Opg Power Regulatory News (OPG)

13 December 2017

OPG Power Ventures plc

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

Unaudited results for the six months ended 30 September 2017

Robust operational performance

OPG (AIM: OPG), the developer and operator of power generation plants in India, announces its unaudited results for the six months ended 30 September 2017 ("H1 FY18").

Highlights

· H1 FY18 total generation of 2.39 billion units up 1% from 2.37 billion units in H1 FY17

· Robust operational performance - Gujarat PLF ramps up to 81%; PLF at Chennai was 73%

· Significant progress on Tamil Nadu and Gujarat receivables

· Gearing of 55% in H1 FY18 (H1 FY17: 55%) with net debt reduced by Rs 1 billion (c£12 million)

· 62 MW Solar projects on track for commissioning in FY18

· Final FY17 dividend of 0.72 pence per share will be paid on 22nd December 2017; 49.4% scrip take up - 4,799,742 new ordinary shares will be issued

Summary financial information (including historic financial data)

Arvind Gupta, Chairman, commented:

"India's GDP increased to 6.3% in Q2 FY18 from 5.7% in Q1 FY18 and is expected to grow over 7% in FY 19. In the power sector, the revival of GDP growth is expected to be accompanied by universal 24/7 electrification, affordable housing to all and a projected 8.1% annual growth rate in per capita electricity consumption until 2022.

"We are pleased to have continued with our robust operational performance and maximised volumes from our assets. Confirmation of our Group Captive status at Gujarat for FY18 reaffirms our business model and is expected to strengthen our cashflow profile. Strong performance from our assets was offset by sustained high seaborne thermal coal prices that have impacted our sector as a whole. Although coal price forecasts continue to show a decline in prices, prices have remained higher than anticipated. 

Our renewable projects continue to progress as planned and will provide us with diversification and further stability in our cashflows. Healthy operational performance, forecast reduction in coal prices and anticipated tariff increases in Tamil Nadu keep us optimistic about the prospects for the Company in FY19. All these factors are expected to provide the basis for OPG to return to profitability in FY19."

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

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 ('MAR').

Half year results statement

Operations Summary

Note:

1. MU - million units or kWh; Mue - millions units or kWH of equivalent power

2. Reported Average PLF based on Mue

Chennai - 1.15 billion units excluding "deemed" offtake

Reported Average PLF at Chennai for the six month period was 73% as follows:

Chennai - Total generation maintained at 1.32 billion kWh and PLF of 73%

Total Generation at the Chennai plant in H1 FY18 was 1.15 billion units, 6% lower than in H1 FY17. This decrease in generation was primarily on account of lower off-take by industrial and commercial customers due to seasonal demand variations from our customers in H1 FY 18. We expect full year PLF to be approximately 75%, including "deemed" off take. Average tariffs realised in H1 FY18 were Rs5.00 and expect to be maintained for FY18 (FY17: Rs5.18). "Deemed" offtake under the Long Term Variable Tariff Agreement ("LTVT") with TANGEDCO is entitled to a fixed capacity charge of Rs1.50.

Looking ahead to FY19 in Tamil Nadu under a MOU with the Ministry of Power, the state government and the utility have agreed to raise tariffs by an average of 6% for FY18-19 across all categories of consumers. In addition, the Group expects to extend/enter multi-year contracts with its Group Captive customers providing visibility over revenue.

Chennai cash collections improve as old outstanding TANGEDCO receivables continue to be collected

Approximately £17 million has been collected from TANGEDCO in H1 FY 18. Of this amount £8 million is in respect of receivables outstanding from 31 March 2016. The Company expects to receive the remaining balance of the TANGEDCO receivables outstanding as at 31 March 2016, of approximately £7.9 million, during the second half of FY18.

Cash collections from group captive customers are typically received within 30 - 60 days of billing.

Gujarat - 1.07 billion units. Strong asset performance delivered with 11% higher generation

Generation at the Gujarat plant in H1 FY18 was 11% higher at 1.06 billion units compared to 960m units in H1 FY17. This was principally driven by improved sales volume to our industrial customers and power exchange. The average tariff in H1 FY18 was Rs 4.06 (FY17: Rs 4.03). For full year FY18, the Company expects the PLF to be approximately 80% and to achieve an average tariff of around Rs 4.00.

