FORWARD WITH MOMENTUM Proactive Investor Conference 3 rd December - - PowerPoint PPT Presentation

POWERING FORWARD WITH MOMENTUM

Proactive Investor Conference – 3rd December 2015

Confidential

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This presentation and its contents may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole

• r in part for any purpose without the consent of OPG Power Ventures Plc

(“OPG”). Having taken all reasonable care to ensure that such is the case, the information contained in this presentation is, to the best of the knowledge and belief of the Directors of OPG, in accordance with the facts and contains no omission likely to affect its import. This presentation 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, or a proposal to make a takeover bid in any jurisdiction. Neither this document nor the fact of its distribution nor the making of the presentation constitutes a recommendation regarding any securities. This presentation is being provided to you for information purposes only. Certain statements, beliefs and opinions contained in this presentation, particularly those regarding the possible or assumed future financial or

• ther 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

• ccur 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 presentation will actually occur. You are cautioned not to place reliance on these forward-looking statements. 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

• therwise.

No statement in this presentation is intended as a profit forecast or a profit estimate and no statement in this presentation 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. The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containing this presentation or any part of it comes should inform themselves about, and observe, any such restrictions. Any failure to comply with such restrictions may constitute a violation of the laws of any such jurisdiction. By attending the presentation and/or accepting or accessing this document you agree to be bound by the foregoing limitations and conditions and will be taken to have represented, warranted and undertaken that you have read and agree to comply with the contents of this notice. 1

Confidential

INTRODUCTION

2

Share price performance (rebased)

750 MW Construction completed

20 30 107 113 190 270 600 750 200 400 600 800

MW

600 MW of Operational Capacity

75 150 225 300 OPG All Share AIM 100

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HIGHLIGHTS: HALF YEAR RESULTS

SIX MONTHS ENDED 30 SEPTEMBER 2015 (H1 FY16)

Operational Highlights

• Operating capacity increased by 122% from

270 MW to 600 MW

− First 150 MW Gujarat unit started operation in Apr 2015 and ramped up to 85% in Oct 15 − 180 MW Chennai unit commenced operation and continuing to ramp up

• Operating capacity to increase to 750 MW

imminently

− Second 150 MW Gujarat unit – transmission line connected and synchronised; on track for commercial operation to commence in Jan 2016

Additional highlights for the period

• EBITDA margin of 41% up from 36% compared with

H1 FY15

• Profit before tax of £15.0 million up by 46%

compared with H1 FY15

• EPS of 3.41 pence up by 52% compared with H1

FY15

• Gearing of 56% down from 59% at year-end; loan

repayments of over £13 million made in the period

• Run-rate revenues growing: Oct 2015 billings

approximately £11 million for Chennai plant (Oct. PLF 70%)

• Gujarat revenues and expenses being capitalised

until Jan 2016 (as previously reported)

• New 257 MW of three year captive sales agreements

at Chennai plant, transforms our sales mix

• Non-binding MoUs for pipeline projects

3

*Gujarat financials not included in H1FY16;

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CONSISTENT OPERATIONAL PERFORMANCE

4

Average Tariff Realisation (INR/kWh) (Chennai) Generation (million kWh)

Landed coal cost (Adjusted INR per tonne of 4200 kcal coal)

Plant Load Factor (%) Chennai plants

* Gujarat production included in H1FY16

293 843 902 1,399 1,861

• 500

1,000 1,500 2,000 H1 FY13 H1 FY14 H1 FY15 H1 FY16* FY15 5.67 5.56 5.57 5.64 5.71 5.00 5.25 5.50 5.75 H1 FY13 H1 FY14 H1 FY15 H1 FY16 FY15

3,940 3,807 3,930 4,056 3,365 3,158 3,816 3,971 4,148 3,805

• 2,000

4,000 FY12 FY13 FY14 FY15 H1 FY16 Indonesian Coal Indian Coal

0% 25% 50% 75% 100%

H1 FY12 H1 FY13 H1 FY14 H1 FY15 H1 FY16

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18 48 47 57

• 20

40 60 80 H1 FY13 H1 FY14 H1 FY15 H1 FY16

0.4 1.6 2.2 3.4

• 1.0

2.0 3.0 4.0 H1 FY13 H1 FY14 H1 FY15 H1 FY16

CAGR: 67%

FINANCIAL PERFORMANCE – P&L

5

Revenues (£m)

5 14 17 23

• 5

10 15 20 25 H1 FY13 H1 FY14 H1 FY15 H1 FY16

Profit before tax (pre- exceptional) (£m)

