22 May 2020
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for the year ended 31 March 2020 and COVID-19 Update
OPG (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 2020 ("FY20").
For the year ended 31 March 2020:
· Total generation (including deemed) of 2.72 billion units (FY19: 2.71 billion units)
· Plant Load Factor ("PLF") was 75 per cent, consistent with FY19 PLF at 75 per cent
· Average tariff was Rs5.67, up 4.8 per cent (FY19: Rs5.41) following full year impact of tariff increases in October 2018 for captive users
· £18.0 million (Rs1.68 billion) (4.5p per share) of term loan principal repayments made during FY20, reducing the term loans balance to £49.8 million (Rs4.63 billion) at 31 March 2020
Operations during COVID-19 lockdown:
· Unit 3 (80 MW) continued operations during the lockdown with limited PLF, although this has substantially increased during May 2020 and PLF is expected to be in 75-80 per cent range this month
· Two (77MW each) out of three other units resumed operations from the beginning and middle of May 2020 respectively
· Various cost reduction, efficiency improvement and liquidity improvement measures have been implemented to ensure sustainable operations
· Nationwide lockdown in India extended to 31 May 2020; restrictions are being relaxed in less affected areas enabling economic activity to restart
· The imposition of lockdown to control the COVID-19 outbreak has had an adverse impact on overall electricity demand in India in FY21
There will be a virtual presentation at InvestorMeetCompany platform for investors and analysts at 11 am on 27 May 2020. To register for the presentation, please contact [email protected] or register at https://www.investormeetcompany.com/opg-power-ventures-plc/register-investor?arc=ffac219d-20c0-4ed5-b428-5b17ea09ef0d
Arvind Gupta, Executive Chairman of OPG, commented:
"We have been working tirelessly to implement plans to limit the human, financial and commercial consequences of COVID-19. We have initiated significant cash conservation initiatives across the Group, whilst ensuring the health and safety of all our employees to secure our long term sustainability. These initiatives have improved the liquidity position of the Company which together with support from our lending banks put the Group in a stronger position to manage the difficult market conditions. I would like to thank, all of our employees, 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:
OPG Power Ventures PLC
+91 (0) 44 429 11211
Arvind Gupta / Dmitri Tsvetkov
Cenkos Securities plc (Nominated Adviser & Broker)
+44 (0) 20 7397 8900
Russell Cook / Stephen Keys
Tavistock (Financial PR)
+44 (0) 20 7920 3150
Simon Hudson / Barney Hayward
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 and by the end of 2023 create a debt free business with significant free cash flows and returns to our shareholders.
The increase in equity value, since the adoption of this strategy is:
FY18 - FY19
Term loan principal repayments
Addition to shareholders value as a result of term loan principal repayments (pence per share)**
* Based upon INR/GBP closing exchange rate at 31 Mar 2020 of 93.07
** based on 400.7 m of Ordinary Shares
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.
Group Operations Summary
Generation (million kWh)
414 MW Generation (MU) including auxiliary
Additional "deemed" offtake
Total Generation (MUe)1
Reported Average PLF (%)2
Average Tariff Realized (Rs)
1. MU - millions units or kWh; Mue - millions units or kWH of equivalent power
2. Reported Average PLF based on Mue
Generation during FY20, excluding deemed generation, was 2,468 million units, in line with the level achieved in FY19.
Average tariff realised during FY20 was Rs5.67 (FY19: Rs5.41), 4.8 per cent higher than in FY19 as a result of tariff increases in October 2018 for captive users.
Coal and Freight costs
The average landed coal price was £48.07 (Rs4,325) (at a INR/GBP average annual exchange rate of 89.97 INR/GBP) per tonne in FY20 (FY19: £49.30 (Rs4,513) at a INR/GBP exchange rate of 91.61 INR/GBP). Following the COVID-19 lockdown, the coal price and freight rates decreased significantly. As per Argus Coal Outlook April 2020, international coal prices and freight rates will remain at lower levels at least for the rest of 2020.
Focus on Deleveraging
Total borrowings during FY20 were reduced from £80.3 million (Rs7.24 billion) to £56.7 million (Rs5.28 billion). Term loan interest and principal repayments during FY20 amounted in aggregate to £25.1 million (Rs2.31 billion), which included £18.0 million (Rs1.68 billion) of term loan principal repayments.
As at 31 March 2020, total borrowings were £56.7 million (Rs5.28 billion), including term loans of £49.8 million (Rs4.63 billion) and working capital loans of £6.9 million (Rs0.64 billion).
As previously reported, the Company achieved a major milestone by fully repaying term loans with respect to Unit I of the Chennai plant (77 MW out of 414 MW) in December 2018. The remainder of the Chennai plant term loans are scheduled to be fully repaid for Unit II and III by calendar year 2022 and for Unit IV by Q3 2023.
