O
P
G
P
o
w
e
r
V
e
n
t
u
r
e
s
P
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
FOCUSING
ON ASSET
MAXIMISATION
PREPARING FOR
THE FUTURE &
DELEVERAGING
OPG Power Ventures Plc
Annual Report & Accounts
2018
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
T: +44 (0)1624 681200
www.opgpower.com
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.
STAY IN TOUCH WITH US ONLINE
Corporate website
opgpower.com
Online annual report
www.opgpower.com/investors
CONTENTS
Strategic Report
01 Highlights
Corporate Governance
Financial Statements
22 Board of Directors
35 Independent Auditors’ report
02 Executive Chairman’s statement
24 Corporate Governance Report
04 Financial review
28 Directors’ Report
07 Key Performance Indicators
30 Directors’ Remuneration Report
08 COO Operational review
34 Statement of Directors’
10 Business model
11 Group objectives and strategies
responsibilities
12 Market review
16 Sustainability report
20 Principal risks
38 Consolidated Statement
of Financial Position
39 Consolidated Statement
of Comprehensive Income
40 Consolidated Statement
of Changes in Equity
41 Consolidated Statement
of Cash Flows
42 Notes to the Consolidated
Financial Statements
72 Corporate Directory
73 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
Strategic Report
Corporate Governance
Financial Statements
HIGHLIGHTS
REVENUES
(£m)
FY14
FY15
FY16**
FY17*
FY18*
98.8
100.0
128.4
136.2
140.1
EBITDA(3)
(£m)
FY14
FY15
FY16**
FY17*
30.9
33.4
50.7
52.1
PROFIT BEFORE TAX(4)
(£m) before impairments and tax
17.9
21.7
FY14
FY15
FY16**
FY17*
28.6
31.8
FY18*
24.0
FY18*
6.2
EPS
(£ pence)
NET DEBT / EBITDA
(£m)
FY14
4.14
FY15
4.91
FY15
7.6
FY16
5.29
FY16**
5.0
FY17
8.43
FY17*
5.9
(24.7)
FY18
FY18*
3.8
* Note : FY 17 & FY 18 Includes only Chennai Operations
** Includes Gujarat Operations
Profit from continuing operations before impairments and tax
was £6.2m compared with a profit of £31.7m in FY17
Full year scrip dividend of 1p per share (FY17: 0.98p per share)
Chennai plant generation up 2% to 2.8(1) billion units from 2.7 billion
units in FY17
Revenue up 3% to £140m from £136m in FY17
EBITDA margin of 17% compared with 38% in FY17 due to higher
coal costs in FY18
Gross debt of £93.5m(2); gearing lower at 40% from 57% in FY17
62 MW solar project commissioned in FY18
Following the deconsolidation of the Gujarat plant, loss from discontinued
operations, incl. Non-Controlling Interest was £(96.7) million (FY17: £(13.4)
million) and the total loss was £(100.9) million (FY17 profit: £23.1m)
(1) 2.8 billion units includes 0.3 billion deemed generation for Chennai Unit 3 (FY17: 0.4 billion)
(2) Gross Debt of Chennai Operations, Gujarat Debt is excluded on account of deconsolidation
(3) Excluding one-off impairment provision of £7.3m in FY18
(4) Profit from continuing operations before impairments and tax in FY17 and FY18
Power Ventures Plc
Annual Report & Accounts 2018
01
Strategic Report
Corporate Governance
Financial Statements
EXECUTIVE CHAIRMAN’S STATEMENT
“This was a year of significant
transition for OPG. We have decided
to focus on the profitable Chennai
SPV and have drawn a line under the
Gujarat SPV which continued to
experience liquidity stress due to the
cascading impact of historic external
issues, coupled with high seaborne
coal prices. We will utilise the strong
cash generation of the Chennai
operation to repay remaining debt
over the Chennai plants within five
years and no further cash will
go to Gujarat.”
This year we have decided to focus on the
profitable Chennai SPV and drawn a line under
the Gujarat SPV. We will utilise the strong cash
generation of the Chennai operation to repay
remaining debt within five years.
20% by March 2020. The Chennai plant is
not affected by the distress of distribution
companies affecting parts of the Indian power
sector. We are therefore optimistic that the
lower coal prices will benefit FY19 and
FY20 profitability.
Operations – a Focus
on Maximising Asset
Performance and
Deleveraging
The Chennai plants’ generation during FY18
was 6 per cent higher than in FY17 at 2,492
million kWh, with average PLF at 77 per cent
(FY17: 76 per cent). Post FY18 year-end we
have negotiated a 5 per cent increase in sales
tariffs for FY19 and, since the year end, most
of our group captive customers in Chennai
have renewed their three year contracts.
We expect to achieve at least 4 per cent
increase in sales tariffs for FY20. All scheduled
interest and principal repayments at Chennai,
amounting in aggregate to Rs2.9 billion
(£33.8 million, including £22.3 million principal
repayments) were made during the twelve
months ended 31 March 2018.
The average landed cost of coal was
approximately 32 per cent higher in FY18 than
FY17, which clearly had a significant impact
on profitability. It is pleasing to report that,
following the coal price spike in 2017 and first
half of 2018, coal prices have reduced by
some 18 per cent in the two months preceding
this statement and consensus forecast for
Australian steaming coal prices indicates
further expected reduction by approximately
As at 31 March 2018, total borrowings were at
£93.5 million. The Company looks forward to
achieving a major milestone later this year as
the term loans with respect to Unit 1 of
Chennai plant (77 MW out of 414 MW) will be
fully repaid in December 2018. The remainder
of Chennai plant term loans are scheduled to
be fully repaid in five years, i.e. in FY24.
The Company has invested in four solar
projects at Karnataka, which will deliver 62MW,
and are being ramped up to full capacity.
The Group continues to evaluate both organic
and acquisitive growth opportunities in the
renewables sector, with return on investment
as the primary evaluation criteria.
Gujarat plant strategic review
and deconsolidation
As previously announced, the trading
difficulties experienced by our Gujarat plant,
almost entirely outside the direct control of
our operational management, triggered a
comprehensive review by the Board of the
Group’s strategy going forward. The key
conclusion was to concentrate on OPG’s high
quality, profitable plant in Chennai which, by
contrast with Gujarat, delivered a robust
performance in FY18.
The Board considers that much has been
achieved at Gujarat, including building the
300 MW plant from scratch within a disciplined
timeframe, increasing production of the plant
to reach the target of 80% load factor and
securing an attractive tariff from a diverse
range of group captive customers. However, it
is clear that the cascading effect of the dispute
with Gujarat authorities regarding the captive
status together with distribution companies
(“DISCOMs”) withholding Cross Subsidy
Surcharges have meant that the outcome has
been very disappointing for our Gujarat SPV.
As previously reported the financial stress put
on the Gujarat SPV led to deferral of scheduled
principal and interest loan repayments,
resulting in the requirement to implement a
lender-assisted Resolution Plan (“RP”). Whilst
it had been hoped that this process would be
concluded in August 2018, it continues.
Management will seek to minimise the time
spent on this and no further cash of the
Group will be spent on Gujarat SPV.
As previously announced, the Group sold
a five per cent equity stake in Gujarat SPV.
Whilst the RP may have a number of
outcomes, including potential conversion of
part of the debt into equity, the Board does
not expect any of these outcomes to produce
any value for the Group. Due to all the above
factors the Group no longer has control or
significant influence in the Gujarat SPV and
the Gujarat subsidiary was, therefore,
deconsolidated as of 31 March 2018. The
Group’s equity interest in Gujarat plant was
accounted for as an investment at fair value
as at 31 March 2018.
The Company has no obligations with respect
to Gujarat plant’s borrowings apart from the
parent company guarantee of £5.8 million
with respect to a short-term loan, which will
02
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
potentially be repaid by the Gujarat SPV from
customer refunds.
To account for the uncertainty implicit in the
RP, a full provision, amounting to £46.3 million,
has been made against the Group's receivable
balances from the Gujarat SPV and financial
securities pledged with lenders of Gujarat SPV.
The board remains confident that the structural
differences between the Gujarat and Chennai
markets mean that these issues are restricted
to Gujarat.
Overview of the Indian power sector
& factors influencing power demand
Despite current stress in parts of the power
sector, India remains an attractive area for
power generation business with GDP growth
at 8.2 per cent for Q1 of 2018-19. The
IMF’s World Economic Update in July 2018
estimated GDP annual growth rate of 7.5 per
cent for 2019. With such strong GDP growth,
India is the fastest growing economy in the
world and historically, growth in power demand
has largely followed GDP growth. We expect
power demand to grow at a rate of 6.7 per cent
CAGR during the period between 2017 and
2022 and, as Indian power consumption per
capita was only 1,075 kWh in 2016, it will catch
up with developed economies / countries with
similar social economic conditions.
