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6
DELIVERY
PERFORMANCE
& PROGRESS
Annual Report & Accounts 2016
OPG HAS ESTABLISHED A
STRONG INVESTMENT CASE
Robust platform of
operating assets
Experienced
management team
Proven ability to execute
Attractive sector
fundamentals
Demonstrated focus on
cash flow generation
OPG’S GOAL IS TO BE A LEADER
IN THE INDIAN ENERGY SECTOR.
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
Revenue
(£m)
38.5
56.2
128.4
98.8
100.0
28%
FY12 FY13 FY14 FY15 FY16
EBITDA
(£m)
50.7
30.9
33.4
11.3
17.7
FY12 FY13 FY14 FY15
FY16
52%
PBT (pre-exceptional items)
(£m)
28.6
21.7
18.0
32%
13.3
8.8
FY12 FY13 FY14 FY15
FY16
Earnings per share
(pence)
5.29
4.91
4.14
2.48
1.71
FY12 FY13 FY14 FY15 FY16
8%
Net debt/EBITDA
7.6
5.0
FY15
FY16
Power Ventures Plc
01
• 480 MW new capacity
commissioned in the year – total
operating capacity 750 MW
• EBITDA margin of 39.5% up from
33.4% compared with FY15
• Profit before tax of £28.6m up by
32% compared with FY15
• EPS of 5.29 pence up by 8%
compared with FY15
• 334 MW allocated to two –
to three-year captive sales
agreements at Chennai plant –
transforms sales mix
• Initial target dividend of 15% of
net earnings commencing with
an interim in calendar year 2016
• 62 MW solar growth projects
expected to be funded from a
combination of new debt facilities
and internal equity
CONTENTS
Strategic Report
01 Highlights
02 Business model
04 Objectives and strategies of the Group
05 Key Performance Indicators
06 Chairman’s statement
08 Our market
10 Market review
14 Chief Executive’s review
18 Our operations
20 Operational review
22
26 Our people
28 Sustainability report
32 Principal risks
Financial review
Corporate Governance
34 Board of Directors
36 Corporate Governance Report
40 Directors’ Report
42 Directors’ Remuneration Report
46 Statement of Directors’ responsibilities
Financial Statements
Independent Auditors’ report
47
48 Consolidated Statement of
Comprehensive Income
49 Consolidated Statement of
Financial Position
50 Consolidated Statement of Changes
in Equity
52 Consolidated Statement of Cash Flows
53 Notes to the Consolidated
Financial Statements
75 Corporate Directory
76 Definitions and Glossary
Power Ventures Plc
08
Annual Report & Accounts 2016
Strategic Report
Corporate Governance
Financial Statements
OUR MARKET
Leading GDP growth drivers.
Annual Report & Accounts 2016
Strategic Report
Corporate Governance
Financial Statements
Power Ventures Plc
09
India is the fastest growing economy
at over 7% GDP growth
The Indian economy is the fourth largest in
the world and the dominant economy in
South Asia. According to the World Bank,
India’s gross domestic product (‘GDP’)
increased by 6.6%, 7.2% and 7.3% in 2013,
2014 and 2015, respectively. Furthermore,
India’s GDP is forecast to grow by 7.6% in
2016 and by 7.7% in each of 2017 and 2018.
1.29bn population – largely young and
rural based
The World Bank estimates that India’s
population of approximately 1.29bn in 2014
is the second highest in the world and has
grown at a compound annual growth rate
of 1.34% since 2007. Per capita electricity
consumption has been growing but remains
lowest among Brazil, Russia, India, China
and South Africa (‘BRICS’) and a third of
world average at 1,010 kWh in 2015.
Focus on infrastructure development
The 12th Five-Year Plan for the period to
31 March 2017 is focused on faster, more
inclusive and more sustainable growth
and a focus on infrastructure investment.
India’s Planning Commission has projected
that infrastructure investment will almost
double to $1,025bn in the 12th Five-Year
Plan, representing approximately 8.2%
of gross domestic product.
Make in India
The growth of the Indian economy has
been pursued through reform and the
introduction of policies that favour
businesses and investors, including the
‘Make in India’ and ‘24x7 Power for All’
programmes. According to the World Bank,
foreign direct investment rose 37% from the
launch of the ‘Make in India’ campaign in
October 2014 to February 2016. As of
December 2015, $45.7bn (approximately
2.2% of GDP) had been pledged under the
‘Make in India’ campaign.
A fast growing
major economy
with a huge
population base
7%+
GDP GROWTH
Annual Report & Accounts 2016
Strategic Report
Corporate Governance
Financial Statements
Power Ventures Plc
19
The Group’s strategy has been to
maximise the performance of its assets.
The Group’s operational parameters
remain ahead of the sector. The Chennai
plant has consistently achieved plant load
factors above national averages and plant
availability has been over 90% – this is on
account of our focus in maintaining our
assets and our coal procurement policy
wherein we have not had a shortage
of coal.
The Group’s focus remains to pursue
profitable and responsible growth.
It expects to develop 300 MW of
renewable projects over the next few
years from internal funding.
With a long-term view
to replicate India’s
energy mix and invest
in renewables.
2016
750 MW
Annual Report & Accounts 2016
Strategic Report
Corporate Governance
Financial Statements
Power Ventures Plc
27
Continual progress on
our environmental and
safety performance.
Power Ventures Plc
18
Annual Report & Accounts 2016
Strategic Report
Corporate Governance
Financial Statements
OUR OPERATIONS
Maximising our assets.
An eight-year track record of
rising profits and project delivery.
Power Ventures Plc
26
Annual Report & Accounts 2016
Strategic Report
Corporate Governance
Financial Statements
OUR PEOPLE
Sox Emission
600
400
400
400
National
Average
Chennai I, II, III
Chennai IV
Gujarat
G1 & G2
C4
Stack Emission-SPM
50
30
30
30
National
Average
Chennai I, II, III
Chennai IV
Gujarat
Safety and environmental compliance
The Company made good progress
with its safety programme, recording
a reported incident rate in FY16 for
Chennai of 0.33 versus 0.40 in FY15
and 0.49 in FY14. Our target for FY16
was 0.35. Gujarat performance will
become a focus in the current year
as it was recently commissioned.
We remain compliant of the environmental
norms and take initiatives to improve
and exceed these where possible.
87 Technicians
and operators
FROM DEVELOPER TO OPERATOR
See pages 08 to 26
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements 20 MW2010 177Field, Area and Control Engineers
Power Ventures Plc
02
BUSINESS MODEL
Our model is driven by economic growth
and the demand for power in India.
DRIVERS
ROBUST PLATFORM
THERMAL
RENEWABLES
INDUSTRY AND
COMMERCE NEEDS
SUSTAINABLE,
RELIABLE POWER
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
03
WHERE OPG ADDS VALUE
OUTCOMES
SELECTIVE APPROACH
TO CUSTOMERS AND
CONTRACT TERMS
BEST PRICE AND ASSURED
VOLUMES
BUILD ON TIME, ON BUDGET
MANAGE GEARING
OPTIMISE AVAILABILITY
OF EVACUATION AND FUEL
ADOPT A RESPONSIBLE
CULTURE
TAKE OPPORTUNITIES
TO GROW THE BUSINESS
AND MANAGE RISK
FIRST CHOICE
FOR CUSTOMERS
RESPONSIBLE
OPERATIONS
ROBUST, LOW COST
OPERATIONS
VISIBILITY OF EARNINGS
AND CASH FLOW
SUSTAINABLE RETURNS
TO INVESTORS
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
04
OBJECTIVES AND STRATEGIES OF THE GROUP
The Group’s objective is to build shareholder value through profitable
growth by becoming the first choice provider of reliable and
uninterrupted power at competitive rates to its customers. In addition,
the Group’s aim is to be a sector leader by reference to the quality of its
earnings, the profitable growth it delivers and its performance against
its own stringent safety and environment management standards.
To meet these objectives, the Group’s strategy includes:
(i) maximising the performance of its existing power generation
assets; (ii) reducing its cost of capital and paying dividends;
(iii) pursuing responsible growth; and (iv) delivering accretive
growth projects within its areas of expertise.
STRATEGIES
DESCRIPTION
Maximising
performance
of existing
power plants
Customers
The Group is committed to maximising the performance
of its existing power generation assets through plant
availability and providing a reliable and uninterrupted
supply of electricity directly to its customers.
The flexible design of our plants allows us to procure a
variety of international and domestic coal and maintain
an uninterrupted supply of coal. Further, the Group
seeks to achieve competitive prices that are negotiated
directly with customers. The Group’s use of the group
captive model means that it is well positioned to
respond to fluctuations in fuel costs through short- and
medium-term sales contracts.
Reducing cost
of capital and
paying
dividends
The Group aims to maximise cash generation at its
existing power plants in order to provide liquidity
support for its operations and to repay debt, pay
dividends and generate equity for use in potential
projects.
The Group continues to prioritise projects that can be
funded through a combination of debt financing and
internal resources, and that can be expected to
generate revenues which meet its target return levels
without any direct subsidies being made available.
Furthermore, the Group seeks to maintain manageable
gearing levels and regular open dialogue with
its shareholders and financing partners.
The Group works with long-term, top-tier financing,
technical and consulting partners to pursue responsible
growth, and targets international environmental standards
while ensuring that domestic standards are met or
exceeded. The Group also seeks to respect the rights
and acknowledge the aspirations and concerns of the
local communities in which it operates.
Pursuing
responsible
growth
Delivering
accretive
growth
projects and
expanding into
renewable
power sector
Energy mix
The Group evaluates projects consistent with its strategy
of accretive growth that better replicate India’s energy
mix, and where it can expect to meet its debt
commitments and enhance earnings. These projects
currently include a range of potential power generation
and related projects, including opportunities for
inorganic growth through the acquisition of existing
distressed or operational assets.
Profitability
The Group’s strategy involves developing and operating
its power plants under the group captive model enabling
it to set its own tariffs with captive users and thereby
providing the Group with the flexibility to optimise tariffs
and profitability.
The Group continuously seeks to improve its operational
performance and so implements strategies for the
optimisation of its power generation assets.
Dividends
The Group seeks returns for shareholders and has
adopted a dividend policy that will, initially, seek to pay
out 15% of full year net earnings, subject to the level of
free cash flow generated, (calculated after scheduled
debt repayments and expected capital expenditure) and
progress to a long-term dividend strategy that pays out
a third of the Company’s net earnings in any year.
The Group has developed, and intends to continue to
develop, small- and medium-sized power projects and,
alongside potential financing arrangements, considers a
number of factors when assessing the viability and
development of potential power projects, including that
land acquisition, water supply, availability of equipment,
logistics, transmission infrastructure or other local and
socio-political issues, are not material constraints, and
that environmental and safety standards are capable of
being met.
Solar power
The Group is expanding into the solar segment with a
planned investment of £45m in four solar energy
projects with a planned aggregate installed capacity of
62 MW in Karnataka.
The Group aims to develop at least 300 MW of solar power
generation projects in India. The Group intends to leverage
its track record and the experience of its management team
to obtain and deliver renewable power generation projects.
The Directors believe that, at present, attractive growth
projects in renewable energy bring with them strong
potential for the Group to replicate India’s energy generation
mix and add to the quality of its earnings and, consequently,
offer the Group attractive organic growth potential.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements
KEY PERFORMANCE INDICATORS
FINANCIAL
Average tariff realisation
(INR/kWh)
5.58
5.55
5.71
5.58
Cost of generation
(INR/kWh)
3.06
3.10
3.09
2.67
Power Ventures Plc
05
NON-FINANCIAL
Plant load factor (%)
(Chennai)
94
96
91
70
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
This is the average price realised per unit
of power sold. The average tariff realised
for FY16 was Rs 5.58 slightly lower than
FY15 due to the sales mix from both plants.
The cost of fuel is the primary input cost
in a thermal plant. Cost of generation
excluding depreciation per kWh decreased
to Rs 2.67 in FY16 from Rs 3.09 in FY15
reflecting lower landed cost principally on
account of international coal prices.
EBITDA
(£m)
50.7
30.9
33.4
17.7
Gearing
(%)
32
59
57
52
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
Earnings before interest, taxes,
depreciation and amortisation (‘EBITDA’)
is a factor of sales volumes, prices, cost
of sales and overheads and is adjusted
for non-operational and exceptional
items. It is a measure of the Company’s
operating cash flows. EBITDA for
FY16 was 52% higher with EBITDA
margins at 40% in FY16 as compared to
33% in FY15.
Gearing is a measure of net debt to
shareholders’ equity plus net debt.
As at 31 March 2016, the Group’s Net
debt was £256.4m with gearing of 57%.
Earnings per share (EPS)
(pence)
5.29
4.91
4.14
2.48
Adjusted EPS
(pence)
6.98
5.34
4.34
2.39
FY13
FY14
FY15
FY16
FY13
FY14
FY15
FY16
This represents net profit after tax
attributable to equity shareholders.
In FY16, earnings per share was
5.29 pence an increase of 8% from
FY15. Higher deferred tax charges (non-
cash) impacted net earnings for FY16.
Adjusted EPS is EPS adjusted for
deferred tax charge as this is a non-cash
tax charge. Adjusted EPS increased by
31% in FY16 from FY15.
Plant load factor (‘PLF’) measures the
output of a power plant compared to
the maximum output it could produce
– it is a factor of plant availability and
plant utilisation. The PLF for the Chennai
plant for FY16 was 70% – lower on account
of ramp up of Chennai IV, flooding and
transmission constraints due to seasonal
demand. The PLF for the Group was
68% with the Gujarat plant reporting
operations as part of the income
statement only from February 2016.
Total Recordable Injury Rate
(Chennai)
0.49
0.40
0.28
FY14
FY15
FY16
The Group ensures a safe working
environment for all its employees and
contractors through regular ongoing
training and improvements in
workplace. The Group uses the Total
Recordable Injury Rate (‘TRIR’) as a
measure of monitoring the frequency of
injury rates per 100,000 hours worked.
The TRIR at the Chennai plant was 0.28
a decrease of 30% and 43% from FY15
and FY14 respectively. The TRIR at
Gujarat for FY16, its first year of
operations, was 0.64.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
06
CHAIRMAN’S STATEMENT
OPG is becoming a leader. The Company has recorded its
eighth successive year of rising revenues and earnings with the
potential to deliver significantly more electricity to its customers
once it has completed the ramp up of its new assets.
The Board has announced and quantified
its approach to dividends, which are to
start this year, in addition to revealing plans
for further debt reductions and growth,
the latter funded by the Company and
adding attractive solar capacity. All of
these initiatives are intended to underpin
and grow the dividend in the longer term.
I believe that gives the OPG management
team much to be proud of upon the
completion of their 750 MW programme.
This positions the Company uniquely
well, in my view, to take advantage of
the many good growth opportunities the
Indian power sector will have to offer in
the years to come. At a time when the
sector is experiencing positive reform
on many fronts including most critically
the availability and cost of financing.
With the Board having now announced
a firm approach to dividends, I have
informed the Board of my decision to
retire and I wish to thank my Board
colleagues and the entire team at OPG
for their warmth and for their efforts in
making this a company of the future.
I have every reason to believe OPG is
well on its way to achieving its goal of
leadership in the Indian energy sector.
M C Gupta
Chairman
29 July 2016
This positions the Company
uniquely well, in my view, to
take advantage of the many
good growth opportunities
the Indian power sector
will have to offer in the years
to come.
Our capacity growth
(MW)
750 MW of thermal power capacity
(MW)
812
750
600
20
30
107
113
270
190
IPO May
2008
31 March
2010
31 March
2011
31 March
2012
31 March
2013
31 March
2014
30 June
2015
31 March
2016
31 March
2018
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
07
OPERATING CAPACITY
750 MW
HISTORIC TIMELINE
Gujarat
300 MW
Tamil Nadu
450 MW
Chennai, Waste heat plant
Mayavaram
2016
Dividend policy.
62 MW Solar project announced
750 MW completed.
2015
300 MW Gujarat and 180 MW
Chennai IV construction completed
and commenced operations
in 2015.
2014
Chennai IV upgraded from 160 MW
to 180 MW increasing the total
capacity at Tamil Nadu to 450 MW.
2013
80 MW Chennai III commissioned
in June 2013. Chennai IV converted
from two units of 80 MW to a single
unit of 160 MW.
2012
77 MW Chennai II delivered in
September 2012, a replica of
Chennai I increasing installed
capacity to 190 MW.
2010
77 MW Chennai I commissioned in
August 2010. Total installed
capacity of 113 MW.
2008
Listed on AIM.
20 MW capacity.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
08
OUR MARKET
Leading GDP growth drivers.
India is the fastest growing economy
at over 7% GDP growth
The Indian economy is the fourth largest in
the world and the dominant economy in
South Asia. According to the World Bank,
India’s gross domestic product (‘GDP’)
increased by 6.6%, 7.2% and 7.3% in 2013,
2014 and 2015, respectively. Furthermore,
India’s GDP is forecast to grow by 7.6% in
2016 and by 7.7% in each of 2017 and 2018.
1.29bn population – largely young and
rural based
The World Bank estimates that India’s
population of approximately 1.29bn in 2014
is the second highest in the world and has
grown at a compound annual growth rate
of 1.34% since 2007. Per capita electricity
consumption has been growing but remains
lowest among Brazil, Russia, India, China
and South Africa (‘BRICS’) and a third of
world average at 1,010 kWh in 2015.
Focus on infrastructure development
The 12th Five-Year Plan for the period to
31 March 2017 is focused on faster, more
inclusive and more sustainable growth
and a focus on infrastructure investment.
India’s Planning Commission has projected
that infrastructure investment will almost
double to $1,025bn in the 12th Five-Year
Plan, representing approximately 8.2%
of gross domestic product.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements
Power Ventures Plc
09
‘Make in India’
The growth of the Indian economy has
been pursued through reform and the
introduction of policies that favour
businesses and investors, including the
‘Make in India’ and ‘24x7 Power for All’
programmes. According to the World Bank,
foreign direct investment rose 37% from the
launch of the ‘Make in India’ campaign in
October 2014 to February 2016. As of
December 2015, $45.7bn (approximately
2.2% of GDP) had been pledged under the
‘Make in India’ campaign.
A fast growing
major economy
with a huge
population base
7%+
GDP GROWTH
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
10
MARKET REVIEW
India remains power hungry and is forecast
to need another 250 GW of capacity over
the next 15 years.
Demand for energy
240m people without power
In 2013, India’s share of the global
population was nearly 18%, but it
accounted for only 5.7% of global energy
demand. According to the International
Energy Agency (‘IEA’), India’s energy
demand has nearly doubled since 2000;
on a per capita basis, in the same period
it has grown by approximately 46% and
represents only around one-third of the
global average. The IEA has estimated
that in 2013 nearly 240m people in India,
or approximately 19% of the population,
did not have access to electricity.
42% of total power demand
from industry
The largest sector for electricity
consumption in India is industry, for which
the IEA estimated energy demand almost
doubled between 2000 and 2013, and
which accounted for approximately 42%
of electricity consumption for the year
ended 31 March 2015. Energy demand by
industry is expected to increase in order
for India to meet GDP growth forecasts.
Electricity demand to grow at 4.7%
CAGR until 2040
For India to achieve its economic growth
target reliable power supply is essential.
The IEA anticipates that gross electricity
generation demand will increase by a
compound annual growth rate (‘CAGR’)
of 4.7% between 2013 and 2040. India
is expected to represent around one-
quarter of the total increase in global
energy consumption over the period
to 2040, according to the IEA.
Coal and renewables to form
India’s energy mix
Power is a key input for India to achieve its
economic growth targets while balancing
its commitment to climate change to
reduce CO2 intensity by 2030 by 33% from
2005 levels. For the purpose of preparing
India’s Intended Nationally Determined
Contributions (‘INDCs’) for submission to
COP21 in Paris, the National Institute for
Transforming India (‘NITI Aayog’) prepared
‘A Report on Energy Efficiency and Energy
Mix in the Indian Energy System (2030)’
which forecasts energy demand to grow to
562 GW by 2030. The report also
considered the anticipated energy mix to
meet increased electricity demand and
projected coal and renewables (solar, wind,
biomass) to comprise approximately 47%
and 29% of installed capacity respectively
and account for approximately 65% and
15% of gross electricity generation
respectively.
Sector reforms
The Government has continued to bring in
reforms and policies to improve the
efficiency, credit worthiness and liquidity of
the sector.
UDAY – revival of Discoms
The power distribution companies
(‘Discoms’) in each state are the biggest
offtakers of power. Discoms have
accumulated losses of over $38bn and
outstanding debts of $45bn on account
of low tariffs, and under recovery of costs
and operational inefficiencies. In November
2015, the GOI announced UDAY (Ujwal
Discom Assurance Yojna) for the financial
turnaround and revival of Discoms.
The scheme has been signed up to
by 14 states. As part of the scheme the
respective state will take over 75% of
the debt and up to 50% of losses in a
phased manner until 2019. The remaining
debt is to be converted to bonds at 10
basis points over the banks base rate.
In return the Discoms will be
required to implement the following
measures to achieve profitability:
• Quarterly tariff increase.
•
Improving operational efficiency –
reducing technical and commercial
losses from 22% to 15% through smart
metering, infrastructure upgrade and
collection efficiency.
