Final Results

25 September 2024

OPG Power Ventures Plc

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

Final Results for the Year Ended 31 March 2024

OPG (AIM: OPG), the developer and operator of power generation assets in India, announces its final results for the year ended 31 March 2024 ("FY24").

FY24 Summary:

·      Strong recovery in FY revenues to £155.7m (FY 2023 £58.7m) with our Chennai operations performing well.

·      OPG generated cash of £20.8m in the period. At the end of the period, OPG had a net cash position of £3.6m (including restricted cash of £10.1m being cash deposits and mutual fund holdings held as collateral).

·      Adjusted EBITDA* was £16.7m in FY 24 (FY 23: £16.5m). The comparable 2023 figure includes profit from opportunistic coal sales, and income from an insurance settlement. Excluding the effects of these EBITDA in 2024 increased 57%.

·      Statutory profit before tax was £7.5m in FY 24 (FY 23: £10.4m) with the comparable again reflecting income from coal sales and settlement of an insurance claim and also including an impairment reversal of £2.95m and share of net Profit from associates of £1.36m.

·      NAV per share of 42.3p per share principally represents the carrying value of our core asset in Chennai. The Board estimates that the replacement cost for assets of this nature and location is considerably higher than the carrying value.

*Defined as Earnings before Interest, Tax, Depreciation & Amortization and Share Based Payments

**Includes £2.2m coal sales and £3.5m insurance settlement.

*** Includes £2.2m coal sales, £3.5m insurance settlement and impairment reversal of £2.95m and share of Net Profit from associates of £1.36m

Mr. N. Kumar, Non-Executive Chairman said: "The financial year 2023-24 saw OPG record an impressive PLF and robust financial performance. This is a testimony to the continued efforts of the Company to achieve excellence in all areas of operations".

We continue to optimally use our facilities, improving efficiency and reducing emissions thereby improving our operational performance. Our commitment to sustainable practices has not only enhanced our operational resilience but also reinforced our position as a responsible leader in the energy sector.

The international coal prices have stabilized after a long time being volatile from the COVID induced supply chain issues and Russia-Ukraine war, marking a return to normalcy. This reduction and stabilizing of prices have led to improved power generation and consequently increased operating revenues and profits.

"In light of the above, OPG looks forward to FY24/25 with an increasing level of optimism."

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 UK version of the EU Market Abuse Regulation (2014/596) which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended and supplemented from time to time.

Chairman's Statement

Proof of Excellence

The financial year 2023-24 saw OPG record an impressive PLF and robust financial performance. This is a testimony to the continued efforts of the Company to achieve excellence in all areas of operations.

We continue to optimally use our facilities, improving efficiency and reducing emissions thereby improving our operational performance. Our commitment to sustainable practices has not only enhanced our operational resilience but also reinforced our position as a responsible leader in the energy sector.

The international coal prices have stabilized after a long time being volatile from the COVID induced supply chain issues and Russia-Ukraine war, marking a return to normalcy. This reduction and stabilizing of prices have led to improved power generation and consequently increased operating revenues and profits.

Strong Performance

The current fiscal year saw the stabilization of coal prices. The Company was able to operate its units at optimal levels thereby delivering strong operating and financial performance. The Group report revenue of £155.7m and an EBITDA of £16.7m.

The Group remains one of the least leveraged power generating companies in India. Prudent cash flow management continues to be a prime focus area.

Building a Sustainable Future

The broad skill set within our team and their commitment to excellence steered by an experienced leadership team have helped achieve a strong performance for the year. The Group's continuous investment in its people and enhancing their skill levels have made our business agile and robust. The FY 24 results are a testimony of the collective efforts of our team. I am happy to note the Company is well positioned to capitalize on opportunities for growth.

We are also pleased to present our fourth standalone ESG report for FY 24. The report summarizes our objectives, activities, and performance from an ESG perspective. This report showcases instances of how we have upheld our commitments and implemented our management approach across various ESG areas, including environmental stewardship, health and safety, community engagement, and corporate governance.

The Company recorded impressive growth in generation of power and consequently on operating revenues. The performance of the Company is discussed in detail in the CEO's and the CFO's reviews.

Indian Economy and Power Sector Update

With a GDP growth rate of 7.8 percent (Source: IMF World Economic Outlook Projections, April 2024), India also witnessed a surge in power demand of approximately 7.02 percent during FY 24, reaching 1,738.1 billion units (BU) compared to 1,624.16 billion units (BU) in FY 23. The surge in energy demand has been fuelled by a confluence of factors, including the Government of India's "Power for All" initiative, population growth, rapid urbanization, industrialization, rising air conditioning usage, and sustained economic expansion.