The key drivers for increasing demand are
initiatives such as ‘24x7 Power for All’,
development of ‘smart cities’, the ‘Housing for
All’ scheme, the industrial push through ‘Make
in India’ initiative, increasing urbanisation,
infrastructure requirements, electric mobility,
and overall strong economic growth.
Ujwal DISCOM Assurance Yojana
(“UDAY) performance & tariff increase
The UDAY, financial turnaround and revival
package for electricity distribution companies
of India, has a clear impact on improving
operational efficiency and reducing the overall
losses of the DISCOMs. A total of 19 States
increased their tariffs either in FY16 or FY17.
According to the Ministry of Power, tariff
hikes have resulted in additional revenue
of Rs.100 billion (£1.1 billion) in FY16 and
Rs.204.3 billion (£2.3 billion) in FY17. Tariff
increases in Tamil Nadu and other UDAY
States where tariff rises did not take place
are expected to happen in FY20.
Financial results
In FY18, the Group’s revenue increased by
£4 million to £140 million, 3 per cent higher
than FY17. Profit from continuing operations
before impairments and tax was £6.2 million
(FY17: £31.7 million). Following the
deconsolidation of the Gujarat plant and
inclusion of the provision, the loss from
discontinued operations, incl. Non-Controlling
Interest was £(96.7) million (FY17: £(13.4)
million) and the total loss was £(100.9) million
(FY17 profit: £23.1m). Cash flow from
continuing operations was £56.4 million
(FY17: £52.1 million). As at 31 March 2018,
total borrowings were £93.5 million (31 March
2017: £321 million, including the Gujarat
plant’s borrowings). All scheduled interest and
principal repayments at Chennai, amounting
in aggregate to Rs2.9 billion (£33.8 million,
including £22.3 million principal repayments)
were made during FY18.
The Company will continue to provide trading
updates as appropriate but intends to adopt
the more traditional half yearly (rather than
quarterly) reporting.
Board
In November 2017, we announced the
appointment of Dmitri Tsvetkov as Chief
Financial Officer of OPG Power Ventures PLC,
replacing V. Narayan Swami. Two of our long
serving Non-executive directors, Martin Gatto
and Ravi Gupta, also stepped down from the
Board. All three had been on the Board since
our IPO and admission to AIM. We appointed
a new Non-executive director, Jeremy Warner
Allen, as Independent Non-executive Deputy
Chairman. On behalf of the Board, I would like
to thank Mr Narayan Swami, Mr Gatto and
Mr Gupta for their service and contributions
over the years and welcome Mr Tsvetkov and
Mr Warner Allen to the Board.
Dividend
In order to conserve cash for the business, the
Board has decided to pay a scrip dividend of
1 pence per share to shareholders in respect of
FY18 and expect dividends to return to a cash
payment (with a scrip alternative) for FY19.
The proposed scrip dividend, if approved by
shareholders at the AGM, will result in an
issuance of new shares which will be credited
to shareholders’ accounts in December 2018.
Outlook
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
KA
KARNATAK
62MW
Solar
TAMIL NADU
414MW
Thermal
remain on repaying the long-term debt on
the Chennai plants and look forward to Unit 1
being debt free later this year with the
remaining units following within five years.
The Board and I thank the loyal and
hardworking team at OPG and believe that the
OPG Group is well positioned to take advantage
of market opportunities as they arise.
As mentioned above, the Gujarat subsidiary
was deconsolidated as of 31 March 2018
and this deconsolidation is reflected in the
separation of the results from Gujarat and
Chennai in FY18 and FY17 income statements.
Future results of operations of Gujarat plant
will not be consolidated in OPG Group’s
consolidated financial statements.
We believe that our skills and experience in
the power sector will enable us to maintain
long term profitable and sustainable business
model. We are already benefitting from
reduced coal prices following the FY18 spike
and expect to be able to demonstrate a clear
path to profitability in FY19. Or focus will
Arvind Gupta
Executive Chairman
22 September 2018
Power Ventures Plc
Annual Report & Accounts 2018
03
Strategic Report
Corporate Governance
Financial Statements
FINANCIAL REVIEW
“The Company looks forward
to achieving a major milestone
later this year as the term loans
with respect to Unit 1 of Chennai
plant (77 MW out of 414 MW) will
be fully repaid in December 2018.
Based on term loans repayments
schedule Chennai plant will be
debt free in five years.”
Revenue
The Group’s revenue has increased by
£4.0m, reflecting a 3% growth year on year.
Generation exported to customers and billed
for revenue increased by 5% to 2,296 million
units in FY18 from 2,182 in FY17.
Production and output levels from the Group’s
operating power plants in Chennai and Gujarat
compared to the prior year were as follows:
Particulars FY18 FY17
Generation (million units) 2,493 2,346
PLF (%) 772 762
Average tariff (INR/unit) 5.213 5.463
1 The above figures are only for Chennai power
plants as Gujarat power plants are reclassified to
discontinued operations
2 Chennai Unit 3: Deemed PLF (%) has been included
3 Average tariff includes effect of deemed offtake tariff
for Chennai Unit 3
Gross profit
Gross profit (‘GP’) in FY18 was 28.5%
of revenue (FY17: 50.3%). The reduction
in GP is primarily on account of significant
increase in fuel cost during FY18 in
comparison with FY17.
Price and blend of Indian and Indonesian coal consumed:
Average factory gate price Average factory gate price Blend
(INR/mt) (INR/mKCal) %
Financial year Indian coal Imported coal Indian coal Imported coal Indian: Imported
FY18 3,467 4,593 963 1,114 6:94
FY17 3,301 3,438 904 799 9:91
Change % 5.0 33.6
increased by 5.0% and those for imported coal
by 33.6%. The table above shows the price
and blend of Indian and Indonesian coal
consumed in FY18 and FY17.
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 £24.0m in FY18 down from
£52.2m in FY17 and EBITDA margin was lower
at 17.2% in FY18 against 38.3% in FY17 on
account of decrease in GP margin.
while after impairments it became loss before
tax of £1.1m (FY17: profit before tax £31.7m).
(Loss)/ Profit before tax reconciliation
(‘PBT’) (£m) FY18
PBT 2017-18 (1.1)
PBT 2016-17 31.7
Decrease in PBT (32.8)
Increase in GP (28.5)
Increase in other income 1.8
Increase in distribution, general and
administrative expenses (1.5)
Decrease in net finance cost 2.5
Impairment provision for loss
on investments and asset
under construction* (7.3)
Others 0.1
Decrease in PBT (32.8)
* £4m being impairment of obsolete assets
under construction, as a one off transaction.
£3.3m being impairment provision of investments
in joint venture Padma Shipping
Power Ventures Plc
Annual Report & Accounts 2018
The cost of revenue represents fuel costs.
The average factory gate costs for Indian coal
Profit from continuing Chennai operations
before tax and impairments was £6.2m
compared with a profit of £31.7m in FY17
04
Strategic Report
Corporate Governance
Financial Statements
The following is a commentary on the Group’s financial performance for the year.
INCOME STATEMENT
Restated*/**
2018 % OF 2017 % OF
YEAR ENDED 31 MARCH £m REVENUE £m REVENUE
Revenue 140.1 136.2
Cost of revenue (excluding depreciation) (100.2) (67.7)
Gross profit 39.9 28.5 68.4 50.3
Other income 2.0 0.1
Distribution, general and administrative expenses (excluding depreciation) (17.9) (16.4)
EBITDA*** 24.0 17.2 52.2 38.3
Depreciation (6.5) (6.6)
Net finance costs (11.3) (13.8)
Profit from continuing operations before tax and impairments 6.2 4.4 31.8 23.4
Impairment provision for loss on investments and assets under construction (7.3) 0.0
(Loss)/Profit before tax from continuing operations (1.1) (0.8) 31.7 23.3
Taxation (3.1) 4.8
(Loss)/Profit after tax from continuing operations (4.2) (3.0) 36.5 26.8
Loss from discontinued operations, incl.
Non-Controlling Interest (96.7) (13.4)
(Loss)/Profit for the year (100.9) 23.1
* Following deconsolidation of Gujarat SPV (described below) the operating performance of Gujarat power plant has been reclassified to loss from discontinued operations.
** Depreciation was reclassified from cost of revenue and general and administrative to a separate line
*** Excluding one-off impairment provision of £7.3m in FY18
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 expense during the year was £3.0m
which includes current tax expense of
£0.4m and tax credit reversal of £2.7m.
Details of tax credit during the year
(£m) FY18
Current tax FY2017-18 0.4
Credit for MAT reversal 2.7
Tax expense/(income) 3.0
Profits after tax from
continuing operations
Profits after tax have decreased by £40.7m
from £36.5m in FY17 to loss of £4.2m in FY18.