3 8 10 15

• 5

10 15 20 H1 FY13 H1 FY14 H1 FY15 H1 FY16

EBITDA (£m) Earnings per share (£ pence)

CAGR: 34% CAGR: 50% CAGR 57%

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NET DEBT & GEARING

6

• Total debt servicing (interest+principal) - £20m

− Debt repayment of £13m − including pre-payment of £6.6m

• Net Debt of £242.7m

− Increased in INR terms by Rs0.8bn

• Gearing at 56%

39% 49% 50% 59% 56% 0% 20% 40% 60% 80% 100% 50 100 150 200 250 300 H1 FY13 H1 FY14 H1 FY15 FY15 H1 FY16 Net Debt (LHS) Gearing (RHS)

Net Debt (£m) & Gearing (%)

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300 MW GUJARAT: 2ND UNIT COMMERCIAL OPERATION EXPECTED JAN 2016

7

2015 2012

• Adapted from water cooled to air cooled
• Second greenfield site developed; built at the same

time as Chennai IV

• New skills developed e.g. transmission lines
• Similar flexible boiler design as in Chennai
• First 150 MW unit commenced commercial sales

in Q2 CY2015;

• Multi circuit line completed by Gujarat State
• Plant synchronisation complete
• Second 150 MW expected to be in commercial
• perational by Jan 2016

Overview of site Coal shed Control room Insulated sub-station & ACC

• Transmission line

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CHENNAI: DIVERSIFICATION IN SALES

• From 1st October change of sales mix

− 257 MW on 3 year contracts linked to regulated industrial tariff − 80 MW (74 MW net) on 15 year Long term variable tariff (“LTVT”) with currency hedge − 77 MW on short term sales, currently to TANGEDCO

• Diversified to over 150 customers in different

sectors

− Average c.1.5MW per customer − Industrial customers - diversified in Textile, paper, chemicals, automobile & other industries

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Sales based on duration Diversified customer base

19% 19% 62% Short term 15 year 3 year 38% 62% State Industrial

Improved revenue visibility and credit profile

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FINANCIAL STATEMENTS

9

Confidential Year ended 31st March (£m) 1HFY16 1HFY15 2015 Notes Revenue 56.57 46.53 99.97

Increased production from Chennai IV

Cost of Revenue (Excluding Depreciation) (28.62) (27.31) (58.45)

Lower coal costs

Gross Profit 27.9 19.22 41.52 Distribution, General & Administrative expenses 1 (4.7) (2.59) (8.13)

Higher distribution costs due to increased sales to Group Captive

EBITDA 23.3 16.62 33.39 Depreciation (2.7) (1.59) (3.15) Net finance costs (5.19) (4.34) (7.97)

Finance costs increased due to Chennai IV

Income from continuing operations (before tax non-operational and / or exceptional items) 15.31 10.69 22.27 Expenditure during the period on expansion projects (0.28) (0.17) (0.38) Employee Stock Option Charge

• (0.24)

(0.24) Profit before Tax 15.03 10.28 21.65 Taxation (3.02) (2.41) (4.36)

Minimum Alternate Tax

Profit after tax 12.01 7.87 17.29 Earnings per share ( pre-exceptional basis) pence 3.41 2.24 4.91

Increase of 52%

SUMMARY INCOME STATEMENT

• 1. Excluding Depreciation, Employee Stock Option Charge, Expenditure during the period on expansion project & including other income

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Confidential

SUMMARY BALANCE SHEET

11 As at (£m) 30 Sep

2015 30 Sep 2014 31 Mar 2015

Notes

Assets Property, plant and equipment 393.62 335.82 414.55 Chennai IV 180MW & Gujarat 300MW completion,

8% INR – USD movement vs H1 FY15

Investments and other assets 27.39 66.14 27.33 Cash, cash equivalents & Restricted cash 10.88 13.57 14.89 Trade and other receivables 38.87 19.89 28.63 Includes sales from Chennai IV Inventories 4.87 7.71 7.89 Current Tax Asset 0.29 0.14 0.57 Total Assets 475.92 443.27 493.87 Liabilities and Shareholders’ Equity Trade and other payables 57.37 73.71 64.63 Short term borrowings 32.60 8.59 22.85 Increased due to Chennai IV Long term borrowings 217.80 215.59 237.94 Rs 0.8bn higher in INR ; lower in GBP due to

exchange movements

Current, deferred tax and other liabilities 3.92 2.51 3.83 Total liability 311.69 300.40 329.26 Total Shareholders’ equity 164.23 142.87 164.61 Total liabilities and equity 475.92 443.27 493.87

