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7
SUSTAINABLE
PROFITABLE
RESILIENT
ANNUAL REPORT 2017
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
T: +44 (0)1624 681200
www.opgpower.com
INTRODUCTION
OPG is a developer and operator of power
plants in India with a track of record
of delivery and an experienced management
team. Our goal is to be a leader in the
Indian energy sector.
CONTENTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
01 Highlights
28 Board of Directors
41 Independent Auditors’ report
02 Executive Chairman’s statement
30 Corporate Governance Report
42 Consolidated Statement
05 Financial review
34 Directors’ Report
10 COO Operational review
36 Directors’ Remuneration Report
14 Business model
16 Group objectives and strategies
17 Key Performance Indicators
40 Statement of Directors’
responsibilities
18 Market review
22 Sustainability report
26 Principal risks
of Comprehensive Income
43 Consolidated Statement
of Financial Position
44 Consolidated Statement
of Changes in Equity
45 Consolidated Statement of
Cash Flows
46 Notes to the Consolidated
Financial Statements
74 Corporate Directory
75 Definitions and Glossary
The paper used in this document contains
materials sourced from responsibly
managed and sustainable commercial
forests, certified in accordance with the
FSC® (Forest Stewardship Council).
Designed and produced by fourthquarter
HIGHLIGHTS
• Profit after tax of £23.1m up 24% compared with £18.6m in FY16
• EPS of 8.43 pence per share on attributable basis up by 59%
compared with FY16
• Full year dividend of 0.98 pence per share, including interim dividend
of 0.26 pence per share already paid
• Generation up 30% to 4.4* billion units from 3.3 billion units in FY16
• Revenue up 60% to £205m from £128m in FY16
• EBITDA margin of 33% despite higher coal costs
• Net debt £308m; Gearing of 57% consistent with FY16
• 62 MW solar project construction started and is on track for
commissioning in FY18
* 4.4 billion units includes 0.4 billion deemed generation for Chennai Unit 3 (FY16: 0.2 billion)
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FINANCIAL HIGHLIGHTS
REVENUES (£m)
EBITDA (£m)
PROFIT BEFORE TAX (£m) (pre-exceptional items)
205.0
128.4
98.8
100.0
56.2
66.7
50.7
28.6
21.7
17.9
17.5
30.9
33.4
17.7
10.5
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
EPS (£ pence)
NET DEBT / EBITDA
8.43
7.6
4.91
5.29
5.0
4.6
4.14
2.48
FY13
FY14
FY15
FY16
FY17
FY15
FY16
FY17
OPG Power Ventures Plc Annual Report and Accounts 2017 1
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OPG has established a
strong investment case
• Robust platform of operating assets
• Experienced management
• Proven ability to execute
• Attractive sector fundamentals
• Demonstrated focus on cash flow generation
2 OPG Power Ventures Plc Annual Report and Accounts 2017
EXECUTIVE CHAIRMAN’S STATEMENT
In the year ended 31 March 2017, we witnessed more of the potential
from our 714 MW portfolio. At 4.4 billion units, OPG generated 30%
more electricity than the previous year, benefitting from a full year of
operation at Gujarat. The Company’s full year profit after tax increased
by 24% to £23.1m and earnings per share increased by 59% to
8.43 pence per share.
Overall performance overview
The Company has recorded its ninth
successive year of increasing revenues,
a near-zero lost time injury rate and
improved environmental performance
measures. The strategy of maximising
our existing assets to make our
business stronger in the long term has
led the Board proposing a final dividend
of 0.72 pence per share bringing the
total dividend payable in respect of
FY17 to 0.98 pence per share. A further,
formal announcement setting out the
record date and payment date for the
final dividend as well as scrip option
will follow in due course.
Maximising our assets,
demonstrating resilience
Since 2010 we have consistently
achieved plant load factors above
published national thermal averages
and FY17 was also such a year.
In addition, our clean dark spreads
(being the difference between tariff
and cost on a per unit basis) at our
flagship Chennai plant were Rs 2.63
per kWh in FY17 in spite of unforeseen
events such as the spike in coal costs
and other external factors that we
reported during FY17. We believe
that this reflects margins amongst
the best in the sector.
On the majority of our sales at both
plants, we continued to be paid within
sixty days of billing industrial customers.
However, slow remittances and
recoveries from state electricity boards
(“SEBs”) have continued to impact the
Indian power sector and it is pleasing that
our track record in recovering amounts
due has been relatively good and the
backlog in Chennai has been appreciably
reduced. We expect to achieve similar
progress in Gujarat now that we have
amended the share capital structure.
Pursuing the maximisation of our assets
strengthens our ability to withstand
external events while keeping gearing at
a sustainable level. The Company’s
gearing remained stable at 57% in FY17
and FY16. Further, to better align our
debt obligations and cash flows, we
have extended our loan repayment at
Gujarat by ten years. This includes a
period of low repayments in the next
five years and thereby reduces principal
amounts to be repaid by £67m up to
2022. We were cushioned, to a degree,
by good volumes, our sales tariffs under
group captive power business model,
the diversity of our largely industrial
customer base and some short term
forward purchasing of coal. We believe
that the underlying business remains
resilient primarily because of the captive
power business model.
Building Towards A Bright Future
Macro – gathering momentum
Alongside a buoyant stock market, the
broader trend of economic growth in
India remains strong. The government
has continued to undertake reforms on
a transformational scale which, in our
view, bode well for momentum and
growth over the long term such that
both power consumption, system
efficiency and cost of capital should
improve. These include the long-
awaited introduction of a uniform
system of indirect taxes (GST) across
the country designed to improve
interstate commerce, prioritising non-
performing assets in the banking sector,
achieving higher levels of electrification
across the country and implementing
reforms to improve profitability of state
power distribution companies (UDAY
scheme). We believe these reforms
will make the Indian power market
stronger from the next year.
UDAY – implementing a game
changer for tariffs and efficiencies
Almost all states in India, including
Gujarat and Tamil Nadu are now
signed up to the UDAY scheme. This
benefits the SEBs through a reduction
in debt and interest costs, while
committing them to a yearly tariff review
and increased efficiency. Tariff orders
issued by most signatory states imply
an average 10% annual improvement
in SEB finances from tariff and other
changes. In Tamil Nadu, under a MoU
with the Ministry of Power, the state
government and the utility have
agreed to raise tariffs by an average
of 6% for FY18-19 across all
categories of consumers.
As well as being resilient, we believe
our underlying business is in a good
position to benefit from these changes
which will progressively compound the
visibility of revenues brought about
as a result of the multi-year sale
agreements the Company has now
negotiated for nearly 500 MW of its
output (including the 74 MW long term
contract with the state of Tamil Nadu).
Managing availability and
cost of landed coal
For most of the last seven years we
have enjoyed highly attractive clean
OPG Power Ventures Plc Annual Report and Accounts 2017 3
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EXECUTIVE CHAIRMAN’S STATEMENT
CONTINUED
dark spreads and uninterrupted coal
supply, unlike many plants in India.
We regularly highlight the risk that
seaborne coal prices present to our
sector, but the last twelve months have
seen unheralded and prolonged coal
price volatility, against which short term
price hedging can only provide limited
protection. Intuitively with market
consensus index coal prices still
forecast to decline by over 20% in the
next two years, our coal procurement
strategy will require careful
management and execution, with the
timing of any forward purchases being
a major strategic consideration. As a
result of the optionality that we have to
switch between several types of coal,
we are exploring additional strategies
to buffer our trading operations for
FY19 and beyond.
Historically, freight costs have also been
volatile. In 2014, we announced a joint
venture with Noble Chartering Limited,
a wholly owned subsidiary of Noble
Resources Group, aimed at acquiring
and managing two new build carrier
vessels supported by the carriage of
OPG cargo. The new vessels are
approaching delivery in mid-2018,
and are expected to provide a degree
of protection against any sharp or
prolonged rise in future seaborne freight
rates for nearly half of coal movements.
The outlook for thermal and
renewable power
Coal India Limited, the world’s largest
coal producer, has recently stated
publicly its own expectation that coal
will remain the mainstay of the Indian
energy sector for decades to come with
the possibility of an increase in its use.
The Ministry of Power has voiced similar
expectations. As a result of a surplus of
domestic coal, there are plans in India
to significantly reduce thermal coal
imports over the next two to three
years, with state owned power
plants importing significantly less.
The reduction of coal imports by India,
the recent Chinese policy measures to
restrict coal imports and suspend new
capacity development and ongoing
global investments in renewables are
generally expected to underpin the
outlook for lower international coal
prices going forward.
In fact, the latest directive issued
recently by the Chinese authorities
enforcing stricter environmental norms
and closure of manufacturing units in
several industries, including metals,
is expected to further depress
international coal prices.
Growth in renewables is progressing,
with many players bidding for new
projects at highly competitive tariff
levels. Pursuant to recent trends in tariff
bidding, as well as volatility in solar
panel prices and in coal prices in our
core business, we continue to approach
new projects from a perspective of
seeking returns rather than purely scale.
Our focus remains on delivering our
62 MW solar entry project this year and
being selective about further projects
while maintaining our target of 300 MW
solar over the next few years.
Outlook
Following a year of rising revenues
and earnings in FY17, the first several
months of FY18 have as previously
announced been challenging given
the sustained and unexpectedly high
seaborne thermal coal prices that have
impacted our sector as a whole. Whilst
consensus prices for coal in the second
half of FY18 are expected to reduce,
the board will continue to review all
options to ensure that any impact is
minimised should this expected
reduction not take place.
India has achieved a GDP growth of
over 7% in FY17 and electricity markets
grew at 5.4% CAGR over the last
10 years, which indicates steady
growth in demand for electricity going
forward. Operationally the business has
continued to deliver high load factors
which we believe puts us in a strong
position to withstand the short-term
challenges to the business and we are
working on a number of initiatives that
we believe will mitigate the impact of
volatility in coal prices on our business.
With coal prices continuing to point
downwards, positive pipeline
developments on tariffs and our
renewable projects progressing,
I believe the current year will prove to
be a year of re-alignment, setting the
business on its course to recover
increased profitability in FY19 due to
the prospective strong tariff potential
and reduction in coal prices.
At the Annual General Meeting, the
Board will seek a renewal of customary
authorisation to purchase ordinary
shares in the Company up to 10% of
the Ordinary Shares in issue. Finally,
the Board and I wish to place on record
our immense gratitude to our team
who have built up the Company’s
track record of success carrying the
responsibility of navigating the
Company through multiple challenges.
After all, the mark of a solid team is
how we respond to the challenges
presented to us and it is this team
strength at OPG that enables the
Board to stand by its confidence in
the Company’s future.
Arvind Gupta
Executive Chairman
28 September 2017
4 OPG Power Ventures Plc Annual Report and Accounts 2017
FINANCIAL REVIEW
The following is a commentary on the Group’s
financial performance for the year.
Income statement
2017 % of 2016 % of
Year ended 31 March £m revenue £m revenue
Revenue 205.00 128.44
Cost of revenue (excluding depreciation) (115.10) (66.60)
Gross profit 89.90 43.85 61.84 48.15
Other income 0.90 4.44
Distribution, general and administrative
expenses (excluding depreciation, (24.05) (15.60)
employee stock option charge)
EBITDA 66.75 32.56 50.68 39.4
Depreciation (11.94) (5.94)
Net finance costs (37.24) (15.91)
Income from continuing operations
(before tax non-operational and/or
exceptional items) 17.57 8.57 28.83 22.4
Employee stock option charge (0.09) (0.28)
Profit before tax 17.48 8.53 28.55 22.2
Taxation 5.59 (9.97)
Profit after tax 23.08 11.26 18.57 14.45
Revenue
The Group’s revenue has increased by
£76.56m, reflecting a 60% growth
year on year. Generation exported to
customers and billed for revenue
increased by 63% to 3,695m units in
FY17 from 2,272 in FY16.
Gross profit
Gross profit (‘GP’), net of depreciation
on Plant and machinery included in cost
of revenue in FY17 was 43.85% of
revenue (FY16: 48.15%). The reduction
in GP is partly on account of reduction
in Tariff during the year.
Production and output levels from the
Group’s operating power plants in
Chennai and Gujarat compared to
the prior year were as follows:
Particulars FY17 FY16
Generation (million units) 4,003 3,1631
PLF (%) 702 70
Average tariff (INR/unit) 4.86 5.58
1 Includes 704m units from Gujarat for
which results were being capitalised.
2 Chennai Unit 3: Deemed PLF (%)
has been included
The cost of revenue represents fuel
costs (including the depreciation on
plant & machinery added therein in the
audited accounts but excluded for the
purpose of this review). The average
factory gate costs for Indian coal
increased by 9.6% and those for
imported coal by 10.85%. The table
overleaf shows the price and blend
of Indian and Indonesian coal
consumed in FY17 and FY16.
OPG Power Ventures Plc Annual Report and Accounts 2017 5
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FINANCIAL REVIEW
CONTINUED
Price and blend of India and Indonesian coal consumed
Average factory gate price Average factory gate price
(INR/mt) (INR perm KCal) Blend %
Indian Imported Indian Imported Indian:
Financial year coal coal coal coal Imported
FY17 3,301 3,565 904 835 5:95
FY16 3,013 3,216 879 769 22:78
Change % 9.56 10.85
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 £66.75m in FY17 up from
£50.68m in FY16 and EBITDA margin
was lower at 32.56% in FY17 against
39.46% in FY16 on account of
decrease in GP margin.