Deconsolidation of Gujarat SPV and
Loss from discontinued operations
As previously reported, the captive consumers
of BVP (formerly known as OPGS Power
Gujarat Private Limited) have withheld from the
sales invoices an amount of approximately
£40m towards Cross Subsidy Surcharge
(CSS) levied by the DISCOMs for the financial
years 2015-2016, 2016-2017 and 2017-2018
challenging the grounds of fulfilment of
required shareholding criteria by BVP to qualify
as a captive power generating unit as per
Rule 3 of the Electricity Rules, 2005.
Although BVP received confirmation of Group
Captive status from the relevant Gujarat
authorities and approximately £9m out of
£40m of dues were already recovered, the
financial stress put on the Gujarat SPV,
coupled with high seaborne coal prices led to
deferral of scheduled principal and interest loan
repayments, resulting in the requirement to
implement a lender-assisted Resolution Plan
(“RP”). The RP plan was developed and
presented to the banks and we had hoped that
this process would be concluded in August
2018 but it still continues. No further cash of
the Group will be spent on Gujarat SPV.
As previously announced, the Group sold a five
per cent equity stake in Gujarat SPV (see note
7 (a) to the FY18 consolidated financial
statements). Whilst the RP may have
a number of outcomes, including potential
conversion of part of the debt into equity, the
Board does not expect any of these outcomes
to produce any value for the Group.
Due to all above factors the Group no longer
has control or significant influence in the
Gujarat SPV and the Gujarat subsidiary was,
therefore, deconsolidated as of 31 March
2018. The Group’s equity interest in Gujarat
plant was accounted for as an investment at
fair value as at 31 March 2018. Future results
of operations of Gujarat plant will not be
consolidated in OPG Group’s consolidated
financial statements.
Accordingly, results of operations of BVP were
reclassified to Loss from discontinued
operations. Operating loss of BVP increased
to £28.0m for FY18 from £13.4m primarily on
account of increase in fuel cost. Further, loss
on deconsolidation of BVP is £22.3m and
the Group has made impairment provision
aggregating to £46.3m for investments in
debentures, trade receivables and advances
and financial securities pledged with lenders
of BVP. Below is a summary of loss from
discontinued operation recognized upon
Gujarat SPV deconsolidation:
Power Ventures Plc
Annual Report & Accounts 2018
05
Strategic Report
Corporate Governance
Financial Statements
FINANCIAL REVIEW
CONTINUED
Particulars FY18 - £m FY17 - £m
Operating loss of BVP 28.0 13.4
Loss on deconsolidation of BVP 22.3 –
Impairment provision for
investments in debentures
of BVP 11.0 –
Impairment provision for trade
receivables and advances
of BVP 22.0 –
Impairment provision for financial
securities pledged with lenders
of BVP 13.3
Total Loss from
discontinued operations 96.7 13.4
Impairment provision of investments
in joint venture Padma Shipping
In 2014 the Company 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 Arrangement,
the Company and Noble agreed to jointly
purchase and operate two 64,000 MT cargo
vessels through a Joint venture company
Padma Shipping Ltd, Hong Kong (‘Padma’).
During the year, the Joint Venture partner due
to a change in their group strategy requested
for the Joint Venture to be terminated. As the
vessels were still under construction and yet to
be delivered during 2018, we agreed and the
process for the same will be initiated in FY19.
OPG has invested approximately £3.5m in
equity and £1.7m to date as advance and
accordingly the joint venture has been reported
using equity method as per the requirements
of IFRS 11. The Company provided corporate
guarantee for 50% of equity portion of the cost
of construction of the vessels remaining
balance in amount of £2m (equivalent of
$2.8m) which was recognised in the FY18
financial statements as part of £3.2m provision
as the shipping yard requested payment
subsequent to the year end. The Company
recognised an impairment provision in the
FY18 financial statements of £3.2m against
its investment to date on account of the
impending dissolution of the JV.
Impairment of Assets under
construction
During the year the Company impaired an
amount of £4m relating to obsolete assets
under construction, as a one off transaction.
The plant and machinery under construction
of proposed 12 MW power project to be set
up on a 120 acre brownfield site in the
industrial heartland of Karnataka state at
Bellary, has been impaired as the group
does not expect any economic benefits out
of same. The plant and machinery were
purchased along with the land and is of no
use hence needs to be scrapped.
Earning per Share (EPS)
The Company’s reported EPS from
continuing operations decreased to loss
of (1.2) pence from 9.5 pence on account
of decrease in PAT.
The Company’s total reported EPS
decreased to loss of (24.7) pence from
8.4 pence earnings on account of decrease in
PAT due to loss from discontinued operations.
Dividend
The Board approved FY18 full year scrip
dividend at 1 pence per share.
For FY17 full year dividend paid at 0.98
pence per share, including interim dividend
of 0.26 pence per share.
Some shareholders elected to receive final
FY17 dividend in form of scrip dividend and
as a result of this election the Company has
issued 4,799,742 shares during the year at
par value of £0.000147 (2017: £0.000147)
per share amounting to £706. The
difference between fair value of shares
issued above par value of £1.2m with
respect to scrip dividend was credited to
share premium.
Foreign exchange loss
on translation
The British Pound-to-Indian Rupee exchange
rate has moved higher to closing rate on
31 March 2018 of 1£= INR 90.81 as against
1£= INR 80.82 on 31 March 2017 thereby
resulting in significant exchange loss of £21.4m
on translating foreign operations.
Given Gujarat plant balances were removed
from the statement of financial position as at
31 March 2018 as a result of deconsolidation,
the comparative balances as at 31 March
2017 were also adjusted for BVP balances for
the purposes of variance analysis below. Also
comparative balances of assets and liabilities
on 31 March 2017 were recalculated based on
exchange rate effective on 31 March 2018 to
eliminate foreign exchange impact.
Property, plant and equipment
The decrease in net book value of our
property, plant and equipment principally
relates to depreciation and forex loss on
account of translation during the year.
Other non-current assets
Other non-current assets (excluding
Property, plant and equipment & Intangible
assets) have increased primarily due to
£9.9m investments in associates (solar
power projects and Padma Shipping
joint venture).
Current assets
Current assets have decreased by £2.4m
from £80.6m to £78.2m year on year
primarily as a result of the following:
• Decrease in trade receivables by £4.8m.
• Increase in cash and bank balances
(including restricted cash) by £3.0m.
• Decrease in inventory holdings by £1.8m.
• Increase in Net current tax asset by £2.2m.
• Decrease in other current assets by £0.9m
Current liabilities
Current liabilities have increased by £21.4m
from £55.6m to £77.0m year on year
primarily due to increase in trade payables
for coal and creditors for supplies to solar
power project.
Other non-current liabilities
Other non-current liabilities have increased
by £9.4m from £79.2m to £88.6m year on
year primarily on account of increase in
trade and other payables of £17.3m and
decrease due to repayment of borrowings
for balance amount.
Gross debt, gearing and finance costs
As of 31 March 2018, total borrowings were
£93.5m. The gearing ratio (borrowings/
(equity plus borrowings) was 40% (31 March
2017: 57%).
Total borrowings (current and non-current
portions) decreased by £228m due to
repayment of term loans of £22.6m by
Chennai plant, deconsolidation of Gujarat
(£206m) and foreign exchange impact of
depreciation of INR against GBP.
The Company looks forward to achieving a
major milestone later this year as the term
loans with respect to Unit 1 of Chennai plant
(77 MW out of 414 MW) will be fully repaid
in December 2018. Based on term loans
repayments schedule Chennai plant will be
debt free in five years.
06
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
KEY PERFORMANCE
INDICATORS
Finance costs have decreased by £2.1m
from £15m in FY17 to £12.9m in FY18
primarily due to scheduled repayments
of term of loans by Chennai plant and
respective reduction in interest expense.
Finance income increased from £1.1m in
FY17 to £1.6m in FY18 and therefore net
finance costs in FY18 amounted to £11.3m
(FY17: £13.8m).
The restricted cash balances totalling
£25.3m at 31 March 2018 (31 March 2017:
£17.8m) is comprised of financial deposits
that have been pledged as security against
borrowings and Letters of Credit.
Cash flow
Net cash flow from operating activities has
increased from £52.2m in FY17 to £56.4m
in FY18, an increase of £3.8m, primarily due
to changes in working capital exceeding
impact of the decrease in gross profit.