Confidential

SUMMARY CASH FLOW

12 Year ended 31st March (£m) 1HFY16 1HFY15 FY15 FY14 Cash from Operations 21.38 16.18 32.88 30.22 Net Changes in Working Capital (13.02) 8.59 (9.74) (2.25) Interest and Taxes (2.00) (1.43) (12.63) (12.34) Net Cash from Operating activities 6.36 23.34 10.51 15.63 Investment in project assets (10.31) (60.06) (77.11) (128.64) Financial and Other investments (5.18) 6.27 10.57 (10.64) Net Cash used in Investing activities (15.49) (53.79) (66.54) (139.28) Increase in Net Borrowings 12.99 32.16 54.97 108.20 Interest Paid (5.90) (4.78) (9.41) (9.51) Net Cash used in Financing activities 7.09 27.38 45.56 98.68 Net by movement in Cash (2.04) (3.07) (1.06) (15.45) (3.07) Opening cash 6.80 6.64 6.63 22.91 Add / Deduct Exchange Movements (1.94) 0.99 1.23 (0.82) Impact on deconsolidation of subsidiaries

• Add / Deduct net movement in cash for the period

(2.04) (3.07) (1.06) (15.45) Closing Cash Balance 2.82 4.56 6.80 6.64

Confidential

INDIAN ECONOMY & POWER SECTOR UPDATE

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INDIA: 4TH LARGEST POWER PRODUCER IN THE WORLD BUT NEEDS MUCH MORE…

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• 4th largest power producer: c.278 GW
• 3rd biggest coal producer: c.459 MT
• 5th highest wind capacity: c.23.7 GW

IEA anticipates

• 400 GW additional in 15 years
• USD1.6 tn Investment by 2035

All India Installed Capacity 278 GW (Fuel wise breakdown)

Source: World Bank ,11 *India, CEA Sept’15 - provisional data

Per Capita Consumption (kWh) …..to meet demand and match world per capita consumption

Source: CEA Sept15, Coal Ministry of India, Sept, 2015 Source: CEA Sept’15

14

774 914. 957 2,438 4,604 5,949 6,486 13,246 6000 12000 18000 India (2012) India (FY13) India (FY14) Brazil South Africa China Russia US

278 GW

61% 15% 13% 9% 2% 0.005%

Coal Hydro Renewables Gas Nuclear Diesel

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REFORMS

“MAKE IN INDIA” & REFORMS EXPECTED TO ACCELERATE GROWTH

Single ministry for power, coal and renewable energy

• Targets “Power to All by 2020”
• Improvement in transmission and distribution

Renewables boost

• Renewable energy impetus with earmarked investments and budgetary measures and other incentives
• Government targets 175GW of renewable capacity addition by 2022
• Renewable Purchase Obligations Mandatory

Mines and Mineral/ Coal Mines Bill

• Private companies would be allowed to participate in bidding for mining (coal and other minerals) for merchant

use

• Transparent auction process for allocation of 204 mines cancelled by supreme court on Sept, 2014
• All mining leases would be granted through auction by competitive bidding, including e-auction

Interest rate cut

• RBI cuts key interest rates by 125 bps since Jan 2015

Tax reforms

• Government is rationalising tax structure; much awaited Goods & Services Tax (GST) bill is in final stages and

expected to be passed soon

• Pledge to not initiate any new retrospective tax claims; simplify corporation tax regime

Electricity Act reforms proposed

• Supreme court ruling on May-June, 2015 makes Renewable Purchase Obligation (RPO) mandatory
• Unbundling “carriage” and “content” (similar to the UK) – Electricity Amendment bill tabled in parliament

Make in India

• The Make in India program includes major new initiatives designed to facilitate investment, foster innovation,

protect intellectual property, and build best-in-class manufacturing infrastructure

• New de-licensing and deregulation measures are reducing complexity, and significantly increasing speed and

transparency of doing business in India

• 100% Foreign Direct Investment in certain areas of Defence and Rail
• Across all sectors ranging from Automobile, Aviation to Pharma, Power and Textiles

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Confidential

DOMESTIC AND INTERNATIONAL COAL OVERVIEW

16

Global coal prices

Investor Presentation: May 2015

200 400 600 800 1000 2012 2013 2014 2015 (F) 2016 (F) 2017 (F) 2018 (F) 2019 (F) 2020 (F) Australia Indonesia South Africa Colombia Russia USA Other Total