Profit before tax reconciliation
(‘PBT’) (£m) FY17
PBT 2016-17 17.48
PBT 2015-16 28.55
Decrease in PBT (11.07)
Reconciliation
Increase in GP 22.06
Decrease in other income (3.55)
Increase distribution, general and
administrative expenses (8.25)
Increase in depreciation* (0.01)
Increase in net finance cost1 (21.33)
Decrease in PBT (11.07)
* excluding depreciation on Property, Plant and
equipment £11.30m (FY16: £5.29m) included
in cost of revenue, adjusted in the GP.
Note1
The increase in Net finance costs of
£21.33m is attributable to the full year
effect of interest costs relating to debt
on the Gujarat plant commissioned
on 30 January 2016.
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 tax liabilities
arising after the tax holiday period.
The tax credit during the year was
£5.60m (FY16: expense of £9.97m)
which includes current tax (MAT)
expense of £3.32m (FY16: £3.99m)
and deferred tax income of £14.49m
net of deferred tax expense of
£5.58m. (FY16: expense of £5.97m).
The deferred tax expense arises
from timing differences in the
amounts of depreciation charged in
the tax accounts as against these
published accounts.
The Group has carried forward
credits in respect of MAT tax paid
in earlier periods to the extent it is
probable that future taxable profits
will be available against which
such tax credits can be utilised.
Consequent to a change in laws
from 1 April 2017, companies in
India can now carry forward and
take benefit of tax credits in respect
of MAT up to the fifteenth assessment
year as against ten assessment
years as was previously allowed.
This has resulted in the group
recognising a deferred tax asset
amounting to £14.49m, out of
which £11.17m was previously
unrecognised.
Details of tax credit during the year
(£m) FY17
Current tax FY 2016-17 3.32
Deferred Tax on Property,
Plant & Equipment 5.59
Credit for MAT (14.49)
Tax expense/(income) (5.59)
Profits after tax
Profits after tax have increased by
£4.50m from £18.51m in FY16 to
£23.08m in FY17.
Earning per Share (EPS)
The Company’s attributable reported
EPS increased from 5.29 pence to
8.43 pence on account of increase
in PAT due to attributable loss to
minority shareholders.
Dividend
In line with our dividend policy, the
Board approved FY17 full year dividend
at 0.98 pence per share, including
interim dividend of 0.26 pence per
share already paid. No dividends were
paid in FY16.
Foreign exchange gain on translation
The Company’s total assets/ liabilities
increased during the year by £112.55m,
which is primarily on account of foreign
exchange translation during the year
of £91.30m. (FY 17: 1 £= INR 80.82;
FY 16: 1 £=INR 95.09)
Property, plant and equipment
The increase in net book value of
our property, plant and equipment
principally relates to forex gain on
account of translation during the year.
Other non-current assets
Other non-current assets (excluding
Property, plant and equipment &
Intangible assets) have increased by
£2.94m year on year primarily as a
result of increase in the restricted cash
holding for more than 12 months.
Current assets
Current assets have increased by
£44.75m to £141.73m year on year
primarily as a result of the following:
6 OPG Power Ventures Plc Annual Report and Accounts 2017
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• Increase in trade receivables by
£26.43m, including cross subsidy
charges deducted on invoices
pertaining to Gujarat subsidiary of
£14.50m. (Total amount of cross
subsidy charges withheld from the
sales invoices of Gujarat subsidiary
was £26m as at 31 March 2017).
• During the year the Company
collected £24m of the £35m
outstanding from TANGEDCO as
at 31 March 2016.
• Increase in cash and bank balances
(including restricted cash) by £12.65m
• Increase in inventory holdings
by £6.23m.
• Effective 2011, the Group’s
investments in the minority owned
plants OPG Energy Pvt Ltd or
OPGE & OPG Renewable Energy
Pvt Ltd or OPGRE in which the
Group holds, respectively, 29.8%
and 22% of the paid-up equity were
deconsolidated from these accounts
and accounted as non-current
investments. In terms of Fair valuation
exercises carried out at the time and
subsequently, these investments are
carried, since 30 November 2011
at NIL value in these accounts.
• The Group has been informed by
OPGE & OPGRE that these
companies propose, shortly, to
make an offer of buy back of their
shares at face value. Having
completed the due process in this
respect, the Group intends, if and
when such an offer is extended to
the shareholders, to tender its
shares under the offer.
Current liabilities
Current liabilities have increased by
£31.37m primarily on account of
increase in trade creditors by £15.81m
(including an increase in Gujarat of
£22.5m offset by decrease in Chennai)
and borrowings by £15.52m.
Other non-current liabilities
Other non-current liabilities have
increased by £25.37m primarily
on account of forex impact on
translation during the year.
Net debt, gearing and finance costs
Net borrowings (borrowings net of
cash and cash equivalents and
available-for-sale of investments)
are £308m. The gearing ratio is 57%
in FY17.
Total borrowings (current and non-
current portions) didn’t change
significantly during the year and
amounted to Rs 25.9 bn as at 31 March
2017 (31 March 2016 – Rs 25.1bn)
while GBP equivalent increased from
£263.6m to £321m due to significant
strengthening of INR against GBP in
FY17. Increase in Total borrowings
(current and non-current) £263.6m in
FY16 to £321m in FY17 and increase
of £57.41m (Increase on account
forex is £46.53m and £10.88m due
to increase in debt).
Finance costs have increased from
£16.71m in FY16 to £38.82m in FY17
OPG Power Ventures Plc Annual Report and Accounts 2017 7
FINANCIAL REVIEW
CONTINUED
primarily due to i) the incidence of full
year of interest on the Gujarat plant
term loan included in the income
statement (such interest having been
capitalised before the completion date
of 1 February 2016) and ii) significant
strengthening of INR against GBP in
FY17. FY18 finance costs are expected
to be similar to FY17 finance costs.
Finance income increased from £0.8m
in FY16 to £1.58m in FY17 and
therefore net finance costs in FY17
amounted to £37.24m.
The FY17 restricted cash balances
totalling £17.83m (FY16: £9.23m)
comprise deposits that have been
pledged as security against the
Company’s specific borrowings.
Cash flow
Operating cash flow has increased
from £48.90m in FY16 to £66.78m in
FY17, an increase of £17.61m or 36%.
The increase is primarily due to the
increased gross profit sales.
Movements (£m) FY17 FY16
Operating cash 66.78 48.90
Tax paid (3.91) (3.97)
Change in working capital
assets and liabilities (6.78) (25.13)
Net cash generated by
operating activities 56.09 19.80
Purchase of property,
plant and equipment
(net of disposals) (5.14) (13.32)
Other investments (10.03) (1.65)
Net cash used in
investing activities (15.17) (14.97)
Net interest paid (38.82) (7.87)
Dividend paid (0.91) –
Total cash change
before net borrowings 1.19 (3.04)
V Narayan Swami
Finance Director
28 September 2017
8 OPG Power Ventures Plc Annual Report and Accounts 2017
OPERATING CAPACITY
750MW
GUJURAT
300MW
Thermal
KARNATAKA
62MW
Solar
TAMIL NADU
450MW
Thermal
Our capacity growth
(MW)
936
812
750
600
270
190
107
113
20
30
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
Estimate
Total
expected
OPG Power Ventures Plc Annual Report and Accounts 2017 9
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COO OPERATIONAL REVIEW
The following is a review of operations
for the year.
Plant availability and generation
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.
Total generation at 414 MW Chennai
plant in FY17, including ‘deemed’
offtake, was 2.7bn units which is 12%
higher than last year despite the
seasonal and regional events, including
Cyclone Vardah hitting northern parts
of the Tamil Nadu state in December
2016. The Chennai plant load factor
(‘PLF’) including ‘deemed’ offtake,
in FY17 was 76% versus a national
average for thermal plants of
approximately 60% and is expected to
be at the same level in FY18.
The 300 MW Gujarat plant’s generation
was up 79% from FY16 to 1.7bn units
following the commissioning of both
units. The Gujarat plant continued to
ramp up achieving a PLF of 63%
in FY17, up from 52% in FY16.
The Company expects PLF to be
approximately 80% during FY18.
For FY19, the Company expects load
factors at both of its plants to be at
around 80%.
Auxiliary consumption levels, also a key
measure of plant efficiency, is typically
between 7.5-8% for our plants.
Sales contracts
During FY17, the Company continued
supplies directly to industrial customers
under short-term and multi-year
contracts in Chennai. The tenure of
sales contracts entered into with
industrial customers at Chennai was
between six months and three years.
This has accelerated cash collections
and improved visibility of earnings.
The capacity allocated to industrial
customers under such contracts
was 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.
Significant portion of 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
less affected by such restrictions as
the state seeks to ensure continuity
of supply to business.
Average tariff realisation (Rs/kWh)
(INR/kWh)
5.58
5.55
5.71
5.58
4.86
FY13
FY14
FY15
FY16
FY17
Cost of generation
(Rs/kWh)
3.06
3.10
3.09
2.67
2.52
FY13
FY14
FY15
FY16
FY17
Generation
(million kWh)
4,003*
3,163*
1,841
1,861
932
FY13
FY14
FY15
FY16
FY17
Note: FY16 includes 704m units from
Gujarat that were capitalised.
* excluding deemed generation for
Chennai Unit 3 of 0.4 billion
(0.2 billion in FY16)
10 OPG Power Ventures Plc Annual Report and Accounts 2017
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For FY18, the Chennai plant expects to
continue with its diversified sales mix,
contracting the majority of its generation
from 414 MW to Group Captive
customers and the balance of 74 MW
(net) to TANGEDCO under the 15 year
Power Purchase Agreement (‘PPA’).
Power sales from the new 300 MW
Gujarat plant have been to mainly
industrial customers on short and
medium-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. 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 63%
in FY17, compared with 52% for the
two-month period since commissioning
from February to March 2016.
The Chennai plant realised an average
tariff of Rs 5.18 in FY17 and a
‘deemed’ offtake charge of Rs 1.50 per
unit for ‘deemed’ generation. The
difference between tariff and cost of
coal on a per unit basis (‘the Clean
Dark Spread’), was Rs 2.63 at Chennai
for FY17, which we believe continues
to be amongst the best in the sector,
notwithstanding the sharp spike in coal
prices we reported earlier during the
year as well as measures taken by
management to mitigate high coal
price volatility.
Rs 5.00. At Gujarat, the Company
expects the average tariff to be around
Rs 3.80. As the Company announced
in Q1 FY18 trading update, it has had
a change in the customer mix with a
higher proportion of offtake by some
large customers paying slightly lower
tariffs, on multi-year sales.
The Gujarat plant realised an average
tariff of Rs 4.03 per unit for FY17 and
the Clean Dark Spread was Rs 1.37 per
unit. The Gujarat Electricity Authorities
have been levying Cross Subsidy and
associated charges since FY 2016 on
our captive users. As per legal opinions
such action is inconsistent with the
express provisions of the Electricity Act,
other regulations and the orders of the
Gujarat Electricity Regulatory
Commission. The amounts withheld
aggregate to £26m as at the end of
FY17. The group is making progress in
its dialogue with the authorities to
revoke and rescind the levy of such
charges and to refund the amounts.
We anticipate resolution of this matter
before the end of FY18.
For FY18, at Chennai, the Company
expects the average tariff to be around
For FY19, with a large number of multi-
year sales contracts agreed to be rolled
over as and when they fall due, the
Company expects average group tariffs
to be consistent with that for the FY18
one at around Rs 4.40. Average realised
tariffs on multi-year contracts would
benefit from any increase in regulated
tariffs. In Tamil Nadu, under a MoU with
the central government, the state has
resolved to raise tariffs by an average of
6% from FY19 across the board.
Coal supply and prices
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
purchased coal primarily on short and
medium-term contracts and because
OPG Power Ventures Plc Annual Report and Accounts 2017 11
COO OPERATIONAL REVIEW
CONTINUED
of that earlier in 2016, the Company
benefited as prices spiked later
during the year.
The average coal price was Rs 3,552
per tonne in FY17 (FY16: Rs 3,171
per tonne). Following coal prices spike
in 2016 and some volatility at the
beginning of 2017, coal prices had
started to decline by the end of FY17.
However in Q1 FY18, prices for
imported coal unexpectedly rose
substantially higher than consensus
expectations, predominantly as a
result of policy actions undertaken in
China. The average landed cost of
the Company’s coal in Q1 FY18 was
Rs 4,420. Based on the current
market consensus we expect the
average landed cost of coal to fall by
around 10% over the course of the
period to March 2019.
Consensus expectations continue to
be for international coal prices to
recede in 2018 and 2019 with longer-
term consensus expectations for that
trend to continue whilst coal supply
is expected to stay robust.
The Company will continue to actively
review its procurement and hedging
practices to establish ways in which
to mitigate the volatility of the coal
price and will report any material
developments in this regard.
Safety and environmental
compliance
The Company made good progress
with its safety programme, recording no
fatalities and a zero reported incident
rate in FY17 for Chennai versus 0.28 for
every 100,000 man hours in FY16. For
Gujarat Plant, total reported incident
rate was targeted at 0.50 for FY17 and
we have been able to bring it down
from 0.64 in FY16 to 0.23 in FY17.
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.
Solar projects
62 MW Karnataka
In FY17, the Company has signed
long-term 25 year PPA for 62 MW
with Karnataka Discoms at an average
tariff of Rs.5.00 across the 4 sites.
The 60 MW out of 62 MW solar projects
have achieved financial closure and
work has started on the first 20 MW
site, and all sites remain on track to
be commissioned in FY18.
124 MW Jharkhand
In FY17, the Company has secured
a Letter of Intent for the award of
a 25 year PPA for 124 MW. The
necessary security deposits and
guarantees have been lodged with
the Jharkhand authorities.