FINANCIAL
AVERAGE TARIFF
REALISATION
(INR/kWh)
FY14
FY15
FY16**
FY17*
FY18*
EBITDA
(£m)
FY14
FY15
FY16**
FY17*
30.9
33.4
5.55
5.71
5.58
5.46
5.21
50.7
52.1
Movements (£m) FY18 FY17
FY18*
24.0
COST OF GENERATION
PER UNIT
(INR/kWh)
FY14
FY15
FY16**
FY17*
FY18*
GEARING
(%)
FY14
FY15
FY16**
FY17*
FY18*
3.10
3.09
2.67
2.52
3.43
52
59
57
57
40
Operating cash flows from
continuing operations before
changes in working capital 23.8 52.3
Tax paid (0.8) (3.9)
Change in working capital
assets and liabilities 33.3 3.7
Net cash generated by
operating activities from
continuing Operations 56.4 52.1
Purchase of property,
plant and equipment
(net of disposals) (1.1) (3.1)
Investments, incl. in solar projects,
shipping JV, market securities (28.8) (8.6)
Net cash used in continuing
investing activities (29.9) (11.7)
Net interest paid (12.9) (15.0
Dividend paid (1.6) (0.9)
Total cash change
before net borrowings 11.9 24.5
Dmitri Tsvetkov
Chief Financial Officer
22 September 2018
FY14
4.14
FY15
4.91
FY16
5.29
FY17
8.4
EPS
(£ pence)
(24.7)
FY18
NON-FINANCIAL
PLANT LOAD FACTOR
(%) (Group)
TOTAL RECORDABLE
INJURY RATE
(Chennai)
FY14
FY15
FY16**
FY17*
FY18*
96
91
FY14
FY15
0.49
0.40
70
76
77
FY16**
0.28
FY17*
0.00
FY18*
0.09
* Note : FY17 & FY18 Includes only Chennai Operations
** Includes Gujarat Operations
Power Ventures Plc
Annual Report & Accounts 2018
07
Strategic Report
Corporate Governance
Financial Statements
COO OPERATIONAL REVIEW
“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
of any of the units.”
The following is a review of operations
for the year.
enforced system back downs and one-off
disruptions to demand such as due to weather.
available for supply on the LTVT to the state
of Tamil Nadu.
Plant availability and
generation
Our operational performance is affected by our
revenue generation model, plant availability and
load factors and auxiliary power consumption.
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 of any of the
units. 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 with the result that
OPG’s plants use 99% less water than
most thermal power plants in the world. As
a result, our station 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),
Total generation at the 414 MW Chennai plant
in FY18, including ‘deemed’ offtake, was
2.8 bn units which is 2% higher than last year
despite seasonal events. The Chennai plant
load factor (‘PLF’) including ‘deemed’ offtake,
in FY18 was 77% versus 76% in FY17 and
a national average for thermal plants of
approximately 61% and is expected to be
at the same level in FY19.
The 300 MW Gujarat plant’s generation was
up by 23% from FY17 to 2.04 bn units. The
Gujarat plant continued to ramp up achieving
a PLF of 78% in FY18, up from 63% in FY17.
For FY19, the Company expects load factors
to be at around 85% in Chennai.
Auxiliary consumption levels, also a key measure
of plant efficiency, is typically between 7.5-8%
for our plants.
Sales contracts
During FY18, 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 were between
one year 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 81% of the plant’s installed capacity and
nearly half of Group capacity. The remaining
74 MW of Chennai capacity has remained
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.
For FY19, the Chennai plant expects to
continue with its diversified sales mix,
contracting the majority of its generation from
414 MW to captive customers and the balance
of 74 MW to the state of Tamil Nadu under the
15 year LTVT Agreement.
Power sales from the 300 MW Gujarat plant
have been mainly to 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 operate 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 78% in FY18,
compared with 63% in FY 17.
The Chennai plant realised an average tariff
of Rs 4.92 per unit (*The plant realised an
average tariff of Rs5.02 which equates to
Rs4.92 net of self-generation tax of Rs 0.1
08
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
per unit which is paid directly to the state by
group captive customers and will not be
included in Company’s tariffs and expenses in
FY19 which was the case in FY18) in FY18 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 1.47
at Chennai for FY18, 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.
The Gujarat plant realised an average tariff
of Rs 4.19 per unit for FY18 and the Clean
Dark Spread was Rs 1.03 per unit. The Gujarat
Electricity Authorities had been levying Cross
Subsidy Surcharge (CSS) and associated
charges since FY16 on our captive users.
However, finally during FY 18, the Gujarat
Authorities have confirmed the captive status
of Gujarat plant for FY18 and subsequent to
year end for F16 and FY17 and have
accordingly initiated the process of refund of
CSS withheld by them. The amounts withheld
aggregated to £40m as at the end of FY18 and
we have received approximately £9m of this
outstanding dues to date.
For FY19, at Chennai, the Company expects
the average tariff to be around Rs 5.18 per
unit as against Rs.4.92 in FY18, due to an
increase in tariff negotiated with all the captive
customers. At Gujarat, the Company expects
the average tariff to be around Rs.4.39 as
against Rs.4.19 in FY18. We expect to
achieve at least 4 per cent increase in sales
tariffs for Chennai plant in 2020.
Further, average realised tariffs on multi-year
contracts would benefit from any increase in
regulated tariff. 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 we have developed
long-standing relationships. The Company
has purchased coal primarily on short and
medium-term contracts during FY 18.
The average coal price for Chennai plant
was Rs 4,527 per tonne in FY18 (FY17:
Rs 3,427 per tonne) which is approximately 32
per cent higher than in FY17. Following the
coal price spike in 2017 and first half of 2018,
predominantly as a result of policy actions
undertaken in China, coal prices have been
weakening recently and have reduced by some
18 per cent in the two months preceding this
statement. Consensus expectations continue
Power Ventures Plc
Annual Report & Accounts 2018
to be for international coal prices to recede in
2019 and 2020 with longer-term consensus
expectations for that trend to continue whilst
coal supply is expected to stay robust.
AVERAGE TARIFF
REALISATION
(INR/kWh)
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
0.08 Total Recordable Incident Report (TRIR)
in FY18 at the Chennai plant. For the Gujarat
plant, the TRIR was targeted at 0.25 for FY18
and we have been able to bring it down from
0.23 in FY17 to 0.13 in FY18.
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.
The Indian Government has notified revised
compliance standards for emission norms for
all thermal power plants across the country
with effect from Dec 2022. The Company is
well placed to comply with the new standards
applicable from 2022 for Sox, Nox and SPM
by doing some minor capital expenditure. The
Company is evaluating various technologies
with a view to be fully compliant by Dec 2022.
62 MW Karnataka
In FY17, the Company had signed long-term
25 year PPAs for 62 MW with Karnataka
Discoms at an average tariff of Rs.5.00 across
4 sites. In FY18, the entire 62 MW of solar
plant has been commissioned. The Company
expects that these 4 sites will get fully ramped
this year and will reach their optimal PLF by
end of FY19.
124 MW Jharkhand
In FY17, the Company had secured a Letter
of Intent for the award of 25 year PPAs for
124 MW. During the course of FY18, the
Jharkhand Government did not enter into
these PPAs and subsequently in FY 19
have returned all the security deposits
and guarantees that were provided by the
Company. As such, the Company does not
expect to go ahead with this Project.
Avantika Gupta
Chief Operating Officer
22 September 2018
FY14
FY15
FY16**
FY17*
5.55
5.71
5.58
5.46
FY18*,***
5.21
COST OF GENERATION
PER UNIT
(INR/kWh)
FY14
FY15
FY16**
FY17*
FY18*
3.10
3.09
2.67
2.52
3.43
GENERATION (million kWh)*
FY14
FY15
FY16
FY17
1,841
1,816
3,163
2,346
FY18
2,493
PLANT LOAD FACTOR (%)*
FY14
FY15
FY16
FY17
FY18
96
91
70
76
77
PLANT LOAD FACTOR (%)(1)
All India (Coal & Lignite
based Plants)
FY14
FY15
FY16
FY17
FY18
66
64
62
60
61
* Note: FY17 & FY18 Includes only Chennai Operations.
** Note: FY16 Includes 704m units from Gujarat that
were capitalised, exlcuding deemed generation for
Chennai Unit 3 of 0.4 billion (0.2 billion in FY16).
*** Average tariff includes effect of deemed offtake
tariffs for Chennai Unit 3.
(1) Source: powermin.nic.in
09
Strategic Report
Corporate Governance
Financial Statements
BUSINESS MODEL
Our model is driven by economic growth and the demand for power in India.
Industry
and commerce
needs sustainable,
reliable power
WHERE OPG
ADDS VALUE
Selective
approach
to customers
and contract
terms
ROBUST
PLATFORM
Thermal
Renewables
Best price
and assured
volumes
OUTCOMES
Responsible
operations
First
choice for
customers
Manage
gearing
Visibility of
earnings and
cash flow
Robust,
low cost
operations
Sustainable
returns to
investors
Adopt a
responsible
culture
Take
opportunities
to grow the
business and
manage
risk
10
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
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
Pursuing
responsible
growth
Deleveraging
Customers
The Group is committed to maximising the performance of
its existing power generation assets through plant
availability and providing a reliable and uninterrupted
supply of electricity directly to its customers.
The flexible design of our plants allows us to procure a
variety of international and domestic coal and maintain
an uninterrupted supply of coal. Further, the Group seeks
to achieve competitive prices that are negotiated directly
with customers. The Group’s use of the group captive
model means that it is well positioned to respond to
fluctuations in fuel costs through short- and medium-term
sales contracts.