• Reducing input cost – rationalisation of
coal costs through streamlining logistics
and reducing imports. The GOI is to
step up domestic coal production to
assist in this area.
• 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.
Banking reforms
Over the last two years, the Government
has brought in a Recapitalisation scheme,
passed the Bankruptcy Bill, initiated
consolidation among Public Sector Banks
(‘PSBs’) and set up a governance and
accountability framework for PSBs to
turnaround the significant build up of
non-performing assets (‘NPAs’) resulting in
weak capitalisation.
• Re-capitalisation of banks
The GOI announced the Indradhanush
scheme which is aimed at shoring up
the PSBs lending capacities that are
restricted by poor asset quality and
weak capitalisation. The government
estimates that PSBs will require
approximately Rs 118,000 crores or
$17bn to remain adequately capitalised
to support growth over the next three
years. The government proposes to
make available Rs 70,000 crores or
$10bn over the next four years and
for the banks to raise the balance in
the market.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
11
562 GW installed by 2030
(47% coal and 29% renewables)
2030
2022
2012
47
52
7 3
14
12
17
9
3
17
7
12
56
13
3
22
1 5
■ Coal ■ Gas ■ Nuclear ■ Hydro ■ Solar PV ■ Wind
Source: NITI Aayog, April 2015
2.8 TWh generation by 2030
(65% coal and 15% renewables)
2030
2022
2012
66
69
67
46
8
15
1
6
4
10
10 1
11
3
14
6
■ Coal ■ Gas ■ Nuclear ■ Hydro ■ Solar PV ■ Wind
GDP growth rate
(%)
%
8
7.6
7.6
7.7
7.7
7.2
7
6
5
4
3
2
1
0
6.6
6.6
5.6
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
F
7
1
0
2
F
8
1
0
2
Source: NITI Aayog April 2015
Source: World Bank
Electricity demand by sector
31 March 2015
(%)
5.37%
1.79%
8.77%
18.45%
42.10%
■
■
■
■
■
■
Industrial
Domestic
Agriculture
Commercial
Traction
Miscellaneous
Per capita consumption of electricity
(kWh)
13,246
6,486
5,945
4,604
2,438
23.53%
774
914
957
1,010
India
(FY12)
India
(FY13)
India
(FY14)
India
(FY15)
Brazil South
Africa
China
Russia
US
Source: CEA
Source: World Bank, 2011, India, CEA , Apr 2016
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
12
MARKET REVIEW
CONTINUED
• Development of corporate debt
market and green bonds
The GOI’s budget in February 2016
proposed measures to deepen the
domestic corporate bond market
development such as extending foreign
investment in unlisted debt, directing
the Reserve Bank of India (‘RBI’) to
encourage bond financing by large
borrowers and requiring India’s largest
insurance company Life Insurance
Corporation of India to set up a credit
enhancement fund for infrastructure
projects. In 2015, India entered the
green bond market, with a total of
$1.1bn of green bonds issued from a
handful of pioneer issuers (Yes Bank,
Export-Import Bank of India, CLP Wind
Farms and IDBI). SEBI is seeing the
green bond market as a key tool to help
raise the finance needed to meet the
ambitious targets of India’s INDC as
established for COP21 and have issued
formal guidelines for green bonds.
• Accountability for non-performing
assets
The infrastructure sector has been the
major recipient of PSBs’ funding during
the past decades. But due to several
factors, many projects have stalled or
are stressed. As such, a new framework
of key performance indicators (‘KPIs’)
for measuring the performance of
PSBs was announced with quantitative
indicators relating to efficiency of capital
use and diversification of business, NPA
management and qualitative criteria
relating to strategic initiatives taken to
improve asset quality, efforts made
to conserve capital, HR initiatives and
improvement in external credit rating.
Solar power in India
The solar power industry has been
transformed significantly in the last decade
largely due to the falling cost of solar
panels. In India, installed solar capacity has
grown from a few MWs in 2010 to 6.7 GW
by March 2016. In its efforts to meet its
commitments at COP21 and increase the
share of renewables in the energy mix by
2030, GOI has accelerated its plans to
install 100 GW of solar by 2022.
Solar power has become attractive in India
due to:
• High irradiation levels all year
round with an average of 320 sun days,
providing stable generation (versus
other renewable energy sources) in
the daytime.
• Lower capex costs has been the key
driver behind the growth in solar power.
In India the cost per MW has fallen from
approximately $3m in 2010 to $1m in
2015 largely on account of equipment/
panel costs but also total capex is lower
than Western countries due to reduced
balance of plant costs making solar
power a more viable option without
reliance on subsidies.
• Short gestation and lower
development risk as solar power
plants can be constructed in
approximately four to six months from
achieving financial closure and
permitting thereby becoming revenue
generating relatively faster than new
build thermal plants. Further the
installation of solar is modular in nature.
• Government policies supportive to
achieve 100 GW targets
The Indian government has introduced
a number of policies to deliver the
ambitious renewables targets that it has
set such as:
– Renewable purchase obligation
(‘RPO’) on state distribution
companies – the Indian government
expects renewable energy sources,
and in particular solar energy, to
make up a significant part of future
energy supply and RPO targets of
between 3 and 8% are intended to
drive demand.
– Long term Power Purchase
Agreements (‘PPA’) – the states and
their respective electricity regulators
have in turn introduced specific
measures to encourage the
development of renewable energy
sources, including offering
competitive long-term PPAs for
renewable power projects.
– Priority status – granting priority
status for power evacuation to
solar power projects, introducing a
customs and excise duty exemption
for solar PV panels and currently
constructing a ‘green corridor’
transmission network to evacuate
power from areas that are rich in
sources of renewable energy to
other parts of the country.
– Automatic approvals – many states
have given solar projects automatic
approvals required for the
establishment of the projects, such
as land use permits and stamp duty
waivers.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
13
India has high irradiation – receives over 300 days of sun
Source: GHI Solar Map © 2016 Solargis
India solar installed capacity (GW)
(Cumulative)
6
4
2
0
India solar capacity target (GW)
(Cumulative)
100
82.5
65
48
32
17
2010
2011
2012
2013
2014
2015/16
2017
2018
2019
2020
2021
2022
Source: MNRE, Mercom
Source: Bloomberg New Energy Finance, The Economic Times
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements
Power Ventures Plc
14
CHIEF EXECUTIVE’S REVIEW
This has been something of a landmark year of an
eight year journey during which the Company has
delivered record results, completed its 750 MW
programme and is now embarking on an exciting
new phase of development.
Performance overview
During FY16, OPG generated a record
3.2bn units of electricity as a result of
which reported revenues rose by 28%
to £128m. A 480 MW uplift in capacity
has been delivered progressively
through FY16 and Q1 FY17 revenues of
approximately £57m reflect the ramp up
to date of this newly delivered capacity.
Profit before tax was up 32%, and
operating margins were higher than last
year, tracking delivered coal prices.
The low point of the year was some of the
worst flooding ever seen in Chennai with
severe impact upon communities in the
region. Although generation at the Chennai
plant was impacted it remained available
throughout to supply electricity and more
importantly the plant had an essential role
in providing emergency drainage to nearby
communities where the impact could have
been significantly greater.
As well as knowing their Company has
been playing its part in the community,
shareholders will be pleased that we
announced the timing and basis for
our initial dividend policy with an initial
pay out target of 15% of net earnings
(subject to cash flow and commitments)
commencing with an interim payment
in the current calendar year and with
an intention to grow that payout over
time. We also re-affirmed our strategy of
pursuing responsible, sustainable growth
from new projects, mirroring the energy
mix of India in the longer term, in line with
which we recently announced our entry
into the promising solar energy segment.
Market
This is a time of opportunity in the Indian
power sector especially for cash generative
participants due to the major developments
taking place:
• The Company operates in the fastest
growing major economy of the world
with GDP growth of over 7% in the last
fiscal year. Electricity is a key growth
enabler and a further 480 GW will
need to be added to India’s power
generating capacity in order to reach
the government’s stated per capita
consumption target of 1,800 kWh by
2034 and to provide electricity for
approximately 260m people. Population
growth, industrialisation, electrification
and urbanisation continue apace in India.
• Financial restructuring of state utilities,
the biggest buyers of electricity in India,
by way of a programme known as
UDAY, is expected to bring about a
material reduction in finance costs to a
large number of utilities. This together
with reforms in the banking sector
are expected to provide a boost to
the availability of efficient financing
for well-run thermal and renewable
energy players.
• Fuel availability and mix is changing
rapidly. India produces more coal
than ever and globally, supplies have
remained strong while producer
currencies have been weak, keeping
prices subdued. Utilities and regulators
have sought to track those dynamics
in power pricing. Renewable energy is
also much more relevant.
• Following the COP21 meeting of nations
in December 2015, India committed
to fast-track renewables development
and responsible growth in thermal
capacity. Thermal energy is still forecast
to remain the backbone of the country’s
power needs for several decades
to come where a focal point will be
mobilising idle capacity in that segment.
FY16 also saw over 5 GW of new solar
energy projects commissioned and the
pace of this development is expected to
quicken as 10 GW of solar projects are
anticipated to be auctioned every year.
With solar development costs in India
being amongst the lowest in the world
and continuing to maintain a benign
momentum, projects have become
viable without subsidies.
Arvind Gupta
Chief Executive Officer
TAMIL NADU
450 MW
GUJARAT
300 MW
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
15
Revenue
(£m)
38.5
56.2
128.4
98.8
100.0
28%
FY12 FY13 FY14 FY15 FY16
EBITDA
(£m)
50.7
30.9
33.4
11.3
17.7
FY12 FY13 FY14 FY15
FY16
52%
PBT (pre-exceptional items)
(£m)
28.6
21.7
18.0
32%
13.3
8.8
FY12 FY13 FY14 FY15
FY16
Earnings per share
(pence)
5.29
4.91
4.14
2.48
1.71
FY12 FY13 FY14 FY15 FY16
8%
‘ Investment of
£45m in four new
solar projects’
We believe these features make India
the most exciting power market in the
world, seeking to add 20 GW of new
capacity every year to keep pace with
demand. Both thermal and renewables
will be important and around a third
of all energy generation is expected to
be from renewable sources by 2030.
We believe our entry into renewables
and our strong thermal portfolio will
ensure we are well placed across
the spectrum of opportunities.
Future projects
Against this fast evolving backdrop, last
year the Company outlined to shareholders
its aim of replicating the power generation
mix of the nation and on 5 July 2016, the
Company announced the investment
of £45m in four new solar projects (total
62 MW) across various locations in
Karnataka, one of the most industrialised
states in India. This investment is expected
to be funded from a combination of internal
cash generation and debt, and the Directors
consider all four of these new projects
capable of generating cash flow by June
2017. The fully permitted projects were
secured in a competitive bidding process
and the Company has signed long-term
(25 year) power purchase agreements
(‘PPAs’) at an average tariff of Rs 5 with
Karnataka State Electricity Distribution
companies (‘Discoms’). The targeted return
levels are expected to be met without
any subsidies and the Board expects
these projects to deliver long-term returns
ahead of our average cost of capital.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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CHIEF EXECUTIVE’S REVIEW
CONTINUED
OPG’s priorities
With many potential opportunities, the
Board seeks to augment the Company’s
strong track record by focusing
management on certain priorities as follows:
• Our first priority has been – and must
remain – maximising the cash
generation and performance of existing
operations. This means making the
most of our multi-year contracts in
Chennai, achieving cost, working
capital, safety and environmental
performance leadership there and of
course, ramping up Gujarat as profitably
as possible. We need to maintain our
unbroken track record on timely coal
procurement and as well as our cost of
operations, seek to continually optimise
our cost of capital. With the normal
determined efforts of the OPG team,
these efforts will be the backbone of our
cash generation, dividends and growth.
• Our second priority is to engage in
•
responsible and sustainable growth.
We should seek to navigate some of the
pitfalls experienced by others seeking
out profitable megawatts only. In so
doing we will retain our ability to be
selective if and when interesting
growth opportunities arise to achieve
the Company’s true potential. In the
context of this priority, we believe our
commitment to internally fund growth
of 300 MW of solar over the coming
years and paying out returns from the
free cash flow generated from them is
achievable and exciting for shareholders.
In everything we do, it’s a priority that
we must be conscious of the need to
protect our people and our environment.
Due to its recent construction, our
existing portfolio operates well within all
Indian regulatory requirements and we
want our plans to involve continual
improvement in this regard. As a result,
as well as rebalancing our portfolio with
renewable energy regeneration, in
implementing any growth in thermal, our
management team has undertaken to
the Board to target improvements in the
environmental performance of our
thermal portfolio as a whole following
such growth. This is an important part
of becoming a leader in the sector.
Board and other developments
Mr M C Gupta, our Chairman, has
informed of his wish to retire from the
Board at the next general meeting. I have
the special privilege of thanking him for
his leadership and guidance over the last
eight years. In my view we could not
have achieved what we have without his
direction and counsel. He has overseen
the 40-fold growth of OPG from its
initial size, which gives us the platform
for our continued growth. On behalf of
shareholders, my Board colleagues and I,
we wish Mr M C Gupta well for his
retirement.
We have identified a new Non-executive
Director to join the Board and I look
forward to welcoming Mr Jeremy Beeton
to our Board. Jeremy’s experience in
emerging markets and on the boards of
many leading companies as well as his
leadership in delivering large, complex
projects including the London Olympics
in 2012 will be valuable to the Company.
We will make a further announcement
regarding the appointment of Jeremy
Beeton in due course which will include
the requisite AIM Rule disclosures.
Being familiar amongst our shareholders,
having completed our 750 MW programme
and built a strong, stable and capable
commercial and operations team, the
Board has considered it appropriate that
I take on the role of Executive Chairman
of OPG, which I have agreed to accept.
Finally, I am delighted to welcome
Mr T Chandramoulee to the new position
of Group Chief Operating Officer, with
a non-Board responsibility for running
the day-to-day operating affairs of the
Company. T Chandramoulee has been
with OPG since 2007, is known to our
customers, suppliers and lenders and has
played a leading role in all aspects of the
development and operation of the Chennai
and Gujarat plants.
In other developments, the Board
continues to evaluate with its advisors the
possibility of a move to the Main Market.
Summary
A lot has changed in the last eight years to
position the Company well as a potential
leader in the sector. We will look to
continue our momentum onwards from this
landmark year by introducing our dividend
shortly and by judiciously identifying good
growth projects. There is no doubt that
encouraging and major reforms are going
on in our sector and our vision is to couple
the opportunities they bring with our
natural skills and to become a sector
leader known for its all round performance.
I want to pay a special tribute to the efforts
of our team, many of whom have been
an integral part of the entire journey. I look
forward to their continued support and
dedication without which we cannot
achieve our desired leadership status.
Similarly, as the Board looks forward with
confidence to the Company’s future, we
wish to place on record our thanks to all
of our shareholders for their support and
participation during our journey.
Arvind Gupta
Chief Executive Officer
29 July 2016
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements
Power Ventures Plc
17
CHENNAI CASE STUDY:
OPTIMISATION OF SALES MIX
Shift to industrial sales at Chennai
(%)
85
81
62
38
15
FY15
■ State ■ Industrial
19
FY16
FY17E
Visibility of revenues at Chennai
(contract lengths) (%)
81
81
62
19
19
19
19
FY15
FY16
FY17E
■ Short-term ■ 2–3 years ■ 15 years
During the year, the Company agreed multi year contracts
of 254 MW of direct supplies to industrial customers under
the group captive model. The contracts signed were for two
to three years. A further 77 MW of contracts have been
allocated from May 2016 to industrial customers. The
Company now allots 81% of its output in Chennai to over
200 customers. In addition, it has a 15-year contract to
supply 80 MW (74 MW net) to the Tamil Nadu state utility
– TANGEDCO.
This new sales mix provides improved visibility of
revenues due to the longer tenure of contracts and with
an improved collection cycle expected. Further, the
customer base is diversified amongst several customers
from different industrial sectors such as textiles, steel,
paper and chemicals. The tariff agreed by OPG with
customers is competitive thereby providing customers with
reliable power at attractive prices.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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OUR OPERATIONS
Maximising our assets.
An eight-year track record of
rising profits and project delivery.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements20 MW2010 Power Ventures Plc
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The Group’s strategy has been to
maximise the performance of its assets.
The Group’s operational parameters
remain ahead of the sector. The Chennai
plant has consistently achieved plant load
factors above national averages and plant
availability has been over 90% – this is on
account of our focus in maintaining our
assets and our coal procurement policy
wherein we have not had a shortage
of coal.
The Group’s focus remains to pursue
profitable and responsible growth.
It expects to develop 300 MW of
renewable projects over the next few
years from internal funding.
With a long-term view
to replicate India’s
energy mix and invest
in renewables.
2016
750 MW
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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OPERATIONAL REVIEW
The following is a review of operations
for the year.
Project delivery
During FY16, the Company commissioned
its two largest assets to date, a 300 MW
plant in Gujarat and 180 MW unit in
Chennai, bringing its installed generation
capacity to 750 MW. The 480 MW uplift in
capacity has been delivered progressively
throughout the year, with the full revenue
impact expected to be reflected across the
next two years.
Plant availability
Our operational performance is affected
by our revenue generation model,
plant availability and load factors and
auxiliary power consumption (the internal
deployment of the plant’s production
as this is not saleable production).
Both coal availability and water
consumption are two factors which have
disrupted the availability and load factors
of other thermal power plants in India in
recent years. OPG’s plants are designed
to be able to use a wide range of fuels,
both domestic and international, and the
Company further has the capability to
maintain reserves of coal. This has been
integral to coal availability at its locations
and we haven’t faced any interruptions on
account of coal since commissioning each
unit. In addition, the plants are designed to
limit the consumption of water as they are
built with air cooled condenser technology
rather than being water cooled. As a
result our plant availability has remained
consistently over 90%. This is important
as availability is the basis of our reward
on the 74 MW Long-Term Variable Tariff
(‘LTVT’) which is discussed further below.
Our load factors take account of plant
availability as reduced by external factors
like normal seasonal demand adjustments
to their offtake under the LTVT (though the
customer still pays us as discussed further
below), enforced system back downs
and once off disruptions to demand such
as due to weather. Accordingly our PLF
for the enlarged 414 MW Chennai plant
in FY16 as a whole was 70% versus a
national average for thermal plants of 62%.
Auxiliary consumption levels, also a key
measure of plant efficiency, is typically
between 7.5–8% for our plants which
compares favourably to national averages
of around 9% for similar sized units in India.
Sales contracts
In October 2015, the Company commenced
supplies directly to industrial customers
under multi-year contracts in Chennai.
The tenure of sales contracts entered
into with industrial customers at Chennai
was between two and three years. This is
expected to accelerate cash collections
and improve visibility of earnings. The
capacity allocated to industrial customers
under such contracts has recently risen
from 257 MW to 334 MW, or 82% of the
plant’s installed capacity and nearly half
of Group capacity. 74 MW of Chennai
capacity has remained available for
supply on the LTVT. Against the LTVT we
earned revenue for our normal available
capacity throughout the year including
approximately £3.7m for the c.250m units
that were not drawn by TANGEDCO as
normal seasonal demand adjustments
by them. We can expect this seasonality
in FY17 too but similarly expect to earn
a profitable capacity charge for it.
The increasing supply of electricity to
industrial customers provides an element
of protection from grid-related issues.
During the year the state of Tamil Nadu
was forced to restrict grid access by
reducing its purchases of electricity
from many generators of conventional
power during an especially strong wind
season due to grid constraints. Industrial
customers are not normally affected by
such restrictions as the state seeks to
ensure continuity of supply to business.
Power sales from the new 300 MW
Gujarat plant have been to mainly
industrial customers on short-term
contracts and to the power exchange.
The industrial customers are also supplied
by the state government utilities, which
operates a power surplus and is able to
determine how grid access is allocated.
During FY16, the Company
commissioned its two
largest assets to date, a
300 MW plant in Gujarat and
180 MW unit in Chennai.
INSTALLED CAPACITY
750 MW
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Power Ventures Plc
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Average tariff realisation
(Rs/kWh)
5.58
5.55
5.71
5.58
FY13 FY14 FY15 FY16
Cost of generation
(Rs/kWh)
3.06
3.10
3.09
2.67
FY13 FY14 FY15 FY16
Generation
(million kWh)
3,163
1,841
1,861
648
932
FY12 FY13 FY14
FY15 FY16
Note: FY16 includes 704m units from
Gujarat that were capitalised.
Plant load factor (Chennai)
(%)
92
94
96
91
81
73
70
66
70
66
FY12 FY13 FY14 FY15 FY16
All India thermal plants
Source: CEA April 2015.
Grid access is being made available
gradually, with the result that the plant
has ramped up gradually as we had
previously reported, achieving a load
factor of 68% for the first three months
of FY17, compared with 52% for the
two-month period since commissioning
from February to March 2016.
We expect both plants to operate at an
average load factor of 75% for the current
year as a whole and for average tariff levels
to be around Rs 4.40.
Coal supply
The Company has consistently been able
to import low sulphur coal from a small
number of high class Indonesian coal
producers and traders with whom it has
developed long-standing relationships.
The Company has also participated
in short-term price hedging which has
been beneficial as prices have fallen.
In addition, the Company has had a
consistent record of supply through
its shipping desk, which has resulted
in no delays or unexpected losses.
