Operations Update

RNS Number : 0696K

OPG Power Ventures plc

14 April 2015

 

14 April 2015

OPG Power Ventures plc

("OPG", the "Group" or the "Company")

Gujarat plant commences commercial sales - scale and diversification

Chennai IV commercial operation expected end April - near term growth

Strong operational performance

Gujarat - scale and diversification

OPG Power Ventures plc (AIM: OPG), the developer and operator of power plants in India, is pleased to report that its new Gujarat plant has commenced commercial operations.

The newly constructed interim transmission line is being used to evacuate power as construction of the multi-circuit transmission line by the State continues and we envisage the gradual ramp up of the plant completing by around September 2015 as additional transmission capacity is made available to us by the State transmission company.

At full capacity, we expect our unit generation costs to be lower in Gujarat than in Tamil Nadu, principally on account of the size of our individual units, and we expect average tariffs across the Group to reflect an increasing mix of sales between the two states. We currently expect this average to be around Rs 5.00 per kWh for FY2016, reflecting the strength of industrial tariffs in our two states and the continued differentiation brought about through our flexible operating model.

The commercial start-up of the Gujarat plant is a milestone event for the Group as it will not only significantly increase the scale of our commercial operations but will also provide a second strong platform on which to base future development.

Gujarat has been amongst the most progressive states in the country in implementing measures to improve the health of the power sector.  Power generation has been rising by over 5 per cent. per annum recently, accompanying the growth in industry and commerce as well as domestic and agricultural activity in the State.  Tariff increases in recent years, along with fuel price adjustments, have sought to provide a degree of investor protection and, in our view, position the State as an attractive investment destination.  Although Gujarat does not have its own coal resources, the State does boast two of India's three ports able to accommodate Capesize vessels with automated coal handling facilities. Both ports are a short distance from our plant and therefore we expect to maintain our track record of efficient coal procurement.

Chennai IV - near term growth

In the meantime, our new Chennai IV unit also continues to progress towards commercial operations. First coal for the unit has been purchased and is in store. With commissioning trials progressing well, we expect commercial operations to begin around the end of April.

Both the Gujarat and Chennai IV projects are fully funded.

Strong load factors for the 12 months ended March 2015

In our Q3 trading update to 31 December 2014, we reported the strong load factors achieved over nine months. Load factors for the final quarter have remained strong with the average for the year as a whole across all units being 91 per cent, marginally ahead of expectations. Average tariffs for group captive sales also increased and interest savings were achieved following reductions in India's base borrowing rates.

Accordingly, the Company's trading in FY2015 is expected to be in line with market expectations.

Power sector possibly in revival - gathering momentum

While we believe momentum is building, there is much to be done to improve the long term health of the power sector in India. Aspects of the federal budget announced in February 2015 and significant well publicised changes in the coal mining sector signal the targeting of a broad based revival of the sector. So whilst we expect encouragement of renewable technologies, investment in coal and bulk mineral transportation networks means thermal power should remain the largest contributor to India's energy needs for some time to come, especially if India is to achieve the Government's targeted 8 per cent. GDP growth rate in FY2016.

Arvind Gupta commented on the developments: "We're delighted to have delivered another project in a second location and my heartiest congratulations go to our excellent projects team and my thanks to all our partners and our local communities for their support. It's not just about the scale - with operations across two separate locations in India, we are now more diversified. Over time, we will seek to augment this broadened platform and to play our full part in the revival of India's power sector."

For further information, please visit www.opgpower.com or contact:

OPG Power Ventures PLC	[phone]
Arvind Gupta / V Narayan Swami / Ajay Paliwal
Cenkos Securities (Nominated Adviser & Broker)
Stephen Keys / Mark Connelly / Callum Davidson	[phone]
Tavistock Communications
Simon Hudson / James Collins	[phone]

About OPG

OPG is operating and developing power plants in India under the group captive model with 750 MW in operation or commissioning.  In the half year ended 30 September 2014, OPG generated revenues of £46.5 million, EBITDA of £16.6 million and earnings per share of 2.24 pence.

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