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.
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.
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.
As of 31 March 2018, total borrowings were £93.5m.
The gearing ratio (borrowings/(equity plus borrowings)
was 40% (31 March 2017: 57%). Total borrowings (current
and non-current portions) decreased by £228m due to
repayment of term loans of £22.6m by Chennai plant,
deconsolidation of Gujarat (£206m) and foreign exchange
impact of depreciation of INR against GBP. The Company
looks forward to achieving a major milestone later this year
as the term loans with respect to Unit 1 of Chennai plant
(77 MW out of 414 MW) will be fully repaid in December
2018. Based on term loans repayments schedule Chennai
plant will be debt free in five years.
Power Ventures Plc
Annual Report & Accounts 2018
11
Strategic Report
Corporate Governance
Financial Statements
MARKET REVIEW
Overview of the Indian power sector: Primary energy
consumption in India in 2015 was the third highest in the world
after China and the USA, with India accounting for 5.3% of
global consumption. India was also the third largest producer
of electricity in 2015, after China and the United States, with
a more than 5% share of global electricity generation.
Despite being among the top three power
consumers in the world, per-capita electricity
consumption in India was only 1,075 kWh in
2017 which is significantly lower than the world
average and the lowest among the BRICS
nations (Brazil, Russia, India, China and South
Africa). For us, this indicates the strong growth
potential of the Indian power sector.
India still has an energy deficit
Demand for energy grew at a CAGR of
approximately 4.0% over the period from 2013
to 2018, while energy supply grew even faster
at a CAGR of 5.8% over the same period.
While India continues to remain a power deficit
country, the deficit is reducing and in fiscal
2018, the energy deficit declined to 0.7%.
Key drivers for power demand
As identified in the Chairman’s statement, there
are a number of factors which will drive power
demand in India in the short to medium term,
including a number of Government initiatives.
These are illustrated in the chart opposite.
Historically, power demand growth has largely
followed GDP growth. CRISIL expects the
co-relation between GDP and power demand
growth to remain high and power demand to
grow at 6.7% CAGR during the period
between 2017 and 2022.
The key drivers for the demand increase would
be initiatives such as ‘24x7 Power for All’,
development of ‘smart cities’, the ‘Housing for
All’ scheme, industrial push through The key
drivers for the demand increase would be
initiatives such as ‘24x7 Power for All’,
development of ‘smart cities’, the ‘Housing for
All’ scheme, industrial push through ‘Make in
India’, increasing urbanisation, infrastructure
requirements, electric mobility, and overall
strong economic growth.
The GoI has announced its goal to produce
only electric vehicles (“EVs”) from year 2030.
With the right policies in place and the GoI’s
focus on promoting EVs, these are expected
to further increase demand.
The demand for energy is expected to rise with
a gradual improvement in the financial health of
DISCOMs, primarily due to the implementation
of the UDAY scheme which aims at improving
the financial health of DISCOMs through
initiatives such as reduction in interest cost,
reduction of cost of power and improvement in
operational efficiencies.
Demand for power is also expected to be
supported by the increasing availability and
supply of power and improving infrastructure,
as well as an improvement in economic activity
led by higher demand from key infrastructure
and manufacturing sectors such as metals,
mining, chemicals, cement and automobiles.
India’s GDP increased
from Rs 87 trillion
in fiscal 2012 to
approximately Rs 131
trillion in fiscal 2018,
which represented
a compound annual
growth rate (“CAGR”)
of approximately 7%.
12
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
India’s per-capita power consumption was almost half of the world’s average in 2015:
World Average Electricity Consumption for 2015 is 2,869 per capita
KwH(
)
60,000
24,692
14,450
15,617
7
,8117,4
6,127
469,45
50,000
40,000
30,000
20,000
10,000
0
2,001
12
6,182
6,460
6
3,738
2,435
2,435
1,010
India
China
Brazil
Russian
Federation
Germany
USA
GDP per capita PPP ($)
Per capita power consumption (KwH)
Source: World Bank, CEA, EIA, CRISIL Research
Key drivers for power demand
Power demand
is expected to
grow at 6.7%
CAGR through
to 2022
24x7 Power for All
Development of ‘smart cities’
‘Housing for All’ scheme
Industrial push through ‘Make in India’
Increasing urbanization
Infrastructure requirements
Electric mobility,
, and overall strong economic
growth
3rd highest
Primary energy consumption in India in 2015 was the third
highest in the world after China and the United States, with
India accounting for 5.3% of the global consumption.
Power Ventures Plc
Annual Report & Accounts 2018
13
Strategic Report
Corporate Governance
Financial Statements
MARKET REVIEW
CONTINUED
Coal
Coal Imports increased in FY18 as a result
of logistical bottlenecks.
Coal imports were widely anticipated to fall
during FY18. The Government has been
pushing steam coal consumers, especially
power producers, to replace imported coal
with Indian domestic coal. However, domestic
logistical bottlenecks such as inadequate
coal transportation infrastructure – particularly
the availability of rakes – has been hampering
supply to power producers.
Regulatory changes targeting pollution
decreases have also fuelled the higher imports,
which are expected to stay firm through the
rest of calendar 2018. On a more positive
note, in the recent bidding guidelines for
commercial private coal mining, the absence
of an end-use condition in the guidelines
is very helpful for commercial mining,
representing a potential market opportunity
for private commercial miners.
The price of coal is forecast to reduce
materially over the next 18 months.
Overview of the Indian economy
Key macroeconomic indicators
Gross domestic product (GDP) India’s GDP
increased from Rs 87 trillion in fiscal 2012 to
approximately Rs 131 trillion in fiscal 2018,
which represented a compound annual growth
rate (“CAGR”) of approximately 7%. India’s
GDP growth rate of 6.6% in fiscal 2018 was
significantly in excess of the world average
of 3.0% in 2017 (estimated) and 3.1% in
2018 (estimated). The Indian economy was
negatively impacted in fiscal 2018 by two
major policy events, namely, the
demonetisation of currency and the
introduction of the Goods and Services Tax
(“GST”) in late 2016 and early 2017,
respectively. These initiatives, coupled with
weaker agricultural growth, have resulted in
a lower estimated real GDP growth rate
of 6.6% in fiscal 2018.
Current account deficit
After reaching 4.8% of the GDP during fiscal
2013, India’s CAD has declined progressively,
reaching 0.7% of GDP in fiscal 2017. This
decline was primarily due to lower oil prices
since oil imports constitute the largest share
of India’s import costs.
Inflation
Fiscal consolidation has helped keep inflation
under check and brought down the cost of
borrowing for both the government and the
private sectors. The government, together with
the Reserve Bank of India (RBI), has adopted
an explicit inflation targeting framework, which
is expected to help engender a low and stable
inflation regime.
Outlook for the Indian economy
The International Monetary Fund (IMF) and
the World Bank have both forecasted higher
growth in the Indian economy for 2018. While
growth in advanced economies is expected
to be moderate as central banks reverse their
previously accommodative stance, growth in
emerging and developing markets is expected
to strengthen. According to the World Bank,
growth in China may be moderate in 2018 but
other Asian economies are poised for higher
growth. Global growth recovery will further
help growth in the Indian economy. India’s
Real GDP growth is expected to be 7.6% in
fiscal 2019.
According to the IMF’s forecasts, India is likely
to overtake China as the fastest-growing
economy in the world during the period
between 2017 and 2022. Based on its
estimates, India will continue to be among
the fastest growing major economies with a
growth rate of 7.4% to 8.9% during the period
between 2017 and 2022. The CAGR over the
period is expected to be approximately 8.5%.
Moreover India’s growth rate is expected to
be significantly higher than the global CAGR
of approximately 4% and the CAGR for other
developing economies, such as Brazil, Russia
and sub-Saharan African nations.
The ongoing liberalisation of India’s FDI regime
has also led to a significant increase in
investments, particularly following the launch
of the ‘Make in India’ campaign in October
2014. Cumulative FDI inflows in India rose
almost 40% to reach US$ 114.1 billion
between fiscal 2016 and fiscal 2017,
compared to US$ 81.1 billion between fiscal
2012 and fiscal 2014 (Source: India Brand
Equity Foundation (IBEF)).