Safety and environmental compliance
The Company made good progress
with its safety programme, recording no
fatalities and a reported incident rate in
FY16 for Chennai of 0.28 versus 0.40 in
FY15 and 0.49 in FY14. Our target for
FY16 was 0.35. Gujarat performance
will become a focus in the current year
as it was recently commissioned and
contractor numbers are greatly reduced.
The Company continues to minimise its
consumption of water through air cooling
and we operate with a philosophy of
continual improvement with regards to
any effluent. For the latter we achieve and
report our continued compliance with all
existing prescribed limits and furthermore
are now in the process of adopting the new
national pollution limits announced in late
2015. These new limits are required to be
met by December 2018 but we anticipate
achieving compliance ahead of that.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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FINANCIAL REVIEW
The following is a commentary on the
Group’s financial performance for the year.
Income statement (£m)
Year ended 31 March
Revenue
Cost of revenue (excluding depreciation)
Gross profit
Other income
Distribution, general and administrative
expenses (excluding depreciation,
employee stock option charge,
expenditure during the period on
expansion project)
EBITDA
Depreciation
Net finance costs
Income from continuing operations
(before tax non-operational and/or
exceptional items)
Expenditure during the period on expansion
projects
Employee stock option charge
Charge on deconsolidated Investments
Profit before tax
Taxation
Profit after tax
% of
revenue
48.15
39.4
2016
128.44
(66.60)
61.84
4.44
(15.60)
50.68
(5.94)
(15.91)
2015
99.97
(58.46)
41.51
0.13
(8.25)
33.39
(3.15)
(7.97)
% of
revenue
41.5
33.4
28.83
22.4
22.27
22.2
–
(0.28)
–
28.55
(9.97)
18.57
22.2
14.45
(0.38)
(0.24)
–
21.65
(4.36)
17.29
21.6
17.2
Revenue
The Group’s revenue has increased by £28.4m, reflecting a 28% growth year on year.
Overall generation increased 70% on account of the commissioning of the 180 MW
Chennai and the 300 MW Gujarat plant part way through the year. Generation for revenue
purposes increased 32% to 2,459m units in FY16 from 1,861 in FY15 with the balance
704m units from Gujarat until 30 January being capitalised.
Production and output levels from the Group’s operating power plants in Chennai and
Gujarat compared to the prior year were as follows:
Particulars
Generation (million units)
PLF (%)
Average tariff (INR/unit)
FY16
3,1631
72
5.58
FY15
1,861
91
5.71
1
Includes 704m units from Gujarat for which results are being capitalised.
Generation at Chennai was lower due to seasonal demand, availability of grid during the
year and heavy rainfall.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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GUJARAT CASE STUDY:
BEST DELIVERY AND RAMP UP
TRANSMISSION LINE CONSTRUCTED
75 km
The Gujarat plant was originally planned as a 270 MW (2x135)
plant. This was later expanded to 300 MW (2x 150 MW). It
has adopted air cooled condenser technology and it had the
necessary permits to use water cooling. Further the inhouse
EPC team took the initiative of assisting the local state utility
and expediting the building of a new dedicated multi circuit
transmission line. The construction of the plant was
completed within c.40 months from commencement, and on
budget which, we believe, given the challenging backdrop of
the Indian power sector where several projects remain ‘stuck’,
positions us amongst industry leaders.
This has been possible due to management’s approach to
commencing projects only once it achieves financial closure
and working with top-tier suppliers, local government and
communities.
Since commencing operations, the management remains
focused on the ramp up of the plant and achieving an optimum
level of operation. The plant has extended sales to industrial
customers from within the state to outside the state to achieve
better tariff realisation. Again, this has been due to the
Company’s flexible sales model. The plant is expected to ramp
up to 75% PLF during FY17, having achieved 68% in FY16.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
24
FINANCIAL REVIEW
CONTINUED
Gross profit
Gross profit (‘GP’), net of depreciation included in cost of revenue in FY16 was 48.15% of
revenue (FY15: 41.5%). The GP growth came from lower factory gate prices of coal.
The cost of revenue represents fuel costs (including the depreciation added therein in the
audited accounts but excluded for the purpose of this review). The average factory gate
costs for Indian coal decreased by 1.6% and those for Indonesian coal by 20.7%. The
table below shows the price and blend of Indian and Indonesian coal consumed in FY16
and FY15.
Average factory gate price
(INR/mt)
Average factory gate price
(INR perm KCal)
Financial year
FY16
FY15
Change %
Indian
coal
Indonesian
coal
3,013
3,062
3,216
4,056
(1.6)
(20.71)
Indian
coal
879
988
Indonesian
coal
769
966
Blend %
Indian:
Indonesian
22:78
32:68
EBITDA
Earnings before interest, taxation, depreciation and amortisation (‘EBITDA’) is a measure
of a business’s cash generation from operations before depreciation, interest and
exceptional and non-standard or non-operational changes such as the annual charge
for stock options which is a non-cash item or expenses relating to projects under
construction.
EBITDA was £50.68m in FY16 up from £33.39m in FY15 and EBITDA margin was higher at
39.4% in FY16 against 33.4% in FY15 on account of increase in GP margin.
Profit before tax reconciliation (‘PBT’) (£m)
PBT 2015–16
PBT 2014–15
Increase in PBT
Reconciliation
Increase in GP
Increase in other income
Increase distribution, general and administrative expenses
Increase in depreciation
Increase in net finance cost
Reduction in expenses on expansion of projects
Increase in Employee Stock Options (‘ESOP’) expense
Increase in PBT
FY16
28.55
21.65
6.90
20.33
4.31
(7.35)
(2.79)
(7.94)
0.38
(0.04)
6.90
Taxation
The Company’s operating subsidiaries are under a tax holiday period but are subject to
Minimum Alternate Tax (‘MAT’) on its accounting profits. Any tax paid under MAT can be
offset against future taxable profits once the tax holiday period is over. The tax charged
during the year was £9.97m (FY15: £4.36m) which includes current tax of £3.99m (FY15:
£2.85m) and deferred tax of £5.97m (FY15: £1.51m). The deferred tax charge arises from
timing differences in the amounts of depreciation charged in the tax accounts as against
these published accounts.
Expenditure on projects
This relates to expenses incidental to projects under construction. These expenses in
FY16 were £nil (FY15: £0.38m).
Employee stock options charge
This relates to the amortisation of the value of stock options granted to certain Directors
and is non-cash in nature and were fully amortised during the year.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
25
Profits after tax
Profits after tax have increased by £1.28m from £17.29m in FY15 to £18.57m in FY16.
Property, plant and equipment
The net book value of our property, plant and equipment principally relates to production
assets capitalised post the construction of our new plants at Chennai and Gujarat.
Other non-current assets
Other non-current assets have decreased by £0.64m year on year primarily as a result of
investments made in the shipping business and in the restricted cash holding for more
than 12 months.
Trade receivables (£m)
Receivables from sales of power
Other receivables
Total
FY16
53.00
4.84
57.84
FY15
28.28
0.35
28.63
Current assets
Current assets have increased by £23.87m to £96.98m year on year primarily as a result of
the following:
•
Increase in trade receivables by £29.21m (on account of slower payment by
TANGEDCO, the short-term supply contracts with this entity having ceased in May 2016).
• Reduction in investments and other assets by £10.54m on account of reduction in
advances to suppliers for the projects in Chennai and Gujarat with corresponding
increase in assets under property, plant and equipment.
Increase in inventory holdings by £2.72m.
Increase in other assets by £2.47m.
•
•
Current liabilities
Current liabilities have increased by £4.8m primarily on account of increase in
retention money.
Other non-current liabilities
Other non-current liabilities have increased by £2.39m primarily on account of:
•
•
Increase in short-term bank borrowing by £4.62m.
Increase in deferred tax liability and reduction in trade and other liabilities by £2.2m.
Net debt and gearing
Net borrowings (borrowings net of cash and cash equivalents and available-for-sale of
investments) are £254.06m. Project debt on 480 MW of new capacity was fully drawn
down during the year. The gearing ratio was 58%.
The FY16 restricted cash balances totalling £9.23m (FY15: £8.1m) comprise deposits that
have been pledged as security against the Company’s borrowings.
Cash flow
Operating cash flow has increased from £32.87m in FY15 to £48.90m in FY16, an increase
of £16.03m, or 48%. The increase is primarily due to the increased gross margin.
Movements (£m)
Operating cash
Tax paid
Change in working capital assets and liabilities
Net cash generated by operating activities
Purchase of property, plant and equipment (net of disposals)
Other investments
Net cash used in investing activities
Net interest paid
FY16
FY15
48.9
(3.97)
(25.13)
19.80
(13.32)
(1.65)
(14.97)
(7.87)
32.88
(3.22)
(9.74)
19.92
(77.11)
10.57
(66.54)
(9.41)
Total cash change before net borrowings
(3.04)
(56.03)
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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OUR PEOPLE
Maintaining our social responsibility.
Sox Emission (mg/Nm3)
(Typical values)
600
400
400
400
National
Average
Chennai I, II, III
Chennai IV
Gujarat
Source: CEA, GOI, Ministry of Power
G1 & G2
C4
Stack Emission-SPM (mg/Nm3)
(Typical values)
50
30
30
30
National
Average
Chennai I, II, III
Chennai IV
Gujarat
Source: CEA, GOI, Ministry of Power
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements177FIELD, AREA AND CONTROL ENGINEERS Power Ventures Plc
27
Safety and environmental compliance
The Company made good progress
with its safety programme, recording
a reported incident rate in FY16 for
Chennai of 0.28 versus 0.40 in FY15
and 0.49 in FY14. Our target for FY16
was 0.35. Gujarat performance will
become a focus in the current year
as it was recently commissioned.
We remain compliant of the environmental
norms and take initiatives to improve
and exceed these where possible.
Continual progress on
our environmental and
safety performance.
87 TECHNICIANS
AND OPERATORS
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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SUSTAINABILITY REPORT
We ensure that our plants are compliant with all national
environment, health and safety regulations. Safeguards are
maintained either through management programmes or
operational control procedures to minimise impact as well
as mitigate risks.
Sustainability and Responsibility is at
the core of our operations. Maintaining
our social responsibility is vital to
successfully delivering on our growth
plans and creating value from our
operations. We aim to achieve
international best practices with our
efforts and continually evaluate our
health, safety, environment, and
community practices to ensure we are
delivering to all our stakeholders. We
are committed to improving the lives of
the societies in which we operate
through the integration of economic
prosperity, social development and
environmental protection.
Health and safety
Health and safety is the matter of
greatest importance at OPG
The Board’s Health, Safety and
Environment Committee (‘HSE
Committee’) was instituted to develop,
implement and oversee a health and
safety culture in the Company and to
assist the management in its drive towards
achieving and maintaining industry-
leading performance in these areas. This
is crucial to ensure, through management,
that the Company’s employees,
customers, suppliers and contractors
enjoy a safe and healthy workplace.
Across the Company, we continually
monitor and review health and safety
procedures, acting promptly if any
improvements are required. Our motto of
SAFETY FIRST is inculcated in all our
personnel and in all our operations and
projects under development. And of
course we ensure that our plant locations
are compliant with all national health and
safety regulations.
The OPG Chennai site is OHSAS
18001:2007 certified. OHSAS 18001 is a
standard used for an occupational health
and safety management system, which
enables an organisation to control its risks
and improve its performance in this area.
The standard provides a systematic
approach to identifying hazards, and then
either eliminates or reduces the risks of
the hazards.
At both Chennai and Gujarat sites,
continuous training programmes in safety
management are established. Targets have
been introduced to enable year on year
improvements and these are monitored
by the Company’s HSE Committee.
To drive the improvement programmes
the Company has adopted the Policy
of Zero Harm.
Following were key initiatives/improvements
that we have introduced at our power plants:
Safety initiatives
• Safety induction for all new employees
and contract workmen as per standard
programme
• Safety training of all employees by
external experts
• Manual call point checking (monthly)
• Monthly EHS training programme for
contract employees
• Weekly EHS training programme for
OPG employees
• Extinguisher and fire hydrant training for
new contract workmen and employees
(monthly)
• Carrying out the IMS (Integrated
Management Systems) internal audit
• Fire hydrants and extinguishers
healthiness and availability inspections
(monthly)
• Safety Committee meetings (monthly)
• Training of 15 employees in first aid by a
certified body
• Five days’ training on occupational
Safety training
Sustainability and
Responsibility is at the
core of our operations.
health safety, conducted by Regional
Labour Institute, Government of India
• Emergency preparedness and response
mock drills conducted (internal and
external)
Increased number of safety signage
boards placed inside the plant
Increased number of fire hydrants and
monitors included in revamping activities
•
•
• Visitor’s safety guidelines introduced
• Safety Committee agenda modified as
per Factories Rules 1950
• EHS external audit was carried out by a
third-party safety consultant
• EMS 14001 and OHSAS 18001 second
surveillance audit carried out
• Alcohol detector procured to monitor
coal truck drivers
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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At Chennai, this information revealed six
lost time injuries at the plant and a Total
Recordable Injury Rate (“TRIR”) of 0.28
down from 0.40 in FY15 and 0.49 in FY14.
At the Gujarat site, the first year of its
operations, the TRIR was 0.64.
There were no employee fatalities at either
plant during the year.
Health initiatives:
• Carbon monoxide measurement
monitoring in coal handling plant (twice
monthly)
• Lux monitoring day and night (weekly)
lighting improvement measures taken
• Ambient Air Quality (‘AAQ’) monitoring
with 12 parameters (yearly)
• Source noise monitoring day and night
(weekly)
• Annual health check-up for all
employees
• Occupational ill-health awareness
classes
• Surprise visit to observe Personal
Protective Equipment compliance
As part of their monthly and yearly
reporting, plant managers are required to
submit details of training activities and
other initiatives. Most often these activities
tend to focus on:
• Fire handling
• Mock emergency drills
• Occupational ill health awareness
The above activities typically take place
at monthly intervals with a compulsory
annual safety awareness day being held
at both plants.
In addition to processes for reporting
specific incidents, plant management are
required to submit a monthly safety report
setting out:
•
Injuries by number, nature, seriousness
and cause
Information on near miss incidents
•
• Safety concerns arising and
improvement actions to be taken
• Safety promotion activities along with
details of attendees
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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SUSTAINABILITY REPORT
CONTINUED
OPG believes that safety is everyone’s
responsibility. The main objective is to
motivate the employees and associates to
put safety first in the workplace and
contribute towards making OPG a healthier
and safer place to work.
Environment
OPG is committed to achieve continuous
improvements in environmental
performance and seek to prevent, mitigate,
reduce or offset the environmental impact
of our operations. The Company’s
objective is to remain compliant and
exceed the standards set out by the
Ministry of Environment and Forest
regulations and State Pollution control
boards. Water conservation is an area of
additional focus at both our sites where we
have installed air cooled condensers which
reduce water usage by over 90% as
compared to water cooling technology
used more widely in the industry.
Environmental and green initiatives
The OPG Chennai site successfully
obtained the ISO 14001:2004 certification.
This specifies requirements for an
environmental management system to
enable an organisation to develop and
implement policies and objectives with
respect to the environment.
At the Gujarat site, the Company instituted
various programs and policies being the
first year of operations such as
• Annual environmental audit
• Monthly testing of chemical parameters
of water of both internal and nearby
water sources
• 9 Piezometer were constructed in the
premises to monitor the level and the
quality of the underground water
• Construction of new hazardous waste
rooms and hazardous waste
management carried out
• 5,500 tree saplings planted
In addition, activities such as sprinkling of
water on road surfaces and mechanical
sweeping is carried out to minimise dust.
Our people
Employee consultation
The Group places considerable value on
keeping employees informed on matters
affecting them and on the various factors
affecting the performance of the Group.
This is achieved through informal meetings
and presentations on new developments
both within the Company and the wider
industry. The Group is committed to
providing equal opportunities and opposes
all forms of unfair or unlawful discrimination.
Employees will not be discriminated against
because of race, colour, nationality, ethnic
origin, disability, sex or sexual orientation,
marital status or age.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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children, an additional 230 students from
last year, belonging to the villages Periya
Obulapuram, Chinna Obulapuram,
Kayalarmedu, SR Kandigai received full
school supplies (uniforms, shoes, books,
bags, etc.) for the entire year before the
commencement of the school year. A
further 86 students from below poverty line
families are also granted annual school/
college fees to ensure that lack of funds
does not preclude their advancement.
As part of OPG Outreach, a strong
awareness programme has been
developed to promote girl child education.
To support this, the Company started a
sponsorship programme last year in higher
secondary education at a reputed private
school. Under this scheme, three girls will
be selected every year based on academic
background and economic needs, and
their entire education will be funded by
OPG Outreach.
OPG has also sponsored monthly salaries
to 11 PTA teachers in four Government
schools situated in the vicinity of the plant.
This programme is intended to provide
support to Government owned schools in
imparting quality education to children.
All employees are encouraged
to raise genuine concerns about
possible improprieties in the conduct
of our business, whether in matters
of financial reporting or other
malpractices, at the earliest opportunity
and in an appropriate way.
Disabled persons
Applications for employment by disabled
persons are always fully considered,
bearing in mind the aptitudes of the
applicant concerned. In the event of
members of staff becoming disabled,
every effort is made to ensure that their
employment with the Group continues
and that appropriate training is arranged.
Training and development
Employing the right people and
encouraging the continuous development of
the skills of our employees is critical to
developing a successful business. The
Company recruits graduate engineering
trainees and provides them with a
comprehensive six-month on-site training
programme. This will ensure that, in keeping
with the growth of the Company’s assets,
adequate well trained and competent
personnel are available for in-house
operations and project development.
Supply chain
The Group works with a team of industry-
leading suppliers and contractors.
The Company’s power generation plants
are fuelled by coal sourced from India but
also from imported coal from Indonesia.
Availability of supplies has not been an
issue given the flexibility of coal types we
can use.
Community
OPG respects the rights and acknowledge
the aspirations and concerns of the
communities in which it works. We recognise
the importance of engaging with the local
communities in which we operate. Promoting
and respecting fundamental needs is at the
heart of our values and business principles,
and crucial to maintaining positive relations
with local communities where we operate.
Chennai floods assistance
During December 2015 areas around
Chennai in Tamil Nadu experienced high
levels of rainfall and flooding. Despite a
lack of continuous power and water for
many residents, we are able to report that
the well-being of all of our management,
staff and contractors had been
established. Our Chennai plant did not
suffer any damage and remained available
for production throughout the rains. This
was as a direct consequence of (a) coal
stocks being available in our on-site sheds
and (b) drainage of excess water from the
plant site operating in accordance with our
design. The design incorporated
tolerances for significant single rainfall
events. Drainage was in fact effective to
the point that we were able to assist local
communities by making available our
drainage systems and expertise for the
considerable relief efforts that were
required nearby. OPG sheltered about 5
villages in and around the community
providing them with food, provisions and
other basic needs.
OPG Outreach
OPG Outreach, launched in July 2011 near
our Kutch site, has now completed five
successful years and has been expanded
to the Chennai site as well during 2013.
The first free primary healthcare centre
that we built in 2013 at Sitha Raja Kandigai
(the nearest village to our Chennai
site), runs daily, handling 50 patients
on an average per day. The centre is
serving the medical requirements of
the residents of five nearby villages.
The second healthcare centre has also
commenced at the Periya Obulapuram
village, also near the Chennai site. It is run
daily and served by a full-time qualified
doctor and nurse, attending to an average
50 people a day. OPG is confident that
both these centres and their associated
facilities will provide much needed basic
care and medical aid to the communities
around the OPG power plant.
In collaboration with Rotary Club of
Chennai (an NGO), we have organised
distribution of tricycles and hearing aids.
Rural infrastructure development
In continuation of our community
development efforts, our Gujarat team has
distributed cattle feed and provided
assistance in building Gowshalas (cow
shelters), water storage tanks in nearby
villages of Kutch district, Gujarat.
On request of the people of Kayalar Medu
village, Gummidipoondi, we have assisted
in patchwork repair of the pothole-ridden
roads in the village. The construction of a
prayer hall/church, which we started last
year is steel roofed and is expected to be
completed shortly.
Educational aid
OPG believes that education and
employment will provide opportunities for
people and communities to develop and
prosper, thus increasing their standard
of living.
We continue to sponsor education of
children from local communities studying in
various Government schools. 1,080 school
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
32
PRINCIPAL RISKS
The Group faces a number of risks to its business
and strategy. Management of these risks is an
integral part of the management of the Group.
Sector-related risks
POWER SALE
DESCRIPTION
The Company’s power plants derive their revenue from the group captive model selling power
on short-term, medium-term, or long-term sale basis and would, for this purpose, enter into
power purchase agreements with counterparties such as industrial captive consumers, power
trading companies and state utilities. Contracts with customers may impose restrictions on
the Company’s ability to, amongst other things, increase prices at short notice and undertake
expansion initiatives with other customers. The Group’s power plants may not qualify or continue
to be recognised as captive power producers which may damage the Group’s business model
or increase the costs to the Group’s customers. This could adversely affect the revenues in the
short- to medium-term and results of operations.
AVAILABILITY OF FUEL SUPPLY AND COSTS
DESCRIPTION
The Group has coal linkages with domestic companies and agreements for imported coal.
