Interim Management Statement

RNS Number : 5348X

KSK Power Ventur PLC

16 February 2012

 



KSK Power Venturplc

Interim Management Statement

KSK Power Ventur plc ("KSKPV" or "the Company"), the power project company listed on the London Stock Exchange with interests in multiple power plants and businesses across India, today issues its Interim Management Statement for the period from 1 October 2011 to the date of this announcement. References to "the Group" are to KSKPV and its subsidiary companies.

Review of operational power plants

·   540 MW Wardha Warora power plant: The total gross power generated from the plant during the last four months stood at 1,066 MU, with the month of October recording the highest generation of 311 MU and a resultant PLF of approximately 80%for the month. Having secured open access permission from Maharashtra State Electricity Distribution Company Limited in January 2012, the commencement of actual power supplies to industrial consumers under open access is expected shortly, leading to the monthly gross generation from the power plant being upwards of 320 MU.  The Company anticipates gettingnear to full supplies from "cost plus" coal blocks beginning March 2012, resulting in lower reliance on imported coal / e-auction coal.

·   135 MW VS Lignite power plant:The total gross power generated in the plant during the last four months stood at 323 MU, with the month of December recording the highest generation of 99 MU and a resultant PLF of 99.9%for the month. From this level of activity, the plant was shut down for scheduled maintenance works during the second fortnight of January. It is expected that the gross generation for the full year is expected to exceed the originally planned 78% level.

·   58 MW Sai Regency power plant: This combined cycle gas based power plant in southern India with predominant power supplies to captive consumers. The total power generation for the last four months is at 155 MU with the month of January recording the highest generation of 38 MU and a resultant PLF of 91 % for the month. The higher generation is mainly on account of sustained supplies of natural gas from GAIL.Additionally, the project company also operates wind based power generation, aggregating to a total capacity of 18.9 MW with power sales to captive industrial customers rather than through traditional sale arrangement to local utilities. This approach is expected to significantly reduce the reliance of the power plant on traditional regulated sale arrangements and associated receivables from the local Indian utilities.

·   86 MW Arasmeta power plant:The Phase -I 43 MW of the power plant continues to operate on the coal linkage from South Eastern Collieries Limited ("SECL") and has achieved a gross generation of 101 MU during the last four months, reflecting a gross PLF of 80 % from the first unit. In regard to the second phase of 43 MW, given the fuel source position and issues that need to be addressed with Lafarge, there has been no generation. Under the existing contractual arrangements, the Company expects to realisethe fixed costs from Lafarge to enable meeting of the financing and associated running costs and the Company is in discussion with Lafarge on the same. The entire power generated from the plant was supplied to the captive customer and no sales were made to outside parties.

·   43 MW Sitapuram power plant:Due to certain localised factors and political unrest, the coal supplies for this plant were temporarily constrained and the gross power generation from this plant stood at 68 MU for the last four months. However, it is anticipated that with the subsequent stabilisation of the political environment in the particular state and increasing consumption by Zuari Cement Limited, the captive consumer, the power plant is expected to complete the full year with a PLF in the range of 70-75%.

·   52.5 MW KSK Wind power plant: Thepower sales from this wind power generation unit are to captive industrial customers rather than traditional sale arrangement to local utilities.

Growth initiative

The Group is currently involved in the setup of a large, single location, greenfield private power project that is expected to commission six units of 600 MW each ("KSK Mahanadi"), with the first unit of 600 MW expected to commission during the third quarter of 2012-13. It is expected that the completion of all the six units by2014 will result in the group's operational capacity exceeding 4,500 MW, with KSK being among the top five private power generators in India.

KSK Mahanadi (3.6 GW)

The progress on both supplies and construction activities at the power project has been good, with significant momentum on the commissioning of the first two units of 600 MW each expected during the financialyear of 2012-13.

The pace of equipment supplies by SEPCO, the main power plant contractor, to the power plant site have picked up during recent months. With theexpedition of the first two units supplies and associated contractual amendments, it is now anticipated that the delivery of all the key equipment for commissioning of the first unit of 600 MW (along with all common operating equipment) will be completed by June 2012.

There has been significant progress during the last four months under review and it is anticipated that during the first quarter of 2012-13 certain key boiler milestones willbe completed,with corresponding progress on the turbine generator units being achieved during the second quarter. With this progress, it is now anticipated that during the third quarter of 2012-13, the first 600 MW unitwill become operational.  Efforts on the associated water intake infrastructure, power evacuation and phase I of the railway siding have been initiated and these infrastructure works are being carried out for synchronized commencement along with the main power plant unit.

In so far as fuel suppliesto the KSK Mahanadipower plant is concerned, Gare Pelma III Coal Block is at an advanced stage of progresswith initial coal production and supplies expected to commence during 2012-13.Additionally, the tapering coal linkagecommitment from SECL to the power plant is expected to provide additional coal supplies in the interim.  The Company is continuing with the construction of the power plant in anticipation that a long termsolution will be provided by the government around the Morga-II coal block permitting, including any potential alternatives.

KSK Mineral Resources ("KSKMR")

With the primary objective of the tie-up of the requisite raw material for power generation by KSK power plants, KSKMR continues to pursue a differentiated approach of collaboration with State Mineral Development Corporations to jointly explore, develop and operate various domestic coal blocks in line with government regulations.

KSKMR, a wholly owned indirect subsidiary of KSKPV, is undertaking an active role in supporting the development of these various coal blocks. KSKMR is also currently involved in tying up additional coal sources and commitments to secure good quality fuel for KSK Group's power projects - both current and prospective,in the most economical way. This is aligned with KSK's desire to achieve timely availability of long term fuel access to its present and future power projects at economical rates. This will allow the company to generate power at competitive levels, throughresultant power supply commitments to various state utilities.

In addition to the track record of developing and operating the Gurha (East) Lignite mine for VS Lignite Power Plant operations, KSKMR's  current capital commitments include those towards  development of the Gare Pelma Coal block of Goa Industrial Development Corporation ("GIDC") in the state of Chhattisgarh from which coal supplies are being made available to KSK Mahanadi.

KSK Cargo Mover ("KCM")

KCMis the designated special purpose vehicle to establish aprivate railway siding with all fuel transport systems and associated loading and unloading infrastructure required for the movement of the coal produced from the coal blocks to the KSK Mahanadi power project at Nariyara, Chhattisgarh.The infrastructure is being developed in close coordination withIndian Railways, Asia's largest rail network company.

The planned infrastructure is being developed in multiple segments to enable commissioning of certain sections along with the commencement of power generation by the first unit of the KSK Mahanadipower project. The project is expected to be completed over the next 24 to 30 months.

Financial Performance

The financial performance during the three months of October- December 2011 at the Indian subsidiary KSK Energy Ventures Limited was announced on 30^th January 2012.

Outlook

With respect to the KSK operating assets, sustained low cost coal supplies, higher operating load factors realized through power supplies under open access arrangements and lower financing costs through refinancing are some of the key initiatives moving forward.

The continuing coal shortages across India reinforce the strategy of the KSK Group to secure and strengthen initiatives for collaboration with government corporations for the tie-up of the required raw material by KSKMR for power generation by KSK power plants at competitive rates.

Also, the development of the much required ancillary infrastructure by KCM will enable KSK Mahanadi earlyaccess to the required coal supplies through vertically integrated power generation operations.

For further information, please contact:

KSK Power Venturplc

Mr. S. Kishore, Executive Director

Mr. K. A. Sastry, Executive Director                                 [phone]

Arden Partners plc

Richard Day / Adrian Trimmings                                     [phone]

 

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