The land has been identified and
potential debt providers are ready to
fund the project. The process of
financial closure and land acquisition is
expected to start post signing of the
PPA, with a progressive commissioning
timeframe over 18 months.
T. Chandramoulee
Chief Operating Officer
28 September 2017
12 OPG Power Ventures Plc Annual Report and Accounts 2017
GENERATION
4.4 BILLION UNITS (KwH)
Our generation increased 30% to
4.4 billion units from 3.3 billion units in
FY16. Our plant load factors remain
ahead of industry average.
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OPG Power Ventures Plc Annual Report and Accounts 2017 13
BUSINESS MODEL
Our model is driven by economic growth
and the demand for power in India.
DRIVERS
ROBUST PLATFORM
THERMAL
Industry and
commerce needs
sustainable,
reliable power
RENEWABLES
14 OPG Power Ventures Plc Annual Report and Accounts 2017
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WHERE OPG ADDS VALUE
OUTCOMES
Selective
approach to
customers and
contract
terms
Best price
and assured
volumes
First choice
for customers
Responsible
operations
Robust, low
cost operations
Visibility of earnings
and cash flow
Sustainable returns
to investors
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
OPG Power Ventures Plc Annual Report and Accounts 2017 15
GROUP OBJECTIVES AND STRATEGIES
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
Reducing cost of
capital and paying
dividends
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 shor t- and medium-term sales contracts.
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.
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.
Pursuing
responsible growth
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.
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.
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.
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.
16 OPG Power Ventures Plc Annual Report and Accounts 2017
KEY PERFORMANCE INDICATORS
FINANCIAL
Average tariff realisation (INR/kWh)
(INR/kWh)
Cost of generation
(INR/kWh)
5.58
5.55
5.71
5.58
4.86
3.06
3.10
3.09
NON-FINANCIAL
Plant load factor
(%) (Group)
94
96
91
2.67
2.52
70
70
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
EBITDA
(£m)
30.9
33.4
17.7
66.7
50.7
Gearing
(%)
32.0
59.0
57.0
57.0
52.0
Total Recordable Injury Rate
(Chennai)
0.49
0.40
0.28
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
Nil
FY17
Earnings per share (EPS)
(pence)
Total Recordable Injury Rate
(Gujurat)*
8.43
4.91
5.29
4.14
2.48
0.64
0.23
FY13
FY14
FY15
FY16
FY17
FY13
FY14
FY15
FY16
FY17
* Commenced commercial operations
on 30 January 2016
OPG Power Ventures Plc Annual Report and Accounts 2017 17
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MARKET REVIEW
India has achieved a GDP growth of over 7% in FY17 and electricity markets
grew at 5.4% compound annual growth rate (‘CAGR’) over the last ten
years. The Government has continued to push ahead with structural reforms
key to driving future growth and improving transparency for businesses. With
Government’s focus on infrastructure, aided by an increasing impetus from
the buoyant domestic equity markets and with a population of 1.3 billion
largely young people, the long term economic outlook continues to remain
strong for India. Further due to its historic correlation with electricity
consumption demand in the power sector is expected to grow.
• As quoted by Niti Aayog on 28 August
2017 “The reality of India’s energy
sector is that around three-quarters of
our power comes from coal-powered
plants and this scenario will not change
significantly over the coming decades”
Demand
• According to a recent credit analyst
report, 24% of India still remains
without electricity
• The government continues to make
significant efforts through increased
generation and transmission to
achieve its target of; ‘Power for All’
by 2020
• Reforms expected to improve liquidity
and demand by Discoms such as
UDAY are beginning to show results
• Government plans to move to all
electric cars by 2030
• As a result, demand for power is
expected to continue to grow in line
with GDP
India’s GDP is forecasted to
grow 7 – 8% annually over
the next 3 – 4 years
Power sector is expected
to grow in line with GDP
growth of 7%
Key drivers for growth
• India’s has a large and young
population of 1.32 bn (World
Bank, 2016)
• Industrial growth is expected to be
led by domestic consumption
and favourable policies such as
‘Make in India’
• Growth in infrastructure and smart
cities will increase the pace of
urbanisation; World Bank estimated
only 32% urbanisation in India
compared to 55% for China and
54% world average
• Interest rates have come down just
under 2% since January 2015
boosting investments
• Trade deficit, exchange rates and
inflation remain favourable
• A buoyant domestic equity market
• Reforms ranging from Demonetisation,
Aadhar to Insolvency Act to Goods
and Services Tax (‘GST’) expected to
improve future investments in India
Key highlights
Supply
• The 12th five year plan (2012-2017)
has seen the highest capacity
additions of approximately 85 GW
and 12 GW in thermal and solar
respectively placing India amongst the
top five power producers in the world
• All India average thermal PLF’s were
60% for FY17 due to an increased
supply from new plants and subdued
demand by distressed Discoms (State
electricity distribution companies)
• Up to 70 GW of ageing coal power
plants to be retired over next 10 years
which will need to be replaced by
new capacity
• A target of 175 GW of renewable
energy by 2022 has been set and is
making efforts to bring 50 GW of
stressed and under construction
thermal capacity into production
by 2022
• Increased coal production by Coal
India Limited of 100Mt from 433Mt in
2012 to 543Mt in FY17 and expected
to increase to 1bn tonnes by 2020 to
meet domestic demand
• The Power Ministry and India’s
planning commission NITI Aayog
expect coal to remain the principal
source of power generation for India
for decades to come
18 OPG Power Ventures Plc Annual Report and Accounts 2017
562 GW installed by 2030
(47% coal and 29% renewables)
2030
2022
2017
47
52
59
7
3
9
14
3
8
12
17
2
14
7
4
17
12
10
3
■ Coal ■ Gas ■ Nuclear ■ Hydro ■ Solar PV ■ Wind ■ Renewable and other
Source: NITI Aayog, CEA
2.8 TWh generation by 2030
(65% coal and 15% renewables)
2030
2022
2017
66
69
67
67
■ Coal ■ Gas ■ Nuclear ■ Hydro ■ Solar PV ■ Wind ■ Renewable and other
Source: NITI Aayog, CEA
6
4
8
15
6
8
4
6
10
10
12
41
2
1
1
Electricity demand by sector 31 March 2015
(%)
GDP growth rate
(%)
5.37%
1.79%
8.77%
42.10%
18.45%
■
■
■
■
■
■
Industrial
Domestic
Agriculture
Commercial
Traction
Miscellaneous
23.53%
Source: CEA
Per capita consumption of electricity
(kWh)
8
7
6
5
4
3
2
1
0
7.6
7.6
7.7
7.7
6.6
6.6
7.2
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: World Bank
774
914
957
1,010
1,075
India (FY12)
India (FY13)
India (FY14)
India (FY15)
India (FY16)
Brazil
South Africa
China
Russia
US
Source: World Bank 2011 and CEA
2,438
4,604
5,945
6,486
13,246
OPG Power Ventures Plc Annual Report and Accounts 2017 19
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MARKET REVIEW
CONTINUED
Ujjwal Discom Assurance Yojna – UDAY update
• UDAY was introduced in November 2015 to bring about a financial and
operational turnaround of Discoms (State Utilities)
• Key reform for the financial sector to improve the financial health of the sector
and in turn reduce the non-performing loans in the banking sector
• 27 States and Union territories have signed up UDAY to date
• Turnaround by FY20 requires sustained efforts to reduce losses and
increase tariffs
Results to date
KEY MEASURES
Improvement in financial metrics
• mainly under recovery of costs
due to lower tariffs
Improvement in operating metrics
• eduction of technical and
commercial power losses and
increase in smart metering
Reduction in financial costs
• as phased take over of Discom
debts State Governments
• converted to State Bonds at
lower interest rates
KEY PERFORMANCE
• 25 of 27 states (including Tamil KEY
Nadu & Gujarat) have agreed
tariff revisions up to FY18-19
• Independently projected, reduction
in average under recovery from
Rs 0.51 to Rs 0.45 per unit
• 1% Reduction in ATC losses in
FY17 to 24.08%
• Reduction in Discom interest costs
to 8.5% from 13% previously
Solar update
• 12 GW of solar capacity installed in
India at June 2017 with a target to
achieve 100 GW by 2022
• Significant decrease in tariffs in the
state auctions, following a fall in panel
price and in some cases due to
provision of payment guarantees and
land and grid availability by States
• Lower tariffs have resulted in a state of
uncertainty with some Discoms
contemplating holding on new
auctions and stalling on previously
agreed PPA’s at higher tariffs but the
Central Government has recently
denounced retrospective changes
• CERC outlines lower ROE of 14%
from 16% on projects going forward
due to lower interest costs and
improved payment terms potentially
making more projects viable
Coal update
International coal markets
• Seaborne coal market has seen
significant volatility in the last 12
months principally due policy changes
in China with two objectives: Eliminate
outdated capacity and improve
domestic coal industry profitability
due to glut in global coal prices
• Key policy changes in China
• Solar panel costs increasing with
demand from US and China,
– Mid 2016: Reduced 330 day
production policy for mines to 276
20 OPG Power Ventures Plc Annual Report and Accounts 2017
days in leading to sharp price spike
of nearly 100% in prices as markets
were not ready with stocks
– Late 2016, the 276 day policy to
330 days was partly reversed
– Early 2017, announced to manage
coal production to keep prices
between US$70-US$75 (RMB
equivalent); In mid 2017, the
Chinese government announced
policy changes to restrict coal
imports and plans to suspend new
coal power plant development to a
total capacity of 150 GW, as well
as to shut down a further 20GW
of outdated capacity
• Demand and price expectations
– As part of Paris Climate
commitment, several countries are
now looking at reduction in Co2
emissions which has led to
curtailment of new coal fired power
capacity in Asia such as China,
South Korea and EU and US
retiring older existing capacity
– Further there is a shift to gas
based capacity
– India is expected to increase coal
production from 550 Mt to 1 billion
tonnes by 2020
– No new coal fired projects slated
for permitting in 13th five year plan
& state enterprises have been
asked to stop use of imported coal
– China plans for power plants to
maintain 15-20 days of stocks in a
bid to ensure supply stability and
keep spot prices in check
– As a result, forward prices and coal
consensus forecasts are for prices
to come down by 20% over the
next 2 years
Declining trend
Higher production at Coal India has led to a decline in thermal coal imports
Indian thermal coal imports
(in million tonne)
168
155
149
133
136
105
71
FY12
FY13
FY14
FY15
FY16
FY17
FY18
(Forecast)
Source: Icra research
Coal consensus forecast for Newcastle coal to come down 20%
(US$/t)
76
72
68
64
60
56
Sep
2017
Dec
2017
Mar
2018
Jun
2018
Sep
2018
Dec
2018
Mar
2019
Jun
2019
Source: Consensus Economics Analysis, Aug 2017
Indonesian coal prices have risen sharply and remain volatile
(US$/t)
50
45
40
35
30
25
20
04 Sep
2015
04 Jan
2016
04 May
2016
04 Sep
2016
04 Jan
2017
04 May
2017
04 Sep
2017
Source: Argus Coal, Sep 2017
OPG Power Ventures Plc Annual Report and Accounts 2017 21
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SUSTAINABILITY REPORT
At OPG, we believe in efficient, sustainable, responsible and inclusive
growth. We ensure that the health and safety of all our employees and
workers remain a top priority for us; environmental compliance and
conserving resource remains an integral part of our organisational culture
and we continue to proactively engage with communities near our
operations; we are working on intensifying our engagement with them
in the coming years to have a measurable positive impact on them.
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.
Our approach
We take our social and environmental
responsibility as seriously as our business
and economic goals. We recognise that
providing safe, efficient and responsible
operations are key to long term
sustainability of the organisation.
We have identified three areas of
priority where we continued our work
in a focussed way in the financial
year FY17.
• Health and Safety
• Community Support
• Environmental Performance
HSE Governance
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.
The Steering Committee set up by the
Board is entrusted with the day to day
responsibility on Health, Safety and
Environment. The responsibilities
include adhering to the compliance,
plan trainings and manage incidents.
It keeps track of strategic and
operational issues. Safety Committee
has the responsibility at the plant level
and monitors all the necessary action
on the ground such as incident and
accident data, corrective measures for
previous incident and campaign for no
repeat of an incident, ill health data
and medical check-up.
Health and Safety
At both Chennai and Gujarat, our
continued and concerted efforts towards
safety and health of our employees have
been rewarding and motivating for us
and our employees. Zero Harm is our
vision for safety at OPG and pursuing a
goal of Zero Harm and incident free
operations gets highest commitment
from OPGs management. We have
structured our Health and Safety
programme in a way that we have
stringent procedures around safety and
zero tolerance for unsafe behaviour
and practices around safety.
In FY17 for the Chennai Plant, we had
a zero Total Recordable Incident Report
(‘TRIR’) and a zero Loss Time Injury
Frequency for every 100,000 man
hours. We have brought this down
from 0.28 in FY16.
For the Gujarat Plant, TRIR was
targeted at 0.50 for FY17 and we have
been able to bring it down from 0.64
in FY16 to 0.23 in FY17.
The responsibility of safety lies with
OPG for all OPG employees and
contractors. Annual health check-up
has revealed no occupational health
issue amongst the workforce which is
checked by a certified surgeon from
Inspectorate of factories. There has
been no report of any woman being
injured or hurt at OPG.
Health and Systems
Our approach is to implement
systematic change. Chennai plant is
certified with ISO 14000 and OHSAS
18001 (Occupational Health and Safety
Management System). This System
helps in identifying hazard risk and
minimising or eliminating that risk.