The dependence on third parties for coal exposes the Group’s power plants to vulnerabilities
such as non-supply, price increases in the international market, foreign exchange fluctuations
and increases in shipping costs and any changes in applicable taxes and duties. This could
impact the operations and profitability of the Group.
TIMELY EXECUTION OF PROJECTS
DESCRIPTION
The length of the construction period and the cost to complete any given project is dependent
on third-party suppliers and Engineering, Procurement and Construction (‘EPC’) contractors.
Factors such as disputes with contractors, price increases, shortages of construction materials,
delays in supply from various contractors, accidents, unforeseen difficulties, changes in
government policies, delays in receipt of necessary approvals and non-availability of external
infrastructure such as transmission lines, can lead to cost overruns and delays impacting the
timely completion and ultimately the profitability of projects.
PROJECT FINANCE
DESCRIPTION
The development of power plants is a capital intensive business and the Group’s projects require
access to both equity and debt markets. The availability of capital as well as terms of debt
funding/interest rates may change including the need for personal guarantees.
MONITORING AND MITIGATION
• Review contracts periodically to obtain
best possible tariffs
• Flexibility to sell to captive consumers or
in the open market
• Benchmarking captive consumer prices to state
utility prices to benefit from any price increases
• Monitor ongoing customer performance,
maintaining a group of counterparties
MONITORING AND MITIGATION
• Seeking long-term supplies
• Maintaining adequate storage facilities to
keep appropriate levels of surplus stocks
• Maintaining relationships with suppliers and
mitigating any potential disruption
• Developing different sources for fuel supply
especially in the imports market
MONITORING AND MITIGATION
• Close monitoring of projects by the project
team and addressing issues causing delays
• Ordering key equipment and long lead items
ahead of schedule
• Including liquidated damages clauses in its
contracts in relation to such matters as delays
and inferior workmanship
• Developed strong and well experienced in-house
EPC team to deliver the projects on time
MONITORING AND MITIGATION
• Assessing financial viability of projects
• Financing projects with an optimum mix of
debt and equity including internal accruals
• Obtaining in-principle project finance from
banks before commencement of projects
• Monitoring cash flow to ensure repayment of
debt and interest in line with schedule
• Exploring new relationships in debt markets
to ensure optimum debt funding terms
RELIABLE TRANSMISSION INFRASTRUCTURE
DESCRIPTION
The Group is dependent upon a reliable transmission and distribution infrastructure so that the
power generated at the Group’s power plants can be evacuated and transmitted to consumers.
The Group pays an open access fee to access the transmission and distribution structure. If the
transmission infrastructure is inadequate or subject to approvals and unexpected fees then this
will adversely affect the Group’s ability to deliver electricity to its customers and impact revenues
and profitability.
MONITORING AND MITIGATION
• Assessing adequate availability of transmission
capacity and related fees during project
evaluation stage
• Construction and/or upgrade of transmission facilities
near the Group’s existing or future power plants
• Maintaining a proactive relationship with local
Distribution Companies (‘Discoms’) and monitor
any changes
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
33
MONITORING AND MITIGATION
• The Group monitors and reviews changes in the
regulatory environment and its commitments under
licences previously granted
• It continually ensures compliance with the
conditions contained within individual licences and
is mindful of the importance of complying with
national and local legislation and standards
• The Group maintains an open and proactive
relationship with the Indian government and its
various agencies
MONITORING AND MITIGATION
• The Group continues to monitor changes and
developments in respect of incentives provided by
the Indian federal and state authorities
• Project investment returns are evaluated based on
the expected incentives available to the Company
and are revised based on the most up-to-date
guidance available
MONITORING AND MITIGATION
• Putting in place, where appropriate, forward
contracts or hedging mechanisms
• Monitoring our risk on a regular basis where no
hedging mechanism is in place and taking steps to
minimise potential losses
MONITORING AND MITIGATION
• The Group continues to monitor changes and
developments in the global markets to assess the
impact on its financing plans
The list of principal risks and uncertainties
facing the Group’s business set out below
cannot be exhaustive because of the very
nature of risk. New risks emerge and the
severity and probability associated with
these will change over time.
India-specific risks
GOVERNMENT POLICY AND REGULATIONS
DESCRIPTION
The Group’s operations are subject to complex national and state laws and regulations
with respect to numerous matters, including the following:
environmental factors (emissions, waste disposal, storage and handling);
health and safety; and
planning and development.
The Group is required to obtain approvals, licences and permits issued by the Indian government
and other regulators and failure to obtain, comply with the terms of or renew such approvals,
licences and permits may restrict the Group’s operations or development plans, or require their
amendment, and may adversely affect the Group’s profitability, or result in it being subject to fines,
sanctions, revocation of licences or other limitations.
ABILITY TO RETAIN FISCAL AND TAX INCENTIVES
DESCRIPTION
The Group’s existing and planned power plants benefit from various fiscal and tax incentives that
are available to the Company from the federal and state governments.
A change in policy or the adoption of tax policies and incentives can have an adverse impact on
the profitability of the Group.
EXCHANGE RATE FLUCTUATIONS
DESCRIPTION
As a consequence of the international nature of its business, the Company is exposed to risks
associated with changes in foreign currency exchange rates. The Group’s operations are based
in India and its functional currency is the Indian Rupee although the presentational currency is
Great Britain Pound. Imported coal is purchased in US Dollars.
The Group’s financial results may be affected by appreciation or depreciation of the value of the
foreign exchange rates relative to the Indian Rupee.
GLOBAL FINANCIAL INSTABILITY
DESCRIPTION
The Indian market and Indian economy are influenced by global economic and market
conditions, particularly emerging market countries in Asia. Financial instability in recent years has
inevitably affected the Indian economy.
Continuing uncertainty and concerns about contagion in the wake of the financial crises could
have a negative impact on the availability of funding.
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34
BOARD OF DIRECTORS
1. Mr M C Gupta
Non-executive Chairman
2. Mr Arvind Gupta
Chief Executive Officer
3. Mr V Narayan Swami
Finance Director
Background and experience
Mr M C Gupta is a retired senior civil
servant of the Indian Administrative
Service, the premier civil service of India.
During his service Mr Gupta held a number
of senior appointments, notably those of
Secretary, Ministry of Industry, Government
of India and Chief Secretary to the
Government of Haryana State. As
Secretary to the Ministry of Industry,
Mr Gupta was one of the civil service
officers responsible for initiating and
implementing the process of economic
reforms which began in the 1990s in India
and which continue to this day. Mr Gupta
serves on the Boards of a number of public
companies in India including Bhansali
Engineering Polymers Ltd and Lumax
Industries Ltd as an independent Director.
Mr M C Gupta is not related to either
Mr Arvind Gupta or Mr Ravi Gupta.
Background and experience
Mr Arvind Gupta gained experience in
various divisions of the business including
flour milling, steel production and logistics,
becoming President of Kanishk Steel,
listed on the Bombay Stock Exchange.
Having identified the opportunities in
power generation, Mr Gupta developed
this division within Kanishk Steel with initial
projects in wind power generation in 1994.
He was the pioneer of the Group Captive
Power Producer concept in Tamil Nadu
State. Since then, Mr Gupta, founder of
OPG Group, has been responsible for the
construction and development of the
power plants of the Group as well as its
overall strategy, growth and direction. He
has also developed profitable wind and
solar power projects within the family
portfolio.
Background and experience
Mr V Narayan Swami has over 30 years’
experience in finance and management.
He has a Masters in business, with a major
in finance and accounting. Mr Swami
started his career with the State Bank of
India before moving to Ashok Leyland
Limited in 1976. For 12 years until 1993, he
held a variety of positions within Standard
Chartered Bank including as Senior
Manager – Corporate Division for Southern
India. Later Mr Swami joined Essar Global
Ltd, Dubai, as Executive Director,
subsequently becoming CFO of Essar
Telecom Group where he played a key role
in the entry and planned exit of Swisscom
from the venture along with the
simultaneous induction of Hutchinson
Whampoa in the business. Mr Swami
was Group Finance Director (and CFO)
of Best & Crompton Engineering Limited,
listed on the Bombay Stock Exchange,
before joining OPG in 2007 as
Finance Director.
Member
Audit, Remuneration Committee
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
35
4. Mr Martin Gatto
Senior Independent
Non-executive Director
5. Mr P Michael (Mike) Grasby
Independent Non-executive
Director
6. Mr Ravi Gupta
Non-executive Director
Background and experience
Mr Ravi Gupta is the brother of Mr Arvind
Gupta and throughout his career has been
involved with family businesses. He is one
of the founders of Kanishk Steel and is
its Chairman. Mr Gupta has also been
associated with the flour mill industry,
setting up a new flour mill in 1988 in Tamil
Nadu State, Salem Food Products Limited,
where he is Managing Director.
Background and experience
Mr Martin Gatto has considerable
experience as a senior financial
professional and has worked at a number
of large UK quoted public companies.
He is a graduate of Brunel University and
is a Fellow of the Chartered Institute of
Management Accountants. During his
career, Mr Gatto gained international
experience at Hilton International Company
where he was responsible for business
development and property. Later, as Chief
Financial Officer of British Energy Plc,
Midlands Electricity Plc and Somerfield
Plc, he was responsible for the successful
execution of turnaround strategies.
He is also the Chairman of Medico-Dental
Holdings Ltd.
Background and experience
Mr P Michael Grasby is a Chartered
Engineer and has been associated with
the UK and international power industry for
many years. He was manager of the Drax
Power Station between 1991 and 1995
and Director of Operations for National
Power, with responsibilities for over
16,000 MW of generating capacity, until
1998. Following the demerger of National
Power in 1999, he joined International
Power as Senior Vice-President for Global
Operations and retired in 2002. Mr Grasby
has experience of power company
directorships in the Czech Republic,
Portugal, Turkey and Pakistan. Mr Grasby
was formerly a Non-executive Director
of Drax Plc where he chaired the Health
and Safety Committee and sat on the
Audit, Remuneration and Nominations
Committees; he retired from the Drax
Board in April 2011. He was also formally
a Director of Strategic Dimension
Technical, a London-based executive
recruitment company.
Member
Audit, Remuneration Committee
Member
Audit, Remuneration Committee
Member
Audit, Remuneration Committee
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
36
CORPORATE GOVERNANCE REPORT
FINANCIAL YEAR ENDED 31 MARCH 2016
Introduction
The Board is committed to good corporate governance practices. The Company was admitted to trading on AIM in May 2008.
Accordingly, compliance with the governance framework contained in the UK Corporate Governance Code published by the Financial
Reporting Council (the ‘Code’) is not currently mandatory. Nevertheless, the Company remains committed to high standards of corporate
governance and endeavours to comply with the Code to the extent practicable for a public company of its size.
Compliance with the Code
Since admission to AIM, the Group has grown substantially against a background of difficult trading conditions within the Indian electricity
generation sector. As noted in the Strategic Report, the Company has delivered strong results, completed its 750 MW programme,
announced its dividend policy and embarked on the next phase of its development. The key objective is to build on these achievements
and the Board has therefore adopted an approach to governance that is proportionate and appropriate to the current size and complexity
of the Group.
The Board notes the following areas of non-compliance with the Code with comments on each as appropriate:
1. Schedule of Matters Reserved (A.1.1)
At present, the Board reviews and adopts the Group’s strategy, plan and key risks, policies and procedures. The Board is to adopt a
schedule of matters specifically reserved to it for decision within the current financial year.
2. Division of Responsibilities (A.2.1)
On 1 August 2016, the Company announced that the Chairman, Mr M C Gupta, would retire at the forthcoming Annual General
Meeting (‘AGM’) and that the Chief Executive, Arvind Gupta, had accepted the Board’s proposal to assume the role of Executive
Chairman effective from the date of the Chairman’s retirement.
The Company simultaneously announced the appointment of Mr T Chandramoulee to a newly created post of Chief Operating Officer.
This is a non-Board appointment. Mr Chandramoulee joined the Company in 2007 and has played an important role in key aspects
of the Group’s development. As Chief Operating Officer, Mr Chandramoulee will be responsible for the day-to-day running of the
operations whilst Mr Gupta will be responsible for the overall business, running the Board, the Executive Committee (‘ExCo’) and
for matters related to strategic direction.
In the Board’s view, these changes together ensure an appropriately clear division of responsibilities between the running of the Board
and the executive responsibility for the running of the Company’s business.
3. Non-executive Directors (A.4.2)
The Code requires the Non-executive Directors, led by the Senior Independent Director, to meet at least annually without the
Chairman to appraise the Chairman’s performance. The Board is to institute a periodic evaluation process, including evaluating the
performance of the Chairman in due course.
4. Nominations Committee (B.2.1)
The Board is committed to establishing a Nominations Committee in due course comprising a majority of independent Non-executive
Directors. The Committee will meet as and when required, its primary function being to provide a formal procedure for the
appointment of new Directors to the Board and to advise generally on issues relating to Board composition and balance. In
appropriate cases, recruitment consultants may be used to assist in the process.
5. Evaluation (B.6)
The Chairman, as part of his responsibilities, informally assesses the performance of the Board and its Directors on an ongoing basis
and brings to the Board’s attention any areas for improvement. For the time being, the Board will continue to evaluate in this way the
balance of skills, experience, independence and knowledge required to ensure that its composition is appropriate to the Group’s size
and complexity. As noted in connection with Code provision A.4.2 above, the Board will be evaluating its performance and that of its
principal committees and the individual Directors annually.
Operation of the Board
Board of Directors
The Board comprises the following individuals:
Executive
1. Arvind Gupta (Chief Executive Officer); and
2. V Narayan Swami (Finance Director).
Non-executive
1. M C Gupta (Non-executive Chairman);
2. Martin Gatto (Senior Independent Director);
3. Michael Grasby; and
4. Ravi Gupta.
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37
The Board considers that, as at the date of this report, it complies with Code provision B.1.2, which requires that, in the case of smaller
companies, there should be a minimum of two independent Non-executive Directors. In addition to the Chairman, Michael Grasby and
Martin Gatto are considered to be independent under the Code. Both Messrs Gatto and Grasby were appointed to the Board in May 2008.
Biographical details of all the Directors at the date of this report are set out on pages 34 and 35 together with details of their membership,
as appropriate, of the Board Committees. The Board is responsible for setting the Company’s objectives and policies and providing
effective leadership and the controls required for a publicly listed company. Directors receive papers for their consideration in advance of
each Board meeting, including reports on the Group’s operations to ensure that they remain briefed on the latest developments and are
able to make fully informed decisions. The Board met 4 times during the year under review.
The ExCo comprises of the two Executive Directors and four members of senior management.
All Directors have access to the advice and services of the Company Secretary, who is responsible for ensuring that Board procedures
are followed and that applicable rules and regulations are complied with.
Directors have the right to request that any concerns they have are recorded in the appropriate Committee or Board minutes. Informal
procedures are in place for Directors to take independent professional advice at the Company’s expense although these are not currently
set down in writing.
The Company maintains Directors’ and officers’ liability insurance and indemnity cover, the level of which is reviewed annually.
Chairman, Chief Executive Officer and Senior Independent Director
The roles of the Chairman and Chief Executive Officer have been held by different individuals with a clear separation of roles. The
Chairman’s key responsibilities have been the effective running of the Board, ensuring that the Board plays a full and constructive part in
the development and determination of the Group’s strategy and overseeing the Board’s decision-making process. The key responsibilities
of the Chief Executive Officer have been managing the Group’s business, proposing and developing the Group’s strategy and overall
commercial objectives in consultation with the Board and, as leader of the executive team, implementing the decisions of the Board and
its Committees.
On 1 August 2016, the Company announced that the current Chief Executive, Arvind Gupta, is to assume the role of Executive Chairman
effective from the date of the present Chairman’s retirement. The Company has recently announced the appointment of Mr T Chandramoulee
to a newly created post of Chief Operating Officer (‘COO’), a non-Board appointment. The COO will be responsible for the day-to-day
running of the operations whilst the Executive Chairman will be responsible for running the overall business, the Board, the ExCo and for
matters related to strategic direction. In the Board’s view, there will continue to be appropriately clear division of responsibilities between
the running of the Board and the executive responsibility for the running of the Company’s business.
Martin Gatto, the Senior Independent Director, is available to shareholders who have concerns that cannot be resolved through
discussion with the Chairman. The role of the Senior Independent Director is to support and tender advice to the Chairman on all
governance matters.
Re-election of Directors
At every AGM, one-third of the Directors for the time being (excluding any Director appointed since the previous AGM) or, if their number
is not divisible by three, the number nearest to one-third, shall retire from office by rotation. On this basis, Messrs Arvind Gupta and
V Narayan Swami will offer themselves for re-election at the forthcoming AGM. In addition, Mr M C Gupta will be standing down from
the Board and Mr Jeremy Beeton will be proposed to the shareholders as a Non-executive Director.
Information and professional development
Prior to the Company’s admission to AIM in May 2008, all Directors received a briefing from the Company’s nominated adviser of their
duties, responsibilities and liabilities as a Director of an AIM company. Directors are encouraged to keep abreast of developments and
attend training courses to assist them with their duties.
In addition to the formal meetings of the Board, the Chairman is available to the other Non-executive Directors to discuss any issues of
concern they may have relating to the Group or as regards their area of responsibility and to keep them fully briefed on ongoing matters
relating to the Group’s operations.
The Chairman is responsible for ensuring that new Directors each receive a full, formal and tailored induction on joining the Board as
required by provision B.4.1 of the Code.
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38
CORPORATE GOVERNANCE REPORT CONTINUED
FINANCIAL YEAR ENDED 31 MARCH 2016
Board performance
As noted above, the Board will in due course consider the most appropriate methodology for evaluating its performance and that of its
principal Committees and the individual Directors.
Meetings of the Board and its Committees
The following table sets out the number of meetings of the Board and its Committees during the year under review and individual
attendance by the relevant members at these meetings:
Board meetings
Board Committee meetings
Audit
Remuneration
Number
Attended
Number
Attended
Number
Attended
Arvind Gupta
V Narayan Swami
M C Gupta
Martin Gatto
Michael Grasby
Ravi Gupta
Number of meetings held during the year
4
4
4
4
4
4
4
3
4
3
4
4
3
NA
NA
2
2
2
2
2
NA
NA
2
2
2
2
NA
NA
1
1
1
1
1
NA
NA
1
1
1
1
In the event that Directors are unable to attend a meeting, their comments on the business to be considered at the meeting are discussed
in advance with the Chairman so that their contribution can be included in the wider Board discussions.
Board Committees
Audit Committee
The members of the Audit Committee are M C Gupta, Martin Gatto, Michael Grasby and Ravi Gupta. Martin Gatto is considered to have
recent, relevant financial experience. The Chief Executive and Finance Director and also, as necessary, a representative of the auditors
are normally invited to attend meetings of the Committee.
The primary duty of the Audit Committee is to oversee the accounting and financial reporting process of the Group, the external audit
arrangements, the internal accounting standards and practices, the independence of the external auditor, the integrity of the Group’s
external financial reports and the effectiveness of the Group’s risk management and internal control system.
The Audit Committee met twice during the year and considered the following matters during the year under review:
• the Annual Report and Accounts for the year ended 31 March 2015; and
• the unaudited results for the half-year FY16 to 30 September 2015.
Remuneration Committee
The Remuneration Committee currently consists of M C Gupta, Martin Gatto, Michael Grasby and Ravi Gupta. Ravi Gupta is not present
when any remuneration matter relating to the Chief Executive, Arvind Gupta (his brother) is discussed.
The primary duty of the Remuneration Committee is to determine and agree with the Board the framework or broad policy for the
remuneration of the Executive Directors and such other members of the executive management team of the Group as is deemed
appropriate. The remuneration of the Non-executive Directors is a matter for the executive members of the Board. No Director may be
involved in any decisions as to his own remuneration.
Full details of the role and composition of the Remuneration Committee, the remuneration policy of the Company and its compliance with
the Code provisions relating to remuneration are set out in the Directors’ Remuneration Report on pages 42 to 45.
The Remuneration Committee met once during the year under report to discuss and consider the LTIP Scheme and the remuneration for
the year of the Chief Executive.
Accountability and Audit
Risk management and internal control
The Board has overall responsibility for the Group’s system of internal control, which includes risk management. The Board has delegated
the responsibility for reviewing the effectiveness of its internal control systems to the Audit Committee. The Audit Committee reviews
these systems, policies and processes for tendering, authorisation of expenditure, fraud and the internal audit plan.
The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and can only
provide reasonable and not absolute assurance against material misstatement or loss.
The Board has instructed the ExCo to be a leading part of its process to identify, evaluate and manage the significant risks the Group
faces, which is in accordance with the current guidance on internal control. The Audit Committee will assist the Board in discharging its
review responsibilities. A summary of the key risks facing the Group and mitigating actions is described on 32 and 33.
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Power Ventures Plc
39
Assurance
Grant Thornton has been auditor for the Group for the last four years. The Committee considers that, at this stage in the Group’s
development, it is more efficient to use a single audit firm to provide certain non-audit services for transactions and tax matters. However,
to regulate the position, the Committee will at the appropriate time establish a policy on the provision of non-audit services by the external
auditor. That policy will set out the external auditor’s permitted and prohibited non-audit services and a fee threshold requiring prior
approval by the Audit Committee for any new engagement. The external auditor did not provide any non-audit services during the year.
