REG - OPG Power Ventures - Trading update and CFO Appointment

OPG Power VenturesAnnouncement

03/05/2022 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220503:nRSC0562Ka&default-theme=true

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 £10.2 million (£16.2 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 1323

 OPG Power Ventures PLC
 Dmitri Tsvetkov

 Cenkos Securities plc (Nominated Adviser & Broker)      +44 (0) 20 7397 8900
 Stephen Keys / Katy Birkin

 Tavistock (Financial PR)                                +44 (0) 20 7920 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 £42.2 million less unrestricted cash
and cash equivalents of £32.0 million was £10.2 million at the end of the
financial year (31 March 2021: £16.2 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
(http://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.

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTBKNBNPBKKNPK