Mytrah Energy Regulatory News (MYT)

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Mytrah Energy Limited

("Mytrah Energy" or the "Company")

Business Update for H1 2012/2013

Related Party Transaction

The directors of Mytrah Energy (the "Board") are pleased to provide an update on the operational performance of the Company and its subsidiaries (the "Group") for the first half of the current financial year.

·; Asset performance ahead of the Group's initial forecasts 

·; 316 MW commissioned across 7 sites in 4 states

·; A further 24 MW to be delivered in Q3 2012-13

·; April to August portfolio level Plant Load Factor ("PLF") of 39.5%

·; Projected revenue of USD 28 - 30 million for H1 2012/2013

·; Projected PBT of USD 10 - 12 million for H1 2012/2013

·; A further 270 MW of assets identified and commissioning scheduled for mid-2013

·; First assets under the Gamesa contract under development and added ReGen as a new vendor

·; Six new banking relationships and an expected interest rate reduction of between 25-50 basis points across the Group's senior debt

The performance of our assets on a portfolio basis has exceeded both ours and our lenders' PLF projections. While it has so far been a good wind year across our sites, we believe that a significant part of this improved performance has been due to the expertise of our specialist teams and our partners in the selection of our sites and project execution. Also, an active participation in asset management has ensured that our plant availability and generation capacity has been maintained in line with the best industry practices. 

This performance should be reflected in our interim results to 30th September 2012 and provides a strong base for continued good revenue generation and PLFs from these sites in the forthcoming years. We expect (subject to forex fluctuations) to report revenue of between US$28 - $30 million and a PBT of between US$10 - 12 million for the interim H1 period ending 30th September 2012.

Three of our sites Tejva (Rajasthan), Mahidad (Gujarat) and Chakala (Maharashtra) have been fully operational in the period. During this time these assets have performed at an average PLF of over 40%. Over 75% of our internal annual revenue forecast from these sites has been generated during H1. Construction at our other sites was on-going during the period and this includes periods of testing and synchronization making an analysis of the PLF's over that short time period unreliable. However, from the performance we have seen, we expect these sites to perform on a similar basis to the first three sites mentioned above. Overall, on a portfolio basis, we believe that our initial estimates of PLF's will prove to be conservative.

In addition to the excellent PLF performance we have also seen positive momentum during the period from a regulatory perspective and feed-in-tariffs increased across all the states in which we operate. The Maharashtra State Electricity Board has recently increased its tariff from Rs. 5.37 per kWh to Rs. 5.67 per kWh and two of the Company's projects (Sinner and Gotne) in Maharashtra have benefited from this increase in tariff providing a significant increase in the overall return on these projects. In addition, the Rajasthan State Electricity Board has increased its tariff from Rs. 4.64 per KwH to Rs. 5.18 per Kwh, which benefited part of our Kaladongar project in that state and will also benefit our future portfolio. The Gujarat State Electricity Board has also announced a significant increase in feed in tariffs from Rs. 3.56 per Kwh to Rs. 4.23/4.61 per Kwh that will greatly benefit the Group's future portfolio. The Group expects the state of Andhra Pradesh to increase their tariffs in the near term followed by the state of Karnataka; again providing significant benefit to the Group's future portfolio. As we believe our project costs have been consistently lower than the average, any increase in the feed in tariff will have a favourable impact on the Company's financial results.

In addition to the 24 MW in Maharashtra to be delivered in Q4 2012 we are at advanced stages of developing a further 270 MW of generating capacity in the states of Karnataka, Maharashtra, Andhra Pradesh and Tamil Nadu. These projects have attractive cost, generation and project risk dynamics and we believe they will deliver above market returns to our shareholders. Construction has commenced at our Tamil Nadu and Karnataka sites and construction at the Maharashtra and Andhra Pradesh sites is scheduled to begin shortly. We are under active discussions with several banks and expect to close the senior debt for these projects by the end of this calendar year. Subject to securing this funding, these projects are scheduled to be commissioned in stages from April to September 2013 and will benefit from the increased tariffs and returns mentioned above.

