Sign up UNITED KINGDOM
Proactive Investors - Run By Investors For Investors

OPG Power Ventures back on an even keel

"We see this statement as evidence that the company has overcome the one-off events in Q3," said Cantor Fitzgerald
Power stations
Plant load factors are moving up again and cash collection is improving

OPG Power Ventures PLC (LON:OPG), the developer and operator of power generation plants in India, traded in line with expectations last year.

Meanwhile, operations in the current financial year have been going well, as the group prepares for the construction of the 62 megawatt (mw) Karnataka solar project, which is set to begin in the third quarter of 2017. The commissioning of its first solar project should strengthen and diversify cash flows.

In the year to the end of March, the company generated around 4.37bn kilowatt hours (kWh) of energy, up from 3.35bn the year before.

The plant load factor (PLF) at Chennai dipped to 76% from 78% the year before, but at its newer plant, Gujarat, the PLF rose to 63% from 52%, well on its way to its targeted level of 75%.

“These figures have been achieved despite one-off external factors reducing output at Chennai during Q3. The site has clearly recovered and in April achieved a PLF of 79%. Gujarat’s lower figure reflects its ramp up during the year. It achieved 66% in April and is expected to hit 75% during FY 18,” noted broker Cantor Fitzgerald, which is very bullish on the stock.

The Chennai plant realised an average tariff of 5.18 rupees (Rs5.18) in fiscal 2017 and a deemed off-take charge of Rs1.50 per unit for deemed generation.

The difference between the tariff and the cost of coal on a per unit basis - known as the clean dark spread - was Rs2.63 at Chennai.

At Gujarat, the average tariff per unit was Rs4.03 and the clean dark spread was Rs1.37 per unit.

“These compare with our forecasts of Rs 2.54 and Rs 1.50, which overall is slightly ahead given the greater output at Chennai,” Cantor commented.

“The spreads were driven by an average landed coal price of Rs 3,526/t. The company has purchased coal recently on short term contracts which in our view seems sensible given the apparent direction of coal markets. It may allow it to better protect spreads in FY 18 although we are not adjusting forecasts at this stage,” the broker revealed.

Cantor also noted that cash collection has been improving, with OPG collecting £24mln of outstanding revenues from the Tamil Nadu state electricity company, TANGEDCO, with the remaining£11mln still outstanding expected to be coughed up in the current financial year.

"During the year we stuck to our strategic priority of maximising the cash contribution of our existing assets and thereby making our business stronger for the long term,” said Arvind Gupta, chairman of OPG.

“We have delivered on our commitment to start paying dividends following a continued strong performance by our flagship plant at Chennai,” he added.  

“At the younger asset in our portfolio, Gujarat, our attention has been devoted to increasing the mix of higher value sales, accelerating slow receivables and establishing a significantly better debt repayment profile. We thus maintain our commitment to strong cash generation from our asset portfolio to fuel dividends and growth," the OPG chairman concluded.

Cantor reiterated its ‘buy’ recommendation and punchy 124p target price.

The shares rose 4.2% to 43p on the trading update.

View full OPG profile View Profile

OPG Power Ventures Plc. Timeline

Related Articles

oil and gas operations
April 19 2018
The first two potential new wells will be drilled in around 45 days, and investors will be keen to see the results
coal trucks
March 14 2018
Polish group Cobant is the latest partner and will work with AEG to develop a new "Super Fuel" that combines CoalSwitch and reclaimed coal
oil and gas operations
February 07 2018
Touchstone shares advanced as a 10-well programme was launched in Trinidad

No investment advice

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable or advisable for any specific person. You further understand that none of the information providers or their affiliates will advise you personally concerning the nature, potential, advisability, value or suitability of any particular security, portfolio of securities, transaction, investment strategy, or other matter.

You understand that the Site may contain opinions from time to time with regard to securities mentioned in other products, including company related products, and that those opinions may be different from those obtained by using another product related to the Company. You understand and agree that contributors may write about securities in which they or their firms have a position, and that they may trade such securities for their own account. In cases where the position is held at the time of publication and such position is known to the Company, appropriate disclosure is made. However, you understand and agree that at the time of any transaction that you make, one or more contributors may have a position in the securities written about. You understand that price and other data is supplied by sources believed to be reliable, that the calculations herein are made using such data, and that neither such data nor such calculations are guaranteed by these sources, the Company, the information providers or any other person or entity, and may not be complete or accurate.

From time to time, reference may be made in our marketing materials to prior articles and opinions we have published. These references may be selective, may reference only a portion of an article or recommendation, and are likely not to be current. As markets change continuously, previously published information and data may not be current and should not be relied upon.

© Proactive Investors 2018

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use