Coal consensus forecast for Newscastle coal to come down 22%
(US$/t)
Coal Imports increased in FY18 as
a result of logistical bottlenecks
100
90
80
70
60
168
161
155
149
22%
136
105
71
Sep18
Dec 18
Mar 19
Jun 18
Sep 19
Dec 19
Mar 20
Jun 20
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Source: Consensus Economics Analysis, Aug 2017
Source: ICRA
14
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
Gross Domestic Pro
)tn(
duct (GDP)
1
14
7.9%
105
7.2%
123
7.1%
98
6.5%
131
1
2.0%
0.0%1
8.0%
6.6%
6.0%
2.8%
2.8%
2.5%
3.0%
3.1%
4.0%
2.0%
0.0%
87
92
5.5%
5 5%
2.6%
FY
12
3
1CY3/1FY
41CY4/1FY
51CY5/1FY
6
1CY6/1FY
71CY7/1FY
18CY8/1FY
)
India’s GDP growth (in tn)
Source: Central Statistics Office (C
Wo
CSO), World Bank Data Indicators, CRISIL Resear
India’s GDP growth (%)
orld GDP growth (%)
rch
Growth in per capita
KwH(
)
a power consumption in Ind
dia against per capita GDP
1,200
1,000
800
600
400
200
0
819
884
8
914
957
1,010
1,075
FY
12
31FY
41FY
51FY
61FY
17FY
140,000
120,000
100,000
80,000
60,000
40,000
40 000
20,000
0
Per capita power consum
Source: International Monetary Fun
mption (KwH)
GDP per capita (Rs)
nd (IMF), CEA, CRISIL Research
Factors influencing
power demand
GDP
growth
p
Gradual improvement
in discom financials,
strengthening of
distribution network &
100% intensive rural
electrification
Tra
ansformation
capacity
expansion
rge-scale infra
Lar
evelopment –
de
S
Smart cities,
dicated Freight
Ded
C
Corridor etc.
Electric vehicles,
railway
electrification
& metro
expansion
vernment push
Gov
to
o industries /
ufacturing under
manu
Make in India’
‘M
campaign
1
40
201
001
80
60
60
40
20
0
s
r
e
v
i
r
D
i
s
t
n
a
r
t
s
e
R
Energy effic
ciency
n
T&D loss reduction
Captive and off-grid
Captive and off grid
RES generation
Source: CRISIL Research
Length of the arrow denotes the e
extent of impact
Power Ventures Plc
Annual Report & Accounts 2018
D
r
i
v
e
r
s
R
e
s
t
r
a
n
t
s
i
15
Strategic Report
Corporate Governance
Financial Statements
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 focused
way in FY18.
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. It keeps track
of strategic and operational issues.
All the Plants have dedicated Steering
Committees, which report to the HSE
Committee and are entrusted with the day
to day responsibility on Health, Safety and
Environment at the individual sites. The
responsibilities of the Steering Committees
include adhering to HSE compliance, planning
trainings and managing incidents. At the
plant level these Committees monitor all
the necessary action on the ground such
as incident and accident data, corrective
measures for previous incidents and ensure
protocols are implemented to avoid repeats
of any incident. They further also review the
annual health data and ensure medical
check-ups are done for all plant employees.
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 FY18 for the Chennai Plant, we had a Total
Recordable Incident Report (‘TRIR’) of 0.08
and zero fatalities.
For the Gujarat Plant, TRIR was targeted at
0.25 for FY18 and we have been able to bring
it down from 0.23 in FY17 to 0.13 in FY18.
The responsibility of safety lies with OPG for all
OPG employees and contractors. Annual health
check-ups have revealed no occupational
0.08 TRIR
In FY18 for the Chennai Plant,
we had a Total Recordable
Incident Report (‘TRIR’) of
0.08 and zero fatalities.
0.13TRIR
For the Gujarat Plant, TRIR was
targeted at 0.25 for FY18 and we
have been able to bring it down
from 0.23 in FY17 to 0.13 in FY18.
16
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
health issue amongst the workforce which is
checked by a certified doctor from the
Inspectorate of Factories.
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 any hazard
or 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 the coal handling plant is
measured and monitored twice per month;
lux (SI unit of illuminance) monitoring is done
during the day and night and Suspended
Particulate Matter and Noise monitoring is
carried out regularly. Periodic health check-up
is carried out for the employees and
contractors and that includes CBS, Urine
Routine Pulmonary Function Test, Audiogram,
Eye Check-up and 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 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 gear – 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 safety issues. Apart
from governance on safety, setting up
systems and providing training, it is equally
important to promote a safety culture
through a mix of educating, disciplining
and incentivising practices.
For example:
Incentivising reporting of near miss.
National Safety Week Celebrations
Visitor Safety guidelines on
visitor passes.
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.
I. 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.
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.
Emergency Response and Reporting
An onsite well equipped medical facility
with a doctor and two nurses is available
in case of any emergency.
II. Measuring and Improving
Environmental Performance
Some of the important indicators that we
measure are auxiliary power consumption,
water quality and quantity, waste generated
Continual
improvement in
environmental
performance
through responsible
operations is one of
the key pillars of our
corporate strategy.
Power Ventures Plc
Annual Report & Accounts 2018
17
Strategic Report
Corporate Governance
Financial Statements
SUSTAINABILITY REPORT
CONTINUED
and recycled and emissions (Sox, Nox, SPM,
GHG, CO). Whether it is material use or energy
or water, we believe in reducing, reusing and
recycling and disposing of the hazardous
materials in compliance with guidelines.
III. 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 FY18 was 7.55% for
the Chennai plant and 8.63% for the Gujarat
plant. We continuously strive to optimize the
energy consumption of our internal facilities
through energy management systems.
IV. 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 since we have taken measures in
improving the ground water level through
recharge pits across the plants.
The water cycle is a closed loop system at
OPG, and water recovered during the process
is diverted to an 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 is treated in a
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 and the OPG plants qualify as zero
discharge plants. The plant processes were set
up in a way that water could be recovered and
sent back to the source.
To further 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.
Quality of water at various entry and exit points
in the system show that the pH is well within
the prescribed limit.
One of the major reasons for consumption
of water at any thermal plant is for cooling
through water-cooled condensers, which is the
norm for most power stations. However, at
OPG, huge water savings result owing to
installation air-cooled condensers instead of
water-cooled condensers, which effectively
reduce the water footprint per unit generated
by 99% in comparison to conventional water
cooled condensers. Air-cooled condensers
with 99.5% recovery of condensate along with
air-cooled heat exchange equipment effectively
deliver huge water savings.
Rainwater Harvesting Initiatives
Rainwater harvesting systems at the
plants are designed to collect 90%
of runout.
Storm water drains with infiltration wells
have been made in the plants 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
rainwater gutter pipes are connected to
the water storage tank.
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 Convention. All
hazardous waste, which in a thermal power
plant is only small quantities of oil soaked
cotton waster, batteries etc., have been
disposed to authorised vendors.
VI. 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 and outside
the premises of our plant including nearby
schools, road sides and community areas.
We annually plant 2,000 trees at each of the
sites and we have a 3-year plan to continue
such annual plantations.
VII. Emissions
OPG makes use of good quality coal and
technology to reduce its emissions.
Our stack emission monitoring analyser is
continuous and has been linked to the
respective Pollution Control Board servers to
get real-time emissions data. An LED display
board has been fixed at the main gates of the
plants to display the real-time emission levels.
The Indian Government has notified revised
compliance standards for emission norms for
all thermal power plants across the country
with effect from Dec 2022. The Company
is well placed to comply with the new
standards applicable from 2022 for Sox,
Nox and SPM by doing some minor capital
expenditure. The Company is evaluating
various technologies with a view to be fully
compliant by Dec 2022.
V. Disposal of Waste
Irresponsible disposal of hazardous waste is
one of the most potentially dangerous acts that
To control dust emissions, we have installed
Electrostatic Precipitators before the stack,
90%
Rain water harvesting systems
at the plants are designed to
collect 90% of runout.
2,000
We annually plant 2,000 trees
at each of the sites and we have
a 3-year plan to continue such
annual plantations.
18
Power Ventures Plc
Annual Report & Accounts 2018
with the communities are transparency,
accountability and gender inclusiveness.
I. Education
We have tied up with an NGO, Isha Vidya and
adopted 10 Government schools near the
plant to improve their English language and
math skills. Through this initiative, we have
impacted 1,057 children.
Through our long lasting association with the
schools near our plants, we distributed school
uniforms, shoes, bags and stationery to 1,080
underprivileged children. We are continuing
to fund salaries of 11 teachers in Government
Schools adjacent to our plant, 3 school
sponsorships for girls, and 86 college/
school fee funding have been provided to
needy students.
Green Initiative within our premises where
we planted more saplings to increase
the green cover in the area.
Mechanical road sweeping of the coal
transportation route
Sprinkling water for dust suppression
Digging of wells in the nearby villages
Cleaning and maintenance of community
water tanks and ponds
IV. Livelihood Generation
To help those who have no means to create
a livelihood for themselves, we have donated
sewing machines to a group of women who
now run a successful stitching center near our
Gujarat plant and we continue to assist the
center by providing monthly maintenance
charges such rent, electricity, repair work etc.
We also continuously sponsor school and
college fees of children of our contract
employees who have shown academic
excellence.
We have conducted local recruitment drives in
the nearby villages and have employed
educated graduates for technical positions
in the plant.
