TIDMOPG
RNS Number : 6687C
OPG Power Ventures plc
22 June 2021
22 June 2021
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for the year ended 31 March 2021 and COVID-19
Update
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 2021 ("FY21").
Summary
For the year ended 31 March 2021:
-- Total generation (including deemed) of 2.11 billion units
(FY20: 2.72 billion units), reduction in generation is primarily
due to the COVID-19 induced nationwide lockdown in India;
-- Plant Load Factor ("PLF") was 58 per cent, compared with FY20 PLF at 75 per cent;
-- PLF for March 2021 was 75% (April 2021 PLF: 85%; May 2021 PLF: 65%);
-- Average tariff for the year was Rs5.52, (FY20: Rs5.67);
-- GBP8.2 million (Rs.7.8 billion) (2.04p per share) term loan
principal repayments made during FY21, with total borrowings,
including non-convertible debentures ("NCDs"), reduced by 17.9% to
GBP46.6 million (GBP56.8 million at 31 March 2020);
-- Subsequent to 31 March 2021, additional GBP5.7 million
(Rs.0.6 billion) collected from a customer in respect of historic
contractual claims.
COVID-19 and the Indian Economy
-- Second wave of COVID-19 has surged across India; state
governments have imposed various restrictions to bring the
situation under control; there are reasons to expect a muted
economic impact as compared to the first wave due to lockdowns
being implemented more narrowly with companies and individuals
adjusting behaviour in ways that cushion the effects;
-- Currently COVID-19 cases are reducing and unlocking processes
have been initiated by various State Governments, in phases;
-- World Bank has projected India's economy to grow at 8.3% in 2021 and 7.5% in 2022;
-- On 1 April 2021, the deadline for meeting emission norms for
a majority of coal-based power plants in India, was extended from
2021 to December 2024.
Arvind Gupta, Chairman of OPG, commented:
"Despite the disruption caused by COVID-19, OPG delivered very
strong cash generation and achieved a significant reduction in debt
during the year and has also continued its strategy of deleveraging
the business.
"We expect to meet the market expectations for our FY21 profit
after tax and cash generation.
"We continue to work tirelessly to implement plans to limit the
business disruption to OPG and the associated human, financial and
commercial consequences of the second wave of COVID-19. 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."
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
Russell Cook / Stephen Keys
+44 (0) 20 7920
Tavistock (Financial PR) 3150
Simon Hudson / Nick Elwes
Deleveraging
In 2018, the Board took the decision to focus on our profitable,
long-life assets in Chennai, and to prioritise deleveraging as a
method to grow 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 Board remains convinced, especially in
light of COVID-19 challenges, that our strategy of maintaining
operational excellence and paying down borrowings was the right one
to pursue for all our stakeholders.
The increase in equity value, since the adoption of this
strategy is:
FY18 - FY20 FY21*
Term loan principal repayments GBP60.9m GBP8.2m
------------ --------
Addition to shareholders value as
a result of term loan principal repayments
(pence per share)** 15.6p 2.0p
------------ --------
* Based upon INR/GBP closing exchange rate at 30 September 2020
of GBP1=94.74
** based on 400.7 m of Ordinary Shares
Term loan and non-convertible debentures interest and principal
repayments during FY21 amounted in aggregate to GBP12.4 million
(Rs1.18 billion), which included GBP8.2 million (Rs0.78 billion) of
term loan principal repayments.
As at 31 March 2021, total borrowings were GBP46.6 million,
including term loans of GBP20.3 million, NCDs of GBP19.8 million
and working capital loans of GBP6.5 million. This represents a
reduction in gross debt of 17.9% from the GBP56.8 million at 31
March 2020.
Group Operations Summary
FY21 FY20
Generation (million kWh)
414 MW Generation (MU) including
auxiliary 1,701 2,468
Additional "deemed" offtake 406 248
Total Generation (MUe)(1) 2,107 2,716
Reported Average PLF (%)(2) 58% 75%
Average Tariff Realized (Rs) 5.52 5.67
------ ------
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 FY21 was 2.11 billion units, 22.4% less than in
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 particularly in the first half of FY21.