Gujarat's Cross Subsidy Surcharge receivables - Captive status confirmed for FY18

OPG Gujarat has recently received approval from the relevant Gujarat authorities confirming its Group Captive status for FY18. This is significant progress in resolving the matter of late payments and the Company anticipates that the amounts delayed for FY18 (approximately £5.3 million as at 30 September 2017) will be recovered principally in the current financial year. Constructive dialogue continues on receiving confirmation on Group Captive status for FY16 and FY17 and, consistent with the view held at the Group's FY17 results, management continues to expect the recovery of the monies, approximately £26.1 million as of 31 March 2017, withheld by the DISCOMs.

Strong operational performance offset by higher coal prices

EBITDA for the period was £22 million, down 48% from £42.1 million in H1FY17 resulting principally from higher seaborne coal prices. The average landed cost of coal was R4,236 in H1FY18 (FY17:Rs3,552). As previously reported, a change in the price of coal of Rs100 impacts the Group's total annual cost of coal by approximately £3.5 million. Based on the current market price we now expect the full year FY18 average landed cost of coal to be in a range of Rs4,300 to Rs4,500 per ton and for FY19, based on consensus forecast prices, we expect the average landed cost of coal price to decrease by at least 10% compared to the current market price.

The "Clean Dark Spread", being the difference between average tariff and cost of coal on a per unit basis, was Rs1.46 for Chennai in H1 FY18 (FY17: Rs2.63) and Rs1.08 for Gujarat in H1 FY18 (FY17: Rs1.37).

Coal prices factors

As has been widely reported, prices for imported coal have risen substantially higher than consensus expectations, predominantly as a result of policy actions undertaken in China. As previously outlined, China's longer term policy aims to reduce coal-fired generation in response to environmental concerns and reducing seaborne coal imports. It expects to maintain coal demand supply balance over 2018 and for prices to stabilise within a pre-determined price band.

In India, in view of rising domestic production of coal, plans are to significantly reduce thermal coal imports over the next two to three years. The action plan established by Niti Aayog (the Government of India's policy "Think tank") in August 2017, which is chaired by India's Prime minister, laid out a nine-point plan for boosting domestic coal production in India in order to feed increasing demand from India's coal power sector. An increase in state owned Coal India Limited production from 554 million tonnes in FY 17 to 1 billion tonnes per year by 2020 is one of the most important items on the nine-point plan agenda. These China-related factors, the reduction of coal imports by India and global investments in renewables are generally expected to underpin the outlook for lower international coal prices going forward.

62 MW Karnataka solar: Construction and equipment delivery is progressing. Commissioning by the end of FY 18

Civil works and installation preparation work is on-going and the delivery of imported PV modules has commenced from suppliers. The transmission network approval for connectivity to the DISCOMS is in place and all sites remain on track to be commissioned in FY18.

Net debt and Gujarat interest

The Company's net debt (total debt minus cash and pledged restricted cash) was £269 million as at 30 September 2017 (FY17: £304 million) and gearing (equity/net debt) was 55% in H1 FY18 (H1 17: 55%).

*Note : Net Debt : Long term Borrowings + Short Term Borrowings less Cash & Cash Equivalents (including pledged Restricted cash of £21.7 million at 30th of September 2017 and £3.7 million at 31st of March 2017)

During the period under review the Group has paid over £15 million in interest and maintained its track record of being up to date with all scheduled repayments on its bank debt and continues to benefit from a supportive relationship with its lenders.

The Group has been in regular dialogue with its lenders at the Gujarat plant with regards to the long term loans at its SPV, OPGS Gujarat ("OPGG"). Due to the previously disclosed delayed recovery of the amounts withheld by the DISCOMS at the Gujarat plant, the Company has withheld £3.9 million of quarterly interest payments due in respect of the period ended 30 September 2017 on OPGG's long term debt. This non-payment of interest enables OPGG to enter the Corrective Action Plan ("CAP") process set out by the Reserve Bank of India ("RBI") circular)1.

