Interim Management Statement and Subsidiary Result
KSK Power Ventur plc
("KSKPV" or the "Company")
Interim Management Statement and Subsidiary Results
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 April 2013 to the date of this announcement. References to "the Group" are to KSKPV and its subsidiary companies.
Significant progress has been made in recent months on tying up fuel supplies and project execution, together with associated benefits from the scaling up of operations. Replacing part of the Indian Rupee denominated debt with lower coupon US Dollar debt in Wardha is expected to result in savings on interest charges, although the foreign currency environment and associated significant Rupee depreciation has been impacting the operating and capital costs. Progress has been affected by continuing delays in government decision making as well as additional management time and effort being spent on enforcing contractual and assured rights under fuel linkage arrangements.
The seasonality factors, with more than abundant rainfall in this year's monsoon period, have ensured gross quarterly generation in the first quarter at 1339 million units. With enhanced asset utilisation levels now coming through and open access to fuel being sought to be addressed, moving forward we are anticipating stabilising generation at 1500+ million units of gross generation on a quarterly basis from the existing operating capacity of 891 MW.
With the imminent commencement of commercial generation from the first 600 MW unit at Mahanadi, this will ensure an additional 900+ million units of generation by the Group on a quarterly basis. The second 600 MW unit on this site is expected to be commissioned during the later part of the current financial year, which should also produce an additional 900+ million units of generation on a quarterly basis. This should enable the Group to achieve gross energy generation of 9+ billion units in aggregate during 2013-14 as against the 5.5 billion units achieved in the year ended 31st March 2013.
Indian power generation market
Power generation from Thermal sources across India during 2012-13 was reported by the Ministry of Power as being 760 billion units (accounting for 83% of the total Indian pool) though with lesser than 60% Plant Load Factors ("PLFs") on an average, as shown below.
|
Source |
GW |
% |
|
BU |
% |
PLF |
|
Thermal |
151.53 |
68% |
|
760.36 |
83% |
57% |
|
Coal |
130.22 |
58% |
|
691.34 |
76% |
61% |
|
Gas |
20.11 |
9% |
|
64.81 |
7% |
37% |
|
Oil |
1.2 |
1% |
|
4.21 |
0% |
40% |
|
Hydro |
39.49 |
18% |
|
118.414 |
13% |
34% |
|
Renewable |
27.54 |
12% |
|
|||
|
Nuclear |
4.78 |
2% |
|
32.87 |
4% |
78% |
|
TOTAL |
223.34 |
|
|
911.64 |
|
|
KSK Group's operating projects typically have PLFs of 70% and more, reflecting an attractive asset mix.
Indian GDP growth has been consistently tracking power generation growth, with power generation growth being a leading indicator demonstrating the value creation potential for independent power producers ("IPPs") with sustainable fuel sourcing and attendant power supply arrangements.
Indian tariff reforms and superior credit of power procurers
During the period a number of state government owned distribution companies (12 states across India accounting for over 78% of the energy consumption pool) have approached their respective Electricity Regulatory Commissions for revisions of consumer tariffs which would enhance their financial viability. Further, with a number of banks in India initiating and providing requisite Financial Restructuring Packages to the various state utilities, it is anticipated that the utilities will have improved financial returns. Consequently, power generators across India should also gain from these reforms.
Market evolution - enhanced sale realisations and tariff upsides
Further progress still needs to be made in the market but the last few months have seen some significant progress in more visible bidding processes, together with more sustainable tariff quotes. Three state utilities in the states of Uttar Pradesh, Tamil Nadu and Rajasthan have recently sought bids for supplies under a long term basis with responses on more attractive rates for power producers.
KSK operational developments
• 540 MW Wardha Power Company Limited (WPCL):
The total gross power generated in the plant during the first quarter is at 775 MU with an average PLF of 66% accounting for the monsoon period seasonality.
The Company has been successful in refinancing the majority of the existing Rupee debt of this power project through a lower cost External Commercial Borrowing arrangement in US Dollars. While one-off charges for Rupee loan pre-payments were incurred during the quarter, accrued savings in financing costs are expected for the full year and thereafter.
The Company continues to pursue recompense for the calorific value shortfall in coal supplied from the coal suppliers during the year.
• 135 MW VS Lignite Power (VSLP):
The total gross power generated in the plant during the quarter is at 267 MU with an average PLF of 91%. The management effort continues to further sustain this power plant performance which would further enhance the financial performance of the Group.