Going concern
A statement on the Directors’ position regarding the Company as going concern is contained in the Directors’ Report on page 40.
Shareholder Relations and the Annual General Meeting
The Board is committed to maintaining an ongoing dialogue with its shareholders. The Directors are keen to build a mutual understanding
of objectives with its principal shareholders. To this end, the Chief Executive and Finance Director together with the Senior Independent
Director met with a number of institutional shareholders during the year. The Directors also encourage communications with private
shareholders and encourages their participation in the AGM.
Arvind Gupta is primarily responsible for ensuring the effective communication of shareholders’ views to the Board as a whole and
updates the Board accordingly. Board members keep abreast of shareholder opinion and to discuss strategy and governance issues with
them as appropriate.
Notice of the AGM will be sent to shareholders at least 21 clear days before the meeting. The voting results will be made available on the
Company’s website following the meeting.
The Company uses its corporate website (www.opgpower.com) to communicate with its institutional shareholders and private investors
and posts the latest announcements, press releases and published financial information together with updates on current projects and
other information about the Group.
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40
DIRECTORS’ REPORT
The Directors present their report, together with the audited financial statements of the Group, for the year ended 31 March 2016.
Particulars of important events affecting the Group, together with the factors likely to affect its future development, performance and
position are set out in the Strategic Report on pages 1 to 33 which is incorporated into this report by reference together with the
Corporate Governance Report on pages 36 to 39. These together contain certain forward looking statements and forecasts with respect
to the financial condition, results, operations and business of OPG Power Ventures Plc which may involve risk and uncertainty because
they relate to events and depend upon circumstances that will occur in the futures. There are a number of factors that could cause actual
results or developments to differ materially from those expressed or implied by these forward looking statements and forecasts. Nothing
in this Annual Report to shareholders should be construed as a profit forecast.
Results and dividends
The audited financial statements for the year ended 31 March 2016 are set out from pages 48 to 74. The Group profit for the year after
taxation was £18.57m (2015: £17.29m). The Board will not be recommending a dividend for the year ended 31 March 2016 but, as
announced on 24 May 2016, it proposes to declare a maiden dividend in respect of the year ending 31 March 2017. A final dividend for
that year will be announced together with the preliminary results and an interim dividend will be paid at the end of calendar year 2016.
No dividend was paid for the year ended 31 March 2015.
Directors
There were no changes to the Board during the period and of the Directors offering themselves for re-election at the forthcoming Annual
General Meeting (‘AGM’) are set out in the Corporate Governance Report on page 37.
Details of Directors’ service agreements are set out in the Directors’ Remuneration Report on page 43.
The interests of the Directors in the shares of the Company are shown in the Directors’ Remuneration Report on page 44.
Biographies of all the Directors at the date of this report are set out on pages 34 and 35.
Related parties
Details of related party transactions are set out in note 23 to the financial statements.
Directors’ liability insurance and indemnities
The Company maintains liability insurance for the Directors and officers of all Group companies.
Indemnities are in force under which the Company has agreed to indemnify the Directors to the extent permitted by applicable law and
the Company’s Articles of Association in respect of all losses arising out of, or in connection with, the execution of their powers, duties
and responsibilities as Directors of the Company or any of its subsidiaries.
Neither the Group’s liability insurance nor indemnities provides cover in the event that a Director or officer is proved to have acted
fraudulently or dishonestly.
Share capital
The issued share capital of the Company at 31 March 2016 was £51,671 comprising 351,504,795 ordinary shares of £0.000147 pence
each, of which there are no designated treasury shares.
The Directors will be seeking to renew authority at the forthcoming AGM to purchase its own shares. Full details of these resolutions,
together with explanatory notes, are contained in the Notice of Annual General Meeting.
Political donations
The Group has made no political donations during the year under review.
Going concern
As highlighted in the Consolidated Statement of Cash Flows and note 21 to the financial statements, the Group meets its day-to-day
working capital requirements through cash from operations and bank facilities.
Further information on the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the
Financial Review on pages 22 to 25. In addition, note 27 to the financial statements details the Group’s objectives, policies and processes
for managing its capital and its exposures to credit risk and liquidity risk.
The management’s forecasts and projections, taking account of possible changes in trading performance, show that the Group should
be able to operate within the level of its current facility.
After making enquiries, the Board has a reasonable expectation that the Company and the Group have adequate resources to continue
in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual
Report and Accounts.
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41
Substantial shareholdings
Details of substantial shareholdings are set out on the Company’s website at www.opgpower.com. The Company has been notified, in
accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, of the following interests (whether directly or
indirectly held) in 3% or more of the Company’s total voting rights at 31 March 2016:
Gita Investments Limited and related parties1
M&G Investment Management Limited
Audley Capital Management Ltd
British Steel Pension Scheme
Sanlam Four Investment UK Ltd
Hargreave Hale Ltd
Percentage of
voting rights
and issued
Number of
share capital
ordinary shares
50.9% 178,886,428
11.3%
39,881,231
5.6% 19,659,544
3.4% 12,000,000
11,512,533
3.3%
10,982,113
3.1%
1 Beneficial interest in these shareholdings vests with Arvind Gupta and his family.
Annual General Meeting
The notice convening the meeting, together with details of the special business to be considered and explanatory notes for each
resolution, is contained in a separate document sent to shareholders. It is also available on the Company’s website, www.opgpower.com,
where a copy can be viewed and downloaded in a pdf format which may be printed or saved by following the link to the Investor Centre/
Shareholder Circulars.
Registered agent
The registered agent of the Company at 31 March 2016 was IOMA Fund and Investment Management Limited who served throughout
the year and has continued to date.
Financial instruments
Information on the Group’s financial risk management objectives and policies and its exposure to credit risk, liquidity risk, interest rate risk
and foreign currency risk can be found in note 27.
Auditor
Grant Thornton have expressed their willingness to continue in office as auditors and a resolution proposing their re-appointment will be
proposed at the forthcoming AGM.
Disclosure of information to the auditor
As required by Section 418 of the Companies Act 2006, each Director serving at the date of approval of the financial statements confirms
that:
1. to the best of their knowledge and belief, there is no information relevant to the preparation of their report of which the Company’s
auditors are unaware; and
2. each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information
and to establish that the Company’s auditors are aware of that information.
Words and phrases used in this confirmation should be interpreted in accordance with the provisions of the Companies Act 2006.
This report was approved by the Board of Directors on 29 July 2016 and signed on its behalf by:
Philip Scales
Company Secretary
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
29 July 2016
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42
DIRECTORS’ REMUNERATION REPORT 2016
Introduction
This report sets out information about the remuneration of the Directors of the Company for the year ended 31 March 2016. As a
company admitted to AIM, OPG is not required to prepare a directors’ remuneration report. However, the Board supports the principle
of transparency and has prepared this report in order to provide information to shareholders on executive remuneration arrangements.
This report has been substantially prepared in accordance with the Schedule 8 of the Large and Medium Sized Companies and Groups
(Accounts and Reports) 2008 (the ‘Regulations’).
Remuneration Committee
The members of the Remuneration Committee are M C Gupta (Chairman), Martin Gatto, Ravi Gupta and Michael Grasby who, with the
exception of Ravi Gupta, are all independent Non-executive Directors.
Terms of reference have been approved for the Remuneration Committee and its primary duty is to determine and agree with the Board
the framework or broad policy for the remuneration of the Executive Directors, senior managers and such other members of the executive
management team of the Group as is deemed appropriate. The remuneration of the Non-executive Directors is a matter for the Chairman
and the executive members of the Board.
The principal responsibilities of the Committee include:
• assessing and setting compensation levels for Directors and senior managers;
• reviewing the ongoing appropriateness and relevance of the remuneration policy to ensure that members of the executive team are
provided with incentives that encourage enhanced performance;
• reviewing the design of share incentive plans for the approval of the Board and shareholders; and
• ensuring that contractual terms on termination are such that failure is not rewarded and that the duty to mitigate losses is fully
recognised in the drafting of Directors’ service agreements and letters of appointment.
In fulfilling these duties, the Committee shall be cognisant of remuneration trends across the Group and within the sector in which the
Group operates.
The Chief Executive Officer and external advisers may be invited to attend meetings of the Remuneration Committee but do not take part
in the decision making.
Attendance at meetings of the Remuneration Committee by individual members is detailed in the Corporate Governance Report on
page 38.
Remuneration policy
The Remuneration Committee seeks to maintain a remuneration policy to ensure that the Company is able to attract, retain and motivate
its Executive Directors and senior management.
The retention of key management and the alignment of management incentives with the creation of shareholder value are key objectives
of this policy.
The Group therefore sets out to provide competitive remuneration for all its management and employees appropriate to the business
environment in the market in which it operates and in recognition of their contribution to Group performance. To achieve this, the
remuneration package is based upon the following principles:
• total rewards should be set to provide a fair and attractive remuneration package;
• appropriate elements of the remuneration package should be designed to reinforce the link between performance and contribution to
the Group’s success and reward; and
• Executive Directors’ incentives should be aligned with the interests of shareholders.
The remuneration strategy is designed to be in line with the Group’s fundamental values of fairness, competitiveness and equity, and also
to support the Group’s corporate strategy. The Group seeks increasingly to align the interests of shareholders with those of Directors and
senior employees by giving the latter opportunities and encouragement to build up a shareholding interest in the Company.
Long-term incentives
The Remuneration Committee believes that it is appropriate to operate share incentive schemes to encourage Executive Directors and
senior employees to meet the Group’s long-term strategic and financial objectives set by the Board.
Stock option plan
All of the Directors have received awards under the stock option plan approved by the Board on 16 July 2009 (see table below). Options
granted must be exercised within 10 years of the date of grant and vesting depends on achievement of the following performance
conditions:
1. the power plant at Kutch in the state of Gujarat must have been in commercial operation for three months; and
2. the closing share price must be at least £1 for three consecutive business days.
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43
Long Term Incentive Plan (‘LTIP’)
In June 2015, the Company announced the introduction of a new Long Term Incentive Plan (‘LTIP’). The Remuneration Committee
approved the introduction of the LTIP in order to incentivise further the executives to continue its planned growth strategy. Vesting of
awards under the LTIP will be subject to the following shareholder value based performance targets:
1. achievement of a share price of 130 pence;
2. achievement of a further 250 MW growth in installed capacity; and
3. a cumulative total of 3 pence in ordinary dividends paid or declared up to FY18.
Up to 16m shares in the Company will be awarded at their nominal value to certain members of the senior management team, including
about 14m shares to Gita Investments Limited, a company controlled by Arvind Gupta and his family. Subject to certain covenants, the
awards, once made, will vest over the period to FY18 with a third of the maximum award vesting upon achievement of a share price of
130 pence and then equally on achieving the other targets. With certain exceptions, vested shares will not be allowed to be sold for one
year. All vested shares are entitled to dividends. The Remuneration Committee has discretion to declare vesting of awards on a linear
scale of performance but cannot raise maximum award levels. The metrics of the scheme have been established to support the Group’s
strategy to deliver responsible and sustainable returns over the long term.
Annual bonus
Bonuses for Arvind Gupta of £600,000 and V Narayan Swami £24,309 have been provided for in the accounts for FY16.
Service agreements, notice periods and termination payments
The service agreements for the Executive Directors are for no fixed term and may in normal circumstances be terminated on the notice
periods set out in the table below. The Company reserves the right and discretion to pay the Executive Directors in lieu of notice. If the
Company terminates the employment of an Executive Director by exercising its right to pay in lieu of notice, the Company is required to
make a payment equal to the aggregate of basic salary and the cost to the Company of providing other contractual benefits for the
unexpired portion of the duration of any entitlement to notice. Under their service agreements, Mr Arvind Gupta and Mr V Narayan Swami
are entitled to medical, travel, insurance and other allowances and received £48,074 and £2,486 respectively.
The key terms of the Executive Directors’ service agreements are as follows:
Name
Arvind Gupta
Position
Date of contract
Notice period
Current salary
(p.a.) £
Chief Executive Officer
23 May 2008 12 months’ prior written notice on
750,000
either side
V Narayan Swami
Finance Director
23 May 2008 Three months’ prior written notice
72,930
on either side
Chairman and Non-executive Directors
The remuneration of the present Chairman of the Company and the Non-executive Directors consists of fees that are paid quarterly in
arrears. The present Chairman does not currently participate in any long-term incentive or annual bonus schemes, nor does any pension
entitlement accrue. Neither the present Chairman nor any of the Non-executive Directors have a contract of employment with the
Company. Each has instead entered into a contract for services with the Company.
Non-executive Directors’ contracts for services
Non-executive Directors were appointed for an initial term of 12 months. M C Gupta, Martin Gatto, Michael Grasby and Ravi Gupta have
each signed a contract for services with the Company. They were each appointed for an initial period of 12 months and, under the terms
of their contracts for services, their appointments were renewable for a further period by mutual agreement, subject to re-election, when
appropriate, by the Company in general meeting.
The key terms of the Non-executive Directors’ letters of appointment are as follows:
Director
M C Gupta
Martin Gatto
Michael Grasby
Ravi Gupta
Date of appointment
Notice period
6 May 2008
6 May 2008
6 May 2008
12 May 2008
12 months’ prior written notice on either side
Three months’ prior written notice on either side
Three months’ prior written notice on either side
12 months’ prior written notice on either side
Fees p.a. £
45,000
45,000
45,000
45,000
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DIRECTORS’ REMUNERATION REPORT 2016 CONTINUED
External appointments
It is the Board’s policy to allow the Executive Directors to accept directorships of other companies provided that they have obtained the
consent of the Board. Any such directorships must be formally notified to the Board.
Directors’ interests in ordinary shares
The interests of Directors in the ordinary share capital of the Company during the year were as follows:
Gita Investments Limited1
Michael Grasby
Martin Gatto
M C Gupta
V Narayan Swami
Total
31 March 2016
31 March 2015
178,886,428
10,000
60,000
9,800
10,300
178,886,428
10,000
60,000
9,800
10,300
178,976,528
178,976,528
1 Beneficial interest in these shareholdings vests with Arvind Gupta and family.
There were no changes to Directors’ interests between 31 March 2016 and the date of this report.
No Director had any interest in any contract of significance with the Group during the year ended 31 March 2016 other than their service
contracts, details of which are given on page 43.
Directors’ remuneration for the period 31 March 2015 to 31 March 2016.
Salary, annual bonus and benefits
Non-executive Chairman
M C Gupta
Executive Directors
Arvind Gupta
V Narayan Swami
Non-executive Directors
Martin Gatto
Michael Grasby
Ravi Gupta
Total
Salary/fees
£
Annual bonus
£
Total
FY16
£
Total
FY15
£
45,000
750,000
72,930
45,000
45,000
45,000
–
45,000
45,000
600,000
24,309
1,350,000
97,239
1,200,000
97,554
–
–
–
45,000
45,000
45,000
45,000
45,000
45,000
1,002,930
624,309
1,627,309
1,477,554
No consideration was paid or received by third parties for making available the services of any Executive or Non-executive Director.
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45
Directors’ share options
Option granted
Option price
£
Options as at
1 April 2015
Movements during the period
Options outstanding
Granted
Lapsed
Exercised
31 March 2016 Latest exercise date
Gita Investments Limited
(Arvind Gupta)
Martin Gatto
M C Gupta
Ravi Gupta
V Narayan Swami
Michael Grasby
16 July 2009
16 July 2009
22 December 2015
22 December 2015
22 December 2015
22 December 2015
0.60
0.60
0.60
0.60
0.60
0.60
21,524,234
1,000,000
Nil
Nil
Nil
Nil
Nil
Nil
250,000
250,000
250,000
250,000
Nil
Nil
Nil
Nil
Nil
Nil
Nil 21,524,234 15 July 2019
Nil
1,000,000 15 July 2019
Nil
Nil
Nil
Nil
250,000 21 December 2025
250,000 21 December 2025
250,000 21 December 2025
250,000 21 December 2025
The share options have vested following the year end.
At 31 March 2016, the closing mid-market price of the Company’s shares was 74 pence. During the year under review, the Company’s
closing mid-market share price ranged between a low of 72 pence and a high of 107 pence.
This report has been approved by the Board of Directors of the Company.
M C Gupta
Chairman, Remuneration Committee
29 July 2016
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
46
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the Group and the Parent
Company financial statements. The Directors are required to prepare financial statements for the Group in accordance with International
Financial Reporting Standards (‘IFRS’) as adopted for use in the European Union and have also elected to prepare financial statements for
the Company in accordance with IFRS as adopted for use in the European Union. Company law requires the Directors to prepare such
financial statements in accordance with IFRS and the Companies Act 2006.
International Accounting Standard 1 requires that financial statements present fairly for each financial year the Group’s and Company’s
financial position, financial performance and cash flows. This requires the fair presentation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the
International Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’. In virtually all
circumstances, a fair presentation will be achieved by compliance with all applicable International Financial Reporting Standards.
Directors are also required to:
• select suitable accounting policies and apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
financial statements;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information; and
• provide additional disclosures when compliance with specific requirements in IFRS is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the financial
position of the Group and of the Company, for safeguarding the assets, for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Group website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements may differ from legislation in other jurisdictions.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
47
INDEPENDENT AUDITORS’ REPORT
to the Members of OPG Power Ventures Plc
We have audited the accompanying financial statements of OPG Power Ventures Plc for the year ended 31 March 2016 which comprise
the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of
Changes in Equity, the Consolidated Statement of Cash Flows and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) (as adopted by the European Union).
This report is made solely to the Company’s members, as a body, in accordance with the terms of the engagement letter dated 1 June
2016. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the financial
statements which give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the
financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or
materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements give a true and fair view of the state of the Group’s affairs as at 31 March 2016 and of its profit for
the year then ended in accordance with IFRSs as adopted by the European Union.