The CAP process is well established and is designed to assist borrowers in the rescheduling and/or restructuring of its long term loans. In light of the recent reaffirmation of OPGG's Group Captive status the Board anticipates that the outcome of the CAP process should enable OPGG to better match the cash flows from the Gujarat plant with its debt obligations and to facilitate OPGG's self-sufficiency.

[1] RBI's MASTER CIRCULAR - PRUDENTIAL NORMS ON INCOME RECOGNITION, ASSET CLASSIFICATION AND PROVISIONING PERTAINING TO ADVANCES (RBI/2015-16/101 DBR.No.BP.BC.2/21.04.048/2015-16, July 1, 2015 (https://www.rbi.org.in/scripts/BS_ViewMasCirculardetails.aspx?id=9908)

Brighter Future: Government targets 24x7 electricity by FY19; Improved GDP and credit outlook

The Government has brought forward its electrification target of "Electricity to All" to FY19 from FY20. To achieve this target, coal production, railway and logistics capacity and the transmission networks are being increased. As a result, it is widely expected that demand for power and utilisation of capacity is set to increase.

India's GDP increased to 6.3% in Q2 FY18 from 5.7% in Q1 FY18. Government expects growth of over 7% for FY19. Further confidence was received in Indian economy by an upgrade - the first in 14 years - by Moody's in both India's sovereign bond rating to Baa2 from Baa3 and outlook from Positive to Stable.

The above policy changes combined with reforms underway to improve liquidity both in the banking and power sector continues to provide positive outlook for the sector.

Niti Aayog has projected a 8.1% CAGR growth in electricity consumption until 2022. Enablers of this growth are 24/7 power for all, household connectivity under the Saubhagya scheme- to provide electricity connections to over 40 million families in rural and urban areas by December 2018 - and share of manufacturing to rise to 25% of GDP. This could push growth by up to an additional 2%. Electricity generation growth in the last 2 years was around 5.8% per year.

New CFO and NED appointments to Board

As previously announced, Mr Dmitri Tsvetkov, has been appointed as the Chief Financial Officer of OPG Power Ventures PLC, he has replaced Mr V. Narayan Swami, Finance Director, who has since retired from the Board.

Mr Jeremy Warner Allen has been appointed as Independent Non-Executive Deputy Chairman; he is replacing Mr Martin Gatto, Non-Executive Director, who is also retiring from the Board.

Dividend

The final FY17 dividend of 0.72 pence per share will be paid on 22nd December 2017. OPG received scrip elections for 49.4% of total shares outstanding resulting in issuance of 4,799,742 new ordinary shares.

Outlook

Operations during H1Y18 performed in line with expectations and notwithstanding the effect of high level of coal price referred to earlier, the Company expects generation to remain strong and cash flows from operating activities to remain resilient. Karnataka solar projects are expected be commissioned by the end of FY18 and will contribute OPG's revenues in FY19. As previously discussed, although FY18 is expected to be a transitional year given the impact of high coal prices that the Company has experienced, the Board remains positive about the Company's prospects for FY19.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(All amounts in £, unless otherwise stated)

The notes are an integral part of these consolidated financial statements.

The financial statements were authorised for issue by the Board of Directors on 12 December 2017 and were signed on its behalf by:

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(All amounts in £, unless otherwise stated)

The notes are an integral part of these consolidated financial statements.

The financial statements were authorised for issue by the Board of Directors on 12 December 2017 and were signed on its behalf by:

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(All amount in £, unless otherwise stated)

The notes are an integral part of these consolidated financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

(All amounts in £, unless otherwise stated)

1Investments maturing during the year have been reinvested upon maturity in similar instruments of short tenor. The figures reported under "Purchase of investments" and "Sale of investments" in the above consolidated cash flow statements are aggregate of such maturities and reinvestments made during the period reported.

The notes are an integral part of these consolidated financial statements.

NOTES TO THE CONSOLIDATED AND FINANCIAL STATEMENTS

For the period ended 30September 2017

(All amount in £, unless otherwise stated)

1. Corporate information

1.1 Nature of operations

OPG Power Ventures Plc ('the Company' or 'OPGPV'), and its subsidiaries (collectively referred to as 'the Group') are primarily engaged in the development, owning, operation and maintenance of private sector power projects In India. The electricity generated from the Group's plants is sold principally to public sector undertakings and heavy industrial companies in India or in the short term market. The business objective of the group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers and other users under the 'open access' provisions mandated by the Government of India.