• 86 MW Arasmeta Captive Power (ACPCPL):
The total gross power generation for the plant during the first quarter is at 93 MU with an average PLF of 49%, up against 44 MU for the same quarter in the previous year. We anticipate that, very shortly, the gross generation will increase and reach 100+ MU during the third quarter and thereafter expected to reach closer to150 MU during the last quarter at a fully stabilised level
• 77 MW Sai Regency Power (SRPCPL):
The total power generation for the first quarter is at 95 MU with an average PLF of 75% in this 58 MW combined cycle gas based power plant. Power continued to be supplied to captive consumers against the committed long term Power Delivery Agreements, as well as to utilities and third party consumers on a shorter term basis.
The 18.9 MW wind energy generators housed in the project company generated 13 MU with an average PLF of 32%, essentially due to the monsoon seasonality. The same is expected to stabilise to annualised PLF of 25% once the post monsoon period generation is achieved.
• 43 MW Sitapuram Power (SPL):
The total gross power generation during the first quarter is at 91 MU with an average PLF of 97%. Management are seeking to enhance the resultant financial performance of the project for the Group
• 10 MW Sai Maithili Power:
The 10 MW PV solar power generation plant in the state of Rajasthan under the Jawaharlal Nehru National Solar Mission, has commenced power generation. The total gross power generation during the first quarter is at 5 MU with an average PLF of 23%.
• 3.6 GW KSK Mahanadi Power:
The Company has successfully synchronised its first 600 MW unit with the National Grid on 18 May, 2013 and commercial production and supplies under the PPA are expected to commence very shortly.
The management's immediate focus is to accelerate the commissioning of the second 600 MW unit of KSK Mahanadi to enable the Group to achieve an operational power plant portfolio of 2000+ MW before the close of the current financial year.
The construction activity with respect to the remaining four units is being pursued, with commissioning expected to be achieved in line with the planned fuel supplies being fulfilled. Recent volatility of foreign currency, with significant depreciation of the Indian Rupee against the US Dollar has resulted in greater costs on the import of necessary capital goods. The Group is exploring various ways to address this over the ensuing months of procurement and construction on this major site, as the construction of balance four units are to be completed and fully commissioned. The Company has recently obtained a small US Dollar denominated Term Financing facility towards part of the financing of the project debt, with significantly lower interest charges than higher cost Indian Rupee debt. Further financing is expected to be pursued on similar terms, which would help align these costs more with underlying currency fluctuations.
The Group has secured debt financing within the Indian holding company and has also completed the buyout of the entire minority of the KSK Mahanadi project. KSKPV therefore now owns 74.94% of KSK Energy Ventures, the listed Indian subsidiary, which controls the entire economic interest at all the underlying power generation portfolio of approximately 4500 MW.
• KSK Water Infrastructure:
All the works associated with the creation of water infrastructure for the 3600 MW KSK Mahanadi Power plant have been completed and are operational.
• KSK Mineral Resources:
KSK Mineral is supporting the fuel requirements of the Group power plants essentially through the mining activities of Gurha (E) lignite block for fuel supplies to the VS Lignite Power Plant and Gare Pelma-III coal block of GIDC for fuel supplies to the KSK Mahanadi Power project.
• Raigarh Champa Rail Infrastructure:
The inward railway line connecting this power plant with the Indian railways line has been completed to enable the movement of coal into the power plant. Subsequent phases of works of this infrastructure are planned to be taken up on expedited basis for commission in synchronisation with the last 600 MW unit of the KSK Mahanadi power project.
Unaudited results of the Indian subsidiary (Indian GAAP) for quarter ended 30th June 2013
KSK Energy Ventures Limited ("KSKEV"), the equity shares of which are listed and traded on the National Stock Exchange of India Limited ("NSE") and the BSE Limited ("BSE"), has filed with the NSE and BSE on 10th August 2013, its un-audited financial results under Indian GAAP for the three months ended 30th June 2013. These results demonstrate sustained operational performance in challenging times.
Full details of the KSKEV un-audited results are available on KSKEV website (www.ksk.co.in ) and the NSE website (www.nseindia.com ) and the BSE website (www.bseindia.com ). KSKEV reports under Indian GAAP whereas KSKPV reports under IFRS.
Business strategy and outlook
The capital intensity and associated debt requirement levels of power generation businesses and the current challenging Indian policy environment coupled with high currency volatility is anticipated to impact shorter term performance indicators. However, overall progress is clearly being made at the operational level, with the Group building on its capabilities to benefit from the growth of scale which should result in longer term financial performance.
With strong execution capability, an efficient business structure, the quality of the asset base in place and secured fuel supplies to the power plants, the Group is well positioned to address the Indian power generation opportunity. The Group remains well equipped to deliver over the longer term, a strong operational performance and will continue to work towards enhancing shareholder returns.
For further information, please contact:
KSK Power Ventur plc
Mr. S. Kishore, Executive Director
Mr. K. A. Sastry, Executive Director +91 40 2355 9922
Arden Partners plc
Richard Day 44 (0)20 7614 5900
This information is provided by RNS
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