We adhere to national laws on
Occupational Health and Safety related
legislations. We have implemented
policies strictly in accordance with the
legislation in letter and spirit and there
has been no violation of any part of
the legislation.
Carbon monoxide in coal handling
plant is measured and monitored twice
per month; lux monitoring during day and
night and Suspended Particulate Matter
and Noise monitoring is carried out
regularly. Periodic health check-up
is carried out for the for employees and
contractors and that includes CBS,
Urine Routine Pulmonary Function Test,
Audiogram, Eye Check-up, Chest X Ray.
Training and Supervision
• At both Chennai and Gujarat sites,
continuous training programmes in
safety management are established.
All employees and contractors at our
22 OPG Power Ventures Plc Annual Report and Accounts 2017
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sites are provided with the necessary
training. The following are the key areas
of training carried out at both plants
Safety Induction training (mandatory for
every new entrant in the system)
• Tool box talks (daily)
• Safety training for all employees
(weekly)
• Safety training for contractors (monthly)
• First Aid Training
• Area specific training
• OHS training (5 day)
• Hazard Identification and risk
assessment training
• Fire extinguishing drill
• Arc Flash
Supervision
• Following safety practices such
as wearing safety gears – goggles,
reflective jackets, headgear and
other necessary equipment is
mandatory for every worker,
employee or visitor at OPG.
Promoting Safety Culture
In an Indian context, creating a safety
culture is essential to ensure personnel
don’t underestimate the safety issues.
Apart from the governance on safety,
setting up systems, providing training,
it is important to promote safety culture
through a mix of educating, disciplining
and incentivising. For example:
• Incentivising Reporting on near miss.
• National Safety Week Celebrations
• Visitor Safety guidelines on Visitor
passes.
Emergency Response and Reporting
• An onsite well equipped medical
facility with a doctor and two nurses
is available in case of any emergency.
• Incident Reporting Format is specified
and it is presented in monthly safety
report and safety committee meetings.
• Any condition that is unsafe is
brought to the notice of the head,
a responsibility is fixed for mitigating
the risk in a time bound manner and
the list is monitored.
• For each incident, reporting is done
with incident type and root cause is
analysed. It also specifies how the
accident risk can be mitigated.
• We have had excellent safety record
in certain areas in plants such as
boiler ESP, Turbine and Generator,
Transformer, ACC, Switch Yard and
DM Plant.
Environmental performance
Continual improvement in environmental
performance through responsible
operations is one of the key pillars of our
corporate strategy. Operational efficiency
and environmental stewardship are two
key drivers for our environmental
management programme.
Environmental Compliance
It is our resolve to remain compliant and
strive to stay ahead of compliance by
monitoring and measuring our impact.
We are compliant on all relevant
environmental local acts and rules.
We have had no incidence of any fine or
monetary sanctions imposed on us for
non-compliance. Our plant has all the
necessary waste water treatment as
well as air pollution control equipment.
There is no consumption of POPs
(Persistent Organic Pollutants) in any
of our operations.
Measuring and Improving
Environmental Performance
Some of the important indicators that
we measure are auxiliary power
consumption, water quality and quantity,
waste generated and recycled and
emissions (Sox, Nox, SPM, GHG, CO).
OPG Power Ventures Plc Annual Report and Accounts 2017 23
SUSTAINABILITY REPORT
CONTINUED
Whether it is material use, or energy, or
water we believe in reducing, reusing
and recycling and disposing off the
hazardous materials in compliance
with guidelines.
is treated in Sewage Treatment Plant
and the treated water from STP is
used for nurturing the green belt.
There is no effluent that is released
from the premises.
Energy
OPG generates power for other
consumers which are industrial and
commercial establishments. The energy
that is consumed within the plant is to
maintain facilities, air conditioning,
systems etc. Auxiliary Power
Consumption for OPG for FY17
is 7.9% for Chennai plant and 9.3%
for Gujarat plant.
Water
The primary source of water for our
plants is ground water. Ground water
level is measured regularly at various
points through piezometric wells and
level of water is as desired. Water cycle
is a closed loop system at OPG, and
water recovered during the process is
diverted to effluent treatment plant.
Treated water enters the water cycle
again and the reject goes to the solar
pond for evaporation. The water used
for domestic consumption at the plant
Quality of water at various entry and exit
points in the system show that the pH
is well within the prescribed limit.
The plant processes were set up in a
way that water could be recovered and
sent back to the source. One of the
major consumption of water at any
thermal plant is for cooling which is
the norm for most power stations.
However, at OPG huge water savings
result owing to the air cooling system
which is employed to reduce water
usage and effectively reduce the water
footprint per unit generated. Air cooled
condenser with 99.5% recovery of
condensate along with air cooled heat
exchange equipment effectively delivers
huge water savings. To reduce the
discharge of water from the system
some other initiatives are reverse
osmosis unit for effluent treatment
plant and sedimentation tank for
backwashed water.
Rain Water Harvesting Initiatives
• Rain water harvesting system is
designed to collect 90% of runoff
• Storm water drains with infiltration
wells have been made in the plant
to enrich ground water table.
• Infiltration pits were dug along storm
water drains to increase infiltration
of water during rains.
• Input recharging pits were cleared
and cleaned at regular intervals to
ensure water recharge.
• To strengthen the system further
gravel was cleared of silt, protective
fencing was put around the pits.
Water from the rain water gutter
pipes are connected to the water
storage tank.
Waste
Disposal of waste
Irresponsible disposal of hazardous
waste is one of the most potentially
dangerous acts that can impact
ecology and mankind immensely.
We are very proud to say that we have
absolutely no waste that is hazardous
and is disposed of against Basel
24 OPG Power Ventures Plc Annual Report and Accounts 2017
Convention. All hazardous waste that
we generated has been disposed to
the authorised vendors.
Green Initiative and Afforestation:
We have dedicated 30% of the area at
our premises as green belt to promote
local biodiversity in the area and we
continued our afforestation initiative
within the premises of our plant. We
would like to further our afforestation
initiatives in areas outside of our
operations as well.
Emissions
Emissions can be considered an
essential negative outcome of burning
any fuel. OPG makes use of good
quality coal and technology to reduce
its emissions.
Our stack emission monitoring analyser
has been linked with Tamil Nadu
Pollution Control Board (TNPCB) server
to get the real-time pollutant data. A LED
display board has been fixed at our main
gate that displays the pollution levels
To control the dust emissions, we use
an electrostatic precipitator which
works at 99.9% efficiency. The efficient
precipitator helps in controlling the
emissions well within the prescribed
limits. Even in coal unloading areas,
dust suppression system is in place.
In coal crushing area, dust filters are
installed to avoid the dust generation.
Sox, Nox and SPM remained within the
prescribed current emission standards
and OPG is well placed to move to new
standards which will be applicable from
2018 for most parameters.
Green House Gas (GHG) Emissions are
one of the long-term consequences of
burning fossil fuel, and OPG measures
its Scope I emissions which are
emissions within OPG’s operations.
OPG’s average Co2 emissions are
around 1.12 Kg carbon dioxide
equivalent per kWh hour.
India is a signatory to the Paris Climate
Agreement which has already come into
effect. The coal cess is imposed at INR
400 a tonne which is contributing
towards decarbonizing India’s economy
through this taxation as the corpus
funds green ideas and green projects.
The total cess paid during FY17 was
approximately Rs 1.1bn (approx. £1.3m).
Community Support
As a corporate with motto of
‘responsible operations’ we engage
with communities around our area of
operations. We would like to impact the
lives of the people around our operations
in a positive way. The basis of the
engagement with the communities is
understanding their needs. As we carried
out the exercise of need assessment in
2012-13, we are continuing our
interaction with them and all the support
is continued as per the needs of the
communities. We are supporting the
communities in neighbouring villages
of S.Kandigai, Periobalapuram,
Chinnaobalapuram, NR.Kandigai,
Kavalarmedu and Pethikuppam.
A systematic engagement plan was
evolved in collaboration with the
communities where it emerged that the
local communities needed assistance in
health, education, community spaces,
environment and recreation. Some of
the basic principles that guides our
engagement with the communities
are transparency, accountability and
gender inclusiveness.
Education
Through the education initiative so far
school uniforms, shoes, bags and
stationary were distributed to 1080
children. We are continuing to fund
salaries of 11 teachers in Government
Schools adjacent to our plant, 3 girl
child sponsorships, and 86
college/school fee funding have been
provided to needy students.
Health
Continuing our support to health
initiative in nearby villages, where we
already renovated and upgraded the
dispensaries i.e. in S.R. Kandigai and
Periobalapuram and villages, number of
patients served every day are around
50. We continue to provide the doctor’s
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salary, medicines, staff salary, supply of
materials and nursing staff salary along
with petrol reimbursement of the staff.
Local Environment
Some of the initiatives that were taken
in the current year are:
• Green Initiative within our premises
where we planted more saplings to
increase the green cover in the area.
• Mechanical road sweeping from SR
Kandigai village to Bypass GNT Road.
• Sprinkling water for dust suppression
near village S.Kandigai
Livelihood Generation
To help some of those who have no
means to create a livelihood for
themselves, we donated sewing
machines to needy families that could
help them with income generation.
However, we would like to engage
with the communities more on this
aspect in the coming years.
Contribution for Community places
Many of the community relationships
get strengthened around places of
worship. Based on the needs of the
communities, we have supported
construction of a Church at
Kayalramedu. Similarly, we have
supported some temple initiatives in
the villages around our operations
and a temple in Madurai.
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OPG Power Ventures Plc Annual Report and Accounts 2017 25
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
DESCRIPTION
MONITORING AND MITIGATION
Power sale
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.
• 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
Availability of
fuel supply
and costs
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
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
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.
Reliable
transmission
infrastructure
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.
26 OPG Power Ventures Plc Annual Report and Accounts 2017
• 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
• 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
• 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
• 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
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
DESCRIPTION
MONITORING AND MITIGATION
Government policy
and regulations
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.
Group’s business model of GCPPs is subject to rules and regulations,
which can be potentially interpreted by the authorities in a way
different from Group’s interpretations. The profitability of the Group
will be in part dependent upon the continuation of a favourable
regulatory regime with respect to its projects.
Ability to retain
fiscal and tax
incentives
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
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
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.
• 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
• The Group is consulting with industry
and legal experts as required and, if
necessary, is prepared to defend its
position in the courts.
• 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
• 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
• The Group continues to monitor changes
and developments in the global markets to
assess the impact on its financing plans
OPG Power Ventures Plc Annual Report and Accounts 2017 27
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BOARD OF DIRECTORS
Mr Arvind Gupta
Executive Chairman
Mr V Narayan Swami
Finance Director
Mr Martin Gatto
Senior Independent
Non-executive Director
Background and experience
Background and experience
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.
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.
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.
Member
Audit, Remuneration Committee
28 OPG Power Ventures Plc Annual Report and Accounts 2017
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Mr P Michael (Mike) Grasby
Independent
Non-executive Director
Mr Ravi Gupta
Independent
Non-executive Director
Jeremy Beeton
Independent
Non-executive Director
Background and experience
Background and experience
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.
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.
Jeremy was appointed to the OPG Board
in November 2016 as a Non-executive
Director. He is a Fellow of the Institution
of Civil Engineers with 40 years of
international experience in project and
programme management over very large
multi-site, multiple project operations
portfolios for and within government,
public companies and private companies.
He is also currently an independent Non-
executive Director of SSE plc, John Laing
and an independent Non-executive
Director of WYG plc, an Advisory Board
member of PricewaterhouseCoopers LLP
and Chairman of Merseylink Ltd.
Additionally, Jeremy sits on the governing
Court of Strathclyde University. He was
Director General of the London 2012
Olympic and Paralympic Games from
2007 until the Olympic Baton was passed
on to Rio de Janeiro in 2012. For eight
years prior to this, he was a Principal Vice
President with Bechtel, responsible for
their worldwide civil operations and has
lived and worked extensively in the Middle
East and Asia Pacific. He was awarded
CB in the 2013 New Year Honours and
holds an honorary Doctorate of
Engineering from Napier University.
Member
Audit, Remuneration Committee
Member
Audit, Remuneration Committee
Member
Audit, Remuneration Committee
OPG Power Ventures Plc Annual Report and Accounts 2017 29
CORPORATE GOVERNANCE REPORT
FINANCIAL YEAR ENDED 31 MARCH 2017
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 adopting
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. The Company completed its development programme, paid interim dividend and is poised for 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 with 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. Subsequent to the
year end, the Board adopted a schedule of matters specifically reserved to it for decision. These include matters relating to
strategy and management, financial reporting, internal controls, audit and risk management, structure and capital, transactions
and contracts, communications, board membership and other appointments, remuneration, litigation and policies.
2. Division of Responsibilities (A.2.1)
At the Annual General Meeting (‘AGM’) on 14 November 2016, Mr M C Gupta retired from the position of Chairman and the
Chief Executive, Arvind Gupta, accepted the Board’s proposal to assume the role of Executive Chairman effective from that
date. As Executive Chairman, Mr Arvind Gupta is responsible for the overall business, strategic decision and heads the
Executive Committee.
Mr V Narayan Swami, the Company’s Finance Director, remains responsible for the finance function, including financial
controls and funding. Simultaneously with the appointment of Mr Arvind Gupta as Executive Chairman, the Company
announced the appointment of Mr T Chandramoulee to a newly created post of Chief Operating Officer. This is a non-Board
appointment. As Chief Operating Officer, Mr Chandramoulee is responsible for the day-to-day running of the operations.