62 MW Karnataka solar projects
All plants are operational and have met all critical operating metrics. A Capacity Utilisation Factor for the solar projects of 18.5 per cent was achieved in FY20 (17 per cent in FY19). As previously announced, the Board has decided to focus on the core thermal power plants business in Chennai and the solar projects remain in a disposal process.
Cost reduction and efficiency improvement measures
The Company has implemented various cost reduction and efficiency improvement measures to conserve cash and improve liquidity, including deferral of coal purchases, 100 per cent salary reduction for Executive Chairman, 50 per cent salary reductions for Executive and Non-Executive Directors, cancelation of discretionary expenditures, re-negotiation and reduction of fees of contractors and other services providers.
COVID-19 update and operations during the lockdown
The Central government has enforced a nation-wide lockdown between 25 March 2020 and 31 May 2020 as part of its measures to contain the spread of COVID-19. During the lockdown, several restrictions have been placed on the movement of individuals and economic activities have come to a halt barring those related to essential goods and services. The restrictions have been relaxed in less affected areas in a limited manner since 20 April 2020.
The Indian Government has announced special economic and comprehensive packages of approximately £215 billion (Rs20 trillion) amounting to 10 per cent of India's GDP, to strengthen the 'Indian Economy, Infrastructure, Technology-driven Systems, Vibrant Demography and Demand'.
COVID-19 followed by lockdown has had a severe impact on the overall industrial activity in India as a result of which electricity demand in the country has seen a significant reduction during the first two months of FY21.
Unit 3 (80 MW) at our Chennai plant, having a Power Purchase Agreement ("PPA") with the state DISCOM, Tamil Nadu Generation and Distribution Corporation ("TANGEDCO"), continued operation during this lockdown with a limited PLF. During May 2020 this unit has seen substantial increase in generation and PLF is expected to be in 75-80 per cent range this month. Two (77MW each) out of three other units, having PPA with commercial captive users, resumed operations from the beginning and middle of May 2020 respectively. Power generation is expected to increase, while our fourth unit (180MW) is also expected to resume operations as the lockdown restrictions are eased accordingly.
The Government of India and Reserve Bank of India ("RBI") have introduced various measures to support the economy, some of which will be of direct and indirect benefit to OPG. The Company is working with its consortium banks to provide support to maintain and improve the Company's liquidity position so that OPG has financial flexibility during this period.
COVID-19 and the subsequent extended countrywide lockdown have caused severe disruption to the Indian economy. However, it is likely to be less severely affected than certain other countries that are largely dependent on exports and wider international demand. Amid projections of a sharp contraction in the global economy, the International Monetary Fund (IMF) projects the Indian GDP to grow at 1.9 per cent in fiscal year 2020-21 and projects the Indian economy to recover strongly, with GDP growth of 7.4 per cent in fiscal 2021-22.
RBI has taken several steps to reduce the negative impact of the lockdown on the economy through various monetary policy measures, including reduction in repo-reverse repo rates, a moratorium on loan repayment, 90 days freeze on non-performing assets declaration. These measures coupled with the easing of lockdown restrictions in a phased manner, will help economic activity to resume to its full extent.
Being an essential service, power generation is likely to be less impacted than other sectors of the Indian economy. However, during the lockdown between 24 March 2020 and 19 April 2020, the total power supply reduced by approximately 25 per cent primarily due to a decrease in industrial demand for electricity. Electricity demand may continue to be subdued over the next few months. At this point, it is unclear when lockdown restrictions will be eased completely and how soon economic activities will return to pre COVID-19 levels. India's growth projections from the IMF highlight a slowdown in the economy during 2020 which might reduce demand for electricity.
On 13 May 2020, the Indian Government announced an infusion of liquidity of approximately £10 billion (Rs. 900 billion) to state DISCOMs against their receivables. This in turn will be used to pay certain outstanding dues to their power suppliers, individual power generation companies, and will improve the financial and liquidity position of generating companies. OPG anticipates being a beneficiary of this initiative given that trade receivables from TANGEDCO at 31 March 2020 were in excess of £20 million.
The Company delivered a robust operational performance and continued its scheduled repayment of term loans during FY20. COVID-19 has posed unprecedented and global challenges for all countries and the Indian economy is expected to slow down during FY21, resulting in lower GDP growth and less demand for electricity. However, the Company is likely to benefit from the projected lower level of coal prices and freight rates. The situation remains uncertain and it remains difficult to accurately quantify the impact of COVID-19 on the Company's performance in FY21 at this point. However, medium-term and long-term fundamentals remain unchanged and following 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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