1.2 Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the European Union (EU) and the provisions of the Isle of Man, Companies Act 2006 applicable to companies reporting under IFRS.

1.3 General information

OPG Power Ventures Plc, a limited liability corporation, is the Group's ultimate parent Company and is incorporated and domiciled in the Isle of Man. The address of the Company's registered Office, which is also the principal place of business, is IOMA House, Hope Street, Douglas, Isle of Man 1M1 1JA. The Company's equity shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.

The Consolidated Financial statements for the period ended 30 September 2017 were approved and authorised for issue by the Board of Directors on 12 December 2017.

2. Recent accounting pronouncements

a) Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group

At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on those expected to be relevant to the Group's financial statements is provided below.

Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Group's financial statements.

IFRS 9 'Financial Instruments'

The IASB recently released IFRS 9 'Financial Instruments' (2014), representing the completion of its project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. The new standard introduces extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new 'expected credit loss' model for the impairment of financial assets. IFRS 9 also provides new guidance on the application of hedge accounting. Management has started to assess the impact of IFRS 9 but is not yet in a position to provide quantified information. At this stage the main areas of expected impact are as follows:

i) the classification and measurement of the Group's financial assets will need to be reviewed based on the new criteria that considers the assets' contractual cash flows and the business model in which they are managed;

ii) an expected credit loss-based impairment will need to be recognized on the Group's trade receivables and investments in debt-type assets currently classified as AFS and HTM, unless classified as at fair value through profit or loss in accordance with the new criteria; and

iii) it will no longer be possible to measure equity investments at cost less impairment and all such investments will instead be measured at fair value. Changes in fair value will be presented in profit or loss unless the Group makes an irrevocable designation to present them in other comprehensive income.

IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018. The group is in the process of evaluation of the impact of IFRS 9 but is not in position yet to provide quantified information.

IFRS 15 'Revenue from Contracts with Customers'

IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities.

IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. Management does not expect significant impact of IFRS 15 on the Company's consolidated financial statements.

IFRS 16 'Leases'

On 13 January 2016, the IASB issued the final version of IFRS 16 'Leases'. IFRS 16 will replace the existing leases standard, IAS 17 'Leases', and related interpretations. The standard sets out the principles for recognition, measurement, presentation and disclosure of leases for both parties to a contract. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of comprehensive income. The standard also contains enhanced disclosure requirements for lessees. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.

The effective date for adoption of IFRS 16 is annual periods beginning on or after 1 January 2019, though early adoption is permitted for companies applying IFRS 15 'Revenue from Contracts with Customers'. The Management does not expect significant impact of IFRS 16 on the Company's consolidated financial statements.

3. Summary of significant accounting policies

a) Basis of preparation

The consolidated financial statements of the Group have been prepared on a historical cost basis, except for financial assets and liabilities at fair value through profit or loss and available-for-sale financial assets measured at fair value.

The financial statements have been prepared on going concern basis which assumes the Group will have sufficient funds to continue its operational existence for the foreseeable future covering at least 12 months. As the Group has forecast it will be able to meet its debt facility interest and repayment obligations, and that sufficient funds will be available to continue with the projects development, the assumption that these financial statements are prepared on a going concern basis is appropriate.

The consolidated financial statements are presented in accordance with IAS 1 Presentation of Financial Statements and have been presented in Great Britain Pounds ('₤'), the functional and presentation currency of the Company.

b) Basis of consolidation

The consolidated financial statements include the assets, liabilities, and results of the operation of the Company and all of its subsidiaries as of 30 September 2017.All subsidiaries have a reporting date of 31 March.

A subsidiary is defined as an entity controlled by the Company. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are fully consolidated from the date of acquisition, being the date on which effective control is acquired by the Group, and continue to be consolidated until the date that such control ceases.