Grant Thornton Limited
Chartered Accountants
Douglas, Isle of Man
6 September 2016
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
48
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(All amounts in £, unless otherwise stated)
Revenue
Cost of revenue
Gross profit
Other income
Distribution cost
General and administrative expenses
Operating profit
Finance costs
Finance income
Profit before tax
Tax expense
Profit for the year
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
Earnings per share
– Basic (in pence)
– Diluted (in pence)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Available-for-sale financial assets
– Reclassification to profit or loss
– Current year gains/(losses)
Exchange differences on translating foreign operations
Items that will be not reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Total other comprehensive income
Total comprehensive income
Total comprehensive income attributable to:
Owners of the Company
Non-controlling interest
Notes
Year ended
31 March 2016
Year ended
31 March 2015
128,438,193
(71,895,139)
99,974,648
(61,228,358)
8(a)
9
10
11
12
24
56,543,054
38,746,290
4,444,268
(6,564,363)
(9,967,112)
127,268
(1,863,441)
(7,388,392)
44,455,847
29,621,725
(16,712,169)
806,453
(9,410,037)
1,437,763
28,550,131
(9,972,626)
21,649,451
(4,360,769)
18,577,505
17,288,682
18,558,014
19,491
17,270,192
18,490
18,577,505
17,288,682
5.29
5.13
4.91
4.80
5,133
38,557
(2,844,341)
(32,633)
(5,133)
10,481,124
2,755
9,875
(2,797,896)
10,453,233
15,779,609
27,741,915
15,757,365
22,244
27,713,554
28,361
15,779,609
27,741,915
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 29 July 2016 and were signed on its behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(All amounts in £, unless otherwise stated)
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment and other assets
Restricted cash
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Restricted cash
Current tax assets (net)
Investment and other assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Other components of equity
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Borrowings
Trade and other payables
Deferred tax liability
Current liabilities
Borrowings
Trade and other payables
Other liabilities
Total liabilities
Total equity and liabilities
Power Ventures Plc
49
Notes
As at
31 March 2016
As at
31 March 2015
13
364,504
14 414,906,166
15
2,951,591
1,940,600
665,673
414,552,876
2,754,393
2,784,990
420,162,861
420,757,932
16
17
18
15
57,840,717
10,614,890
7,153,455
7,294,778
715,214
13,365,243
28,628,701
7,889,661
6,805,449
5,303,217
574,834
23,907,952
96,984,297
73,109,814
517,147,158
493,867,746
51,671
124,316,524
(13,652,725)
69,684,455
51,671
124,316,524
(11,135,645)
51,126,441
180,399,925
276,325
164,358,991
254,079
180,676,250
164,613,070
21 242,558,875
22
8,463,049
12
9,310,429
237,936,689
16,795,079
3,205,851
260,332,353
257,937,619
21
22
21,023,963
54,890,882
223,710
22,851,498
47,839,604
625,955
76,138,555
71,317,057
336,470,908
329,254,676
517,147,158
493,867,746
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 29 July 2016 and were signed on its behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
50
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(All amounts in £, unless otherwise stated)
At 1 April 2014
Employee share-based payments
Transaction with owners
Profit for the year
Other comprehensive income
Currency translation differences
Gain on sale/re-measurement of available-for-sale financial assets
Total comprehensive income
At 31 March 2015
Employee share-based payments
Transaction with owners
Profit for the year
Other comprehensive income
Currency translation differences
Gain on sale/re-measurement of available-for-sale financial assets
Total comprehensive income
Issued capital
(Number of shares)
351,504,795
Ordinary shares
Share premium
51,671
–
124,316,524
–
51,671
124,316,524
–
–
–
–
–
–
–
–
351,504,795
51,671
124,316,524
–
–
51,671
124,316,524
–
–
–
–
–
–
–
–
Other reserves
translation reserve
Retained earnings
owners of parent
interests
Total equity
Foreign currency
Total attributable to
Non-controlling
6,962,395
(28,784,289)
33,856,249
136,402,550
225,717
136,628,267
242,888
–
242,888
–
242,888
7,205,283
(28,784,289)
33,856,249
136,645,438
225,717
136,871,155
–
–
–
–
17,270,192
17,270,192
18,490
17,288,682
10,481,124
(37,763)
–
–
10,481,124
(37,763)
9,875
10,490,999
(3)
(37,766)
(37,763)
10,481,124
17,270,192
27,713,553
28,362
27,741,915
7,167,520
(18,303,165)
51,126,441
164,358,991
254,079
164,613,070
283,571
283,571
–
283,571
7,451,091
(18,303,165)
51,126,441
164,642,562
254,079
164,896,641
–
18,558,014
18,558,014
19,491
18,577,505
(2,844,341)
43,690
(2,844,341)
43,690
2,755
(2,841,586)
–
43,690
43,690
(2,844,341)
18,558,014
15,757,363
22,246
15,779,609
–
–
–
–
–
–
–
–
At 31 March 2016
351,504,795
51,671 124,316,524
7,494,781
(21,147,506)
69,684,455 180,399,925
276,325 180,676,250
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 29 July 2016 and were signed on its behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
51
Other reserves
Foreign currency
translation reserve
Retained earnings
Total attributable to
owners of parent
Non-controlling
interests
Total equity
6,962,395
242,888
(28,784,289)
–
33,856,249
–
136,402,550
242,888
225,717
–
136,628,267
242,888
7,205,283
(28,784,289)
33,856,249
136,645,438
225,717
136,871,155
–
–
17,270,192
17,270,192
18,490
17,288,682
–
(37,763)
10,481,124
–
–
–
10,481,124
(37,763)
9,875
(3)
10,490,999
(37,766)
(37,763)
10,481,124
17,270,192
27,713,553
28,362
27,741,915
7,167,520
(18,303,165)
51,126,441
164,358,991
254,079
164,613,070
283,571
–
–
283,571
–
283,571
7,451,091
(18,303,165)
51,126,441
164,642,562
254,079
164,896,641
–
–
18,558,014
18,558,014
19,491
18,577,505
–
43,690
(2,844,341)
–
–
–
(2,844,341)
43,690
2,755
–
(2,841,586)
43,690
43,690
(2,844,341)
18,558,014
15,757,363
22,246
15,779,609
At 31 March 2016
351,504,795
51,671 124,316,524
7,494,781
(21,147,506)
69,684,455 180,399,925
276,325 180,676,250
Gain on sale/re-measurement of available-for-sale financial assets
At 1 April 2014
Employee share-based payments
Transaction with owners
Profit for the year
Other comprehensive income
Currency translation differences
Total comprehensive income
At 31 March 2015
Employee share-based payments
Transaction with owners
Profit for the year
Other comprehensive income
Currency translation differences
Total comprehensive income
Gain on sale/re-measurement of available-for-sale financial assets
Issued capital
(Number of shares)
Ordinary shares
Share premium
351,504,795
51,671
124,316,524
51,671
124,316,524
351,504,795
51,671
124,316,524
51,671
124,316,524
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 29 July 2016 and were signed on its behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
52
CONSOLIDATED STATEMENT OF CASH FLOWS
(All amounts in £, unless otherwise stated)
Cash flows from operating activities
Profit before income tax
Adjustments for
Unrealised foreign exchange loss
Provisions no longer required written back
Financial costs
Financial income
Share-based compensation costs
Depreciation and amortisation
Changes in working capital
Trade and other receivables
Inventories
Other assets
Trade and other payables
Other liabilities
Cash generated from operations
Taxes paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment (including capital advances)
Interest received
Dividend received
Movement in restricted cash
Sale of investments1
Purchase of investments1
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings (net of costs)
Repayment of borrowings
Interest paid
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at the end of the year
Year ended
31 March 2016
Year ended
31 March 2015
28,550,131
21,649,451
299,256
(1,823,228)
16,460,854
(806,452)
283,571
5,944,912
(131,219)
–
9,410,037
(1,437,763)
242,888
3,145,119
(29,279,858)
(2,918,712)
3,362,875
4,066,886
(359,581)
23,780,654
(3,973,243)
(5,835,530)
5,595,078
(1,025,573)
(6,002,207)
(2,474,534)
23,135,747
(3,218,221)
19,807,411
19,917,526
(13,321,443)
690,548
–
(1,308,062)
42,247,590
(43,277,870)
(77,111,796)
1,375,174
53,543
101,759
128,973,581
(119,935,336)
(14,969,237)
(66,543,075)
77,159,277
(74,259,217)
(7,874,257)
59,998,942
(5,026,019)
(9,410,037)
(4,974,197)
45,562,886
(136,023)
6,805,449
484,029
(1,062,663)
6,636,577
1,231,535
7,153,455
6,805,449
1
Investments maturing during the year have been reinvested upon maturity in similar instruments of short tenor. The figures reported under ‘Purchase of investments’ and
‘Sale of investments’ in the above consolidated cash flow statements are aggregate of such maturities and reinvestments made during the period reported.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
All amounts in £, unless otherwise stated
1. Nature of operations
OPG Power Ventures Plc (‘the Company’ or ‘OPGPV’), and its subsidiaries (collectively referred to as ‘the Group’) are primarily engaged in
the development, owning, operation and maintenance of private sector power projects in India. The electricity generated from the Group’s
plants is sold principally to public sector undertakings and heavy industrial companies in India or in the short-term market. The business
objective of the Group is to focus on the power generation business within India and thereby provide reliable, cost-effective power to the
industrial consumers and other users under the ‘open access’ provisions mandated by the government of India.
2. Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards
(‘IFRS’) and their interpretations as adopted by the European Union (‘EU’) and the provisions of the Isle of Man Companies Act 2006
applicable to companies reporting under IFRS.
3. General information
OPG Power Ventures Plc, a limited liability corporation, is the Group’s ultimate Parent Company and is incorporated and domiciled
in the Isle of Man. The address of the Company’s registered office, which is also the principal place of business, is IOMA House,
Hope Street, Douglas, Isle of Man IM1 1JA. The Company’s equity shares are listed on the Alternative Investment Market (‘AIM’) of
the London Stock Exchange.
The consolidated financial statements for the year ended 31 March 2016 were approved and authorised for issue by the Board of
Directors on 29 July 2016.
4. Recent accounting pronouncements
a) Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted
early by the Group
At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been
published by the International Accounting Standards Board (‘IASB’) that are not yet effective, and have not been adopted early by the
Group. Information on those expected to be relevant to the Group’s financial statements is provided below.
Management anticipates that all relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning
after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not
expected to have a material impact on the Group’s financial statements.
IFRS 9 ‘Financial Instruments’ (2014)
The IASB recently released IFRS 9 ‘Financial Instruments’ (2014), representing the completion of its project to replace IAS 39 ‘Financial
Instruments: Recognition and Measurement’. The new standard introduces extensive changes to IAS 39’s guidance on the classification
and measurement of financial assets and introduces a new ‘expected credit loss’ model for the impairment of financial assets. IFRS 9
also provides new guidance on the application of hedge accounting. Management has started to assess the impact of IFRS 9 but is not
yet in a position to provide quantified information. At this stage the main areas of expected impact are as follows:
i)
the classification and measurement of the Group’s financial assets will need to be reviewed based on the new criteria that considers
the assets’ contractual cash flows and the business model in which they are managed;
ii) an expected credit loss-based impairment will need to be recognised on the Group’s trade receivables (see note 16) and investments
in debt-type assets currently classified as Available for Sale (‘AFS’) and Held to Maturity (‘HTM’) (see note 15), unless classified as at
fair value through profit or loss in accordance with the new criteria; and
iii) it will no longer be possible to measure equity investments at cost less impairment and all such investments will instead be measured
at fair value. Changes in fair value will be presented in profit or loss unless the Group makes an irrevocable designation to present
them in other comprehensive income.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018.
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and
several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional
guidance in many areas not covered in detail under existing IFRS, including how to account for arrangements with multiple performance
obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities.
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. Management has started to assess the impact of
IFRS 15 but is not yet in a position to provide quantified information.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
4. Recent accounting pronouncements continued
Amendments to IFRS 11 ‘Joint Arrangements’
These amendments provide guidance on the accounting for acquisitions of interests in joint operations constituting a business. The
amendments require all such transactions to be accounted for using the principles on business combinations accounting in IFRS 3
‘Business Combinations’ and other IFRS except where those principles conflict with IFRS 11. Acquisitions of interests in joint ventures are
not impacted by this new guidance.
The Group’s only investment made to date in a joint arrangement (note 5(d)(ii)) is characterised as a joint venture in which the Group has
rights to a share of the arrangement’s net assets rather than direct rights to underlying assets and obligations for underlying liabilities.
Accordingly, if adopted today, these amendments would not have a material impact on the consolidated financial statements.
The amendments are effective for reporting periods beginning on or after 1 January 2016.
IFRS 16 ‘Leases’
On 13 January 2016, the IASB issued the final version of IFRS 16 ‘Leases’. IFRS 16 will replace the existing leases standard , IAS 17
‘Leases’, and related interpretations. The standard sets out the principles for recognition, measurement, presentation and disclosure
of leases for both parties to a contract. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets
and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease
expenses are charged to the statement of comprehensive income. The standard also contains enhanced disclosure requirements for
lessees. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.
The effective date for adoption of IFRS 16 is annual periods beginning on or after 1 January 2019, though early adoption is permitted for
companies applying IFRS 15 ‘Revenue from Contracts with Customers’. The Group is yet to evaluate the requirements of IFRS 16 and
the impact on the consolidated financial statements.
5. Summary of significant accounting policies
a) Basis of preparation
The consolidated financial statements of the Group have been prepared on a historical cost basis, except for financial assets and liabilities
at fair value through profit or loss and available-for-sale financial assets measured at fair value.
The financial statements have been prepared on going concern basis which assumes the Group will have sufficient funds to continue
its operational existence for the foreseeable future covering at least 12 months. As the Group has forecast it will be able to meet its
debt facility interest and repayment obligations, and that sufficient funds will be available to continue with the projects development,
the assumption that these financial statements are prepared on a going concern basis is appropriate.
The consolidated financial statements are presented in accordance with IAS 1 ‘Presentation of Financial Statements’ and have been
presented in Great Britain Pounds (‘£’), the functional and presentation currency of the Company.
b) Basis of consolidation
The consolidated financial statements include the assets, liabilities, and results of the operation of the Company and all of its subsidiaries
as of 31 March 2016. All subsidiaries have a reporting date of 31 March.
A subsidiary is defined as an entity controlled by the Company. The parent controls a subsidiary if it is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which effective control is acquired by the Group,
and continue to be consolidated until the date that such control ceases.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses
on transactions between Group companies. Where unrealised losses on intra-Group asset sales are reversed on consolidation, the
underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries
have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately
in the consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately
from parent shareholders’ equity. Acquisitions of additional stake or dilution of stake from/to non-controlling interests/other venturer in the
Group where there is no loss of control are accounted for as an equity transaction, whereby the difference between the consideration
paid or received and the book value of the share of the net assets is recognised in ‘other reserve’ within statement of changes in equity.
c) Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment in
associates and joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive
income of the associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the
Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
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5. Summary of significant accounting policies continued
d) List of subsidiaries and joint ventures
Details of the Group’s subsidiaries and joint ventures, which are consolidated into the Group’s consolidated financial statements,
are as follows:
i) Subsidiaries
Subsidiaries
Caromia Holdings limited (‘CHL’)
Gita Power and Infrastructure Private Limited,
(‘GPIPL’)
OPG Power Generation Private Limited
(‘OPGPG’)
OPGS Power Gujarat Private Limited
(‘OPGG’)
OPGS Industrial Infrastructure Developers
Private Ltd (‘OPIID’)
OPGS Infrastructure Private Limited
(‘OPGIPL’)
ii) Joint ventures
Joint ventures
Immediate
parent
OPGPV
Country of
incorporation
Cyprus
CHL
GPIPL
GPIPL
OPGG
OPGG
India
India
India
India
India
% voting right
% economic interest
March 2016
March 2015
March 2016
March 2015
100
100
76.96
99.09
100
100
100
100
93.94
62.07
100
100
100
100
99
99
100
100
100
100
99
99
100
100
Venturer
Country of
incorporation
% voting right
% economic interest
March 2016
March 2015
March 2016
March 2015
Padma Shipping Ltd (‘PSL’)
OPGPV
Hong Kong
50
50
50
50
The Company has entered into a joint venture agreement with Noble Chartering Ltd (‘Noble’), to secure competitive long-term rates for
international freight for its imported coal requirements. Under the Long-Term Freight Arrangement (‘LTFA’), the Company and Noble are to
purchase and own, jointly and equally, two 64,000 mt cargo vessels through a joint venture company Padma Shipping Ltd, Hong Kong
(‘Padma’). The Company will commit to provide 1.5 mt of coal per annum for carriage by the two vessels for a minimum period of 10 years
at competitive long-term rates. Pursuant to this agreement, Padma has been incorporated in order to execute the joint arrangement for
procuring two cargo ships of 64,000 mt capacity from Cosco Shipyard, Hong Kong which are expected to be delivered by 2017. The
Company and Noble are to invest approximately $9m over the period of delivery of the vessels as their equity contribution thereby and
during the current period, the Company has paid an advance of $782,897 (2015: $2,801,700). Accordingly the joint venture has been
reported using equity method as per the requirements of IFRS 11.
e) Foreign currency translation
The functional currency of the Company is the Great Britain Pound Sterling (‘£’). The Cyprus entity is an extension of the parent and
pass through investment entity. Accordingly the functional currency of the subsidiary in Cyprus is the Great Britain Pound Sterling.
The functional currency of the Company’s subsidiaries operating in India, determined based on evaluation of the individual and
collective economic factors is Indian Rupees (‘
submitted to the AIM counter of the London Stock Exchange where the shares of the Company are listed.
’ or ‘INR’). The presentation currency of the Group is the Great Britain Pound (£) as
At the reporting date the assets and liabilities of the Group are translated into the presentation currency at the rate of exchange prevailing
at the reporting date and the income and expense for each statement of profit or loss are translated at the average exchange rate (unless
this average rate is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case
income and expense are translated at the rate on the date of the transactions). Exchange differences are charged/credited to other
comprehensive income and recognised in the currency translation reserve in equity.
Transactions in foreign currencies are translated at the foreign exchange rate prevailing at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies at the statement of financial position date are translated into functional currency at the
foreign exchange rate ruling at that date. Aggregate gains and losses resulting from foreign currencies are included in finance income or
costs within the profit or loss.
INR exchange rates used to translate the INR financial information into the presentation currency of Great Britain Pound (£) are the closing
rate as at 31 March 2016: 95.09 (2015: 92.76) and the average rate for the year ended 31 March 2016: 98.73 (2015: 98.41).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
5. Summary of significant accounting policies continued
f) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group,
and revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable in accordance
with the relevant agreements, net of discounts, rebates and other applicable taxes and duties.
Sale of electricity
Revenue from the sale of electricity is recognised when earned on the basis of contractual arrangement with the customers and reflects
the value of units supplied including an estimated value of units supplied to the customers between the date of their last meter reading
and the reporting date.
Interest and dividend
Revenue from interest is recognised as interest accrued (using the effective interest rate method). Revenue from dividends is recognised
when the right to receive the payment is established.
g) Operating expenses
Operating expenses are recognised in the statement of profit or loss upon utilisation of the service or as incurred.
h) Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive
income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or
prior reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in
the financial statements.
Calculation of current tax is based on tax rates and tax laws that have been enacted or substantively enacted by the end of the
reporting period.
Deferred income taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and
liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an
asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary
differences associated with investments in subsidiaries is not provided if reversal of these temporary differences can be controlled by the
Group and it is probable that reversal will not occur in the foreseeable future.
Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always
provided for in full.
Deferred tax assets are recognised to the extent that it is probable that they will be able to be utilised against future taxable income.
Deferred tax assets and liabilities are offset only when the Group has a right and the intention to set off current tax assets and liabilities
from the same taxation authority. Changes in deferred tax assets or liabilities are recognised as a component of tax income or expense in
profit or loss, except where they relate to items that are recognised in other comprehensive income or directly in equity, in which case the
related deferred tax is also recognised in other comprehensive income or equity, respectively.
i) Financial assets
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of any financial
instrument and are measured initially at fair value adjusted by transactions costs, except for those carried at fair value through profit or
loss which are measured initially at fair value.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial
asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged,
cancelled or expires.
Financial assets are classified into the following categories upon initial recognition:
i)
ii) available-for-sale financial assets.
loans and receivables; and
The category determines subsequent measurement and whether any resulting income and expense is recognised in profit or loss or in
other comprehensive income.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
They are included in current assets except for assets having maturities greater than 12 months after the reporting date. These are
classified as non-current assets. After initial recognition these are measured at amortised cost using the effective interest method, less
provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category of financial instruments.
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5. Summary of significant accounting policies continued
Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received
that a specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in
groups, which are determined by reference to the industry and region of a counterparty and other shared credit risk characteristics.
The impairment loss estimate is then based on recent historical counterparty default rates for each identified group.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated to this category or do not qualify for
inclusion in any of the other categories of financial assets. The Group’s available-for-sale financial assets include mutual funds and equity
instruments. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the
reporting date. Available-for-sale financial assets are measured at fair value. Gains and losses are recognised in other comprehensive
income and reported within the other reserves in equity, except for impairment losses and foreign exchange differences on monetary
assets, which are recognised in profit or loss. When the asset is disposed of or is determined to be impaired the cumulative gain or loss
recognised in other comprehensive income is reclassified from the equity reserve to profit or loss and presented as a reclassification
adjustment within other comprehensive income. The fair value of the mutual fund units is based on the net asset value publicly made
available by the respective mutual fund manager.
Reversals of impairment losses are recognised in other comprehensive income, except for financial assets that are debt securities which
are recognised in profit or loss only if the reversal can be objectively related to an event occurring after the impairment loss was recognised.
j) Financial liabilities
The Group’s financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at
amortised cost using the effective interest method.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within
‘finance costs’ or ‘finance income’.
k) Fair value of financial instruments
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market
prices at the close of business on the statement of financial position date. For financial instruments where there is no active market, fair
value is determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference
to the current fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.
l) Property, plant and equipment
Property, plant and equipment are stated at historical cost, less accumulated depreciation and any impairment in value. Historical cost
includes expenditure that is directly attributable to property plant and equipment such as employee cost, borrowing costs for long-term
construction projects etc, if recognition criteria are met. Likewise, when a major inspection is performed, its costs are recognised in the
carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repairs and maintenance
costs are recognised in the profit or loss as incurred.
Land is not depreciated. Depreciation on all other assets is computed on straight-line basis over the useful life of the asset based on
management’s estimate as follows:
Nature of asset
Buildings
Power stations
Other plant and equipment
Vehicles
Useful life (years)
40
40
3–10
5–11
Assets in the course of construction are stated at cost and not depreciated until commissioned.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and
the carrying amount of the asset) is included in the profit or loss in the year the asset is derecognised.
The assets residual values, useful lives and methods of depreciation of the assets are reviewed at each financial year end, and adjusted
prospectively if appropriate.
m) Intangible assets
Acquired software
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and install the specific software.
Subsequent measurement
All intangible assets, including software are accounted for using the cost model whereby capitalised costs are amortised on a straight-line
basis over their estimated useful lives, as these assets are considered finite. Residual values and useful lives are reviewed at each
reporting date. The useful life of software is estimated as four years.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
5. Summary of significant accounting policies continued
n) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date
and whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to
use the asset.
Group as a lessee
Contracts to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset
to the Group. Leases where the Group does not acquire substantially all the risks and benefits of ownership of the asset are classified as
operating leases.
Operating lease payments are recognised as an expense in the profit or loss on a straight-line basis over the lease term. Lease of land is
classified separately and is amortised over the period of the lease.
o) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial
period of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary
investment of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.
Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated
as borrowing costs and are charged to profit or loss.
All other borrowing costs including transaction costs are recognised in the statement of profit or loss in the period in which they are
incurred, the amount being determined using the effective interest rate method.
p) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists,
or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable
amount is the higher of an asset’s or cash-generating unit’s (‘CGU’) fair value less costs to sell and its value in use and is determined for
an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups
of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is
written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or
CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used
to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss.
q) Cash and cash equivalents
Cash and cash equivalents in the statement of financial position includes cash in hand and at bank and short-term deposits with original
maturity period of three months or less.
For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash in hand and at bank and short-term
deposits. Restricted cash represents deposits which are subject to a fixed charge and held as security for specific borrowings and are
not included in cash and cash equivalents.
r) Inventories
Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and
condition is accounted for based on weighted average price. Net realisable value is the estimated selling price in the ordinary course of
business, less estimated selling expenses.
s) Earnings per share
The earnings considered in ascertaining the Group’s earnings per share (‘EPS’) comprise the net profit for the year attributable to ordinary
equity holders of the parent. The number of shares used for computing the basic EPS is the weighted average number of shares
outstanding during the year. For the purpose of calculating diluted EPS the net profit or loss for the period attributable to equity share
holders and the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential
equity share.
