Opg Power Regulatory News (OPG)

28 February 2019

OPG Power Ventures plc

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

Trading update for Nine Months FY19

Summary

For the nine months to 31 December 2018

· Production of 2.15 billion units, up 4.5 per cent on the corresponding period in FY18

· Plant Load Factor ("PLF") at Chennai was 79%

· Average tariff for nine months FY19 was Rs5.33 as a result of 7 per cent increase to Rs5.58 effective from October 2018 for captive consumers

Operations

· Coal prices reduced by 4 per cent from end of September 2018 to third week of February 2019

· Unit 4 (180 MW) has been under shut down from early December 2018 whilst turbine repairs have been undertaken

Corporate

· FY18 full year scrip dividend of 1p per share (FY17: 0.98p per share) was paid in December 2018

· Chennai Unit 1 term loans were fully repaid in December 2018, and

· Parent company guarantee for short-term loan of Gujarat plant was released upon loan repayment by the Gujarat Plant

Arvind Gupta, Executive Chairman, commented:

"We are pleased to report another strong operational performance by Chennai plant for the first nine months of FY19 and we expect to meet market profit expectations for our full FY19 results."

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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')

Group Operations Summary

Note:

1. MU / Mue - millions units or kWh of equivalent power

2. Reported Average PLF based on Mue

Total Generation at the Chennai plant excluding deemed generation during the first nine months of FY19 was 1.97 billion units, 8.4 per cent higher than during the corresponding period in FY18. This increase in generation was primarily due to higher plant availability and increased demand by industrial customers and the Company is pleased to report that FY19 EBITDA, Profit Before Tax and Profit After Tax are expected to be within market expectations.

The Company benefitted from higher tariffs, lower coal prices and continuing strong operating performances of Units I, II and III. However, Unit IV (180 MW) was shut down in early December 2018 to undertake turbine repairs caused by the malfunctioning of a high pressure by-pass valve. Whilst this work was initially expected to be no more disruptive than the shut down for annual maintenance, the repair works, which have been progressed under the supervision of the turbine manufacturer, continue and Unit IV is now expected to re-start operations by mid-March 2019. As a result of this shut down the Company is expecting to experience a one off loss of generation of approximately 367 million kWh assuming PLF of 85%.

Average tariffs realised during the first nine months of FY19 were Rs5.33 (nine months FY18: Rs4.96) and for FY19 as a whole are expected to be approximately Rs5.40, as tariffs were increased to approximately Rs5.58 in October 2018 (FY18: Rs4.92). Deemed offtake under the Long Term Variable Tariff Agreement ("LTVT") with TANGEDCO is entitled to a fixed capacity charge of Rs1.50.

Coal Costs

The average landed cost of coal was £50.5 (Rs 4,622) per tonne during nine months of FY19, which was approximately 2 per cent higher than in FY18. Coal prices have reduced by 4 per cent from the end of September 2018 to the third week of February 2019. We are cautiously optimistic that the lower coal prices will provide some additional benefits in FY20.

Focus on Deleveraging

All scheduled interest and principal repayments at Chennai, amounting in aggregate to £23.2 million (Rs2.06 billion), including £16.2 million (Rs1.44 billion) of principal repayments, were made during the nine months ended 31 December 2018.

As at 31 December 2018, total borrowings were £87.5 million (Rs7.75 billion), including term loans of £76 million (Rs6.74 billion) and working capital loans of £11.5 million (Rs1.01 billion). Gross debt is higher than previously projected on account of increase in working capital loans which were utilised primarily to repay trade payables and purchase coal inventory and FX impact of weakened INR against GBP. This should start reversing when Chennai IV recommences production (expected by mid-March). After scheduled repayments, term loans are expected to reduce to £69.1 million (Rs6.32 billion) at 31 March 2019, assuming 91.5 INR/GBP exchange rate, as projected.

The Company achieved a major milestone by fully repaying term loans with respect to Unit I of the Chennai plant (77 MW out of 414 MW) in December 2018. The remainder of the Chennai plant term loans are scheduled to be fully repaid for Unit II and III in calendar year 2022 and for Unit IV in Q3 2023.

Update on shipping Joint Venture

In 2014, the Company formed a Joint Venture with Noble Chartering Ltd ("Noble"), to secure competitive long term freight rates for its imported coal requirements. In this Joint Venture company, the Company and Noble jointly purchased two 64,000 MT cargo vessels.

As previously reported, during FY18, Noble, due to a change in their group strategy, requested the Joint Venture to be terminated. As the vessels were still under construction the termination process was to be initiated in FY19. As part of this process, one of the vessels was sold in January 2019. We currently expect that the sale of the second vessel and the termination of the Joint Venture to be concluded during CY 2019.

Release of parent company guarantee given for short-term loan of Gujarat plant

As previously reported, the Company has no obligations with respect to the deconsolidated Gujarat plant's borrowings apart from a parent company guarantee of £5.8 million with respect to a short-term loan taken by the Gujarat plant. The Gujarat plant fully repaid this short-term loan, following which the parent company guarantee was released by the lender. With the release of this guarantee, the Company has no obligations with respect to the Gujarat plant's borrowings.

Scrip Dividend and Issue of Equity

As previously reported, the final FY18 dividend of 1 pence per share was paid in December 2018 and a total of 31,601,503 new Ordinary Shares were allotted by the Company to shareholders.

62 MW Karnataka Solar projects

Group's Karnataka solar projects (62MW) are situated north of Bengaluru. All plants are operational and have met all critical operating metrics. The Capacity Utilisation Factor for the solar projects is expected to be around 18 per cent in FY 19.

Outlook

The Board is confident that Unit IV of Chennai plant will shortly return to normal operations and will provide strong operational performance. The Company continues to expect its FY19 EBITDA, Profit Before Tax and Profit After Tax to be within market expectations. The Company continued to repay its scheduled term loans during the first nine months of FY19 and these term loans are expected to reduce during the last quarter of FY19, as scheduled. The Indian economy is expected to be the fastest growing major economy resulting in high GDP growth and higher demand of electricity. Hence, looking forward to FY20, the Company is expected to benefit from robust tariffs and the projected level of coal prices. Term loans will continue to be repaid in accordance with their repayment schedule and the Company expects to maintain its long term profitability and sustainable business model.