TIDMOPG
RNS Number : 2126D
OPG Power Ventures plc
20 June 2023
20 June 2023
OPG Power Ventures plc
("OPG", the "Group" or the "Company")
Trading update for the year ended 31 March 2023
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 2023 ("FY23").
Summary
For the year ended 31 March 2023 and to date:
-- Total generation in FY23 was 1.5 billion units (FY22: 1.8
billion units). The reduction in generation was primarily due to
high coal prices and the Company's strategy to focus on profitable
operations, resulting in revenues, EBITDA and PAT in line with FY23
market expectations.
-- Plant Load Factor ("PLF") was 42.1 per cent in FY23, compared to 51.5 per cent in FY22.
-- Average tariff for FY23 was Rs. 8.71 (FY22: Rs. 5.82) per kwh.
-- During FY23, the Company repaid debt totalling Rs.1.72
billion (equivalent to GBP17 million based on an exchange rate of
101.44/GBP1).
-- PLF for April 2023 was 74.6 per cent (March 2023 PLF: was 70.7 per cent).
-- Non-Convertible Debentures (NCDs) totalling Rs. 2 billion were repaid in May 2023
Indian Economy Update
-- India's electricity demand in the financial year 2022-23
increased by 9.5 per cent compared to the previous financial year,
a record high in the past decade, per data released by the Central
Electricity Authority (CEA).
-- In May 2023, India's daily peak power demand reached 221
gigawatts (GW) - the highest daily peak ever in the history of the
country.
-- To de-risk the country from international coal price
increases and to make the country self- sufficient in terms of
energy security, India has increased coal production in FY23 by
14.62 per cent.
-- Over the next two years, it is expected that there will be
major capacity expansion along with commercial coal mining. The
country has set the target of producing one billion tons and is
expected to become a net exporter of thermal coal by FY
2025-26.
-- The Russia and Ukraine conflict, as well as the lasting
effects of the COVID-19 pandemic, have impacted economic growth
across the globe. Demand dropped while sanctions on Russia led to
unprecedented increases in gas & power prices, fuelling
inflation which remains a concern. In addition, central banks
raised interest rates, and this further eroded demand.
-- The International Monetary Fund "IMF" has reduced its growth
projections for the global economy in 2023, predicting a growth
rate of 2.8 per cent and 3 per cent in 2024, both down 10 basis
points from its January 2023 forecasts.
-- The IMF has revised its forecast for India's GDP growth
forecast to 5.9 per cent for FY 2023-24 and 6.3 per cent for FY
2024-25.
-- As per the latest World Economic Outlook figures released by
the IMF, India remains the fastest-growing economy in the world,
despite a drop in growth rate projections from 6.8 per cent in 2022
to 5.9 per cent in 2023.
-- The Indian economy has shown resilience amidst these external
headwinds and a weakening global economic scenario. For the last
few years, the Indian government has focused on infrastructure
development and its capital expenditure plan continues to reflect
this. Capex spending by the Government has steadily increased in
the last few years and is expected to be the highest to date in
FY24.
-- The private sector in India has also seen a capex revival
with credit growth being at a four-year high, as the balance sheets
of both banks and corporates remain healthy.
N. Kumar, Non Executive Chairman commented
" I congratulate the team in successfully navigating FY23 in the
wake of high coal prices. The Company zeroed in on profitable
operations and delivered an exceptional performance and cash
generation in what may be termed as 'a difficult year'. With the
softening of global coal demand and increase in coal production,
most of the global benchmarks are now moving closer to their long
term averages signifying return to rationality in the markets.
OPG has repaid its entire project debt in FY23 as well as the
NCDs availed in June 2020 .
With revenues , EBITDA and PAT in line with FY23 market
expectations , the Company can now focus upon enhancing shareholder
value."
