GKO.L Regulatory News (GKO)

19 Dec 2008 07:00



Greenko Group plc

Interim results for the six months ended 30 September 2008

Greenko Group plc ("Greenko" or the "Group"), the Indian renewable energy owner and operator, today announces its results for the six months ended 30 September 2008. 

Highlights 

90.5MW of contracted capacity 

146.5MW of concessions under development 

Post period end

Anil Chalamalasetty, CEO and co-founder of Greenko, commented:

"Greenko continues to make good progress in our aim to become a leading Indian renewable energy owner and operator. We have made the transition from a strategy of aggregating existing assets to developing concessions, which is reflected in the growth of our portfolio of secured total production capacity from 137.5MW at the start of the period to 237MW including 146.5MW of concessions under development. In order to take advantage of the deregulation of the Indian Energy market we have applied for and been awarded an interstate power trading licence. This will enable us to sell electricity on the open market at greatly increased premiums and we recently signed our first contract under these terms at the Roshni biomass plant. 

'Although Indian growth is forecast to slow in 2009 to levels of 7%, the continuing acute energy deficit and deregulation of the electricity market continues to support increases in cost per Kwh/H. Greenko, with a healthy pipeline of projects under development and the capacity for direct energy sales to the end user is well placed to deliver growth within the emerging and dynamic Indian energy market." 

  Enquires:

  Chairman's Statement:

I am very pleased to announce Greenko's interim results for the six months ended 30 September 2008. This has been a successful period for the Group, despite the setbacks suffered at the AMR and Rithwik hydro power projects. The Group's focus in the short term has been to prioritise cash investments into small hydro projects development and defer the acquisition of operational assets with long term PPAs in order to create optimum shareholder value. We have also focused on a number of strategic objectives. The first of these is the transition from being an owner operator to a leading developer of projects.  Secondly, we are looking to significantly increase the capacities of projects under development to be operational by FY 2011. Finally, we aim to take Greenko from the traditional utility model within India of 'long term PPAs and Regulatory dependence' to a model that captures the maximum value from the high demand markets of Indian Power and the EU's Emission Trading Scheme ("EU ETS").

In line with our stated policy, earnings will be fully re-invested to finance the ongoing growth of the business and the Directors therefore do not recommend the payment of an interim dividend for the year to 30 September 2008. 

Greenko has made significant progress during the period under review and has now moved into the development of clean energy assets, with 173.75MW of concessions secured for construction under premium power supply contracts. There has also been excellent progress in the direct sale of power with the securing of an Interstate Trading Licence, which has enabled us to negotiate short term PPAs at substantial premiums to the average tariffs paid under more long term agreements. Greenko continues to generate significant numbers of CERs and despite the short term weaknesses of the market at present, the Directors believe that CERs are predicted to trade close to €17 as European compliance buying periods draw closer. 

Post the period under review, the Group has successfully brought the AMR and Rithwik plants to the state of being ready for testing and commissioning, secured increases in the tariffs from both long and short term PPAs for three of its biomass operations and successfully secured another 27.75MW of hydro concessions. 

The Board believes that Greenko will continue to generate positive growth as it progresses towards becoming a major developer and provider of clean energy assets in India. We are over half way towards our goal of securing 400MW of capacity and continue to source quality clean energy concessions for development. We anticipate that demand for electricity will continue to rise as a result of domestic growth and ongoing electricity deficits and that CERs will provide a useful secondary revenue stream, despite recent price falls. I would like to take this opportunity to thank all of our key management as well as our teams covering operations, implementation, business development and administration for all their hard work. The Directors believe that, even in this period of global economic slowdown, the fundamentals of the Indian energy markets remain strong and that Greenko can continue to generate above normal growth and shareholder value. 

Y. Harish Chandra Prasad 

Chairman

  CEO REPORT

Introduction

I am pleased to present Greenko's interim results for the period ended 30 September 2008. The Group has made considerable progress during the period under review, having increased secured capacity by 146.5 MW, secured an interstate trading licence and the first short term PPAs at a substantially higher tariff rate. 

Greenko is focused on developing a portfolio of biomass, hydro and wind assets within India and intends to increase its operated installed capacity through a combination of acquiring both existing assets and projects under construction, as well as winning concessions to develop new greenfield assets. The group is also now involved in trading of green power from third party assets through the recently awarded trading licence. The Group's current short term strategy is to invest and develop assets with potential to generate power in merchant models, defer operational asset acquisitions and focus on refinancing existing assets to release funds. 

The Group's income is generated from receipts for power sold to state electricity boards and from sale of high margin carbon credits, CERs, which are generated from the Group's United Nations registered clean energy projects. In the future, the Directors believe that new opportunities, such as the direct sale of electricity to industrial users and trading of Green Power from third party renewable assets, will broaden the income streams of the Group as well as further enhance profitability.

The Group is witnessing increased deal flow from standalone renewable companies. Furthermore, Indian banks in general have not been affected by international subprime issues and continue to actively support the liquidity needs of Greenko. 

