India-based power utility OPG Power Ventures PLC (LON:OPG) has undertaken major surgery after a tough year.
One of its two power stations, Gujarat, has been written off after a series of ongoing disputes over payment and rebates with the provincial government and power distributors meant it missed interest and debt repayment deadlines.
Chennai and solar the future
OPG will not put any more money into Gujarat and its involvement now is effectively at an end.
Efforts in future will be directed toward the Chennai power plant and OPG’s growing solar capacity.
Profits here for the year to March were £6.2mln while revenues rose by 3% to £140mln.
The Gujarat write-down, however, meant a loss for the year of £100.9mln (£23.1mln profit).
Another of the recent issues has been a sharp rise in seaborne coal prices, one of the key raw material inputs for OPG’s power stations though encouragingly for Chennai, the price has fallen back recently.
Coal pressure easing
The landed cost of coal rose 32% over the year but has dropped 18% since August and is forecast to fall by a further 20% to March 2020.
Chennai’s output rose 6% in the year March to 2.49 million kWh.
Since the year end, OPG adds it has negotiated a 5% increase in sales tariffs for the 2019 financial year and most of its group captive customers have renewed three-year contracts.
The group expects to achieve at least a 4% increase in sales tariffs in the following year.
In addition, the loan on the first generator built at Chennai is on schedule to be paid back fully in December.
Four solar projects at Karnataka, meanwhile, are ramping up to full capacity of 62Mw.
Borrowings at the end of the March were £93.5mln, down from £321mln, which reflects the absence of the Gujarat loans.
To preserve cash, there was a scrip rather than cash dividend for the year.
Arvind Gupta, executive chairman: “We are already benefitting from reduced coal prices following the FY18 spike and expect to be able to demonstrate a clear path to profitability in FY19.
“Our focus will remain on repaying the long-term debt on the Chennai plants and look forward to Unit 1 being debt free later this year with the remaining units following within five years.”