Global coal exports forecast remain unchanged

40 50 60 70 80 90 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15

NEWC INDO 4900 (CV 6000 Equivalent) ICI4 (CV 6000 Equivalent) USDINR

Source: RBI, Macquarie

US$/MT, INR:USD

Source: Macquarie

MT 532 533 540 556 566 590 75 70 105 141 168 214 100 200 300 400 500 600 700 FY10 FY11 FY12 FY13 FY14 FY15 Domestic Coal, mt Imported Coal, mt 452 462 494 550 1,000 200 400 600 800 1,000 1,200 FY13A FY14A FY15A FY16F FY20F

Mt

CIL Targets 1bn tons by 2020

MT

Domestic coal production risen but still reliant on imports

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DISCOMS: FINANCIAL RESTRUCTURING AND REFORMS (UDAY)

Targets

Achieve 15% Aggregate Technical and commercial losses Breakeven of Sales and Purchase price of power by DISCOMS All DISCOMS to be profitable

Measures

Past losses to be taken

• ver by State in a phased

manner Quarterly Tariff increase Improving operational efficiency – reducing losses by c.30% by smart metering, infra upgrade and collection efficiency Reducing input cost – rationalisation of coal costs through streamlining logistics & reducing imports Reducing high interest cost– by converting high cost loans (12-15%) to State bonds (8-9%) Enforcing financial discipline of DISCOMs by aligning them with state finance

Outcomes expected

Rs 880 bn reduction in losses from all measures – a saving of Rs0.95/unit by FY2019 Reduce PSU bank’s exposure to DISCOM debt Reduce counterparty credit exposure for IPP’s with PPA with DISCOMS Operating and financial efficiency of DISCOMS

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OBJECTIVE : To improve financial health of DISCOMs & revive the sector

Confidential

GROWTH

18

Confidential

75% 25% 64% 17% 16% 3%

Thermal Renewables Hydo Nuclear

OUR GROWTH FOCUS

Source: Company & CEA

OPG (illustrative) India (projected)

Sustainable return on equity is key

• Maximise our existing portfolio

− Commissioning and ramp up of Gujarat

• Balance sheet optimisation
• Aligning our generation profile to sourcing needs of
• ur customers

− Increase share of renewables

• Thermal Brownfield/expansion possibilities

− Existing sites provide potential for additional growth − Lowering the overall time frame for new capacity − Our desire to be good environmental custodians

• Acquisition – opportunistic approach

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Confidential

INDIA ENERGY MIX AND EFFICIENCY: FUTURE

• Energy Efficiency & Energy Mix in India Report

(2030) by NITI Aayog based on

− Comprehensive supply and demand inputs sector wise (industry, residential, urban, agriculture etc) − Current and expected technology, energy efficiency − Economic growth, current policies, resource, historical track record

• 4 scenarios from “Least effort “ to Heroic Effort “ – interactive

model with detailed inputs;

• Forecasts based on Level 2 assumptions –

“Determined Effort” ~ most achievable based on current policy and programmes of Government.

− 562 GW installed capacity by 2030 − Coal expected to remain principal contributor; − Renewables 32% of installed capacity & 15% by generation in 2030 − Significant investment required to achieve current targets

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1000 2000 3000 4000 5000

2012 2022 2030 2047

Coal Gas Nuclear Hydro Renewables Other

Electricity Mix by Generation (TWh)

200 400 600 800 1000 2012 2022 2030 2047

Coal Gas Nuclear Hydro Solar PV Wind

Electricity Mix by Installed capacity (GW)

TWh MW

Source: NITI Aayog April 2015 - Report on Energy Efficiency and Energy Mix

in Indian Energy System (2030) using India Energy Security Scenarios 2047

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PIPELINE DEVELOPMENTS: MOU’S FOR 4,200 MW

MoU with Government of Tamil Nadu

• 3,200 MW of thermal and renewable
• 2,700 MW of thermal project

− 720 MW brownfield project − 1 other specific project − Supercritical / high efficiency technology

• 500 MW of renewables (Wind & Solar)
• Assistance with clearance and approvals

MoU with IBC Germany

• 1,000 MW of solar projects in India
• IBC Germany

− Leading EPC in solar PV − has 30 years of experience − 2,500 MW of solar projects worldwide

• Expected to contribute to EPC & operations
• Expected to contribute to c.1/3rd equity for projects

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SUMMARY

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SUMMARY

Key points

• Operational assets of 750 MW
• A large proportion of our asset base in ramp-up
• Financial performance under transformation
• Dividend intention re-emphasised – following

sustainable operation of 750 MW capacity

• Gearing levels managed carefully
• Profitability focused strategy for growth
• Maximising existing portfolio
• Actively evaluating pipeline of brownfield and

renewable projects

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Gujarat Chennai I, II, III,IV & Waste Heat Mayavaram