All transactions and balances between Group companies are eliminated on consolidation, including unrealized gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent shareholders' equity. Acquisitions of additional stake or dilution of stake from/ to non-controlling interests/ other venturer in the Group where there is no loss of control are accounted for as an equity transaction, whereby, the difference between the consideration paid or received and the book value of the share of the net assets is recognized in 'other reserve' within statement of changes in equity.

c) Investments in associates and joint ventures

Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment in associates and joint ventures is increased or decreased to recognize the Group's share of the profit or loss and other comprehensive income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group.

Unrealized gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group's interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.

d) List of subsidiaries and joint ventures

Details of the Group's subsidiaries and joint ventures, which are consolidated into the Group's consolidated financial statements, are as follows:

i) Subsidiaries

ii) Joint ventures

The Company has entered into a Joint Venture agreement with Noble Chartering Ltd ("Noble"), to secure competitive long term rates for international freight for its imported coal requirements. Under the Long Term Freight Arrangement (LTFA), the company and Noble are to purchase and own, jointly and equally, two 64,000 MT cargo vessels through a Joint venture company Padma Shipping Ltd, Hong Kong ('Padma'). The company will commit to provide 1.5 million tonnes of coal per annum for carriage by the two vessels for a minimum period of 10 years at competitive long term rates.

Pursuant to this agreement, Padma Shipping Ltd has been incorporated in order to execute the joint arrangement for procuring two cargo ships of 64,000 MT capacity from Cosco Shipyard, Hong Kong which are expected to be delivered by mid 2018. The company and Noble are to invest approximately US$ 9 million over the period of delivery of the vessels as their equity contribution. Accordingly the joint venture has been reported using equity method as per the requirements of IFRS 11.

iii) Associates

The Group has invested in the following entities which are in the business of solar projects in India.

e) Foreign currency translation

The functional currency of the Company is the Great Britain Pound Sterling (£). The Cyprus entity is an extension of the parent and pass through investment entity. Accordingly the functional currency of the subsidiary in Cyprus is the Great Britain Pound Sterling. The functional currency of the Company's subsidiaries operating in India, determined based on evaluation of the individual and collective economic factors is Indian Rupees ('₹' or 'INR'). The presentation currency of the Group is the Great Britain Pound (£) as submitted to the AIM counter of the London Stock Exchange where the shares of the Company are listed.

At the reporting date the assets and liabilities of the Group are translated into the presentation currency at the rate of exchange prevailing at the reporting date and the income and expense for each statement of profit or loss are translated at the average exchange rate (unless this average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expense are translated at the rate on the date of the transactions). Exchange differences are charged/ credited to other comprehensive income and recognized in the currency translation reserve in equity.

Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the Statement of financial position date are translated into functional currency at the foreign exchange rate ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in finance income or costs within the profit or loss.

INR exchange rates used to translate the INR financial information into the presentation currency of Great Britain Pound (£) are the closing rate as at 30 September 2017: 87.44 (31 March 2017: 80.82; 30 September 2016: 86.42) and the average rate for the year ended 30 September 2017: 83.19 (31 March 2017: 80.82; 30 September 2016: 92.02).

f) Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group, and revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable in accordance with the relevant agreements, net of discounts, rebates and other applicable taxes and duties.

Sale of electricity

Revenue from the sale of electricity is recognized when earned on the basis of contractual arrangement with the customers and reflects the value of units supplied including an estimated value of units supplied to the customers between the date of their last meter reading and the reporting date.

Interest and dividend

Revenue from interest is recognised as interest accrued (using the effective interest rate method). Revenue from dividends is recognised when the right to receive the payment is established.

g) Operating expenses

Operating expenses are recognised in the statement of profit or loss upon utilization of the service or as incurred.

h) Taxes

Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or directly in equity.

Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the financial statements.

Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.

Deferred tax assets are recognized to the extent that it is probable that they will be able to be utilized against future taxable income. Deferred tax assets and liabilities are offset only when the Group has a right and the intention to set off current tax assets and liabilities from the same taxation authority. Changes in deferred tax assets or liabilities are recognized as a component of tax income or expense in profit or loss, except where they relate to items that are recognized in other comprehensive income or directly in equity, in which case the related deferred tax is also recognized in other comprehensive income or equity, respectively.

I) Financial assets

Financial assets and financial liabilities are recognized when the Group becomes a party to the contractual provisions of any financial instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or loss which are measured initially at fair value.