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
Executive Chairman to appraise the Executive Chairman’s performance. The Board is to institute a periodic evaluation
process, including evaluating the performance of the Executive Chairman in due course.
4. Nominations Committee (B.2.1)
Subsequent to the year end, the Board established a Nominations Committee 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 Executive 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 is to institute a process of periodic evaluation of its performance and that of its principal committees and the
individual Directors annually.
30 OPG Power Ventures Plc Annual Report and Accounts 2017
Operation of the Board
Board of Directors
The Board comprises the following individuals:
Executive
1. Arvind Gupta (Executive Chairman since 14 November 2016 (Chief Executive Officer before 14 November 2016)); and
2. V Narayan Swami (Finance Director).
Non-executive
1. Martin Gatto (Senior Independent Director);
2. Michael Grasby;
3. Jeremy Beeton (since 14 November 2016); and
4. Ravi Gupta.
Having been Non-executive Chairman of the Company for eight years Mr M C Gupta retired from the board at the Annual
General Meeting (‘AGM’) of the Company on 14 November 2016.
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. The Board considers both
Mr Gatto and Mr Grasby to be independent in character and judgement notwithstanding their length of service. Mr Beeton was
appointed in November 2016 and is considered to be independent under the Code. Biographical details of all the Directors at
the date of this report are set out on pages 28 and 29 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 5 times during the year under review.
The Executive Committee (‘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.
Executive Chairman, Chief Executive Officer and Senior Independent Director
The roles of the Chairman and Chief Executive Officer have been held by different individuals until 14 November 2016 with a
clear separation of roles. The Chairman’s key responsibilities were 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 were 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.
As mentioned above, at the AGM of the Company on the 14 November 2016, the previous Chief Executive, Arvind Gupta,
assumed the role of Executive Chairman and the previous Chairman retired on the same date.
Martin Gatto, the Senior Independent Director, is available to shareholders who have concerns that cannot be resolved through
discussion with the Executive Chairman. The role of the Senior Independent Director is to support and tender advice to the
Executive 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 Ravi
Gupta and Jeremy Beeton will offer themselves for re-election at the forthcoming AGM.
OPG Power Ventures Plc Annual Report and Accounts 2017 31
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CORPORATE GOVERNANCE REPORT
CONTINUED
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 Executive 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 to their area of responsibility and to keep them
fully briefed on ongoing matters relating to the Group’s operations.
The Executive 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.
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 Committee meetings
Board meetings Audit Remuneration
Number Attended Number Attended Number Attended
Arvind Gupta 5 5 2 2 NA NA
V Narayan Swami 5 5 2 2 NA NA
M C Gupta 3 2 2 1 1 1
Martin Gatto 5 5 2 2 1 1
Michael Grasby 5 5 2 2 1 1
Ravi Gupta 5 3 2 2 1 1
Jeremy Beeton 2 1 2 1 1 1
Number of meetings held
during the year 5 2 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 Executive Chairman so that their contribution can be included in the wider Board discussions.
Board Committees
Audit Committee
The members of the Audit Committee are Martin Gatto, Michael Grasby, Ravi Gupta and Jeremy Beeton (M C Gupta was a
member of the Audit Committee until his resignation in November 2016). Martin Gatto is considered to have continuing, relevant
financial experience. The Executive Chairman 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 2016; and
• the unaudited results for the half-year FY17 to 30 September 2016.
32 OPG Power Ventures Plc Annual Report and Accounts 2017
Remuneration Committee
The Remuneration Committee currently consists of Martin Gatto, Michael Grasby, Ravi Gupta and Jeremy Beeton. Ravi Gupta
is not present when any remuneration matter relating to the 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 36 to 39.
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 pages 26 and 27.
Assurance
Grant Thornton has been auditor for the Group for the last five years. The Audit 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 Audit 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
pages 34 and 35.
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 Executive Chairman 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.
OPG Power Ventures Plc Annual Report and Accounts 2017 33
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DIRECTORS’ REPORT
The Directors present their report, together with the audited financial statements of the Group, for the year ended 31 March 2017.
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 27 which is incorporated into this report by reference together with
the Corporate Governance Report on pages 30 to 33. 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 future. 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.
Principal activity
OPG Power Ventures Plc (‘the Company’ or ‘OPGPV’) is a public limited company incorporated in the Isle of Man, registered
number 002198V, which is listed on the Alternative Investment Market (‘AIM’) of the London Stock Exchange.
The Company 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 ‘Group Captive ’ provisions mandated by the Government of India.
Results and dividends
The audited financial statements for the year ended 31 March 2017 are set out from pages 42 to 73. The Group profit for the
year after taxation was £23.08m (2016: £18.57m).
The Board will be recommending a dividend for the year ended 31 March 2017 in amount of 0.98 pence per share, comprising
of the interim dividend already paid, 0.26 pence per share, and the final dividend to be paid 0.72 pence per share. Shareholders
will have an option to take their cash dividend in form of scrip. No dividend was paid for the year ended 31 March 2016.
Directors
There were changes to the Board during the period (see page 31 of the Corporate Governance Report) 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 31.
Details of Directors’ service agreements are set out in the Directors’ Remuneration Report on page 37.
The interests of the Directors in the shares of the Company are shown in the Directors’ Remuneration Report on page 38.
Biographies of all the Directors at the date of this report are set out on pages 28 and 29.
Related parties
Details of related party transactions are set out in note 24 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 2017 was £51,672 comprising 351,508,955 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 notes 5(a) and 22 to the financial statements, the Group
meets its day-to-day working capital requirements through cash from operations and bank facilities.
34 OPG Power Ventures Plc Annual Report and Accounts 2017
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 5 to 8. In addition, note 28 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.
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 July 2017:
Percentage of voting
rights and issued Number of
share capital ordinary shares
Gita Investments Limited and related parties1 50.9% 178,886,428
M&G Investment Management Limited 11.3% 39,881,231
Audley Capital Management Ltd 5.6% 19,659,544
British Steel Pension Scheme 3.6% 12,650,000
1 Beneficial interest in these shareholdings vests with Arvind Gupta and his family.
Annual General Meeting
The Annual General Meeting of the Company will take place on 31 October 2017 at 11:30am at IOMA House, Hope Street,
Douglas, Isle of Man, IM1 1AP. 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 2017 was FIM Capital 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 28.
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 28 September 2017 and signed on its behalf by:
Philip Scales
Company Secretary
OPG Power Ventures Plc
IOMA House, Hope Street, Douglas, Isle of Man IM1 1AP
28 September 2017
OPG Power Ventures Plc Annual Report and Accounts 2017 35
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DIRECTORS’ REMUNERATION REPORT
Introduction
This report sets out information about the remuneration of the Directors of the Company for the year ended 31 March 2017.
As a company admitted to AIM, OPG is not required to prepare a directors’ remuneration report. However, the Board follows 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 Jeremy Beeton (Chairman since November 2016), Martin Gatto, Ravi Gupta
and Michael Grasby who, with the exception of Ravi Gupta, are all independent Non-executive Directors. M C Gupta was the
Chairman of the Remuneration Committee until his resignation from the Board of Directors in November 2016.
Terms of reference have been approved for the Remuneration Committee the primary duty of which 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 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 at regular intervals 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 or shareholders, as appropriate; 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 Executive Directors 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 32.
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.
36 OPG Power Ventures Plc Annual Report and Accounts 2017
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, with the exception of Jeremy Beeton who joined the Board in November 2016, 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.
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 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. No awards have been made under this Plan.
Annual bonus
The Remuneration Committee considered bonuses and in subsequent discussions Arvind Gupta volunteered to reduce his
bonus by 40%. Therefore bonuses for Arvind Gupta of £360,000 and for V Narayan Swami £27,422 have been provided in
the accounts for FY17.
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, insurance and other allowances and received £52,959
(FY16: £48,074) and £1,984 (FY16: £2,486) respectively.
The key terms of the Executive Directors’ service agreements are as follows:
Current salary
Name Position Date of contract Notice period p.a. £
Arvind Gupta Executive Chairman 23 May 2008 12 months’ prior written notice on either side 750,000
V Narayan Swami Finance Director 23 May 2008 Three months’ prior written notice on either side 82,267
Non-executive Directors
The remuneration of the Non-executive Directors consists of fees that are paid quarterly in arrears. The Non-executive Directors do
not have a contract of employment with the Company. Each has instead entered into a contract for services with the Company.
OPG Power Ventures Plc Annual Report and Accounts 2017 37
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Non-executive Directors’ contracts for services
Non-executive Directors were appointed for an initial term of 12 months. Martin Gatto, Michael Grasby, Ravi Gupta and Jeremy
Beeton 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 Date of appointment Notice period Fees p.a. £
Martin Gatto 6 May 2008 Three months’ prior written notice on either side 45,000
Michael Grasby 6 May 2008 Three months’ prior written notice on either side 45,000
Ravi Gupta 12 May 2008 12 months’ prior written notice on either side 45,000
Jeremy Beeton 14 November 2016 Three months’ prior written notice on either side 45,000
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:
31 March 2017 31 March 2016
Gita Investments Limited1 178,886,428 178,886,428
Michael Grasby 10,041 10,000
Martin Gatto 60,000 60,000
M C Gupta (resigned on 14 November 2016) n/a 9,800
Jeremy Beeton – –
V Narayan Swami 10,300 10,300
Total 178,966,769 178,976,528
1 Beneficial interest in these shareholdings vests with Arvind Gupta and family.
There were no changes to Directors’ interests between 31 March 2017 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 2017 other than
their service contracts, details of which are given in the table above.
38 OPG Power Ventures Plc Annual Report and Accounts 2017
Directors’ remuneration for the period 31 March 2016 to 31 March 2017.
Salary, annual bonus and benefits
Total Total
Salary/fees Annual bonus FY17 FY16
£ £ £ £
Non-executive Chairman
M C Gupta (until 14 November 2016) 27,880 – 27,880 45,000
Executive Chairman
Arvind Gupta (paid in INR equivalent) 750,000** 360,000* 1,110,000 1,350,000
Executive Director
V Narayan Swami (paid in INR equivalent) 82,267** 27,422* 109,689 97,239
Non-executive Directors
Martin Gatto 45,000 – 45,000 45,000
Michael Grasby 45,000 – 45,000 45,000
Ravi Gupta 45,000 – 45,000 45,000
Jeremy Beeton 22,500 – 22,500 –
Total 1,017,647 387,422 1,405,069 1,627,309
No consideration was paid or received by third parties for making available the services of any Executive or Non-executive Director.
* Bonus provision made, not paid (INR equivalent of FY17 bonus: INR 31.5m for Arvind Gupta and INR 2.4m for V Narayan Swami)
** INR equivalent of FY17 salary: INR 64.1m for Arvind Gupta and INR 7.2m for V Narayan Swami)
Directors’ share options
Movements during the period Options outstanding
Option Options as at Cancelled/ Latest
Option granted price £ 1 April 2016 Granted Lapsed Exercised 31 March 2017 exercise date
Gita Investments Limited
(Arvind Gupta) 16 Jul 2009 0.60 21,524,234 Nil Nil Nil 21,524,234 15 Jul 2019
Martin Gatto 16 Jul 2009 0.60 1,000,000 Nil Nil Nil 1,000,000 15 Jul 2019
M C Gupta 22 Dec 2015 0.60 250,000 Nil 250,000 Nil Nil 21 Dec 2025
Ravi Gupta 22 Dec 2015 0.60 250,000 Nil Nil Nil 250,000 21 Dec 2025
V Narayan Swami 22 Dec 2015 0.60 250,000 Nil Nil Nil 250,000 21 Dec 2025
Michael Grasby 22 Dec 2015 0.60 250,000 Nil Nil Nil 250,000 21 Dec 2025
All share options have vested.
At 31 March 2017, the closing mid-market price of the Company’s shares was 49.75 pence. During the year under review, the
Company’s closing mid-market share price ranged between a low of 48 pence and a high of 75.5 pence.
This report has been approved by the Board of Directors of the Company.
Jeremy Beeton
Chairman, Remuneration Committee
28 September 2017
OPG Power Ventures Plc Annual Report and Accounts 2017 39
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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.
40 OPG Power Ventures Plc Annual Report and Accounts 2017
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 2017 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 2017 and of its
profit for the year then ended and have been properly prepared in accordance with IFRSs as adopted by the European Union.
