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OPG Power keeps profits in line as coal prices soften

New hedging contracts provide "greater visibility" on future financial performance

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OPG is cautiously optimistic about lower coal prices for the coming year

OPG Power Ventures PLC (LON:OPG) has reported that full-year profits are likely to be in line with market expectations as the India-focused power generation group expects coal prices to move further in its favour.

Following the recent softening in the price of seaborne coal after a spike in the first seven months of its financial year, the company pointed to independent forecasts that suggest prices will continue to weaken in 2019 and beyond. Directors said they are “cautiously optimistic that the lower coal prices will provide some additional benefits for the group” in the new financial year.

OPG has begun hedging coal costs for the new year and has forward-booked its freight requirements until end-June. Purchasing swaps on the Chicago Mercantile Exchange, the company has agreed to buy 30,000 tonnes of coal at a price US$39 per tonne, with delivery from July 2019 to September 2019.

With these agreements in place, the company said it “now has greater visibility on its future financial performance”, while also buoyed by forecasts that the India is expected to be one of the fastest growing major economies this year, resulting in higher demand for electricity.

For the 12 months to 31 March, OPG’s 414Mw coal-fired power station at Chennai generated a total of 2.71bn units (Kwh) in the year to 31 March, which compared to 2.77bn the previous year after one four units was temporarily shut down for most of the fourth quarter for repair. Total generation in the first nine months had been up 4.5%.

The plant load factor at Chennai was 75% over the 12 months, compared with 77% the year before.

Average tariffs were up 10% to 5.41 rupees as a result of tariff increases during the year, while for the whole year the average landed coal price was little moved year-on year at £49.30 per tonne versus £49.40.

OPG’s 62Mw solar power project in Karnataka, north of Bangalore, was commissioned during the year and achieved a capacity utilisation factor of 17%.

All in all, executive chairman Arvind Gupta, felt it was a “continued strong operational performance” that would filter though to profits in line with expectations for the past year, while the new financial year is expected to benefit from “robust tariffs” and lower coal prices.

Repaying £20.6mln of term loans during the year, the balance of these loans closed the year at £69.9mln.

Quick facts: OPG Power Ventures PLC

Price: 17 GBX

AIM:OPG
Market: AIM
Market Cap: £68.12 m
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