Financial assets are de-recognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is de-recognized when it is extinguished, discharged, cancelled or expires.

Financial assets are classified into the following categories upon initial recognition:

i) loans and receivables

ii) available-for-sale financial assets.

The category determines subsequent measurement and whether any resulting income and expense is recognized in profit or loss or in other comprehensive income.

Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets except for assets having maturities greater than 12 months after the reporting date. These are classified as non-current assets. After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics. The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.

Available-for-sale financial assets:

Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for inclusion in any of the other categories of financial assets. The Group's available-for-sale financial assets include Mutual funds and equity instruments. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the reporting date. Available-for-sale financial assets are measured at fair value. Gains and losses are recognized in other comprehensive income and reported within the other reserves in equity, except for impairment losses and foreign exchange differences on monetary assets, which are recognized in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss recognized in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification adjustment within other comprehensive income. The fair value of the mutual fund units is based on the net asset value publicly made available by the respective mutual fund manager.

Reversals of impairment losses are recognized in other comprehensive income, except for financial assets that are debt securities which are recognized in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.

j) Financial liabilities

The Group's financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at amortized cost using the effective interest method. All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within 'finance costs' or 'finance income'.

k) Fair value of financial instruments

The fair value of financial instruments that are actively traded in organized financial markets is determined by reference to quoted market prices at the close of business on the Statement of financial position date. For financial instruments where there is no active market, fair value is determined using valuation techniques. Such techniques may include using recent arm's length market transactions; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.

l) Property, plant and equipment

Property, plant and equipment are stated at historical cost, less accumulated depreciation and any impairment in value. Historical cost includes expenditure that is directly attributable to property plant & equipment such as employee cost, borrowing costs for long-term construction projects etc, if recognition criteria are met. Likewise, when a major inspection is performed, its costs are recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance costs are recognized in the profit or loss as incurred.

Land is not depreciated. Depreciation on all other assets is computed on straight-line basis over the useful life of the asset based on management's estimate as follows:

Assets in the course of construction are stated at cost and not depreciated until commissioned.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the year the asset is derecognized.

The assets residual values, useful lives and methods of depreciation of the assets are reviewed at each financial year end, and adjusted prospectively if appropriate.

m) Intangible assets

Acquired software

Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and install the specific software.

Subsequent measurement

All intangible assets, including software are accounted for using the cost model whereby capitalized costs are amortized on a straight-line basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each reporting date. The useful life of software is estimated as 4 years.

n) Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date and whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset.

Group as a lessee

Contracts to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the group. Leases where the Group does not acquire substantially all the risks and benefits of ownership of the asset are classified as operating leases.

Operating lease payments are recognized as an expense in the profit or loss on a straight line basis over the lease term. Lease of land is classified separately and is amortized over the period of the lease.

o) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary investment of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.

Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated as borrowing costs and are charged to profit or loss.

All other borrowing costs including transaction costs are recognized in the statement of profit or loss in the period in which they are incurred, the amount being determined using the effective interest rate method.

p) Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or cash-generating unit's recoverable amount. A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years. Such reversal is recognized in the profit or loss.

q) Cash and cash equivalents

Cash and cash equivalents in the Statement of financial position includes cash in hand and at bank and short-term deposits with original maturity period of 3 months or less.

For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash in hand and at bank and short-term deposits. Restricted cash represents deposits which are subject to a fixed charge and held as security for specific borrowings and are not included in cash and cash equivalents.

r) Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition is accounted based on weighted average price. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling expenses.

s) Earnings per share

The earnings considered in ascertaining the Group's earnings per share (EPS) comprise the net profit for the year attributable to ordinary equity holders of the parent. The number of shares used for computing the basic EPS is the weighted average number of shares outstanding during the year. For the purpose of calculating diluted earnings per share the net profit or loss for the period attributable to equity share holders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity share.

t) Other provisions and contingent liabilities

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Restructuring provisions are recognised only if a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan's main features to those affected by it. Provisions are not recognized for future operating losses.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities are recognized on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured reliably, even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable provision as described above and the amount recognized on the acquisition date, less any amortisation.

u) Share based payments

The Group operates equity-settled share-based remuneration plans for its employees. None of the Group's plans feature any options for a cash settlement.