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Grant Thornton Limited
Chartered Accountants
Douglas, Isle of Man
28 September 2017
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OPG Power Ventures Plc Annual Report and Accounts 2017 41
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017
Year ended Year ended
31 March 2017 31 March 2016
Notes £ £
Revenue 204,998,415 128,438,193
Cost of revenue 8(a) (126,397,331) (71,895,139)
Gross profit 78,601,084 56,543,054
Other income 9 897,551 4,444,268
Distribution cost (13,693,144) (6,564,363)
General and administrative expenses (11,081,178) (9,967,112)
Operating profit 54,724,313 44,455,847
Share of profit/(loss) from equity accounted investments 15 (352) –
Finance costs 10 (38,817,909) (16,712,169)
Finance income 11 1,577,702 806,453
Profit before tax 17,483,754 28,550,131
Tax income/(expense) 12 5,592,150 (9,972,626)
Profit for the year 23,075,904 18,577,505
Profit for the year attributable to:
– Owners of the Company 29,614,506 18,558,014
– Non-controlling interests (6,538,602) 19,491
23,075,904 18,577,505
Earnings per share
– Basic (in pence) 25 8.43 5.29
– Diluted (in pence) 8.39 5.13
Other comprehensive income
Items that will be reclassified subsequently to profit or loss
Available-for-sale financial assets
– Reclassification to profit or loss (38,557) 5,133
– Current year gains 73,351 38,557
Exchange differences on translating foreign operations 34,890,638 (2,844,341)
Items that will be not reclassified subsequently to profit or loss
Exchange differences on translating foreign operations (1,166,597) 2,755
Total other comprehensive income 33,758,835 (2,797,896)
Total comprehensive income 56,834,739 15,779,609
Total comprehensive income attributable to:
Owners of the Company 64,539,938 15,757,365
Non-controlling interest (7,705,199) 22,244
56,834,739 15,779,609
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 28 September 2017 and were signed on
its behalf by:
Arvind Gupta V Narayan Swami
Executive Chairman Finance Director
42 OPG Power Ventures Plc Annual Report and Accounts 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2017
As at As at
31 March 2017 31 March 2016
Notes £ £
Assets
Non-current assets
Intangible assets 13 223,224 364,504
Property, plant and equipment 14 479,904,726 414,906,166
Investments accounted for using equity method 15 1,342,395 552,028
Other long-term assets 16 2,665,892 2,399,563
Restricted cash 19 3,825,733 1,940,600
487,961,970 420,162,861
Current assets
Inventories 18 16,853,761 10,614,890
Trade and other receivables 17 84,271,986 57,840,717
Other short-term assets 16 12,686,018 13,365,243
Current tax assets (net) 826,398 715,214
Restricted cash 19 14,009,027 7,294,778
Cash and cash equivalents 19 13,086,123 7,153,455
141,733,313 96,984,297
Total assets 629,695,283 517,147,158
Equity and liabilities
Equity
Share capital 51,672 51,671
Share premium 124,319,142 124,316,524
Other components of equity 22,065,498 (13,652,725)
Retained earnings 101,491,205 69,684,455
Equity attributable to owners of the Company 247,927,517 180,399,925
Non-controlling interests (11,239,914) 276,325
Total equity 236,687,603 180,676,250
Liabilities
Non-current liabilities
Borrowings 22 284,415,451 242,558,875
Trade and other payables 23 283,754 8,463,049
Deferred tax liability (net) 12 1,007,851 9,310,429
285,707,056 260,332,353
Current liabilities
Borrowings 22 36,576,466 21,023,963
Trade and other payables 23 70,706,795 54,890,882
Other liabilities 17,363 223,710
107,300,624 76,138,555
Total liabilities 393,007,680 336,470,908
Total equity and liabilities 629,695,283 517,147,158
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 28 September 2017 and were signed on
its behalf by:
Arvind Gupta V Narayan Swami
Executive Chairman Finance Director
OPG Power Ventures Plc Annual Report and Accounts 2017 43
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017
Foreign Total
currency attributable Non-
Ordinary Share Other translation Retained to owners controlling Total
Issued capital shares premium reserves reserve earnings of parent interests equity
(No. of shares) £ £ £ £ £ £ £ £
At 1 April 2015 351,504,795 51,671 124,316,524 7,167,520 (18,303,165) 51,126,441 164,358,991 254,079 164,613,070
Employee share-based payments – – – 283,571 – – 283,571 – 283,571
Transaction with owners – – – 283,571 – – 283,571 – 283,571
Profit for the year – – – – – 18,558,014 18,558,014 19,491 18,577,505
Other comprehensive income – – – 43,690 (2,844,341) – (2,800,651) 2,755 (2,797,896)
Total comprehensive income – – – 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
Employee share-based payments – – – 87,907 – – 87,907 – 87,907
Change in non-controlling interests
without change in control
(refer note 5(d)) – – – (893,826) 1,598,710 3,106,156 3,811,040 (3,811,040) –
Dividends# 4,160 1 2,618 – – (913,912) (911,293) – (911,293)
Transaction with owners 4,160 1 2,618 (805,919) 1,598,710 2,192,244 2,987,654 (3,811,040) (823,386)
Profit for the year – – – – – 29,614,506 29,614,506 (6,538,602) 23,075,904
Other comprehensive income – – – 34,794 34,890,638 – 34,925,432 (1,166,597) 33,758,835
Total comprehensive income – – – 34,794 34,890,638 29,614,506 64,539,938 (7,705,199) 56,834,739
At 31 March 2017 351,508,955 51,672 124,319,142 6,723,656 15,341,842 101,491,205 247,927,517 (11,239,914) 236,687,603
# During the year, in addition to the cash dividend paid of £911,293, the Company had declared a stock dividend of 4,160 shares.
The notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 28 September 2017 and were signed on
its behalf by:
Arvind Gupta V Narayan Swami
Executive Chairman Finance Director
44 OPG Power Ventures Plc Annual Report and Accounts 2017
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2017
Year ended Year ended
31 March 2017 31 March 2016
£ £
Cash flows from operating activities
Profit before income tax 17,483,754 28,550,131
Adjustments for:
– Unrealised foreign exchange loss 54,616 299,256
– Provisions no longer required written back – (1,823,228)
– Finance cost 38,817,909 16,460,854
– Finance income (1,577,702) (806,452)
– Share-based compensation costs 87,907 283,571
– Depreciation and amortisation 11,908,819 5,944,912
Changes in working capital
Trade and other receivables (2,634,413) (29,279,858)
Inventories (4,364,886) (2,918,712)
Other assets (4,095,766) 3,362,875
Trade and other payables 5,434,569 4,066,886
Other liabilities (1,116,616) (359,581)
Cash generated from operations 59,998,191 23,780,654
Taxes paid (3,910,745) (3,973,243)
Net cash from operating activities 56,087,446 19,807,411
Cash flows from investing activities
Purchase of property, plant and equipment (including capital advances) (5,136,876) (13,321,443)
Interest received 1,413,781 690,548
Dividend received 163,920 –
Movement in restricted cash (6,381,763) (1,308,062)
Sale of investments1 88,415,450 42,247,590
Purchase of investments1 (93,639,958) (43,277,870)
Net cash used in investing activities (15,165,446) (14,969,237)
Cash flows from financing activities
Proceeds from borrowings (net of costs) 29,264,909 77,159,277
Repayment of borrowings (27,080,680) (74,259,217)
Interest paid (38,817,909) (7,874,257)
Dividend paid (911,293) –
Net cash from financing activities (37,544,973) (4,974,197)
Net increase in cash and cash equivalents 3,377,027 (136,023)
Cash and cash equivalents at the beginning of the year 7,153,455 6,805,449
Exchange differences on cash and cash equivalents 2,555,641 484,029
Cash and cash equivalents at the end of the year 13,086,123 7,153,455
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.
The notes are an integral part of these consolidated financial statements.
OPG Power Ventures Plc Annual Report and Accounts 2017 45
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 1M1 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 2017 were approved and authorised for issue by the
Board of Directors on 28 September 2017.
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 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’
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)
ii)
iii)
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;
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 AFS and HTM (see note 15), unless classified as at fair value through
profit or loss in accordance with the new criteria; and
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.
46 OPG Power Ventures Plc Annual Report and Accounts 2017
4. RECENT ACCOUNTING PRONOUNCEMENTS CONTINUED
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.
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 2017. 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.
OPG Power Ventures Plc Annual Report and Accounts 2017 47
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
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 Parent incorporation March 2017 March 2016 March 2017 March 2016
Immediate Country of
% Voting Right % Economic Interest
Caromia Holdings limited (‘CHL’) OPGPV Cyprus 100 100 100 100
Gita Power and Infrastructure
Private Limited, (‘GPIPL’) CHL India 100 100 100 100
OPG Power Generation
Private Limited (‘OPGPG’) GPIPL India 77.07 76.96 99.90 99.90
OPGS Power Gujarat
Private Limited (‘OPGG’)# GPIPL India 51 53.27 51 99.90
OPGS Industrial Infrastructure
Developers Private Ltd (‘OPIID’) OPGG India Nil 100 Nil 100
OPGS Infrastructure
Private Limited (‘OPGIPL’) OPGG India Nil 100 Nil 100
Samriddhi Solar Power Private Limited OPGPG India 77.07 Nil 99.90 Nil
Samriddhi Surya Vidyut Private Limited* OPGPG India 77.07 Nil 99.90 Nil
OPG Surya Vidyut Private Limited* OPGPG India 77.07 Nil 99.90 Nil
Powergen Resources Pte Ltd* OPGPV Singapore 77.07 Nil 99.90 Nil
# During the current financial year, OPGG had amendments to the share capital rights with retrospective effect from 1 April 2015. By means of the
amendment, the voting rights and economic rights of all shareholders, irrespective of the class of shares held, were aligned. The aforesaid transaction is
accounted as an equity transaction, and accordingly no gain or loss is recognised in the consolidated income statement.
* These companies were incorporated by the group during the year.
ii) Joint ventures
Joint ventures Venturer incorporation March 2017 March 2016 March 2017 March 2016
Country of
% Voting Right % Economic Interest
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 million tonnes 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 Shipping
Ltd 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 mid-2018. The company and Noble are to invest
approximately US$9m over the period of delivery of the vessels as their equity contribution thereby and during the current
period, the company has further invested US$1,072,193 (2016: US$782,897). Accordingly, the joint venture has been reported
using equity method as per the requirements of IFRS 11.
48 OPG Power Ventures Plc Annual Report and Accounts 2017
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
iii) Associates
The Group has invested in the following entities which are engaged in the business of solar projects in India.
Associates Venturer incorporation March 2017 March 2016 March 2017 March 2016
Country of
% Voting Right % Economic Interest
Avanti Solar Energy Private Limited OPGPG India 31 Nil 31 Nil
Mayfair Renewable Energy
Private Limited OPGPG India 31 Nil 31 Nil
Avanti Renewable Energy
Private Limited OPGPG India 31 Nil 31 Nil
Brics Renewable Energy
Private Limited OPGPG India 31 Nil 31 Nil
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 (‘₹’ or ‘INR’). The presentation currency of the Group is the Great
Britain Pound (£) as submitted to the AIM counter of the London Stock Exchange where the shares of the Company are listed.
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 2017: 80.82 (2016: 95.09) and the average rate for the year ended 31 March 2017: 87.52 (2016: 98.73).
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.
OPG Power Ventures Plc Annual Report and Accounts 2017 49
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CONTINUED
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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)
loans and receivables; and
available-for-sale financial assets.
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.
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.
50 OPG Power Ventures Plc Annual Report and Accounts 2017
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 Useful life (years)
Buildings 40
Power stations 40
Other plant and equipment 3-10
Vehicles 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.
OPG Power Ventures Plc Annual Report and Accounts 2017 51
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CONTINUED
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 4 years.
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.
52 OPG Power Ventures Plc Annual Report and Accounts 2017
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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 shareholders and the weighted average number of shares outstanding during the period are adjusted for
the effects of all dilutive potential equity share.
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’.
OPG Power Ventures Plc Annual Report and Accounts 2017 53
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CONTINUED
5. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
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.
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.
54 OPG Power Ventures Plc Annual Report and Accounts 2017
6. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS CONTINUED
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.
Recognition of revenue and collectability of receivables:
The captive consumers of OPGS Power Gujarat Private Limited (OPGG) (a subsidiary of the Company) have withheld from the
sales invoices an amount of £26,098,738 towards Cross Subsidy Surcharge (CSS) levied by GUVNL through their DISCOMs for
the financial years 2015-2016 and 2016-2017, challenging the grounds of fulfilment of required shareholding criteria by OPGG
to qualify as a captive power generating unit as per Rule 3 of the Electricity Rules, 2005. The Group, based on a legal opinion,
strongly believes that OPGG is in compliance with the said provisions and qualifies as a captive power generating unit. Further,
in order to settle the matter amicably, OPGG based on an order obtained from the High court has entered into a scheme of
arrangement wherein the share capital of OPGG has been reconstituted to give effect to the required economic interest and
voting rights to the Captive shareholders retrospectively from 1 April 2015 and to be treated continuously as a captive
generating unit. In making its judgement, the group has considered the criteria for recognition of revenue as set out in IAS 18
and the relevant regulatory requirements and is of the opinion that recognition of revenue is appropriate.
Further, the Group has assessed that the levy of CSS is in violation of certain regulatory orders and such unilateral and arbitrary
action does not impact the ‘flow of the said economic benefit’ to the group. Accordingly, the management believes that recovery
of the aforementioned amounts is highly probable and hence the same has been recognised after considering necessary
provisions on a prudent basis.
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 re-measured at each statement of
financial position date (see note 5(j) and note 28).
iii)
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:
iv) 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.
OPG Power Ventures Plc Annual Report and Accounts 2017 55
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CONTINUED
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 £18,489,011 (2016: £53,345,178).