Financial review 

For the six months ended 30 September 2008, Greenko's gross revenue was € 6.68 million (2007: €3.92 million) and profit after tax was €267,699 (2007: €84,854). The Group generated EBITDA of €1,930,984 (2007: €896,283) before the charge for share based expenses of €278,817 (2007: nil), which represents an EBITDA margin of 29% (2007: 22%).

During the period under review the Group recognised CER revenue of € 989,529 (2007: €744,827) having sold 77,006CERs (2007: 51,452). As at 30 September 2008 the Group had 87,000 CERs in stock. 

Operational review

Biomass assets

The Group currently operates 6 biomass plants with a total secured installed capacity of 42 MW. During the period under review, a short term PPA was signed with the India Power Trading Company (PTC) to supply electricity from the Roshni plant at Rs6 per Kwh as opposed to contract rates of Rs3.2 per Kwh. Since the period end, Greenko has also secured an 18.8% uplift in the tariff on longer term PPAs related to the Balaji Power (6 MW) and KMS Power (6MW) plants in Andhra Pradesh. Greenko currently has 58MW biomass plants under development in the states of Punjab, Chattisgargh and Karnataka. 

Hydro assets

During the period under review Greenko secured 4 new hydro concessions for development totalling 44.5MW capacity and bringing the total hydro concessions under development to 115.5MW. Since the period end, the AMR (24.5MW) and Rithwik (24.5MW), developments which were both delayed due to flooding in August 2008, have now had critical components installed and are ready for testing and commissioning. The timing of this process is dependent upon the water levels during the offpeak periods. The Group is confident of generating power at full capacity for the financial year 2009 The Sonna Hydro Power (10.5MW) is on track in development to produce power from the 2009 Hydro season.

CER activity

The Group has 87,000 CERs in stock, generated from existing operational biomass assets during the six month period under review. The market outlook for EU ETS in the short term is weak with CERs trading at €13 to €14. The Directors believe that the medium term forecast is more positive with CERs expected to trade in the region of €17 in the run up to EU compliance buying periods.

Outlook

The Directors believe that, despite the global economic slowdown, due to robust forecasts for Indian growth, along with the long term shortages in power supply, demand for electricity will continue to be strong, supporting the present rate of prices increases. 

Greenko is continuing to source and secure new concessions for development and will look to capture premium prices through short term PPAs and the direct sale of power to the end user. We remain confident of growth in the full year and anticipate making further announcements of business growth plans in the New Year. 

Anil Chalamalasetty

CEO

  Unaudited Consolidated Balance Sheet

As at 30 September 2008

Amount in Euros

Unaudited Consolidated Income Statement

For the period ended 30 September 2008

Amount in Euros

Consolidated Cash Flow Statement

For the period ended 30 September 2008

Amount in Euros

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. Basis of preparation

The interim consolidated financial statements of the Group for the six month period ended 30 September 2008 were approved by the Board of Directors on 18th December 2008.

The interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC).

In the opinion of the Directors, the financial statements for the six months period ended 30 September 2008 present fairly the financial position of operations and cash flows in conformity with IFRS.

These interim consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets, and financial liabilities at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial information are disclosed in these notes.

b. Revenue and revenue recognition

(i) Sale of electricity Income from sale of electricity is recognized on the basis of number of units of power exported in accordance with joint meter reading done on monthly basis by the representatives of the buyer and the Group at the rates prevailing as on the date of export.

(ii) Sale of Certified Emission Reductions("CER's") Revenue is recognized when CERs have been generated and sold to an end user.  (iii) Interest income

Interest income is recognized as the interest accrues.

c. Taxes

Current tax provisions represent the amount that would be payable based on computation of tax as per prevailing taxation laws in respective jurisdictions.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purpose. Deferred income tax liabilities are recognized for all taxable temporary differences.

d. Use of estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, management evaluates its estimates and judgments, including those relating to revenue recognition, fair value valuations, allowance for doubtful amounts, associates and financial assets, property, plant and equipment, goodwill, intangible assets, income taxes, financial instruments, self-insurance, employee benefits, contingencies and litigation

Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates under different assumptions and conditions.

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. The Group considers that it operates in a single geography being India and in a single business segment being the production and sale of electricity and related CER's.

2. Share capital

3. Earnings per share

The following is the reconciliation of the weighted average number of equity shares and equity equivalent used in the computation of basic and diluted EPS for the period ended September 30, 2008

4. Employee Stock Options

An amount of €278,817 was charged to the consolidated Income statement for the half year ended 30 September, 2008, based on the fair valuation of the Employee Stock Options granted to Mr. Anil Chalamalasetty and Mr.Mahesh Kolli, on 22 April, 2008. None of the options vested during the period.

5. Events after the Balance Sheet date:

Over 51% of the equity was acquired by a Group Company in M/s Jasper Energy Private Limited, a company with a 10.5MW Hydro Power Project and a concession for the development of about 18 MWs Hydro Power Projects. Acquisition of 100% equity of this company will be completed during this financial year. Similarly, another Company with 16 MW Hydro Power Project license was also acquired.

Share Purchase Agreement was signed for acquiring 100% equity of another company which will have licenses for the development of 22.75 MW Hydro Power Projects.