The average tariff realised during FY21 was Rs5.52 (FY20:
Rs5.67). The decrease in tariff realisation is primarily due to the
impact of COVID-19.
Subsequent to 31 March 2021, the Company collected GBP5.7
million (Rs.0.6 billion) from a customer in respect of historic
contractual claims which were accumulated over several periods.
Coal and Freight costs
The average landed coal price was GBP42.67 (Rs4,127) (at a
INR/GBP average annual exchange rate of 96.72 INR/GBP) per tonne in
FY21 (FY20: GBP48.07 (Rs4,325) at a INR/GBP exchange rate of 89.97
INR/GBP).
Over last several months the prices of thermal coal and freight
have surged primarily due to increased imports of coal and other
goods by China and other Asian countries on the back of post
COVID-19 economic recovery. Whilst OPG is 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. However, the
Company is exploring various options including sourcing the coal
from other geographies (including domestic sources) to reduce the
per unit cost of electricity. We strongly believe that the prices
of coal and freight will moderate later in FY22 and in the
longer-term.
62 MW Karnataka solar projects
All plants are operational and have met all critical operating
metrics. A Capacity Utilisation Factor ("CUF") for the solar
projects of 19.2 per cent was achieved in FY21 (FY20: 18.5 per
cent). OPG owns a 31% equity interest in 62 MW Karnataka solar
projects.
COVID-19 and Indian Economy Update
A second wave of COVID-19 has surged across India with State
governments imposing several restrictions to curb public movement
in order to bring the situation under control. However, the Indian
authorities have implemented lockdowns more narrowly than in the
first wave, and companies and individuals have adjusted behaviour
in ways that cushion the effects. Moreover, unlike the first wave,
the administrative response is unfolding gradually in a graded
manner. In addition, households, businesses and other economic
agents are better prepared and there was a significant amount of
learning in practice which can help all parties to withstand and
navigate the second wave of the COVID-19 crisis more effectively.
Lastly, the roll-out of the COVID-19 vaccine since 16 January 2021
has enhance safety and reduced the fear element among the
vaccinated economic agents. Both vaccination production and the
pace of deployment of the vaccination are key in controlling the
pandemic as well as for growth recovery.
The Ministry of Finance in its monthly economic report said that
the impact of the second wave of the coronavirus pandemic on the
economy is likely to remain muted as compared to the first wave in
2020, even though caseloads and fatalities are much higher. This is
because the administrative response is likely to be confined to the
regional/local lockdowns and containment zones. Despite COVID-19,
the World Bank has projected India's economy to grow at 8.3% in
2021 and 7.5% in 2022.
Power Sector
Power consumption in the country grew nearly 41 and 8 per cents
in April and May 2021 respectively over the same months last year,
showing robust recovery in industrial and commercial demand of
electricity, according to Ministry of Power data. Power consumption
remained substantially low in April and May last year due to
lockdown. The increased growth rate of power consumption indicates
healthy recovery in both commercial and industrial demand. During
FY21, power consumption dipped by one per cent to 1,271.54 BU from
1,284.44 BU in FY20.
On 1 April 2021, the Indian Ministry of Environment, Forest and
Climate Change extended the timeline for meeting emission norms for
a majority of coal-based power plants in India, which are now
allowed to comply with the emission norms by December 2024.
Environmental, Social and Governance ("ESG") strategy
development
OPG continues to develop its ESG strategy which, among other
matters, will include objectives to reduce its carbon footprint. As
part of this strategy, the Company is evaluating various options to
increase its renewable energy asset base and to establish joint
ventures to roll out various energy transition technologies. These
initiatives will ensure that OPG delivers year-on-year improvements
to reach the Company's emissions reduction targets in the medium
and longer-term and should generate attractive returns for
shareholders.
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 meet market expectations for our
FY21 profit after tax and cash generation.
Robust cash collections, continued deleveraging and the
extension of the deadline for meeting emission norms have
significantly strengthened the Company's balance sheet and its
liquidity position.
Notwithstanding the volatility in coal prices and freight, the
Company's medium-term and long-term fundamentals remain unchanged
with strong cash flows and a reduction in debt enabling the
long-term profitable business model
and sustainable returns to shareholders .
-ends-
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