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 2017 31 March 2016
£ £
Included in cost of revenue:
Cost of fuel consumed 109,521,406 63,797,398
Depreciation 11,296,791 5,294,947
Other direct costs 5,579,134 2,802,794
Total 126,397,331 71,895,139
Depreciation included in general and administrative expenses amount to £639,572 (2016: £649,965).
b) Employee benefit expenses forming part of general and administrative expenses are as follows:
31 March 2017 31 March 2016
£ £
Salaries and wages 3,406,416 4,246,864
Employee benefit costs 384,464 714,113
Employee stock option 87,907 283,571
Total 3,878,787 5,244,548
c) Auditor’s remuneration for audit services amounting to £90,000 (2016: £48,663) is included in general and administrative expenses.
d) Foreign exchange movements (realised and unrealised) included in the general and administrative expenses is as follows:
31 March 2017 31 March 2016
£ £
Foreign exchange realised – (loss) (282,416) (533,976)
Foreign exchange unrealised – (loss)/gain (54,615) (299,256)
Total (337,031) (833,232)
9. OTHER INCOME
Other income is comprised of:
31 March 2017 31 March 2016
£ £
Provisions no longer required written back – 1,823,228
Sale of coal 398,911 2,335,834
Sale of fly ash 109,815 57,242
Others 388,825 227,964
Total 897,551 4,444,268
56 OPG Power Ventures Plc Annual Report and Accounts 2017
10. FINANCE COSTS
Finance costs are comprised of:
31 March 2017 31 March 2016
£ £
Interest expenses on borrowings 35,836,445 15,793,916
Other finance costs 2,981,464 918,253
Total 38,817,909 16,712,169
11. FINANCE INCOME
Finance income is comprised of:
31 March 2017 31 March 2016
£ £
Interest income:
– Bank deposits 1,118,400 576,421
Profit on disposal of financial instruments1 459,302 230,032
Total 1,577,702 806,453
1 Financial instruments represent the mutual funds held during the year.
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 2017 and 2016 is as follows:
31 March 2017 31 March 2016
£ £
Accounting profit before taxes 17,483,754 28,550,131
Enacted tax rates 34.61% 34.61%
Tax on profit at enacted tax rate 6,050,778 9,880,629
Differences on account tax holiday and MAT rates 2,843,959 (477,625)
MAT credit entitlement (14,489,964) –
Others 3,077 569,622
Actual tax expense/(income) for the period (5,592,150) 9,972,626
31 March 2017 31 March 2016
£ £
Current tax 3,321,205 3,993,441
Deferred tax (8,913,355) 5,979,185
Tax expense/(income) reported in the statement of comprehensive income (5,592,150) 9,972,626
The Company is subject to Isle of Man corporate tax at the standard rate of zero percent. As such, the Company’s tax liability is
zero. Additionally, 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 ten consecutive years out of a total of fifteen consecutive years from the date of commencement of the operations.
However, the entities in India are still liable for Minimum Alternate Tax which is calculated on the book profits of the respective
entities currently at a rate of 21.34% (31 March 2016: 21.34%).
OPG Power Ventures Plc Annual Report and Accounts 2017 57
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CONTINUED
12. TAX EXPENSES CONTINUED
The Group has carried forward credit in respect of MAT tax liability paid to the extent it is probable that future taxable profit
will be available against which such tax credit can be utilised. Consequent to change in laws proposed by Finance Bill 2017,
operating companies in India can now carry forward and take benefit of tax credits in respect of MAT up to the fifteenth
assessment year as against ten assessment years as was previously allowed. This has resulted in the group recognising a
deferred tax asset for the MAT credit amounting to £14,489,964, out of which £11,168,759 pertains to the previous years,
now recognised.
Deferred income tax for the Group at 31 March 2017 and 2016 relates to the following:
31 March 2017 31 March 2016
£ £
Deferred income tax assets
MAT credit entitlement 15,691,186 –
15,691,186 –
Deferred income tax liabilities
Property, plant and equipment 16,684,770 9,287,307
Mark to market on available-for-sale financial assets 14,267 23,122
16,699,037 9,310,429
Deferred income tax liabilities, net 1,007,851 9,310,429
Movement in temporary differences during the year
Recognised
Recognised in other
As at in income comprehensive Translation As at
1 April 2016 statement income adjustment 31 March 2017
Particulars £ £ £ £ £
Property, plant and equipment and others (9,287,307) (5,576,609) – (1,820,854) (16,684,770)
MAT credit entitlement – 14,489,964 – 1,201,222 15,691,186
Mark to market gain/(loss) on available-for-sale
financial assets (23,122) – 8,855 – (14,267)
(9,310,429) 8,913,355 8,855 (619,632) (1,007,851)
Recognised
Recognised in other
As at in income comprehensive Translation As at
1 April 2015 statement income adjustment 31 March 2016
Particulars £ £ £ £ £
Property, plant and equipment and others (4,024,156) (5,162,148) – (101,003) (9,287,307)
Lease transactions 67,360 (67,360) – – –
Provisions 749,677 (749,677) – – –
Mark to market gain/(loss) on available-for-sale
financial assets 1,268 – (24,390) – (23,122)
(3,205,851) (5,979,185) (24,390) (101,003) (9,310,429)
In assessing the recoverability of deferred income tax assets, management considers whether it is more likely than not that
some portion or all 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.
58 OPG Power Ventures Plc Annual Report and Accounts 2017
12. TAX EXPENSES CONTINUED
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 2017 and 2016, 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.
13. INTANGIBLE ASSETS
Acquired
software licences
£
Cost
At 1 April 2015 749,769
Additions 39,216
Exchange adjustments (16,858)
At 31 March 2016 772,127
Additions 27,298
Exchange adjustments 138,577
At 31 March 2017 938,002
Accumulated depreciation and impairment
At 1 April 2015 84,096
Charge for the year 313,589
Exchange adjustments 9,938
At 31 March 2016 407,623
Charge for the year 215,462
Exchange adjustments 91,693
At 31 March 2017 714,778
Net book value
At 31 March 2017 223,224
At 31 March 2016 364,504
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OPG Power Ventures Plc Annual Report and Accounts 2017 59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
14. PROPERTY, PLANT AND EQUIPMENT
The property, plant and equipment comprises of:
Land & Power Other plant Asset under
Buildings stations & equipment Vehicles construction Total
£ £ £ £ £ £
Cost
At 1 April 2015 12,985,013 117,517,504 711,515 701,318 291,689,584 423,604,934
Additions 138,719 309,514 69,298 58,980 17,847,939 18,424,450
Deletions (25,323) – (370) – (2,608,174) (2,633,867)
Transfers on capitalisation – 282,423,229 – – (282,423,229) –
Exchange adjustments (313,595) 7,557,605 (14,784) (14,915) (17,029,535) (9,815,224)
At 31 March 2016 12,784,814 407,807,852 765,659 745,383 7,476,585 429,580,293
Additions 153,123 2,143,268 64,318 1,818,377 71,418 4,250,504
Deletions – – – (29,531) – (29,531)
Exchange adjustments 2,677,442 72,256,562 140,920 279,887 932,873 76,287,684
At 31 March 2017 15,615,379 482,207,682 970,897 2,814,116 8,480,876 510,088,950
Accumulated depreciation and impairment
At 1 April 2015 96,176 8,148,424 446,651 360,807 – 9,052,058
Charge for the year 14,536 5,294,947 223,959 97,881 – 5,631,323
Exchange adjustments (1,799) 3,058 (5,425) (5,088) – (9,254)
At 31 March 2016 108,913 13,446,429 665,185 453,600 – 14,674,127
Charge for the year 14,142 11,296,791 131,980 277,988 – 11,720,901
Exchange adjustments 20,342 3,629,865 35,232 103,757 – 3,789,196
At 31 March 2017 143,397 28,373,085 832,397 835,345 – 30,184,224
Net book value
At 31 March 2017 15,471,982 453,834,597 138,500 1,978,771 8,480,876 479,904,726
At 31 March 2016 12,675,901 394,361,423 100,474 291,783 7,476,585 414,906,166
The net book value of land and buildings block comprises of:
31 March 2017 31 March 2016
£ £
Freehold land 15,032,841 12,545,682
Buildings 439,141 130,219
15,471,982 12,675,901
Property, plant and equipment with a carrying amount of £477,787,455 (2016: £414,433,996) is subject to security restrictions
(refer note 22).
An amount of £Nil (2016: £17,575,016) pertaining to interest on borrowings made specifically for the qualifying assets was
capitalised as the funds were deployed for the construction of qualifying assets.
60 OPG Power Ventures Plc Annual Report and Accounts 2017
15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD
31 March 2017 31 March 2016
£ £
The carrying amount of investments accounted for using the equity method is as follows:
Investment in joint venture 1,339,635 552,028
Investments in associates 2,760 –
Total 1,342,395 552,028
The Group’s share of profit from equity accounted investments is as follows:
31 March 2017 31 March 2016
£ £
Investment in joint venture – –
Investments in associates (352) –
Total (352) –
a) Investment in joint venture (Refer note 5(d))
The investment in Padma Shipping Limited (“PSL”) is accounted for using the equity method in accordance with IAS 28.
Summarised financial information for Padma Shipping Limited (“PSL”) is set out below:
31 March 2017 31 March 2016
£ £
Non-current assets 5,802,605 –
Current assets (a) 317,646 5,070,540
Total assets 6,120,251 5,070,540
Current liabilities (b) 3,440,982 3,966,483
Total liabilities 3,440,982 3,966,483
Net assets 2,679,269 1,104,057
31 March 2017 31 March 2016
£ £
(a) Includes cash and cash equivalents 10,540 34,303
(b) Includes financial liabilities (excluding trade and other payables and provisions) 3,440,982 3,966,483
A reconciliation of the above summarised financial information to the carrying amount of the investment in PSL is set out below:
31 March 2017 31 March 2016
£ £
Total net assets of PSL 2,679,269 1,104,057
Proportion of ownership interests held by the Group 50% 50%
Carrying amount of investment in PSL 1,339,635 552,028
b) Investment in associates (Refer note 5(d))
Summarised aggregated financial information of the Group’s share in the associates:
31 March 2017 31 March 2016
£ £
Profit from continuing operations (352) –
Total comprehensive Income (352) –
Aggregate carrying amount of the Group’s interests in these associates 2,760 –
OPG Power Ventures Plc Annual Report and Accounts 2017 61
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CONTINUED
16. OTHER ASSETS
31 March 2017 31 March 2016
£ £
A. Current
Available-for-sale financial assets 2,757,272 2,364,269
Capital advances 1,724,432 3,516,716
Bank deposits 2,903,273 –
Loans and receivables:
– Advance to suppliers 176,486 5,651,654
– Others 5,124,555 1,832,604
Total 12,686,018 13,365,243
B. Non-current
Prepayments – 622,206
Advances to related parties (Refer note 24) 1,575,484 1,684,776
Lease deposits – 92,581
Bank deposits 681,746 –
Other advances 408,662 –
Total 2,665,892 2,399,563
Available-for-sale investments are comprised of:
Quoted short-term mutual fund units
The fair value of the mutual fund instruments is determined by reference to published data. These mutual fund investments
are redeemable on demand.
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.
17. TRADE AND OTHER RECEIVABLES
31 March 2017 31 March 2016
£ £
Current
Trade receivables 80,546,225 56,687,426
Unbilled revenues 3,716,051 1,045,219
Other receivables 9,710 108,072
84,271,986 57,840,717
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 £83,157,785 (2016: £57,840,717) has been pledged as security for
borrowings. As at 31 March 2017, trade receivables of £1,177,967 (2016: £Nil) were collectively impaired and provided for.
Trade receivables that are neither past due nor impaired represents billings for the month of March.
62 OPG Power Ventures Plc Annual Report and Accounts 2017
17. TRADE AND OTHER RECEIVABLES CONTINUED
The age analysis of the (overdue) trade receivables is as follows:
Neither past due
Total nor impaired Within 90 days 90 to 180 days Over 180 days
Year £ £ £ £ £
Past due but not impaired
2017 80,546,225 19,867,879 11,203,698 7,499,958 41,974,690
2016 56,687,426 15,743,623 9,721,710 5,725,198 25,496,895
Subsequent to the reporting date, the Company has received £14,927,895 from Tamil Nadu Generation and Distribution
Corporation (TANGEDCO) towards the sale made during the month of September 2016 under short term sale agreement and
for November 2016 to March 2017 under 15 year variable tariff LTOA contract.
The movement in the provision for trade receivables is as follows:
Provision
Opening balance for the year Write off/Reversal Closing balance
Year £ £ £ £
2017 – 1,177,967 – 1,177,967
2016 563,827 – (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.
18. INVENTORIES
31 March 2017 31 March 2016
£ £
Coal and fuel 14,947,860 9,477,390
Stores and spares 1,905,901 1,137,500
Total 16,853,761 10,614,890
The entire amount of £16,853,761 (2016: £10,614,890) has been pledged as security for borrowings (refer note 22).
19. CASH AND CASH EQUIVALENTS
Cash and short-term deposits comprise of the following:
31 March 2017 31 March 2016
£ £
Cash at banks and on hand 13,049,622 6,169,046
Short-term deposits 36,501 984,409
Total 13,086,123 7,153,455
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 twelve months amounting to £14,009,027
(previous year £7,294,778) and maturing after twelve months amounting to £3,825,733 (previous year £1,940,600) which have
been pledged by the group in order to secure borrowing limits with banks. (Refer note 22).
OPG Power Ventures Plc Annual Report and Accounts 2017 63
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CONTINUED
20. 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 351,508,955 equity shares (2016: 351,504,795) at par value of
£0.000147 (2016: £0.000147) per share amounting to £51,672 (2016: £51,671) in total.
The Company has issued share capital at par value of £51,672 (£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 re-measurement 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.
21. SHARE-BASED PAYMENTS
The board has granted share options to directors and nominees of directors which are limited to 10 percent of the group’s share
capital. Once granted, the share must be exercised within ten 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 £87,907
(2016: £283,571) 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:
31 March 2017 31 March 2016
£ £
At 1 April 23,524,234 22,524,234
Granted – 1,000,000
Forfeited/exercised/expired (250,000) –
At 31 March 23,274,234 23,524,234
64 OPG Power Ventures Plc Annual Report and Accounts 2017
21. SHARE-BASED PAYMENTS CONTINUED
The fair value of options granted and the assumptions used under the Black-Scholes option pricing model are as follows:
Granted in
2015 2011
Weighted average fair value of options granted 0.37 0.28
Exercise price 0.60 0.60
Weighted average share price 0.78 0.66
Volatility (%) 40.95% 31.34%
Annual risk-free rate (%) 1.26% 3.00%
Expected option life (years) 5.36 4.96
22. BORROWINGS
The borrowings comprise of the following:
31 March 2017 31 March 2016
Interest rate (range %) Final maturity £ £
Term loans at amortised cost 10.80 – 15.17 March 2025 320,991,917 263,582,838
Total 320,991,917 263,582,838
Total debt of £320,991,917 (2016: £263,582,838) 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 except loans with a cumulative debt balance of £158.82m
as at year end 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 2017, the Group has met all the
relevant covenants.