Confidential

APPENDIX

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Confidential

OPG’S FLEXIBLE REVENUE MODEL

Flexible - Group Captive

• Uncapped ROE
• Variable term and market pricing
• Flexibility as to customers
• Meeting demands of high tension, industrial consumer
• Reliability of provision of power
• Fixed price tariff
• Fixed term
• Fixed return
• State support for land and debt

E.g. Reliance, Adani, TATA Power

Regulated - Majority players have long term PPA’s with State utilities at fixed prices

HT III – Commercial Establishments HT IA – Industrial Establishments: HT IB – Railway Traction, Educational institutions LT IIA – Public services: LT IC – Govt PSU domestic housing: L TIIC – Places of Worship L TIIB(1) – Govt Educational Institutions, Hospitals LT IA – Domestic, Charitable & Handlooms LT IB – Villages & agriculture TN - 6.9 6.67 6.35 5.75 4.60 4.30 3.17 0.00 8.4

Tiered Pricing: Industry paying highest, rural & agriculture rates are subsidized (INR/kWh)

Source: TNERC Dec ’14 *GERC April’15

Generator State utility Industrial Consumer Guj* - 6.05

High tension

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Confidential

FLEXIBILITY IN FUEL SOURCING

OUR FLEXIBILITY BETWEEN DOMESTIC AND IMPORTED COAL MEANS WE HAVE NOT HAD A FUEL SHORTAGE TO DATE

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Source: Company

OPG’s boiler configuration allows use of

• 100% Domestic or 100% Imported
• Or any mix of the 2

Option to use high moisture coal provides relative cost advantage

• Low premium
• OPG Power Plants are located at close

proximity to major coal ports

Kandla

Gujarat

Mumbai Goa Mangalore Kochi

Mayavaram

Tuticorin Ennore

Chennai I, II, III, IV, Waste Heat

Dhamra Paradip Krishnapatnam Mundra

Major ports OPG Plant Locations

Confidential

OUR DIFFERENTIATED STORY

27

Performance Delivery vs Planned Established reliable Fuel supply Sensible Leverage Flexible revenue model Diversification & Growth

• Strong track record of

project delivery

• Long standing

management has built internal expertise

• Supported by a 51%

shareholder and top UK institutions

• Boilers designed with

flexibility to use domestic/imported coal

• Proven coal linkages,

logistical advantages and storage facilities for coal

• High PLF’s achieved

consistently; No previous stoppages due to lack of fuel availability

• Strong operating

portfolio with positive cash flow to date

• Ahead of schedule on

debt repayments

• Continued

deleveraging through repayments

• Local credit rating “A”,

following two upgrades in last 6 months

• Strong project

management minimising scope for

• verruns
• Positioned to

maximise tariffs through flexible sales model

• Better positioned to

respond to coal costs through short/medium term sale contracts

• 270 MW to 750 MW
• f installed capacity
• Diversified - in 2

locations

• Focus continues to be

to secure profitable growth

• Evaluation of

brownfield thermal and renewable projects

Confidential Year ended 31st March (£m) 2015 2014 2013 2012* PROFIT & LOSS Revenue 99.97 98.81 56.19 38.48 Gross Profit 41.51 39.29 22.94 12.94 EBITDA 33.39 30.97 17.74 11.30 Profit before Tax 21.65 17.95 10.54 1.8 Profit after tax 17.29 14.56 8.83 0.28 Earnings per share ( pre-exceptional basis) pence 4.91 4.14 2.48 1.71 BALANCE SHEET Property, plant and equipment 414.55 279.62 182.51 93.03 Cash, cash equivalents & Restricted cash 14.89 14.28 28.01 42.46 Short term borrowings 22.85 8.19 4.97 14.81 Long term borrowings 237.94 186.58 103.90 56.06 Total liability 329.57 256.68 155.71 81.86 Total Shareholders’ equity 164.61 136.63 142.74 131.75 Total Assets/Shareholders equity 493.87 393.31 298.45 213.61 CASHFLOW Cash from Operations 33.10 30.22 18.10 12.26 Net Cash from Operating activities 10.49 15.63 43.80 (0.71) Investment in project assets (77.10) (128.64) (94.80) (71.35) Net Cash used in Investing activities (66.53) (139.28) (95.27) (69.49) Increase in Net Borrowings 54.97 108.20 36.28 37.12

RECENT SUMMARY FINANCIALS

* Excluding legacy assets

• 1. Excluding Depreciation, Employee Stock Option Charge, Expenditure during the period on expansion project, Electricity consumption tax relating to prior years, including other income

28