During FY 24, India added 26 GW of new generation capacity and as of 31 March 2024 the total generation capacity reached 442 GW of which 211 GW is from thermal sources. Compared with the 55% share in installed capacity, the thermal sector contributed 76% of India's electricity generated during FY 24, primarily on account of the higher load factors that thermal plants can achieve.

In India, temperatures in most parts of the country are expected to be above average during summer 2024. The Government of India has projected a peak power demand of 260 GW during the summer season in light of an extended heat wave. By 2030, the Government of India estimates peak electricity demand to exceed 400 GW. 

Outlook

During FY 24, with increased generation and continued deleveraging, the Company has significantly strengthened its balance sheet and liquidity position which provides OPG with the financial strength and latitude to pursue new growth opportunities in energy transition. 

India is on track to become the world's third largest economy in the years to come and the country's rapid economic growth and burgeoning population have continued to create a significant demand for energy, prompting the country to undergo a transformative shift in its power sector. Currently, while India ranks third in total power consumption globally, it is significantly lagging in per capita consumption. The demand for energy will continue to increase not only in the industrial sector but also in the retail sector where the retail customer will have an increased reliance on energy due to a rise in temperature, improved lifestyle and increasing purchasing power. The Government of India's initiatives have improved the state utilities financial health, thus enhancing the investment climate for power generation and transmission.

The increase in electricity demand and transformation in the power sector in India provides a prime opportunity for OPG to continue to generate profitable revenues through its sustainable operations.

The Company will continue to generate strong cash flows from operations and deleverage its balance sheet to maximise returns to its shareholders.

I take this opportunity to extend my sincere gratitude to all our stakeholders and employees for their continued support to our growth.

N. Kumar

Non-Executive Chairman

24 September 2024

CEO's Operational Review

OPG remains agile in its market strategy, continuously assessing opportunities to optimize capacity and maximize margins. By balancing stable, long-term contracts with short-term supplies and exchanges, the Group ensures robust operational efficiency amid fluctuating market conditions. This proactive approach underscores OPG's commitment to strategic resource management and sustainable profitability.

In the past year, we have reinforced our commitment to sustainable business stewardship and reaffirmed our determination to prove that our purpose-driven, impact-focused business can deliver sustainable performance today and well into the future. The Group continues to honour all its commitments to all stakeholders.

A review of the Group's operations is as follows:

Plant Availability and Generation

OPG's operational performance depends on its sales model, which includes a mix of power purchase agreements with various state utilities, Industry and Power Exchanges, plant availability, plant load factors, and auxiliary power consumption.

Following, the post-Covid stabilization of coal prices, ongoing geopolitical tensions such as the Ukraine-Russian war and instability in the Middle East pose potential risks of supply disruptions. Despite these challenges, the Group has proactively secured its raw material procurement and put in place robust processes to safeguard its operations from any potential interruptions. This strategic approach underscores the Company's resilience in navigating external uncertainties to maintain operational continuity.

OPG's plants are designed to use a wide range of fuels from various sources and are equipped with world class air-cooled condenser technology to minimise water consumption. This flexibility, though initially capital-intensive, paid dividends during challenging times, allowing us to use cheaper coal from various sources, including Indian coal.

Total generation at our plant in FY 24, including deemed offtake, was 2.32 billion units (FY 23: 1.53 billion units). The increased generation was due to higher demand of electricity in India and the Company's ability to secure short term profitable contracts. OPG continues to focus on such contracts in the current financial year.

The plant load factor ('PLF'), including deemed offtake, in FY 24 was 69.21 percent (FY 23: 42.1 percent). Auxiliary consumption levels are a key measure of plant efficiency, typically averaging around 8.5 percent for our units. OPG has implemented several measures and technical improvements to enhance plant efficiency by optimising auxiliary power consumption.

Power Offtake

In FY 24, the coal indices have decreased and the Group is consciously focusing on using a mix of domestic and international coal with the ultimate objective of generating electricity at optimum cost to achieve profitable operations. In FY 24, owing to various measures taken by OPG, the plant realised an average tariff of 7.5p (FY 23: 8.6p).

Coal and Freight

The Group has consistently imported low sulphur coal from reputable mines with established long standing relationships. In FY 24, we purchased coal through medium-term Fuel Supply Agreements (FSA) allowing us to procure  1,99,600 metric tons of Indian coal . Current coal prices and sea freight rates are returning to normal levels and the Group continues to actively review its procurement policy to mitigate the impact of coal price volatility.

Safety and Environmental Compliance

The Group has made excellent progress with its safety programs, recording zero Total Recordable Incident Rate (TRIR) in FY 24. We continue to minimise water consumption using air-cooled condensers and the Group's philosophy of continual improvement to remain a zero discharge unit.