For further information, please visit www.opgpower.com or
contact:
OPG Power Ventures PLC Via Tavistock
below
Ajit Pratap Singh
Cenkos Securities (Nominated Adviser +44 (0) 20 7397
& Broker) 8900
Stephen Keys/Katy Birkin
+44 (0) 20 7920
Tavistock (Financial PR) 3150
Simon Hudson / Nick Elwes
Enhancing shareholders' value
In 2018, the Board took the conscious decision to focus on
profitable, long-life assets in Chennai, and to prioritise
deleveraging as a method to grow shareholders' equity. With
reduction in debt, significant portion of free cash flows will be
earmarked to enhance shareholders' value and to capitalize on
future growth opportunities.
As at 31 March 2023, total borrowings were GBP32.54 million
comprising term loans and NCDs of GBP30.6 million and working
capital loans of GBP1.9 million. This represents a 25% reduction in
gross debt from GBP43.3 million at 31 March 2022.
Further , the Company has repaid NCDs totaling Rs. 2 billion in
May 2023. The repayment has been financed by a mix of internal
accruals and new debt comprising both, term loans and a new tranche
of NCDs. This refinancing pares down the debt as well as elongates
the tenure to five years thereby providing more flexibility in
managing cash flows.
Group Operations Summary
FY22 FY23
Total Generation (in billion
units) 1.8 1.5
------ ------
Average PLF 51.5% 42.1%
------ ------
Average Tariff Realised 5.82 8.71
------ ------
-- Total Generation in FY23, at the Chennai plant was 1.5
billion units. The generation was lower due to the Company's
increased focus on profitable operations in light of substantial
increases in international coal prices.
-- The average tariff realised in FY23 improved by 49.7 per cent
as the Company focused solely on supply of electricity under
profitable contracts.
Coal Prices
-- Coal prices surged sharply to over US$150/Ton in Oct'21 and
remained at higher levels largely due to Russia's invasion of
Ukraine, the ensuing gas crisis in Europe and higher demand from
both China and India. The prices have come down to below US$75/Ton
and are expected to soften further.
-- The Company is consciously focusing on increased consumption
of domestic coal and participating in various auctions to mitigate
the increase in the weighted average landed price of coal. The
weighted average landed price of coal was Rs. 7,811/Ton in FY23 as
compared to Rs. 5,461/Ton for FY22.
Power Sector
-- India's per capita electric consumption in FY22 was 1,255 kWh
which is one third of the global average. Significant scope of
growth exists in energy consumption and generation in the country
and thermal power will remain the backbone of this growth.
-- India's energy demand in the financial year 2022-23 increased
by 9.5 per cent compared to the previous financial year due to the
rebound of economic activities after COVID-19 lockdowns eased,
leading to increased consumption. The Central Electricity Authority
(CEA) has projected a peak power demand of 335 GW and 2.28 trillion
units of electricity for the year 2029-30. The projected peak
demand for FY30 is 45 per cent higher than the about 230 GW
estimate for the current financial year.
-- An additional 16,204.5 MW of coal-based power will be
required to meet the electricity demand in 2029-30 in addition to
the 26,900 MW currently under construction.
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 plant efficiency and to establish joint ventures to
roll out various energy transition technologies including fuel
substitution for power generation. 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.
During FY23, Company has replaced burners in two units to meet
the environmental norms in terms of controlling Nitrogen Oxide
(NOX) emissions, well ahead of the required deadline announced by
the Government of India.
Outlook
Despite the disruption caused by high coal prices and as a
result of our strategy of maximising operational performance and
deleveraging, we expect that the Company will meet FY23 market
expectations for revenue, EBITDA and PAT.
Profitable generation and continued leveraging of opportunities
have significantly strengthened the Company's balance sheet and its
liquidity position.
Notwithstanding the volatility in coal prices, the Company's
medium-term and long-term fundamentals remain unchanged with strong
cash flows and a reduction in debt enabling the achievement of the
Company's long-term profitable business model and sustainable
returns to shareholders.
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