All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees' services is determined indirectly by reference to the fair value of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example profitability and sales growth targets and performance conditions).

All share- based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to 'Other Reserves'.

If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different to that estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium.

v) Employee benefits

Gratuity

In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan ("the Gratuity Plan") covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment.

Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each Statement of financial position date using the projected unit credit method.

The Group recognises the net obligation of a defined benefit plan in its statement of financial position as an asset or liability, respectively in accordance with IAS 19 'Employee benefits'. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss in the statement of comprehensive income in the period in which they arise.

w) Business combinations

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder's consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.

4. Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and assumptions that affect the reported amounts of assets and liabilities and the 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.

The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of a number of these policies requires the Group to use a variety of estimation techniques and apply judgment to best reflect the substance of underlying transactions.

The Group has determined that a number of its accounting policies can be considered significant, in terms of the management judgment that has been required to determine the various assumptions underpinning their application in the consolidated financial statements presented which, under different conditions, could lead to material differences in these statements. The actual results may differ from the judgments, estimates and assumptions made by the management and will seldom equal the estimated results.

a) Judgements

The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on the financial statements.

Deferred tax assets

The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group's latest approved budget forecast, which is adjusted for significant non-taxable income and expenses and specific limits to the use of any unused tax loss or credit. The tax rules in India in which the Group operates are also carefully taken into consideration. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits or uncertainties is assessed individually by management based on the specific facts and circumstances.

Application of lease accounting

Significant judgment is required to apply lease accounting rules under IFRIC 4 Determining whether an arrangement contains a Lease and IAS 17 Leases. In assessing the applicability to arrangements entered into by the Group, management has exercised judgment to evaluate customer's right to use the underlying assets, substance of the transaction including legally enforced arrangements and other significant terms and conditions of the arrangement to conclude whether the arrangements meet the criteria under IFRIC 4.

Recognition of Revenue and collectability of receivables

The captive consumers of OPGS Power Gujarat Private Limited (OPGG) (a subsidiary of the company) have withheld from the sales invoices a cumulative amount of £31.4 Million (31 March 2017: £26.10 Millions) towards cross subsidy surcharge (CSS) levied by GUVNL through their DISCOMs, challenging the grounds of fulfilment of required shareholding criteria by OPGG to qualify as a captive power generation unit as per Rule 3 of the Electricity Rules,2005. The Group, based on a legal opinion, strongly believes that OPGG is in compliance with the said provisions and qualifies as a captive power generating unit. Further, in order to settle the matter amicably, OPGG based on an order obtained from the high court has entered into a scheme of arrangement wherein the share capital of OPGG has been reconstituted to give effect to the required economic interest and voting rights to the captive shareholders retrospectively from 01 April 2015 and to be treated continuously as a captive generating unit. In making its judgment, the group has considered the criteria for recognition of revenue as set out in IAS 18 and the relevant regulatory requirements and is of the opinion that recognition of revenue is appropriate. OPGG has recently received a letter from Gujarat authorities granting captive generating status to the subsidiary for FY 17-18. Gujarat authorities continue reviewing and verifying OPGG's statements and data for granting similar captive generating status for FY 16 and FY 17.

Further, the Group has assessed that the levy of CSS is in violation of certain regulatory orders and such unilateral and arbitrary action does not impact the 'flow of the said economic benefit' to the group. Accordingly, the management believes that recovery of the aforementioned amounts is highly probable and hence the same has been recongnised after considering necessary provisions on a prudent basis.

b) Estimates and uncertainties

The key assumptions concerning the future and other key sources of estimation uncertainty at the Statement of financial position date, that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year are discussed below:

i) Recoverability of deferred tax assets: The recognition of deferred tax assets requires assessment of future taxable profit.

ii) Estimation of fair value of financial assets and financial liabilities: While preparing the financial statements the Group makes estimates and assumptions that affect the reported amount of financial assets and financial liabilities.