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5. Summary of significant accounting policies continued
t) Other provisions and contingent liabilities
Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources
from the Group and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises
from the presence of a legal or constructive obligation that has resulted from past events. Restructuring provisions are recognised only if
a detailed formal plan for the restructuring has been developed and implemented, or management has at least announced the plan’s
main features to those affected by it. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence
available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of
similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a
whole. Provisions are discounted to their present values, where the time value of money is material.
Any reimbursement that the Group can be virtually certain to collect from a third party with respect to the obligation is recognised as a
separate asset. However, this asset may not exceed the amount of the related provision. All provisions are reviewed at each reporting
date and adjusted to reflect the current best estimate.
In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote,
no liability is recognised, unless it was assumed in the course of a business combination. In a business combination, contingent liabilities
are recognised on the acquisition date when there is a present obligation that arises from past events and the fair value can be measured
reliably, even if the outflow of economic resources is not probable. They are subsequently measured at the higher amount of a comparable
provision as described above and the amount recognised on the acquisition date, less any amortisation.
u) Share-based payments
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans feature any options for
a cash settlement.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees
are rewarded using share-based payments, the fair values of employees’ services is determined indirectly by reference to the fair value
of the equity instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions
(for example profitability and sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to ‘Other Reserves’.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate
of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options
that are expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options
expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No
adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the
shares issued are allocated to share capital with any excess being recorded as share premium.
v) Employee benefits
Gratuity
In accordance with applicable Indian laws, the Group provides for gratuity, a defined benefit retirement plan (‘the Gratuity Plan’) covering
eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination
of employment, of an amount based on the respective employee’s salary and the tenure of employment.
Liabilities with regard to the gratuity plan are determined by actuarial valuation, performed by an independent actuary, at each statement
of financial position date using the projected unit credit method.
The Group recognises the net obligation of a defined benefit plan in its statement of financial position as an asset or liability, respectively
in accordance with IAS 19 ‘Employee Benefits’. The discount rate is based on the government securities yield. Actuarial gains and losses
arising from experience adjustments and changes in actuarial assumptions are charged or credited to profit or loss in the statement of
comprehensive income in the period in which they arise.
Employees Benefit Trust
Effective during the previous year, the Group has established an Employees Benefit Trust (‘EBT’) for investments in the Company’s shares
for employee benefit schemes. IOMA Fiduciary in the Isle of Man have been appointed as trustees of the EBT with full discretion invested
in the Trustee, independent of the Company, in the matter of share purchases. As at present, no investments have been made by the
Trustee nor any funds advanced by the Company to the EBT. The Company is yet to formulate any employee benefit schemes or to make
awards thereunder.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
5. Summary of significant accounting policies continued
w) Business combinations
Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group
are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date
that common control was established using pooling of interest method. The assets and liabilities acquired are recognised at the carrying
amounts recognised previously in the Group controlling shareholder’s consolidated financial statements. The components of equity of the
acquired entities are added to the same components within Group equity. Any excess consideration paid is directly recognised in equity.
6. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses during the reporting period.
The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of a
number of these policies requires the Group to use a variety of estimation techniques and apply judgement to best reflect the substance
of underlying transactions.
The Group has determined that a number of its accounting policies can be considered significant, in terms of the management
judgement that has been required to determine the various assumptions underpinning their application in the consolidated financial
statements presented which, under different conditions, could lead to material differences in these statements. The actual results may
differ from the judgements, estimates and assumptions made by the management and will seldom equal the estimated results.
a) Judgements
The following are significant management judgements in applying the accounting policies of the Group that have the most significant
effect on the financial statements.
Deferred tax assets
The assessment of the probability of future taxable income in which deferred tax assets can be utilised is based on the Group’s latest
approved budget forecast, which is adjusted for significant non-taxable income and expenses, and specific limits to the use of any
unused tax loss or credit. The tax rules in India in which the Group operates are also carefully taken into consideration. If a positive
forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilised without a time limit, that
deferred tax asset is usually recognised in full. The recognition of deferred tax assets that are subject to certain legal or economic limits
or uncertainties is assessed individually by management based on the specific facts and circumstances (see note 12).
Application of lease accounting
Significant judgement is required to apply lease accounting rules under IFRIC 4 ‘Determining Whether an Arrangement Contains a Lease’
and IAS 17 ‘Leases’. In assessing the applicability to arrangements entered into by the Group, management has exercised judgement to
evaluate customers’ rights to use the underlying assets, substance of the transaction including legally enforced arrangements and other
significant terms and conditions of the arrangement to conclude whether the arrangements meet the criteria under IFRIC 4.
b) Estimates and uncertainties
The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date,
that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities within the next financial year
are discussed below:
i) Recoverability of deferred tax assets: The recognition of deferred tax assets requires assessment of future taxable profit (see
note 5(h)).
ii) Estimation of fair value of financial assets and financial liabilities: while preparing the financial statements the Group makes estimates
and assumptions that affect the reported amount of financial assets and financial liabilities.
Available-for-sale financial assets
Management applies valuation techniques to determine the fair value of available-for-sale financial assets where active market quotes
are not available. This requires management to develop estimates and assumptions based on market inputs, using observable data
that market participants would use in pricing the asset. Where such data is not observable, management uses its best estimate.
Estimated fair values of the asset may vary from the actual prices that would be achieved in an arm’s length transaction at the
reporting date.
Other financial liabilities
Borrowings held by the Group are measured at amortised cost. Further, liabilities associated with financial guarantee contracts in
the Company financial statements are initially measured at fair value and remeasured at each statement of financial position date
(see note 5(j) and note 28).
Impairment tests
In assessing impairment, management estimates the recoverable amount of each asset or CGUs based on expected future cash flow
and use an interest rate for discounting them. Estimation uncertainty relates to assumptions about future operating results and the
determination of a suitable discount rate:
iii) Useful life of depreciable assets: Management reviews its estimate of the useful lives of depreciable assets at each reporting date,
based on the expected utility of the assets.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements
Power Ventures Plc
61
7. Segment reporting
The Group has adopted the ‘management approach’ in identifying the operating segments as outlined in IFRS 8 ‘Operating Segments’.
Segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating
decision maker evaluates the Group’s performance and allocates resources based on an analysis of various performance indicators at
operating segment level. Accordingly, there is only a single operating segment ‘generation and sale of electricity’. The accounting policies
used by the Group for segment reporting are the same as those used for consolidated financial statements. There are no geographical
segments as all revenues arise from India.
Revenue on account of sale of power to one party amounts to £53,345,178 (2015: £82,182,445).
8. Depreciation, costs of inventories and employee benefit expenses included in the consolidated statements of
comprehensive income
a) Depreciation and cost of fuel:
31 March 2016
31 March 2015
Included in cost of revenue:
Cost of fuel consumed
Depreciation
Other direct costs
Total
Depreciation included in general and administrative expenses amount to £649,965 (2015: £372,590).
b) Employee benefit expenses forming part of general and administrative expenses are as follows:
Salaries and wages
Employee benefit costs
Employee stock option
Total
63,797,398
5,294,947
2,802,794
55,187,812
2,772,529
3,268,017
71,895,139
61,228,358
31 March 2016
31 March 2015
4,246,864
714,113
283,571
2,970,704
855,207
242,888
5,244,548
4,068,799
c) Auditor’s remuneration for audit services amounting to £48,663 (2015: £45,000) is included in general and administrative expenses.
d) Foreign exchange movements (realised and unrealised) included in the general and administrative expenses is as follows:
Foreign exchange realised – (loss)
Foreign exchange unrealised – (loss)/gain
Total
9. Other income
Other income is comprised of:
Provisions no longer required written back
Sale of coal
Sale of fly ash
Others
Total
10. Finance costs
Finance costs are comprised of:
Interest expenses on borrowings
Other finance costs
Total
31 March 2016
31 March 2015
(533,976)
(299,256)
(444,409)
131,219
(833,232)
(313,190)
31 March 2016
31 March 2015
1,823,228
2,335,834
57,242
227,964
4,444,268
–
–
40,583
86,685
127,268
31 March 2016
31 March 2015
15,793,916
918,253
8,735,529
674,508
16,712,169
9,410,037
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
11. Finance income
Finance income is comprised of:
Interest income
– Bank deposits
Dividend income
Profit on disposal of financial instruments1
Total
1 Financial instruments represent the mutual funds held during the year.
31 March 2016
31 March 2015
576,421
–
230,032
634,619
53,544
749,600
806,453
1,437,763
12. Tax expenses
Tax reconciliation
Reconciliation between tax expense and the product of accounting profit multiplied by India’s domestic tax rate for the years ended
31 March 2016 and 2015 is as follows:
31 March 2016
31 March 2015
Accounting profit before taxes
Enacted tax rates
Tax on profit at enacted tax rate
Differences on account MAT rate
Items taxed at zero rate
Changes in unrecognised deferred tax assets
Others
Actual tax expense
Current tax
Deferred tax
Tax expense reported in the statement of comprehensive income
28,550,131
34.61%
9,880,629
(2,442,698)
–
1,965,073
569,622
21,649,451
33.99%
7,358,648
(3,210,347)
(1,572,734)
–
1,785,202
9,972,626
4,360,769
31 March 2016
31 March 2015
3,993,441
5,979,185
2,848,045
1,512,724
9,972,626
4,360,769
The Company is subject to Isle of Man corporate tax at the standard rate of 0%. As such, the Company’s tax liability is zero. Additionally,
the Isle of Man does not levy tax on capital gains. However, considering that the Group’s operations are entirely based in India, the
effective tax rate of the Group has been computed based on the current tax rates prevailing in India. Further, a substantial portion of the
profits of the Group’s India operations are exempt from Indian income taxes being profits attributable to generation of power in India.
Under the tax holiday the taxpayer can utilise an exemption from income taxes for a period of any 10 consecutive years out of a total of 15
consecutive years from the date of commencement of the operations.
The Group is subject to the provisions of Minimum Alternate Tax (‘MAT’) under the Indian Income taxes for the year ended 31 March 2016
and 2015. Accordingly, the Group calculated the tax liability for current taxes in India after considering MAT.
The Group has carried forward credit in respect of MAT liability paid to the extent it is probable that future taxable profit will be available
against which such tax credit can be utilised.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
63
31 March 2016
31 March 2015
–
–
–
67,360
749,677
817,037
9,287,307
23,122
4,024,156
(1,268)
9,310,429
4,022,888
9,310,429
3,205,851
12. Tax expenses continued
Deferred income tax for the Group at 31 March 2016 and 2015 relates to the following:
Deferred income tax assets
Lease transactions and others
Provisions
Deferred income tax liabilities
Property, plant and equipment
Mark to market on available-for-sale financial assets
Deferred income tax liabilities, net
Movement in temporary differences during the year
Particulars
Property, plant and equipment and others
Lease transactions
Provisions
Mark to market gain/(loss) on available-for-sale
financial assets
Particulars
Property, plant and equipment and others
Lease transactions
Provisions
Mark to market gain/(loss) on available-for-sale
financial assets
As at
1 April
2015
(4,024,156)
67,360
749,677
Recognised
in income
statement
(5,162,148)
(67,360)
(749,677)
Recognised
in other
comprehensive
income
–
–
–
Translation
adjustment
(101,003)
–
–
As at
31 March
2016
(9,287,307)
–
–
1,268
–
(3,205,851)
(5,979,185)
(24,390)
(24,390)
–
(23,122)
(101,003)
(9,310,429)
As at
1 April
2014
(2,251,032)
56,728
699,442
Recognised
in income
statement
(1,518,906)
6,182
–
Recognised
in other
comprehensive
income
–
–
–
Translation
adjustment
(254,218)
4,450
50,235
As at
31 March
2015
(4,024,156)
67,360
749,677
(14,991)
–
(1,509,853)
(1,512,724)
16,259
16,259
–
1,268
(199,533)
(3,205,851)
In assessing the recoverability of deferred income tax assets, management considers whether it is more likely than not that some portion
or all of the deferred income tax assets will be realised. The ultimate realisation of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which the temporary differences become deductible. The amount of the
deferred income tax assets considered realisable, however, could be reduced in the near term if estimates of future taxable income
during the carry forward period are reduced.
Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them.
Further, dividends are not taxable in India in the hands of the recipient. However, the Group will be subject to a ‘dividend distribution tax’
currently at the rate of 15% (plus applicable surcharge and education cess) on the total amount distributed as dividend.
As at 31 March 2016 and 31 March 2015, there was no recognised deferred tax liability for taxes that would be payable on the unremitted
earnings of certain of the Group’s subsidiaries, as the Group has determined that undistributed profits of its subsidiaries will not be
distributed in the foreseeable future.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
13. Intangible assets
Cost
At 1 April 2014
Additions
Exchange adjustments
At 31 March 2015
Additions
Exchange adjustments
At 31 March 2016
Accumulated depreciation and impairment
At 1 April 2014
Charge for the year
Exchange adjustments
At 31 March 2015
Charge for the year
Exchange adjustments
At 31 March 2016
Net book value
At 31 March 2016
At 31 March 2015
14. Property, plant and equipment
The property, plant and equipment comprises of:
Acquired
software licences
529,415
171,860
48,494
749,769
39,216
(16,858)
772,127
54,756
23,949
5,391
84,096
313,589
9,938
407,623
364,504
665,673
Cost
At 1 April 2014
Additions
Exchange adjustments
At 31 March 2015
Additions
Deletions
Transfers on capitalisation
Exchange adjustments
At 31 March 2016
Land and
buildings
Power
stations
Other plant and
equipment
Vehicles
Asset under
construction
Total
12,140,751
283,011
561,251
12,985,013
138,719
(25,323)
–
(313,595)
109,110,905
304,404
8,102,195
117,517,504
309,514
–
282,423,229
7,557,605
588,065
124,166
(716)
711,515
69,298
(370)
–
(14,784)
660,699
45,759
(5,140)
162,573,007
122,319,301
6,797,276
285,073,427
123,076,641
15,454,866
291,689,584
701,318
17,847,939
58,980
–
(2,608,174)
– (282,423,229)
(17,029,535)
(14,915)
423,604,934
18,424,450
(2,633,867)
–
(9,815,224)
12,784,814 407,807,852
765,659
745,383
7,476,585 429,580,293
Accumulated depreciation and impairment
At 1 April 2014
Charge for the year
Exchange adjustments
At 31 March 2015
Charge for the year
Exchange adjustments
At 31 March 2016
Net book value
At 31 March 2016
At 31 March 2015
55,950
34,644
5,582
96,176
14,536
(1,799)
4,949,021
2,772,529
426,874
8,148,424
5,294,947
3,058
228,542
192,985
25,124
446,651
223,959
(5,425)
218,631
121,012
21,164
360,807
97,881
(5,088)
108,913
13,446,429
665,185
453,600
–
–
–
–
–
–
–
5,452,144
3,121,170
478,744
9,052,058
5,631,323
(9,254)
14,674,127
12,675,901 394,361,423
12,888,837
109,369,080
100,474
264,864
291,783
7,476,585 414,906,166
340,511
291,689,584
414,552,876
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements 14. Property, plant and equipment continued
The net book value of land and buildings block comprises of:
Freehold land
Buildings
Power Ventures Plc
65
31 March 2016
31 March 2015
12,545,682
130,219
12,699,397
189,440
12,675,901
12,888,837
Property, plant and equipment with a carrying amount of £414,433,996 (2015: £413,947,500) is subject to security restrictions (refer note 21).
An amount of £17,575,016 (2015: £19,129,734) pertaining to interest on borrowings made specifically for the qualifying assets was
capitalised as the funds were deployed for the construction of qualifying assets.
15. Investments and other assets
A. Current
Available-for-sale financial assets
Capital advances
Loans and receivables
– Advance to suppliers
– Others
Total
B. Non-current
Investment in joint venture1
Prepayments
Loans and receivables
– Lease deposits
– Other advances
Total
31 March 2016
31 March 2015
2,364,269
3,516,716
1,233,620
11,747,387
5,651,654
1,832,604
8,991,147
1,935,798
13,365,243
23,907,952
2,236,804
622,206
1,681,058
637,848
92,581
–
94,908
340,579
2,951,591
2,754,393
1 Represents investment made in Padma Shipping Limited. The venturers are entitled for a share in the net assets of Padma Shipping Limited which is a separate legal entity.
Accordingly, the Company has used equity method of accounting for the same.
Available-for-sale investments are comprised of:
Quoted short-term mutual fund units
The fair value of the mutual fund instruments are determined by reference to published data. These mutual fund investments are
redeemable on demand.
Investments in other assets
The investments in OPG Energy Private Limited (‘OPG E’) and OPG Renewable Energy Limited (‘OPG RE’), (fair value of retained non-
controlling investments) have been fairly valued and the share of the Group has been determined and disclosed as available-for-sale
classified as non-current. There is no change in the valuation technique to those adopted in the previous year. The fair value of OPGE and
OPGRE is determined using discounted cash flow approach. Significant inputs into the model are based on management’s assumption of
the expected cash flow up to 31 March 2024 and a discount rate of 17%. These investments are fully impaired as at 31 March 2016.
Loans and receivables (current)
Advances to suppliers include the amounts paid as advance for supply of fuel. Capital advances comprise of payments made to
contractors for construction of assets and advances paid for purchase of capital equipment. The management expects to realise
these in the next one year.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
16. Trade and other receivables
Current
Trade receivables
Unbilled revenues
Other receivables
31 March 2016
31 March 2015
56,687,426
1,045,219
108,072
27,964,156
314,803
349,742
57,840,717
28,628,701
Trade receivables are generally due within 30 days terms and are therefore short term and the carrying values are considered a reasonable
approximation of fair value. An amount of £57,840,717 (2015: £28,628,701) has been pledged as security for borrowings. As at 31 March
2016, trade receivables of £nil (2015: £563,827) were collectively impaired and provided for. Trade receivables that are neither past due
nor impaired represents billings for the month of March.
The age analysis of the (overdue) trade receivables is as follows:
Total
Neither past due
nor impaired
Past due but not impaired
Within 90 days
90 to 180 days
Over 180 days
56,687,426
15,743,623
9,721,710
5,725,198
25,496,895
27,964,156
6,394,665
13,700,217
7,869,274
–
Year
2016
2015
Subsequent to the reporting date, the Company has received £15,715,917 from Tamil Nadu Generation and Distribution Corporation
(‘TANGEDCO’) towards the sale made during the months of May 2015 to July 2015 under short-term sale agreement and for October
2015 to March 2016 under a 15-year variable tariff Long Term Open Access (‘LTOA’) contract.
The movement in the provision for trade receivables is as follows:
Year
2016
2015
Opening balance
for the year Write off/Reversal
Closing balance
Provision
563,827
527,883
–
–
(563,827)
–
35,944
563,827
The creation of provision for impaired receivables has been included in general and administrative expenses in the consolidated
statement of comprehensive income. Amounts charged to the allowance account are generally written off, when there is no expectation
of recovering additional cash. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable
mentioned above. The Group does not hold any collateral as security.
17. Inventories
Coal and fuel
Stores and spares
Total
31 March 2016
31 March 2015
9,477,390
1,137,500
6,860,904
1,028,757
10,614,890
7,889,661
The entire amount of £10,614,890 (2015: £7,889,661) has been pledged as security for borrowings (see note 21).
18. Cash and cash equivalents
Cash and short-term deposits comprise of the following:
Cash at banks and on hand
Short-term deposits
Total
31 March 2016
31 March 2015
6,169,046
984,409
6,200,830
604,619
7,153,455
6,805,449
Short-term deposits are placed for varying periods, depending on the immediate cash requirements of the Group. They are recoverable
on demand. Restricted cash represents deposits maturing between three to 12 months amounting to £7,294,778 (previous year
£5,303,217) and maturing after 12 months amounting to £1,940,600 (previous year £2,784,990) which have been pledged by the Group in
order to secure borrowing limits with banks (see note 21).
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
67
19. Issued share capital
Share capital
The Company presently has only one class of ordinary shares. For all matters submitted to vote in the shareholders meeting, every holder
of ordinary shares, as reflected in the records of the Group on the date of the shareholders’ meeting, has one vote in respect of each
share held. All shares are equally eligible to receive dividends and the repayment of capital in the event of liquidation of the Group.
The Company has an authorised and issued share capital of 351,504,795 equity shares (2015: 351,504,795) at par value of £0.000147
(2014: £0.000147) per share amounting to £51,671 (2015: £51,671) in total.
The Company has issued share capital at par value of £51,671 (£0.000147 per share).
Reserves
Share premium represents the amount received by the Group over and above the par value of shares issued and the excess of the fair
value of share issued in business combination over the par value of such shares. Any transaction costs associated with the issuing of
shares are deducted from securities premium, net of any related income tax benefits.
Foreign currency translation reserve is used to record the exchange differences arising from the translation of the financial statements
of the foreign subsidiaries.
Other reserve represents the difference between the consideration paid and the adjustment to net assets on change of controlling
interest, without change in control, other reserves also includes any costs related with share options granted and gain/losses on
remeasurement of available-for-sale financial assets.
Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income less
dividend distribution.