The Board are also pleased to report a strengthening of the Group's banking relationships in the period. We established relationships with six new banks and we expect to begin relationships with a further six over the coming months. These relationships have been created during what is recognised as a challenging time for most of the infrastructure sector in India. The RBI has announced two rounds of cuts over the last year and we expect a 25-50 bps reduction in interest rates, the impact of which will be visible in H2 2013.

We continue to see senior debt and non-dilutive mezzanine funding as the best method of maximising shareholder returns. The current planned 270MW will be funded on this basis. Whilst the Company maintains flexibility over future funding options, we will continue to focus on delivering shareholder value and funding our future projects appropriately.

Related Party Transaction

The Company has been primarily pursuing its development strategy using a fully turn key model with Suzlon and its current assets have been executed under this model. The Company has also entered into a contract with Gamesa under which the turbine vendor will provide the turbines, and supervise the erection and commissioning.

The Board believes that in order to deliver the Company's pipeline of 270 MW under its self-development strategy, the Company would have required to rapidly grow its current balance of plant ("BoP") and project development team of 160-180 employees by around 3-4 times, which the Board believes would unnecessarily increase the Group's fixed cost base and have a resultant impact on Group profitability

Accordingly, in order to focus management time on our core activities and in keeping with our strategy to outsource project development on a turn-key and de-risked basis, the Board has approved the re-deployment of Mytrah's existing BoP and project development team of about 160-180 employees to Bindu Urja Infrastructure Private Limited ("BUIL"), a company in which Ravi Kailas, the Chairman and CEO of Mytrah Energy Limited, is the sole beneficial owner.

An agreement has been entered into with BUIL under which BUIL has agreed to provide the BoP services (the "BUIL Agreement"). The terms have been agreed by the Company with BUIL to build our first self-build projects totalling 270 MW using turbines from Gamesa in Karnataka, Maharashtra and Andhra Pradesh and from Regen in Tamil Nadu. These order values totalling to Rs 509.66 crores (USD 96m), are such that the overall cost of the assets including turbines are below market for similar assets. Management estimates that the net saving to the Group will be approximately Rs 530m (US$ 10m) when compared to retaining and expanding the BoP team in-house. All other terms and conditions are broadly in-line with work orders for similar contracts including delivery penalty clauses and damages for non-performance.

In awarding the contract to BUIL the Company has considered other service providers and concluded that the BUIL Agreement represents both the most cost effective solution and from a strategic perspective provides strong visibility regarding the ability to meet development targets. 

Going forward, any additional BoP contracts awarded to BUIL will require Board approval and will be subject to further market announcements in accordance with AIM rule 13 regarding related-party transactions.

The independent directors, being all members of the Board with the exception of Mr. Kailas (the "Independent Directors"), having consulted with the Company's NOMAD, Strand Hanson, consider that the terms of the BUIL Agreement are fair and reasonable in so far as shareholders are concerned. Furthermore, the Independent Directors consider that the outsourcing of BoP and re-deployment of the development team to BUIL are in the best interests of the Company.

Ravi Kailas, Mytrah Energy's Chairman and Chief Executive Officer, commented:

"I am very pleased to report on the performance of our assets and our guidance for H1 2013. Although there has been a slight delay in commissioning some of the assets, the tariff increases across our portfolio and superior performance of the assets means that the overall return across our portfolio should be significantly ahead of our initial forecasts. At a portfolio level, just in the first five months of this year, the assets have generated about 75-80% of their annual internal forecasts. This is indeed a great performance by any standard"

"We continue to be innovative and entrepreneurial with our capital and with the building of assets. We expect to take our total asset base to over 600 MW during 2013 with no further equity capital raising, the result being that, once these assets are fully commissioned and operational, we estimate that the company will have the ability to generate an EBITDA of $120-$140 million on an annualised basis (about $60-$70 million with the current assets of 340 MW). With our projected cash-flows we are self financing from an equity perspective to build out these assets and thereafter to continue to add 250 - 350 MW a year."

"I am happy with the progress so far and believe that we have built a unique company in the Indian IPP space."

Further information on the Company can be found at www.mytrah.com.

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