During the year instalment of loan amounting to £242,549 relating to Unit I, II and III was prepaid up to April 2017
The fair value of borrowings at 31 March 2017 was £320,991,917 (2016: £263,582,838). 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:
31 March 2017 31 March 2016
£ £
Current liabilities
Amounts falling due within one year 36,576,466 21,023,963
Non-current liabilities
Amounts falling due after one year but not more than five years 104,970,101 123,362,705
Amounts falling due in more than five years 179,445,350 119,196,170
Total non-current 284,415,451 242,558,875
Total 320,991,917 263,582,838
OPG Power Ventures Plc Annual Report and Accounts 2017 65
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CONTINUED
23. TRADE AND OTHER PAYABLES
31 March 2017 31 March 2016
£ £
Current
Trade payables 52,526,424 34,645,009
Creditors for capital goods 8,547,998 2,016,958
Bank Overdraft 5,609,229 6,235,017
Other payables 4,023,144 11,993,898
Total 70,706,795 54,890,882
Non-current
Retention money 54,321 8,296,003
Other payables 229,433 167,046
Total 283,754 8,463,049
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.
24. RELATED PARTY TRANSACTIONS
Key management personnel
Name of the party Nature of relationship
Arvind Gupta Executive Chairman
V Narayan Swami Finance Director
M. C. Gupta (until November 2016) Chairman
Martin Gatto Director
Ravi Gupta Director
Patrick Michael Grasby Director
Jeremy Beeton (from November 2016) Director
Related parties with whom the Group had transactions during the period
Name of the party Nature of relationship
Chennai Ferrous Industries Limited Entity in which key management personnel has control/significant influence
Kanishk Steel Industries Limited Entity in which key management personnel has control/significant influence
Padma Shipping Limited Entity in which key management personnel has control/significant influence
Avanti Solar Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
Mayfair Renewable Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
Avanti Renewable Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
Brics Renewable Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
Avantika Gupta Relative of key management personnel
66 OPG Power Ventures Plc Annual Report and Accounts 2017
24. RELATED PARTY TRANSACTIONS CONTINUED
Summary of transactions with related parties
31 March 2017 31 March 2016
Name of the party £ £
Kanishk Steel Industries Limited
Class A shares allotted – 1,052
Padma Shipping Limited
Investment 746,268 561,288
Chennai Ferrous Industries Ltd
Purchase of coal 10,322 –
Avantika Gupta
Remuneration 68,556 60,774
Summary of balance with related parties
31 March 2017 31 March 2016
Name of the party Nature of balance £ £
Padma Shipping Limited Investment 1,339,635 552,028
Padma Shipping Limited Advance 1,167,169 1,684,776
Avanti Solar Energy Private Limited Investment 690 –
Avanti Solar Energy Private Limited Advance 123,732 –
Mayfair Renewable Energy Private Limited Investment 690 –
Mayfair Renewable Energy Private Limited Advance 123,732 –
Avanti Renewable Energy Private Limited Investment 690 –
Avanti Renewable Energy Private Limited Advance 123,732 –
Brics Renewable Energy Private Limited Investment 690 –
Brics Renewable Energy Private Limited Advance 37,120 –
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 2017, the Group has not recorded any impairment of receivables relating
to amounts owed by related parties (2016: £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.
25. 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 2017 or 2016).
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:
31 March 2017 31 March 2016
Particulars £ £
Weighted average number of shares used in basic earnings per share 351,505,142 351,504,795
Shares deemed to be issued for no consideration in respect of share-based payments 1,264,567 10,949,551
Weighted average number of shares used in diluted earnings per share 352,769,709 362,454,346
OPG Power Ventures Plc Annual Report and Accounts 2017 67
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CONTINUED
26. DIRECTORS’ REMUNERATION
31 March 2017 31 March 2016
Name of Director £ £
Arvind Gupta 1,110,000 1,350,000
V Narayan Swami 109,689 97,239
Martin Gatto 45,000 45,000
Mike Grasby 45,000 45,000
MC Gupta (until November 2016) 27,880 45,000
Ravi Gupta 45,000 45,000
Jeremy Beeton (from November 2016) 22,500 –
Total 1,405,069 1,627,239
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.
27. 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:
31 March 2017 31 March 2016
£ £
Not later than one year 43,226 29,035
Later than one year and not later than five years 157,056 116,140
Later than five years – 435,525
Total 200,282 580,700
During the year ended 31 March 2017, £41,204 (2016: £27,965) was recognised as an expense in the statement of
comprehensive income in respect of operating leases.
Capital commitments
During the year ended 31 March 2017, the Group entered into a contract to purchase property, plant and equipment for
£Nil (2016: £Nil) for its power generation projects under development. In respect of its interest in joint ventures the Group is
committed to incur capital expenditure of £18,630,157 (2016: £15,834,660) 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 £11,635,734 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 2017: £40,497,741 (2016: £25,462,779) and Bank Guarantee as at 31 March 2017:
£23,425,291 (2016: £12,223,606) are treated as contingent liabilities until such time it becomes probable that the Company
will be required to make a payment under the guarantee.
68 OPG Power Ventures Plc Annual Report and Accounts 2017
28. 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 2017 and 31 March 2016.
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 2017, 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 2017 and 31 March 2016, 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 2017 would decrease or increase by £2,865,102 (2016: £2,692,161).
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 £. 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 2017 As at 31 March 2016
Currency Financial assets Financial liabilities Financial assets Financial liabilities
United States Dollar 3,000,000 19,852,758 – 21,487,313
OPG Power Ventures Plc Annual Report and Accounts 2017 69
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
Set out below is the impact of a 10% change in the US dollar on profit arising as a result of the revaluation of the Group’s
foreign currency financial instruments:
As at 31 March 2017 As at 31 March 2016
Effect of 10% Effect of 10%
strengthening strengthening
of GBP on of GBP on
Currency Closing rate net earnings Closing rate net earnings
United States Dollar 64.75 1,226,728 66.25 2,549,030
The impact on total equity is the same as the impact on net earnings as disclosed above.
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
£87,029,258 (2016: £60,204,986).
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 credit worthiness 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 6(a), 16 and 17, 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
on-going 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.
70 OPG Power Ventures Plc Annual Report and Accounts 2017
28. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
The following is an analysis of the group contractual undiscounted cash flows payable under financial liabilities at 31 March 2017
and 31 March 2016:
Current Non-current
As at 31 March 2017 Within 12 months 1-5 years Later than 5 years Total
Borrowings 36,576,466 104,970,101 179,445,350 320,991,917
Interest on borrowings 33,903,890 45,442,677 123,948,503 203,295,070
Trade and other payables 70,706,795 283,754 – 70,990,549
Other current liabilities 17,363 – – 17,363
Total 141,204,514 150,696,532 303,393,853 595,294,899
Current Non-current
As at 31 March 2016 Within 12 months 1-5 years Later than 5 years Total
Borrowings 21,023,963 123,362,705 119,196,170 263,582,838
Interest on borrowings 31,280,267 47,246,652 106,939,534 185,466,453
Trade and other payables 54,890,882 8,463,049 – 63,353,931
Other current liabilities 223,710 – – 223,710
Total 107,418,822 179,072,406 226,135,704 512,626,932
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 2017 and 2016. 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:
31 March 2017 31 March 2016
£ £
Total equity 236,687,603 180,676,250
Less: cash and cash equivalents (13,086,123) (7,153,455)
Capital 223,601,480 173,522,795
Total equity 236,687,603 180,676,250
Add: borrowings (including buyer’s credit) 320,991,917 263,582,838
Overall financing 557,679,520 444,259,088
Capital to overall financing ratio 0.40 0.39
OPG Power Ventures Plc Annual Report and Accounts 2017 71
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
29. SUMMARY OF FINANCIAL ASSETS AND LIABILITIES BY CATEGORY AND THEIR FAIR VALUES
Carrying amount Fair value
March 2017 March 2016 March 2017 March 2016
£ £ £ £
Financial assets
Loans and receivables
– Cash and cash equivalents1 13,086,123 7,153,455 13,086,123 7,153,455
– Restricted cash1 17,834,760 9,235,378 17,834,760 9,235,378
– Current trade receivables1 84,271,986 57,840,717 84,271,986 57,840,717
– Available-for-sale instruments3 2,757,272 2,364,269 2,757,272 2,364,269
117,950,141 76,593,819 117,950,141 76,593,819
Financial liabilities
Term loans 320,991,917 263,582,838 320,991,917 263,582,838
Current trade and other payables1 70,706,795 54,890,882 70,706,795 54,890,882
Non-current trade and other payables2 283,754 8,463,049 283,754 8,463,049
391,982,466 326,936,769 391,982,466 326,936,769
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.
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).
72 OPG Power Ventures Plc Annual Report and Accounts 2017
29. SUMMARY OF FINANCIAL ASSETS AND LIABILITIES BY CATEGORY AND THEIR FAIR VALUES
Level 1 Level 2 Level 3 Total
Available-for-sale financial assets
Unquoted securities – – – –
Quoted securities 2,757,272 – – 2,757,272
Total 2,757,272 – – 2,757,272
There were no transfers between Level 1 and 2 in the period.
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.
30. 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 28 September 2017 and signed on its behalf by:
Arvind Gupta V Narayan Swami
Executive Chairman Finance Director
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OPG Power Ventures Plc Annual Report and Accounts 2017 73
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
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
74 OPG Power Ventures Plc Annual Report and Accounts 2017
DEFINITIONS AND GLOSSARY
Act: Isle of Man Companies Act 2006
AGM: Annual General Meeting
Great Britain Pound Sterling or £/pence: Pounds sterling
or pence, the lawful currency of the UK
Board: Board of Directors of OPG Power Ventures Plc
Group Captive: Group Captive power plant as defined
under Electricity Act 2003, India
BHEL: Bharat Heavy Electricals Limited
Group or OPG: the Company and its subsidiaries
BOP: Balance of Plant
bps: Basis points
GW: Gigawatt is 1,000 megawatts
IAS: International Accounting Standards
BRICS: Brazil, Russia, India, China and South Africa
IEA: International Energy Agency
CAGR: Compound Average Growth Rate
IFRS: International Financial Reporting Standards
CEA: Central Electricity Authority
CIL: Coal India Limited and its subsidiaries
CO: Carbon Monoxide
Indian Companies Act: the Companies Act, 1956 and
amendments thereto
INDC: Intended Nationally Determined Contribution
kWh: Kilowatt hour is one unit of electricity
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
LOI: Letter of Intent
LSE: London Stock Exchange plc
LTOA: Long Term Open Access
EHS: Environment, Health and Safety
LTVT: Long Term Variable Tariff
Electricity Act: Indian Electricity Act 2003 as amended
MoU: Memorandum of Understanding
EPC: Engineering, Procurement and Construction
mt: Million tonnes
EPS: Earnings per share
MW: Megawatt is 1,000 kilowatts
ESOP: Employee Stock Options
MWh: Megawatt hour
FDI: Foreign Direct Investment
NITI Aayog: National Institution for Transforming India
FII: Foreign Institutional Investor
Nox: Notrigen Oxides
FY: Financial year commencing from 1 April to 31 March
O&M: Operating and Management
GAR: Gross as Received (coal)
OPG E: OPG Energy Private Limited
GCP: Group Captive Plant
OPG RE: OPG Renewable Energy Limited
GDP: Gross Domestic Product
PLF: Plant Load Factor
GHG: Green House Gas
PPA: Power Purchase Agreement
Government or GOI: Government of India
PSA: Power Supply Agreement
OPG Power Ventures Plc Annual Report and Accounts 2017 75
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DEFINITIONS AND GLOSSARY
CONTINUED
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
Sox: Sulphur Oxides
SPM: Suspended Particular Matter
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
76 OPG Power Ventures Plc Annual Report and Accounts 2017
INTRODUCTION
OPG is a developer and operator of power
plants in India with a track of record
of delivery and an experienced management
team. Our goal is to be a leader in the
Indian energy sector.
CONTENTS
STRATEGIC REPORT
CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
01 Highlights
28 Board of Directors
41 Independent Auditors’ report
02 Executive Chairman’s statement
30 Corporate Governance Report
42 Consolidated Statement
05 Financial review
34 Directors’ Report
10 COO Operational review
36 Directors’ Remuneration Report
14 Business model
16 Group objectives and strategies
17 Key Performance Indicators
40 Statement of Directors’
responsibilities
18 Market review
22 Sustainability report
26 Principal risks
of Comprehensive Income
43 Consolidated Statement
of Financial Position
44 Consolidated Statement
of Changes in Equity
45 Consolidated Statement of
Cash Flows
46 Notes to the Consolidated
Financial Statements
74 Corporate Directory
75 Definitions and Glossary
The paper used in this document contains
materials sourced from responsibly
managed and sustainable commercial
forests, certified in accordance with the
FSC® (Forest Stewardship Council).
Designed and produced by fourthquarter
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SUSTAINABLE
PROFITABLE
RESILIENT
ANNUAL REPORT 2017
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
T: +44 (0)1624 681200
www.opgpower.com