Long Term Variable Tariff Arrangement Chennai III

RNS Number : 6268Y

OPG Power Ventures plc

28 January 2014

 



28 January 2014

OPG Power Ventures plc

("OPG" or the "Company")

Long Term Variable Tariff Arrangement for 80 MW Chennai III Unit

OPG Power Ventures PLC, the developer and operator of power generation plants, is pleased to announce that it has entered into a long term variable tariff arrangement ("the LTVT arrangement") with the Tamil Nadu State Electricity Utility, TANGEDCO for the sale of 74 MW of its capacity from its 80 MW Chennai III unit ("C3").  Under the 15 year arrangement, commencing on 1 January 2014, the Company will benefit from foreign exchange protection on coal purchases as well as protection against inflation on certain inland logistics costs. 

Foreign exchange protection on imported coal at C3

Prior to the LTVT arrangement, most of C3's output was sold to TANGEDCO under a fixed, Rupee denominated, one year tariff agreement of Rs5.50 per kWh due to expire in May 2014 ("the Short Term Fixed Tariff Arrangement" or "STFT").  Whilst carrying both the risk and reward of any revisions in tariff beyond May 2014, the STFT type of arrangement does not offer any predictable or long term protection against foreign exchange fluctuations on input fuel or international freight costs.      

The LTVT allocates the risk and reward of currency movements on the cost of purchasing as well as international freight on such coal, to the power purchaser.  Since the Company's plants are designed to utilise a broad range of coals of different specifications efficiently, which also have varying price volatilities, the Company has secured this currency protection in relation to one-third of its current output.  In addition, the LTVT incorporates protection against escalation in certain transportation and logistics costs.

Tariff estimate at current exchange rates

At the currently prevailing exchange rate, the current tariff receivable by the Company under the LTVT is expected to be Rs 5.51 per kWh with a change of Rs 1 against the US dollar leading to a corresponding change in tariff of Rs 0.05 per kWh.  

Arvind Gupta, Chief Executive commented: "In recent years the power industry in India has been buffeted by volatility in input costs and foreign exchange rates.  The Board believes entering into the LTVT arrangement is opportune and adds diversity in our sales mix at tariffs that are expected to be attractive and further provides a long term basis for mitigating some of the volatility that exists in our industry. We expect this combination to be good for shareholder returns."

For further information, please visit www.opgpower.com or contact:

OPG Power Ventures PLC	[phone]
Arvind Gupta
V Narayan Swami
Cenkos Securities (Nominated Adviser & Broker)	[phone]
Stephen Keys / Camilla Hume
Tavistock Communications	[phone]
Simon Hudson / James Collins

Disclaimer

This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The making of this announcement does not constitute a recommendation regarding any securities. Certain statements, beliefs and opinions contained in this announcement, particularly those regarding the possible or assumed future financial or other performance of OPG, industry growth or other trend projections are or may be forward looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "plans", "goal", "target", "aim", "may", "will", "would", "could" or "should" or, in each case, their negative or other variations or comparable terminology. These forward looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond OPG's ability to control or predict. Forward-looking statements are not guarantees of future performance. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Neither OPG, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations, OPG is not under any obligation and OPG expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per OPG share for the current or future financial years would necessarily match or exceed the historical published earnings per OPG share.

 

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