Avantika Gupta

Chief Executive Officer

24 September 2024

CFO's Financial Review

The following is a commentary on the Group's financial performance for the year ending 31 March 2024.

Revenue

The Group's revenues saw an increase of £97m, representing a rise of 165.30 percent in FY 24. This strategic shift was driven by the Group's focus on profitable operations and capitalising on opportunities.

Adjusted EBITDA for FY 24 amounted to £16.7m, equivalent to 10.71 percent of revenues, compared to the previous year's figure of £16.5m, which constituted 28.15 percent of the previous year's revenue.

Income Statement

In FY 24, the average tariff realised was 7.5p/kWh, marking a 12.79 percent decrease compared to the previous year's 8.6p/kWh. However, the total generation (including deemed generation), amounted to 2,322m units, which represented a substantial increase of 51.96 percent when compared to the previous year's 1,528m units. The increased generation was due to higher demand for electricity in India and the Company's ability to secure short term profitable contracts. OPG continues to focus on such contracts in the current financial year.

Coal prices stabilized during the year compared with the highly volatile prices in the previous year. However, the continuing Russia-Ukraine conflict and the unrest in the Middle East creates uncertainty with regard to uninterrupted raw material supplies.

Gross Profit

In the fiscal year, Gross Profit (GP) amounted to £27.67m, equivalent to 17.77 percent of revenue. When compared to the previous year (FY 23 - £16.42m, representing 27.98 percent of revenue), the GP increased by £11.25mrepresenting a 68.66 percent rise. This increase is due to the stabilisation of coal prices, where the Company was able to significantly improve the power generation leading to higher revenues and consequently had a positive impact on GP as compared to the previous year.

The cost of revenue primarily comprises fuel costs. The table below provides insight into the average prices of coal consumed in FY 24 and FY 23.

Adjusted EBITDA

Adjusted Earnings before Interest, Depreciation, Taxes and Amortisation ('Adjusted EBITDA') serves as a measure of a business's cash generation from operations before accounting for depreciation, interests, exceptional charges, and non-standard or non-operational expenses, such as share-based compensation, amongst others. Adjusted EBITDA is a valuable tool for analysing and comparing profitability over different periods and amongst companies, as it removes the impact of financing and capital expenditure.

Figures pertaining to FY 23 are reinstated on account of reclassification completed during FY 24, where applicable.

In FY 24, Adjusted EBITDA amounted to £16.7m, in contrast to £16. 52m in FY 23, reflecting an increase of £0.16m or 0.97 percent. This increase can primarily be attributed to increase in gross profit and revenue in the current year when compared to the previous year.

Profit from operations before tax was £7.55m, equivalent to 4.85 percent of revenue, as compared to £6.12m, representing 10.42 percent of revenue, in FY 23.

Profit Before Tax (PBT) reconciliation for FY 24 (£m)

Taxation

The Group's operating subsidiary continues to benefit from a tax holiday period. However, the subsidiary is subject to Minimum Alternate Tax (MAT) on its accounting profits. The taxes paid under MAT can be used to offset future tax liabilities that may arise after the conclusion of the tax holiday period.

The tax expense for the year amounted to £3.44m.

Profit After Tax from continuing operations

Profit After Tax from operations decreased by £3.15m (43.38 percent) from £7.26m to £4.11m in FY 24. This is due to a one time impact recorded in FY23 as shown in the table above.

Karnataka Solar Projects

As previously announced, the Group has been seeking to divest its stake in the solar assets which was impacted by Covid-19. In March this year the Group sold its 31% interest in each asset for a total consideration of approximately £291,000. This compares to an original investment by the Group in these assets of approximately £2,115. The Group will continue to hold the debentures of approximately £10.80m subscribed in these solar assets.

Despite this Board remains committed, as appropriate, to optimise its thermal power business with alternative green solutions, like, bundled power, battery energy storage system, biofuel etc., especially given the strong domestic demand for power, and that the Government of India has placed trust on capacity addition in thermal power sector.

Current Year's Operations

The plants are running well with a Plant Load Factor of 70%. 15% is for long-term open access with 85% in short-term open access or exchange. The exchange rates have a southward trend owing to increased rains in most part of the Country as well as higher solar generation during the day. The Company is continuing to work on securing domestic coal in government schemes to reduce its costs.

Earnings per Share (EPS)

The Group's total reported EPS decreased from 1.80 Pence in FY 23 to 1.02 Pence in FY 24.

Dividend policy

The Board firmly believes that it is in the interests of stakeholders and the Company to conserve cash to meet its operational and capex requirements and also to provide for any adverse impact on account of economic uncertainties. Therefore, the Board has decided not to declare a dividend for FY 24. The Board will revisit the Group's dividend policy in due course.