20. Share-based payments
The Board has granted share options to Directors and nominees of Directors which are limited to 10% of the Group’s share capital.
Once granted, the share must be exercised within 10 years of the date of grant otherwise the options would lapse.
The vesting conditions are as follows:
• The 300 MW power plant of Kutch in the state of Gujarat must have been in commercial operation for three months.
• The closing share price being at least £1.00 for consecutive three business days.
The related expense has been amortised over the remaining estimated vesting period and an expense amounting to £283,571
(2015: £242,888) was recognised in the profit or loss with a corresponding credit to other reserves.
Movement in the number of share options outstanding are as follows:
At 1 April
Granted
At 31 March
31 March 2016
31 March 2015
22,524,234
1,000,000
22,524,234
–
23,524,234
22,524,234
The fair value of options granted and the assumptions used under the Black-Scholes option pricing model are as follows:
Weighted average fair value of options granted
Exercise price
Weighted average share price
Volatility (%)
Annual risk free rate (%)
Expected option life (years)
Granted in
2015
0.37
0.60
0.78
40.95%
1.26%
5.36
2011
0.28
0.60
0.66
31.34%
3.00%
4.96
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
21. Borrowings
The borrowings comprise of the following:
Term loans at amortised cost
Other borrowings
Total
Interest rate
(range %)
Final maturity
31 March 2016
31 March 2015
10.80–15.17 March 2025 263,582,838
March 2015
–
258,694,310
2,093,877
263,582,838
260,788,187
Total debt of £263,582,838 (2015: £260,788,187) is secured as follows:
• The term loans taken by the Group are fully secured by the property, plant, assets under construction and other current assets of
subsidiaries which have availed such loans. All the loans are personally guaranteed by a Director.
• The cash credits and working capital arrangements availed by the Group are secured against hypothecation of current assets and in
certain cases by deposits and margin money is provided as collateral.
• Other borrowings are fully secured by hypothecation of current assets and in certain cases by margin money deposits and other fixed
deposits of the respective entities availing the facility.
Term loans contain certain covenants stipulated by the facility providers and primarily require the Group to maintain specified levels of
certain financial metrics and operating results. The terms of the other borrowings arrangements also contain certain covenants primarily
requiring the Group to maintain certain financial metrics. As of 31 March 2016, the Group has met all the relevant covenants.
During the year instalment of loan amounting to £2,748,080 relating to Unit I, II and III was prepaid up to June 2016 and £3,885,656
relating to Unit IV was prepaid up to September 2016.
The fair value of borrowings at 31 March 2016 was £263,582,838 (2015: £260,788,187). The fair values have been calculated by
discounting cash flows at prevailing interest rates.
The borrowings are reconciled to the statement of financial position as follows:
Current liabilities
Amounts falling due within one year
Non-current liabilities
Amounts falling due after one year but not more than five years
Amounts falling due in more than five years
Total non-current
Total
22. Trade and other payables
Current
Trade payables
Creditors for capital goods
Other payables
Total
Non-current
Retention money
Other payables
Total
31 March 2016
31 March 2015
21,023,963
22,851,498
123,362,705
119,196,170
220,969,216
16,967,473
242,558,875
237,936,689
263,582,838
260,788,187
31 March 2016
31 March 2015
34,645,009
2,016,958
18,228,915
21,161,525
11,080,339
15,597,740
54,890,882
47,839,604
8,296,003
167,046
16,670,794
124,285
8,463,049
16,795,079
With the exception of retention money and certain other trade payables, all amounts are short term. Trade payables are non-interest
bearing and are normally settled on 45 days terms. Creditors for capital goods are non-interest bearing and are usually settled within a
year. Other payables include accruals for gratuity and other accruals for expenses.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
69
23. Related party transactions
Where control exists
Name of the party
Gita Investments Limited
Caromia Holdings limited
OPG Power Generation Private Limited
OPGS Power Gujarat Private Limited
Gita Power and Infrastructure Private Limited
OPGS Industrial Infrastructure Developers Private Ltd
OPGS Infrastructure Private Limited
Nature of relationship
Ultimate parent
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Key management personnel
Name of the party
Arvind Gupta
V Narayan Swami
M C Gupta
Martin Gatto
Ravi Gupta
Patrick Michael Grasby
Nature of relationship
Chief Executive Officer
Chief Financial Officer
Chairman
Director
Director
Director
Related parties with whom the Group had transactions during the period
Name of the party
Nature of relationship
Chennai Ferrous Limited
Kanishk Steel Industries Limited
Padma Shipping Limited
Avantika Gupta
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Entity in which key management personnel has control/significant influence
Relative of key management personnel
Summary of transactions with related parties
Name of the party
Kanishk Steel Industries Limited
a) Class A shares allotted
b) Share application money received
Padma Shipping Limited
a) Investment
Chennai Ferrous Industries Ltd
a) Sale of coal
Avantika Gupta
a) Remuneration
Name of the party
Summary of balance with related parties
Padma Shipping
a) Investments
31 March 2016
31 March 2015
1,052
–
–
7,526
561,288
1,681,058
–
399,470
60,774
60,971
31 March 2016
31 March 2015
2,242,346
1,681,058
Outstanding balances at the year end are unsecured. There have been no guarantees provided or received for any related party
receivables or payables. For the year ended 31 March 2016, the Group has not recorded any impairment of receivables relating to
amounts owed by related parties (2015: £nil). This assessment is undertaken each financial year through examining the financial position
of the related party and the market in which the related party operates.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
24. Earnings per share
Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the Parent Company
as the numerator (no adjustments to profit were necessary for the year ended March 2016 or 2015).
The weighted average number of shares for the purposes of diluted earnings per share can be reconciled to the weighted average
number of ordinary shares used in the calculation of basic earnings per share (for the Group and the Company) as follows:
Particulars
Weighted average number of shares used in basic earnings per share
Shares deemed to be issued for no consideration in respect of share-based payments
Weighted average number of shares used in diluted earnings per share
31 March 2016
31 March 2015
351,504,795
10,949,551
362,454,346
351,504,795
8,400,981
359,905,776
25. Directors’ remuneration
Name of Director
Arvind Gupta
V Narayan Swami
Martin Gatto
Mike Grasby
M C Gupta
Ravi Gupta
Total
31 March 2016
31 March 2015
1,350,000
97,239
45,000
45,000
45,000
45,000
1,200,000
97,554
45,000
45,000
45,000
45,000
1,627,239
1,477,554
The above remuneration is in the nature of short-term employee benefits. As the future liability for gratuity and compensated absences is
provided on actuarial basis for the companies in the Group, the amount pertaining to the Directors is not individually ascertainable and
therefore not included above.
26. Commitments and contingencies
Operating lease commitments
The Group leases land under operating leases. The leases typically run for a period of 15 to 30 years, with an option to renew the lease
after that date. None of the leases includes contingent rentals.
Non-cancellable operating lease rentals are payable as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Total
31 March 2016
31 March 2015
29,035
116,140
435,525
580,700
29,764
119,056
474,105
622,925
During the year ended 31 March 2016, £27,965 (2015: £28,054) was recognised as an expense in the statement of comprehensive
income in respect of operating leases.
Capital commitments
During the year ended 31 March 2016, the Group entered into a contract to purchase property, plant and equipment for £nil (2015:
£3,256,530) for its power generation projects under development. In respect of its interest in joint ventures the Group is committed to
incur capital expenditure of £15,834,660 (2015: £16,232,097) of their share of interest.
Contingent liabilities
OPGS had entered into a Bulk Power Transmission Agreement (‘BPTA’) with Gujarat Energy Transmission Corporation Limited (‘GETCO’)
for availing the transmission network for power generated from its plants. Pursuant to the BPTA, GETCO has raised demand for
transmission charges of £9,889,766 for the period from April 2013 to December 2015. OPGS has challenged the aforesaid demand in the
Hon’ble Supreme Court in India. Based on a legal opinion management believes that they have good grounds for favourable disposal of
the case and accordingly no adjustment to the financial statements is considered necessary.
Guarantees and letter of credit
The Group has provided bank guarantees and letter of credits (‘LC’) to customers and vendors in the normal course of business.
The LC provided as at 31 March 2016: £25,462,779 (2015: £40,347,660) and bank guarantee as at 31 March 2016: £12,223,606
(2015: £10,248,750) are treated as contingent liabilities until such time it becomes probable that the Company will be required to
make a payment under the guarantee.
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
71
27. Financial risk management objectives and policies
The Group’s principal financial liabilities comprises of loans and borrowings, trade and other payables, and other current liabilities. The
main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has loans and receivables, trade and
other receivables, and cash and short-term deposits that arise directly from its operations. The Group also hold investments designated
at available-for-sale categories.
The Group is exposed to market risk, credit risk and liquidity risk.
The Group’s senior management oversees the management of these risks. The Group’s senior management advises on financial risks
and the appropriate financial risk governance framework for the Group.
The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below:
Market risk
Market risk is the risk that the fair values of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market prices comprise three types of risk: interest rate risk, currency risk and other price risk, such as equity risk. Financial instruments
affected by market risk include loans and borrowings, deposits, available-for-sale investments.
The sensitivity analyses in the following sections relate to the position as at 31 March 2016 and 31 March 2015.
The following assumptions have been made in calculating the sensitivity analyses:
i) The sensitivity of the statement of comprehensive income is the effect of the assumed changes in interest rates on the net interest
income for one year, based on the average rate of borrowings held during the year ended 31 March 2016, all other variables being
held constant. These changes are considered to be reasonably possible based on observation of current market conditions.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt
obligations with average interest rates.
At 31 March 2016 and 31 March 2015, the Group had no interest rate derivatives.
The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each
reporting date that are sensitive to changes in interest rates. All other variables are held constant. If interest rates increase or decrease by
100 basis points with all other variables being constant, the Group’s profit after tax for the year ended 31 March 2016 would decrease or
increase by £2,692,161 (2015: £2,047,577).
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rate. The Group’s presentation currency is the Great Britain Pound (£). A majority of our assets are located in India where the
Indian Rupee is the functional currency for our subsidiaries. Currency exposures also exist in the nature of capital expenditure and
services denominated in currencies other than the Indian Rupee.
The Group’s exposure to foreign currency arises where a Group company holds monetary assets and liabilities denominated in a currency
different to the functional currency of that entity:
As at 31 March 2016
As at 31 March 2015
Currency
United States Dollar
Financial
assets
Financial
liabilities
Financial
assets
Financial
liabilities
–
21,487,313
–
15,590,116
Set out below is the impact of a 10% change in the United States Dollar on profit arising as a result of the revaluation of the Group’s
foreign currency financial instruments:
As at 31 March 2016
As at 31 March 2015
Currency
United States Dollar
Effect of 10%
strengthening
of GBP on
Closing rate
net earnings
Closing rate
Effect of 10%
strengthening
of GBP on
net earnings
66.25
2,549,030
62.53
1,546,417
The impact on total equity is the same as the impact on net earnings as disclosed above.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
27. Financial risk management objectives and policies continued
Credit risk analysis
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial
loss. The Group is exposed to credit risk from its operating activities (primarily for trade and other receivables) and from its financing
activities, including short-term deposits with banks and financial institutions, and other financial assets.
The maximum exposure for credit risk at the reporting date is the carrying value of each class of financial assets amounting to £60,204,986
(2015: £37,889,350).
The Group has exposure to credit risk from accounts receivable balances on sale of electricity. The operating entities of the Group has
entered into short-term agreements with transmission companies incorporated by the Indian state government (TANGEDCO) to sell
the electricity generated. Therefore the Group is committed, in the short term, to sell power to these customers and the potential risk of
default is considered low. For other customers, the Group ensures concentration of credit does not significantly impair the financial assets
since the customers to whom the exposure of credit is taken are well established and reputed industries engaged in their respective
field of business. The creditworthiness of customers to which the Group grants credit in the normal course of the business is monitored
regularly. The credit risk for liquid funds is considered negligible, since the counterparties are reputable banks with high quality external
credit ratings.
The Group’s management believes that all the above financial assets, except as mentioned in note 15 and 16, are not impaired for each of
the reporting dates under review and are of good credit quality.
Liquidity risk analysis
The Group’s main source of liquidity is its operating businesses. The treasury department uses regular forecasts of operational cash flow,
investment and trading collateral requirements to ensure that sufficient liquid cash balances are available to service ongoing business
requirements. The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial
liabilities as well as cash outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and
week-to-week basis, as well as on the basis of a rolling 90-day projection. Long-term liquidity needs for a 90-day and a 30-day lookout
period are identified monthly.
The Group maintains cash and marketable securities to meet its liquidity requirements for up to 60-day periods. Funding for long-term
liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The following is an analysis of the Group contractual undiscounted cash flows payable under financial liabilities at 31 March 2016 and
31 March 2015:
As at 31 March 2016
Borrowings
Trade and other payables
Other current liabilities
Total
As at 31 March 2015
Borrowings
Trade and other payables
Other current liabilities
Total
Non-current
Current within
12 months
1–5 years
Later than
5 years
Total
21,023,963 123,362,705
8,463,049
54,890,882
–
223,710
119,196,170 263,582,838
63,353,931
223,710
–
–
76,138,555 131,825,754
119,196,170
327,160,479
Non-current
Current within
12 months
1–5 years
Later than
5 years
Total
49,981,971
48,152,547
625,957
198,541,687
16,795,079
–
104,228,299
–
–
352,751,957
64,947,626
625,957
98,760,475
215,336,766
104,228,299
418,325,540
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
73
27. Financial risk management objectives and policies continued
Capital management
Capital includes equity attributable to the equity holders of the parent and debt less cash and cash equivalents.
The Group’s capital management objectives include, among others:
• ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value;
• ensure Group’s ability to meet both its long-term and short-term capital needs as a going concern; and
• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust
the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.
No changes were made in the objectives, policies or processes during the years end 31 March 2016 and 2015. The Group maintains
a mixture of cash and cash equivalents, long-term debt and short-term committed facilities that are designed to ensure the Group has
sufficient available funds for business requirements. There are no imposed capital requirements on Group or entities, whether statutory
or otherwise.
The capital for the reporting periods under review is summarised as follows:
Total equity
Less: Cash and cash equivalents
Capital
Total equity
Add: Borrowings (including buyer’s credit)
Overall financing
Capital to overall financing ratio
28. Summary of financial assets and liabilities by category and their fair values
31 March 2016
31 March 2015
180,676,250
(7,153,455)
164,613,070
(6,805,449)
173,522,795
157,807,621
180,676,250
263,582,838
164,613,070
260,788,187
444,259,088
0.39
425,401,257
0.37
Financial assets
Loans and receivables
– Cash and cash equivalents1
– Restricted cash1
– Current trade receivables1
– Available-for-sale instruments3
Financial liabilities
Term loans
LC bill discounting and buyers’ credit facility1
Current trade and other payables1
Non-current trade and other payables2
Carrying amount
Fair value
March 2016
March 2015
March 2016
March 2015
7,153,455
9,235,378
57,840,717
2,364,269
6,805,449
8,088,207
28,628,701
1,233,620
7,153,455
9,235,378
57,840,717
2,364,269
6,805,449
8,088,207
28,628,701
1,233,620
76,593,819
44,755,977
76,593,819
44,755,977
263,582,838
–
54,890,882
8,463,049
258,694,310 263,582,838
–
54,890,882
8,463,049
2,093,877
48,152,547
16,795,079
258,694,310
2,093,877
48,152,547
16,795,079
326,936,769
325,735,813 326,936,769
325,735,813
The fair value of the financial assets and liabilities are included at the price that would be received to sell an asset or paid to transfer a
liability (i.e. a exit price) in an ordinary transaction between market participants at the measurement date. The following methods and
assumptions were used to estimate the fair values.
1 Cash and short-term deposits, trade receivables, trade payables, and other borrowings like short-term loans, current liabilities approximate their carrying amounts largely due
to the short-term maturities of these instruments.
2 The fair value of loans from banks and other financial indebtedness, obligations under finance leases, financial liabilities at fair value through profit or loss as well as other
non-current financial liabilities is estimated by discounting future cash flows using rates currently available for debt or similar terms and remaining maturities.
3 Fair value of available-for-sale instruments held for trading purposes are derived from quoted market prices in active markets. Fair value of available-for-sale unquoted equity
instruments are derived from valuation performed at the year end.
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
All amounts in £, unless otherwise stated
28. Summary of financial assets and liabilities by category and their fair values continued
Fair value measurements recognised in the statement of financial position
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped
into Levels 1 to 3 based on the degree to which the fair value is observable.
• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
Available-for-sale financial assets
Unquoted securities
Quoted securities
Total
There were no transfers between Level 1 and 2 in the period.
Level 1
Level 2
Level 3
Total
–
2,364,269
2,364,269
–
–
–
–
–
–
–
2,364,269
2,364,269
The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values. Valuation
techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based
information. The finance team reports directly to the Chief Financial Officer.
Valuation processes and fair value changes are discussed by the Board of Directors at least every year, in line with the Group’s
reporting dates.
29. Post-reporting date events
No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation.
Approved by the Board of Directors on 29 July 2016 and signed on its behalf by:
Arvind Gupta
Chief Executive Officer
V Narayan Swami
Chief Financial Officer
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements Power Ventures Plc
75
CORPORATE DIRECTORY
Nominated Adviser and Broker
Cenkos Securities Plc
6–7–8 Tokenhouse Yard
London
EC2R 7AS
Joint Broker
Macquarie Capital (Europe) Limited
Ropemaker Place
28 Ropemaker Street
London
EC2Y 9HD
Financial PR
Tavistock Communications
131 Finsbury Pavement
London
EC2A 7AS
Administrators and Company Secretary
FIM Capital Limited
(Formerly IOMA Fund and Investment Management Limited)
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
Auditors
Grant Thornton
Third Floor
Exchange House
54/62 Athol Street
Douglas
Isle of Man
IM1 1JD
Legal advisers
Dougherty Quinn
The Chambers
5 Mount Pleasant
Douglas
Isle of Man
IM1 2PU
Registrars
Capita Registrars (Isle of Man) Limited
3rd Floor
Exchange House
54–58 Athol Street
Douglas
Isle of Man
IM1 1JD
Annual Report & Accounts 2016 Strategic ReportCorporate GovernanceFinancial Statements PLF: Plant Load Factor
PPA: Power Purchase Agreement
PSA: Power Supply Agreement
ROE: Return on Equity
Rupees/INR or Rs: Indian Rupee, the lawful currency of India
SEB: State Electricity Board
SEBI: Securites Exchange Board of India
SPV: Special Purpose Vehicle
State: State of India
TANGEDCO: Tamil Nadu Generation and Distribution
Corporation Limited
The Code: the UK Corporate Governance code, issued by the
Financial Reporting Council
TNWMS: Tamil Nadu Waste Management Services
UK/United Kingdom: United Kingdom of Great Britain and
Northern Ireland
UMPPS: Ultra Mega Power Projects
US$/USD or $: US Dollars, the lawful currency of the US
Power Ventures Plc
76
DEFINITIONS AND GLOSSARY
Act: Isle of Man Companies Act 2006
AGM: Annual General Meeting
Board: Board of Directors of OPG Power Ventures Plc
BHEL: Bharat Heavy Electricals Limited
BOP: Balance of Plant
bps: Basis points
BRICS: Brazil, Russia, India, China and South Africa
CAGR: Compound Average Growth Rate
CEA: Central Electricity Authority
CIL: Coal India Limited and its subsidiaries
Company or OPG or parent: OPG Power Ventures Plc
Discom: Distribution Company (of the State Electricity Utility)
EBITDA: Earnings before interest, tax, depreciation and
amortisation
EHS: Environment, Health and Safety
Electricity Act: Indian Electricity Act 2003 as amended
EPC: Engineering, Procurement and Construction
EPS: Earnings per share
ESOP: Employee Stock Options
FDI: Foreign Direct Investment
FII: Foreign Institutional Investor
FY: Financial year commencing from 1 April to 31 March
GAR: Gross as Received (coal)
GCP: Group Captive Plant
GDP: Gross Domestic Product
Government or GOI: Government of India
Great Britain Pound Sterling or £/pence: Pounds sterling
or pence, the lawful currency of the UK
Group Captive: Group Captive power plant as defined under
Electricity Act 2003, India
Group or OPG: the Company and its subsidiaries
GW: Gigawatt is 1,000 megawatts
IAS: International Accounting Standards
IEA: International Energy Agency
IFRS: International Financial Reporting Standards
Indian Companies Act: the Companies Act, 1956 and
amendments thereto
INDC: Intended Nationally Determined Contribution
kWh: Kilowatt hour is one unit of electricity
LOI: Letter of Intent
LSE: London Stock Exchange plc
LTOA: Long Term Open Access
LTVT: Long Term Variable Tariff
MoU: Memorandum of Understanding
mt: Million tonnes
MW: Megawatt is 1,000 kilowatts
MWh: Megawatt hour
NITI Aayog: National Institution for Transforming India
O&M: Operating and Management
OPG E: OPG Energy Private Limited
OPG RE: OPG Renewable Energy Limited
Annual Report & Accounts 2016Strategic ReportCorporate GovernanceFinancial Statements O
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www.opgpower.com
OPG Power Ventures Plc
IOMA House, Hope Street
Douglas, Isle of Man
IM1 1AP
T: +44 (0)1624 681200
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