Available for sale financial assets

Management applies valuation techniques to determine the fair value of available for sale financial assets where active market quotes are not available. This requires management to develop estimates and assumptions based on market inputs, using observable data that market participants would use in pricing the asset. Where such data is not observable, management uses its best estimate. Estimated fair values of the asset may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

iii) Other financial liabilities: Borrowings held by the Group are measured at amortized cost. Further, liabilities associated with financial guarantee contracts in the Company financial statements are initially measured at fair value and re-measured at each Statement of financial position date.

iv) Impairment tests: In assessing impairment, management estimates the recoverable amount of each asset or cash-generating units based on expected future cash flows and use an interest rate for discounting them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate;

Useful life of depreciable assets: Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets.

5. Segment reporting

The Group has adopted the "management approach" in identifying the operating segments as outlined in IFRS 8 - Operating segments. Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators at operating segment level. Accordingly, there is only a single operating segment "generation and sale of electricity". The accounting policies used by the Group for segment reporting are the same as those used for consolidated financial statements. There are no geographical segments as all revenues arise from India.

6. Other income

Other income comprises of:

7. Finance Cost

Finance cost comprises of:

8. Finance income

Finance income comprises of:

9. Intangible assets

10. Property, plant and equipment

The property, plant and equipment comprises of:

11. Trade and other receivables

Trade receivables are generally due within 30 days and therefore short term and the carrying value is considered as reasonable approximation of fair value. An amount of £40,340,893 (2017: £83,157,785) has been pledged as security for borrowing. For the period ended 30 Sep 17, trade receivable of £500,000 were impaired and provided for. Trade receivable that are neither past due or impaired represents billing for the month of September 2017.

The movement in the provision for trade receivables is as follows:

The creation of provision for impaired receivables has been included in general and administrative expenses in the consolidated statement of comprehensive income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

12. Cash and cash equivalents

Cash and short term deposits comprise of the following:

Short-term deposits are placed for varying periods, depending on the immediate cash requirements of the Group. They are recoverable on demand. Restricted cash represents deposits maturing after three months have been pledged by the group in order to secure borrowing limits with banks.

13. Borrowings

The borrowings comprises of the following:

The group has serviced long-term and short term debt interest on all borrowings except for interest of £3.9 million relating to OPGS Power Gujarat Private Limited ("OPGG") for the quarter ending 30 Sep 2017. This is primarily due to the Cross Subsidy Surcharge (CSS) issue (see note 4(a)). The Group is evaluating various options allowing to defer payment of interest payments. Following this evaluation OPGG will apply to the banks to implement appropriate debt restructuring scheme. Accrued and unpaid interest was classified as other current liabilities.

14. Dividend

On 31 October 2017, the Company's Annual General Meeting approved final dividend of 0.72 pence per share for the financial year 2017. Final FY 2017 dividend of 0.72 pence per share will be paid on 22 December 2017. OPG received final valid elections for the Script Dividend Alternative in respective of 173,478,295 existing ordinary shares of 0.0147P each in the capital of the company. Accordingly, based on the previously announce reference price of 26.023P per share and final dividend of 0.72P per share, a total of 4,799,742 new ordinary share of 0.0147P each will be allotted to the Companies' shareholders who elected to receive the Scrip Dividend Alternative. Following admission, the company will have 356, 308,697 ordinary shares in issue admitted to trading on AIM.

15. Buy back

As previously reported in the FY17 Annual Report, OPG Energy Private Limited ("OPGE") and OPG Renewable Energy Private Limited ("OPGRE") made an offer of buy back of their shares of their shares at face value. Having completed the due diligence process in this respect, the Group tendered its shares under the offer. The buyback was completed in November 2017 and the Group received £45,600 for its shares in OPGE and OPGRE subsequent to reporting period end. OPGE and OPGRE have combined generation capacity of 36MW and completion of the buyback resulted in a reduction of the Group's generation capacity to 714MW. Group's investments in OPGE and OPGRE were fully impaired in previous years.

16. Tax expenses

The Group has assessed its current tax liability for the period ended 30 September 2017 and its estimated tax liability as nil. The tax expense in the income statement pertains to deferred tax liability that has been assessed for the period, that is the temporary differences between the carrying value of its Property, plant and equipment as per accounting books and tax books.

Details of tax expense is provided below:

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