GKO.L Regulatory News (GKO)

17 Nov 2008 07:00

Greenko Group plc

Tariff increases and new concessions 

The Company is now realizing Rs7.1 (11.7¢) per kwh through direct power sales from Roshni Biomass plant compared to Rs3.19 under previous tariffs 

Three new concessions acquired with a combined capacity of 27.75 MW bringing total assets installed and under development to 269 MW

Tariff Increases

Greenko Group plc ("Greenko" or the "Company") is pleased to announce that it has concluded successful tariff negotiations under long term PPAs for 2 out of the 6 operational Biomass plants in its portfolio. This important development will increase the tariffs of Sri Balaji Power (6 MW) and KMS Power (6MW) in Andhra Pradesh from Rs3.19 to 3.79 per kwh, resulting in a net increase of 18.8 % of revenue with a minimal effect on their cost structure.

The Company believes there is further potential for tariff increases under long term PPAs across all States, and Greenko has initiated negotiations to secure tariff increases within the other states where the Company has operational assets.

The Company continues its efforts to take advantage of the direct power sale model and is currently successfully selling on power from Roshni to the Power Trading Corporation India at Rs7.1 per kwh and realized net revenue of Rs2.32 crores in October (approximately €383,000). This compares with Rs1.2 crores (approximately €200,000) in the month of September. 

Current Projects and New Concessions

In line with its announcement on 20 August 2008, the Company is confident that the installed Hydro project of AMR and Rithwik power will be completed in December 2008. Furthermore, Greenko has agreed to acquire three new concessions with combined capacities of 27.75 MW in the state of Karnataka: Ullipu Stage 1 and Ullipu Stage 2 Mini Hydro Schemes with a combined capacity of 22.75 MW and Kodekal Basaveshwara Mini Hydro Scheme of 5 MW. 

The new assets will increase Greenko's total projects under development from 146 MW in July 2008 to 173.75 MW, which in addition to the Company's 90.5 MW of secured installed capacity, gives a total of 269 MW of assets. Once the total portfolio is fully operational, it is anticipated that the assets will generate over 860,000 tonnes/annum of CO2 emission reductions certificates (CERs). These latest additions should help position Greenko as a leader in the sustainable renewable asset class within India with attractive returns above those of a normal utility operator.

The details of the concessions are as follows:

Ullipu Stage 1 and Ullipu Stage 2 Mini Hydro Schemes

Greenko has agreed to acquire licenses to develop two hydro concessions. The Ullipu Stage 1 and Ullipu Stage 2 Mini Hydro schemes with a combined capacity of 22.75 MW on the Kumaradhara river, South Canara District in Karnataka. 

Kodekal Basaveshwara Mini Hydro Scheme

Greenko has agreed to acquire licenses to develop this hydro concession. The Kodekal Basaveshwara Mini Hydro scheme is a 5 MW concession on the Don River, Gulbarga District in Karnataka and a detailed project report is now under preparation.

The  above projects are expected to achieve financial closure in 6 weeks and it is currently planned that the assets will be commissioned in Q1 2011. The 27.75 MW of new concessions meet Greenko's strategic and financial objectives and will be developed through capital expenditure of €24 million with a targeted debt to equity ratio of 75:25. 

It is anticipated that the electricity from these three assets will be sold at premium prices either through an agreement with power trading companies or direct to industrial end users.

Commenting on the tariff increases and new concessions, Anil Chalamalasetty, CEO and co-founder of Greenko, said: 

"The signing of the tariff agreement is exciting news for Greenko. It represents a significant increase in our tariff without any change to the Company's input costs which we hope to extend to our other installed capacity and concessions under development.  The new concessions are excellent additions to Greenko's portfolio and, with their relatively short construction times, builds upon our strategy of capturing the value of premium power prices which are forecast to last well into the next decade". 

Enquiries:

NOTES TO EDITORS

Background

Greenko intends to become a leading owner and operator of clean energy projects in India. Greenko currently has 90.5 MW contracted capacity of clean energy assets including six biomass and two hydro plants and 173.75 MW of concessions under development. The Company is focused on developing a portfolio of biomass, hydro-electric and wind assets within India and intends to increase the installed capacity it operates through a combination of purchasing d projects as well as the winning of concessions to develop new greenfield assets. 

The Indian renewable energy sector is a relatively young and fragmented market. The new projects are likely to take the form of the acquisition of existing assets under construction and the building of new plants on greenfield sites. Greenko intends to be a consolidator within this sector. The Directors believe that operational and financial benefits will flow from this strategy.

The Group's income is generated from receipts for power sold to state electricity boards and from sale of high margin carbon credits or Certified Emission Reduction units ("CERs") generated from the Group's registered clean energy projects. In the future, the Directors believe that new opportunities, such as the direct sale of electricity to large scale users and sales of CERs in the voluntary market, will broaden the income streams of the Group as well as enhance profitability.

The Indian economy

India has a population of approximately 1.1 billion people, which is currently growing at 1.5 per cent. per annum, making it one of the largest populations in the world. The average age of the population is 24, providing a growing, well educated workforce. The Indian economy has benefited from low inflation and recent liberalisation has encouraged strong international investment which has helped to promote strong economic growth particularly in the past five years. The growth in industrial production and GDP per capita has resulted in a strong increase in demand for electricity. This has led to a shortfall in supply of supply, resulting in both brown-outs (where the voltage level drops below the normal minimum level specified for the system, therefore particularly damaging to electric motors) and black-outs. In addition, the 2001 Indian Census reported that 44 per cent. of households did not have access to electricity.