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OPG Power to push on again as coal price pressure eases

Snapshot

  • OPG owns a 414Mw capacity coal-fired power station at Chennai, Tamil Nadu
  • Weaker seaborne coal prices are giving margins a boost
  • Developing solar power north of Bangalore
Meter

Quick facts: OPG Power Ventures PLC

Price: 16.19 GBX

AIM:OPG
Market: AIM
Market Cap: £64.88 m
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How It's doing

India-focused OPG Power Ventures PLC (LON:OPG) has re-grouped following major disruption from a spike in the price of seaborne coal.

The company is focused on cutting its debt levels while focusing on its profitable coal station in Chennai.

The India-based power generator reported an 8.9% increase in profit from continuing operations to £7.4mln in the half-year to September, while earnings per share rose by 23.1% to 1.97p.

First-half revenue amounted to £78.4mln, compared to £77.9mln in the same period of last year and pre-tax profit was reported at £9.7mln for the period.

Gross debt also shrunk by 17.6% to £70.7mln.

“By maintaining our sector-leading operational performance, we intend to sustain the rate of term debt repayment with the objective that in 2023 we will be debt-free. 

"As interest costs decline in line with borrowings we will generate increasing levels of free cash flow which, in due course, will increase shareholder value substantially."

What the boss says: Arvind Gupta, chairman 

"We will maintain our strategy of maximising operational performance and deleveraging.

"Operationally, the Company is benefitting from the current level of coal prices and we expect to maintain strong plant load factors of between 75 and 80 per cent in FY20.

"This will allow us to demonstrate good profitability in FY20."

Inflexion points

  • Further deleveraging – gross loans reduced to £70.7 million,
  • Return to cash dividend from scrip currently
  • Hedged 60% of the coal requirement for the year 2019-20
  • Seaborne coal prices have weakened meaning a material cost reduction

Blue Sky

Indian economy is expected to be the fastest-growing major economy resulting in high GDP growth and higher demand for electricity.

GDP is set to grow 7.5% in 2019 yet consumption of electricity in India is low by western standards at 1,075 Kwh per person.

Power demand is forecast by OPG to grow 6-7% annually over the next five years

Coal prices have reduced by 4% from the end of September 2018 to the third week of February 2019.

Expansion of solar capability

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