The Foreign Exchange Gain / Loss on Translation

The British Pound to Indian Rupee appreciated to a closing rate of £1= INR 105.28 as at 31 March 2024 from a rate of £1= INR 101.44 as at 31 March 2023 resulting in an exchange loss of £0.02m. The same has been recognised under "Exchange differences on translating foreign operations".

Property, Plant and Equipment & Intangible Assets

The decrease in net book value of our Property, Plant and Equipment & Intangible assets to £157.6m principally relates to depreciation, deletions, foreign exchange impact offset by additions during FY 24.

Other Non-Current Assets

Other Non-Current Assets (excluding Property, Plant and Equipment & Intangible Assets) have decreased by £2.95m. The major components of this decrease was £6.52m decrease in "Non-current restricted cash". Further, the same is offset by increase in non-current investments by £3.06m from £15.25m in FY23 to £18.31m.

Current Assets

Current Assets increased by 46.73 per cent or £30.15m from £64.52m to £94.67m year on year. Some of the components of the change are as follows:

·    increase in trade receivables by £5.17m,

·    increase in inventories by £11.02m,

·    increase in other short-term assets by £4.55m from £13.64m in FY 23 to £18.19m in FY 24,

·    decrease in Current Tax Assets (Net) by £0.45m from £1.15m in FY 23 to £0.70m in FY 24,

·    increase in current restricted cash by £1.47m and

·    increase in cash and cash equivalents by £8.39m.

Liabilities

Current liabilities have increased by £5.83 m from £55.52m to £61.35m year on year.

·    Borrowings which include current maturities of long term debt decreased by £16.48m from £25.50m to £9.02m principally relates to repayment of debt totalling to £23.54m.

·    Trade and other payables increased by £22.33m from £29.51m to £51.85m.

·    Other current liabilities decreased by £0.02m from £0.50m to £0.48m.

Non-current liabilities have increased by £14.47m (54.77 percent) from £26.63m last year to £41.10m this year.

·    Non-Current portion of long term debt increased by £12.51m from £7.10m to £19.61m on account of the net effect of repayments, new debt as well as movements to current liabilities.

·    Trade and other payables increased by £0.49m from £0.34m to £0.83m.

Net Deferred Tax Liabilities increased by £1.47m from £19.19 m to £20.66m.

Financial position, debt, gearing and finance costs

As of 31st March 2024, total borrowings were £28.63m (31 March 2023: £32.60m). The gearing ratio, net debt (i.e. total borrowings minus cash and current and non-current investments in mutual funds)/ (equity plus net debt), was 6.63 percent (31 March 2023: 8.58 percent). The gearing ratio is a useful measure to identify the financial risk of a company.

The Company issued Non-Convertible Debentures (NCDs) (listed on the Bombay Stock Exchange) equivalent to approximately £3m in August 2023.

During FY 24, net debt (total borrowings minus cash and current and non-current investments in mutual funds) decreased to £6.50m from £16.11m. The Net Debt to Adjusted EBITDA ratio also decreased to 0.39x from 1.00x. This decrease was a result of the Company increasing its cash holdings and reducing borrowings by the repayment of borrowings. During FY 24, the Company repaid debt amounting to £23.54m and the same was offset by increasing the issuance of Non-convertible debentures amounting to £3m in the month of August 2023. The net debt position demonstrates the robustness of OPG's financial position. The Group remains amongst the least leveraged power companies in India.

Finance costs have decreased by 6.07 percent or £0.36m to £5.57m in FY 24 from £5.93m in FY 23. This was primarily due to the impact of a decrease in foreign exchange losses. Finance income increased by £0.75m from £1.22m in FY 23 to £1.97m in FY 24.

Overall, this resulted in a decrease of £1.10m (23.35 percent increase) in Net Finance Costs from £4.71m in FY 23 to £3.61m in FY 24.

Current restricted cash representing deposits and mutual funds maturing up to twelve months amounted to £8.25m (FY 23: £6.79m) an increase of 21.5 percent which have been pledged as security for Letters of Credit, Bank Guarantees and debenture redemption fund.

Non-current restricted cash represents investments in mutual funds of £1.86m (FY 23: £8.38m). Non-current restricted cash decreased by 77.80 percent.

Cash flow

Cash flow from operations; before, and after, the changes in working capital was £17.4m (FY 23: £16.0m) and £20.8m (FY 23: £1.2m) respectively.

The Company is required under AIM Rule 19 to publish its FY 24 Accounts by 24 September 2024.

Ajit Pratap Singh

Chief Financial Officer

24 September 2024