer and Dmitri will be working with
Ajit to ensure an orderly handover of responsibilities.
Ajit has been an Executive Director of OPG Power Generation Pvt.
Ltd., the Chennai subsidiary of OPG, since February 2019. He has
over 24 years of corporate finance, accounting, M&A, commercial
and investors relations experience, working primarily with large
conglomerates publicly listed in India. He is a Company Secretary,
Cost Accountant, Law Graduate, Certified Management Accountant and
Chartered Financial Analyst.
Outlook
During the first seven months to the end of October 2021, the
prices of thermal coal and freight surged primarily due to the
increased requirement for coal and other goods as a result of post
COVID-19 economic recovery. Coal prices decreased significantly
since the peak in October 2021, however increased again in February
and March 2022 primarily due to the crisis in Ukraine. The Company
anticipates that coal prices will normalise over the medium term.
In April 2022, OPG signed a short-term offtake contract for 150 MW
of capacity at Rs 9.65 per kWh. State regulated tariffs are
expected to be reviewed during FY23 which would favourably impact
the Company's tariffs.
Due to the negative impact of higher coal prices and freight
costs, the Group's plants are expected to operate at lower than
normal capacity in FY23 and revenue and net profit respectively
will be lower than during normal years.
OPG believes that the medium and long-term fundamentals of the
Group remain unchanged and post-COVID-19 recovery and the
normalisation of coal prices and freight costs, the Company expects
to continue to prosper as management seeks to deliver its long
term, profitable and sustainable business model. OPG will also
continue to focus on advancing its ESG strategy and the maiden
investment in Atsuya is the first step in the Group's ESG
development and focus on ESG compliant projects.
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END
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(END) Dow Jones Newswires
May 03, 2022 02:01 ET (06:01 GMT)
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