Strategic Report
Corporate Governance
Financial Statements
which works at 99.9% efficiency. The
Electrostatic Precipitator helps in controlling
the emissions well within the current prescribed
limits. Even in coal unloading areas, various
dust suppression systems are in place such
as, in the coal crushing area, dust filters are
installed to avoid dust generation. During the
year to further control dust emission from coal
movement and unloading, we have erected
wind screens and additional water sprinklers
in various areas around the coal handling plant
and we have procured an automatic heavy
duty sweeping machine to clean the roads
used for coal movement.
India is a signatory to the Paris Climate
Agreement, which has already come into
effect. Accordingly, the Indian Government
charges a coal cess of INR 400 a tonne of coal
which is contributing towards decarbonizing
India’s economy. This taxation goes to a
national corpus that funds green ideas and
green projects. The total cess paid by Chennai
plant during FY18 was approximately Rs 0.7 bn.
Community Support
As a corporate with a 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 carry out
a need based assessment study periodically,
we are continuing our interaction with them
and all the support is continued as per the
needs of the communities.
II. Health
We have continued our support to health
initiatives in nearby villages, where we already
renovated and upgraded the dispensaries and
the number of patients treated every day is
around 50. We continued to provide the
doctor’s salary, medicines, staff salary, supply
of materials and nursing staff salary. We also
have an ambulance at the ready in the event
of any local emergencies.
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 guide our engagement
We have improved sanitation facilities by
constructing toilets in the nearby villages.
III. Local Environment
Some of the initiatives that were taken in the
current year are:
We have indirectly generated job opportunities
for 500 families by engaging the villagers
across various services in the plants such
as gardening, housekeeping etc.,
V. Building Community Spaces:
Many community relationships get
strengthened around places of worship.
Based on the needs of the communities,
we have supported construction of a Church
in Chennai and a Community Center in
Gujarat. Similarly, we have supported many
temple initiatives in the villages around our
operations based on the needs of the locals.
As a corporate with
a 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.
Power Ventures Plc
Annual Report & Accounts 2018
19
Strategic Report
Corporate Governance
Financial Statements
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 RISK
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.
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.
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
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
20
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
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.
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
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.
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
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.
The Group continues to monitor changes and
developments in the global markets to assess
the impact on its financing plans
Continuing uncertainty and concerns about contagion in the wake of the
financial crises could have a negative impact on the availability of funding.
Power Ventures Plc
Annual Report & Accounts 2018
21
Strategic Report
Corporate Governance
Financial Statements
BOARD OF DIRECTORS
Arvind Gupta
Executive Chairman
Jeremy Warner Allen
Non-executive Deputy Chairman
Dmitri Tsvetkov
Chief Financial Officer
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 Warner Allen has over 25 years’
experience in capital markets. He is
currently a Non-Executive Director of
TP Group plc. Prior to that he was an
Executive Director, Board Member and
Head of the Growth Companies Team at
Cenkos Securities plc, where he advised
a number of AIM companies over a period
of 11 years. Prior to joining Cenkos,
he was a founding member of Beeson
Gregory Limited and responsible for the
UK sales desk, a role he retained when
Beeson Gregory merged with Evolution
Securities in 2002.
Mr Tsvetkov has over 23 years of financial,
accounting and operational experience,
including significant experience of working
with promoter/founder-led energy sector
listed companies in London, Africa, Asia
and Canada.
Mr Tsvetkov was Chief Financial Officer
of OPG Power Generation Pvt Ltd, the
Chennai subsidiary of OPG from July
2017 to October 2017. Prior to that he
was Chief Financial Officer of Advance
International Exploration, Inc., Interim
Chief Executive Officer and Chief Financial
Officer of Mart Resources, Inc., a TSX
listed oil and gas company, and Chief
Financial Controller of Heritage Oil Plc,
a FTSE 250 oil and gas company.
Mr Tsvetkov was with Pricewaterhouse
Coopers in Calgary, Canada and Moscow,
Russia from 1994 to 2006.
He has a Chartered Accountant (CA)
designation from the Canadian Institute
of Chartered Accountants, an FCCA
designation from the Association of
Chartered and Certified Accountants in
the UK and Chartered Financial Analyst
(CFA) designation from the CFA Institute
in the US.
Member
Nomination Committee
Member
Audit, Remuneration Committee
22
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
P Michael (Mike) Grasby
Independent
Non-executive Director
Jeremy Beeton
Independent
Non-executive Director
Background and experience
Background and experience
Mr P Michael Grasby is a Chartered
Engineer and has been associated with
the UK and international power industry
for many years. He was manager of the
Drax Power Station between 1991 and
1995 and Director of Operations for
National Power, with responsibilities for
over 16,000 MW of generating capacity,
until 1998. Following the demerger
of National Power in 1999, he joined
International Power as Senior
Vice-President for Global Operations
and retired in 2002. Mr Grasby has
experience of power company
directorships in the Czech Republic,
Portugal, Turkey and Pakistan. Mr Grasby
was formerly a Non-executive Director
of Drax Plc where he chaired the Health
and Safety Committee and sat on the
Audit, Remuneration and Nominations
Committees; he retired from the Drax
Board in April 2011. He was also formally
a Director of Strategic Dimension
Technical, a London-based executive
recruitment company.
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, Nomination, Remuneration
Committee
Member
Audit, Nomination, Remuneration
Committee
Power Ventures Plc
Annual Report & Accounts 2018
23
Strategic Report
Corporate Governance
Financial Statements
CORPORATE GOVERNANCE REPORT
FINANCIAL YEAR ENDED 31 MARCH 2018
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
3. Evaluation (B.6)
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 dividend with respect to year ended 31 March 2017
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:
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.
1. Division of Responsibilities (A.2.1)
Operation of the Board
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 Dmitri Tsvetkov, the Company’s Chief Financial Officer is
responsible for the finance function, including financial controls
and funding (V Narayan Swami, the Company’s former Finance
Director had these responsibilities before his resignation).
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 was a non-Board appointment. Mr T Chandramoulee
resigned from the Company and Ms Avantika Gupta, daughter
of Mr Arvind Gupta, was appointed as Chief Operating Officer
on 1 March 2018. As Chief Operating Officer, Ms Gupta 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.
2. 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.
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. Dmitri Tsvetkov (Chief Financial Officer) (joined on
8 November 2017).
3. V Narayan Swami (Finance Director) (resigned on
8 November 2017).
Non-executive
1. Jeremy Warner Allen (Deputy Chairman) (joined on
8 November 2017);
2. Martin Gatto (Senior Independent Director) (resigned on
8 November 2017);
3. Michael Grasby;
4. Jeremy Beeton; and
5. Ravi Gupta (resigned on 29 May 2018).
24
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
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 Grasby and
Mr Beeton to be independent in character and judgement
notwithstanding their length of service. Mr Allen was appointed in
November 2017 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 22 and 23 together with details of their
membership, as appropriate, of the Board Committees. The Board is
responsible for setting the Company’s objectives and policies and
providing effective leadership and the controls required for a publicly
listed company. Directors receive papers for their consideration in
advance of each Board meeting, including reports on the Group’s
operations to ensure that they remain briefed on the latest
developments and are able to make fully informed decisions.
The Board met 4 times during the year under review.
The 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 and Deputy Chairman
The Executive Chairman’s key responsibilities were the effective
running of the Board, proposing and developing the Group’s
strategy and 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. In addition
to that, the Executive Chairman, as leader of the executive team,
is responsible for implementing the decisions of the Board and
its Committees.
At the AGM of the Company on the 14 November 2016, the previous
Chief Executive, Arvind Gupta, assumed the role of Executive
Chairman and previous Chairman retired on the same date.
Jeremy Warner Allen, the Deputy Chairman, is available to
shareholders who have concerns that cannot be resolved through
discussion with the Executive Chairman. The role of the Deputy
Chairman is to support and tender advice to the Executive Chairman
on all governance matters. Martin Gatto, former Senior Independent
Director, played this role before his resignation in November 2017.
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. Pursuant to the Company’s Articles, the Board
shall have power at any time to appoint Directors to fill a vacancy and
any Directors so appointed shall hold office only until the annual
general meeting of the Company and shall be eligible for re-election.
On this basis, Messrs Jeremy Warner Allen, Dmitri Tsvetkov (both
appointed on 8 November 2017) and Michael Grasby, will offer
themselves for re-election at the forthcoming AGM.
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.
Also all Directors received a briefing on the Market Abuse Regime
(MAR) regulation from the Company’s Nominated Advisor. 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.
Power Ventures Plc
Annual Report & Accounts 2018
25
Strategic Report
Corporate Governance
Financial Statements
CORPORATE GOVERNANCE REPORT
FINANCIAL YEAR ENDED 31 MARCH 2018
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 Nomination
Number Attended Number Attended Number Attended Number Attended
Arvind Gupta 4 3 2 2 NA NA 1 1
Dmitri Tsvetkov 4 2 2 1 NA NA NA NA
V Narayan Swami 4 2 2 1 NA NA NA NA
Jeremy Warner Allen 4 2 2 1 NA NA NA NA
Martin Gatto 4 2 2 2 1 1 NA NA
Michael Grasby 4 4 2 2 1 1 1 1
Ravi Gupta 4 1 2 1 1 1 NA NA
Jeremy Beeton 4 1 2 1 1 1 1 1
Number of meetings held
during the year 4 2 1 1
In the event that Directors are unable to attend a meeting, their
comments on the business to be considered at the meeting are
discussed in advance with the 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 Jeremy Warner Allen,
Michael Grasby and Jeremy Beeton (Martin Gatto and Ravi Gupta
were members of the Audit Committee until their resignations in
November 2017 and May 2018 respectively). Jeremy Warner Allen is
considered to have continuing, relevant financial experience (Martin
Gatto was considered to have continuing, relevant financial
experience before his resignation). The Executive Chairman and Chief
Financial Officer 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
2017; and
• the unaudited results for the half-year FY18 to 30 September 2017.
Remuneration Committee
The Remuneration Committee currently consists of Jeremy Beeton,
Jeremy Warner Allen and Michael Grasby (Martin Gatto and Ravi
Gupta were members of the Audit Committee until their resignations
in November 2017 and May 2018 respectively). Ravi Gupta was not
present when any remuneration matter relating to the Executive,
Arvind Gupta (his brother) were 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 30 to 33.
Nomination Committee
The members of the Nomination Committee are Arvind Gupta,
Jeremy Beeton and Michael Grasby. The primary duty of the
Nomination Committee is to lead the process for Board
appointments and make recommendations to the Board.
26
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
Accountability and Audit
Shareholder Relations and the Annual General Meeting
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 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 Chief Financial Officer together with the Deputy
Chairman 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.
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 20 and 21.
Assurance
BDO LLP was appointed as auditor for the Group for the financial
year ended 31 March 2018. 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 Committee will
at the appropriate time establish a policy on the provision of non-audit
services by the external auditor. That policy will set out the external
auditor’s permitted and prohibited non-audit services and a fee
threshold requiring prior approval by the Audit Committee for any
new engagement. The external auditor did not provide any non-audit
services during the year.
Going concern
A statement on the Directors’ position regarding the Company as
going concern is contained in the Directors’ Report on page 28.
Power Ventures Plc
Annual Report & Accounts 2018
27
Strategic Report
Corporate Governance
Financial Statements
DIRECTORS’ REPORT
The Directors present their report, together with the audited financial statements of the Group,
for the year ended 31 March 2018.
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 Group’s results for the year ended 31 March 2018 are set out in
the Consolidated Statement of Comprehensive Income. The Group
loss for the year after tax was £(100.9)m (2017 profit after tax:
£23.1m).
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 2018 was
£52,378 comprising 356,308,697 ordinary shares of £0.000147
pence each, of which there are no designated treasury shares.
Political donations
The Group has made no political donations during the year
under review.
A review of the Group’s activities is set out in the Executive
Chairman’s statement.
Going concern
The Board will be recommending a scrip dividend for the year ended
31 March 2018 in amount of 1 pence per share. 0.98 pence per share
dividend was paid for the year ended 31 March 2017.
As highlighted in the Consolidated Statement of Cash Flows and
notes 5 (a) and 23 to the financial statements, the Group meets its
day-to-day working capital requirements through cash from
operations and bank facilities.
Directors
The Directors of the Company during the year and up to the date of
this report were as follows:
Arvind Gupta Executive Chairman
Dmitri Tsvetkov Chief Financial Officer, Executive Director
(joined on 8 November 2017)
V Narayan Swami Finance Director, Executive Director
(resigned on 8 November 2017)
Jeremy Warner Allen Deputy Chairman, Non-Executive Director
and Audit Committee Chairman
(joined on 8 November 2017)
Michael Grasby Non-Executive Director
Jeremy Beeton Non-Executive Director, Remuneration
and Nomination Committee Chairman
Martin Gatto Non-Executive Director
(resigned on 8 November 2017)
Ravi Gupta Non-Executive Director
(resigned on 29 May 2018)
Further information on the financial position of the Group, its cash
flows, liquidity position and borrowing facilities are described in the
Financial Review. In addition, note 29 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 Accounts.
28
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
Substantial shareholdings
Disclosure of information to the auditor
The Directors serving at the date of approval of the financial
statements confirm 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.
This report was approved by the Board of Directors on 22 September
2018 and signed on its behalf by:
Philip Scales
Company Secretary
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
22 September 2018
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 29 June 2018:
Percentage of
voting rights
and issued Number of
share capital ordinary shares
Gita Investments Limited and
related parties1 51.5% 183,600,557
M&G Investment Management Limited 13.0% 46,281,231
River and Mercantile Asset Management LLP 5.3% 18,908,384
British Steel Pension Scheme 3.6% 12,650,000
1 Beneficial interest in these shareholdings vests with Arvind Gupta and his family.
Registered agent
The registered agent of the Company at 31 March 2018 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 29.
Auditor
BDO LLP have expressed their willingness to continue in office as
auditors and a resolution proposing their re-appointment will be
proposed at the forthcoming AGM.
Power Ventures Plc
Annual Report & Accounts 2018
29
Strategic Report
Corporate Governance
Financial Statements
DIRECTORS’ REMUNERATION REPORT
Introduction
This report sets out information about the remuneration of the Directors of the Company for the year
ended 31 March 2018. 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,
Jeremy Warner Allen (from November 2017) and Michael Grasby (Martin
Gatto and Ravi Gupta were members of the Remuneration Committee
until November 2017and May 2018 respectively) who, with the
exception of Ravi Gupta, are all independent Non-Executive Directors.
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 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
The principal responsibilities of the Committee include:
• Executive Directors’ incentives should be aligned with the interests
• assessing and setting compensation levels for Directors and
of shareholders.
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 26.
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 remuneration strategy is designed to be in line with the
Group’s fundamental values of fairness, competitiveness and
equity, and also to support the Group’s corporate strategy. The
Group seeks increasingly to align the interests of shareholders
with those of Directors and senior employees by giving the latter
opportunities and encouragement to build up a shareholding
interest in the Company.
Long-term incentives
The Remuneration Committee believes that it is appropriate to
operate share incentive schemes to encourage Executive Directors
and senior employees to meet the Group’s long-term strategic and
financial objectives set by the Board.
Stock option plan
All of the Directors, with the exception for of Jeremy Beeton who
joined the Board in November 2016, Jeremy Warner Allen and Dmitri
Tsvetkov, both joined the Board in November 2017, 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.
30
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
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 and in
FY18 this Plan expired.
Annual bonus
The Remuneration Committee considered bonuses for Executive
Directors and in subsequent discussions Arvind Gupta volunteered
to waive his bonus for FY18. Therefore only the bonus for Dmitri
Tsvetkov of £50,000 has been provided in the accounts for FY18.
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, Mr V Narayan
Swami (until 8 Nov 2017) and Mr. Dmitri Tsvetkov (from 8 Nov 2017)
are entitled to medical, insurance and other allowances and
received £4,702 (FY17: £52,959), £nil (FY17: £1,984) and £9,200
(FY17: nil) respectively.
The key terms of the Executive Directors’ service agreements are
as follows:
Name Position Date of contract Notice period Current salary (p.a.) £
Arvind Gupta Executive Chairman 23 May 2008 12 months’ prior written notice on either side 750,000
Dmitri Tsvetkov Chief Financial Officer 26 June 2017 Three months’ prior written notice on either side 240,000
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.
Non-Executive Directors’ contracts for services
Non-Executive Directors were appointed for an initial term of 12 months. Jeremy Warner Allen, 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. £
Jeremy Warner Allen 8 November 2017 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
Martin Gatto (resigned in November 2017) 6 May 2008 Three months’ prior written notice on either side 45,000
Ravi Gupta (resigned in May 2018) 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
Power Ventures Plc
Annual Report & Accounts 2018
31
Strategic Report
Corporate Governance
Financial Statements
DIRECTORS’ REMUNERATION REPORT
CONTINUED
External appointments
It is the Board’s policy to allow the Executive Directors to accept directorships of other companies provided that they have obtained the
consent of the Board. Any such directorships must be formally notified to the Board.
Directors’ interests in ordinary shares
The interests of Directors in the ordinary share capital of the Company during the year were as follows:
31 March 2018 31 March 2017
Gita Investments Limited1 183,600,557 178,886,428
Michael Grasby 10,318 10,041
Jeremy Warner Allen (joined on 8 November 2017) 303,729 n/a
Dmitri Tsvetkov (joined on 8 November 2017) 100,000 n/a
Martin Gatto (resigned on 8 November 2017) n/a 60,000
Ravi Gupta (resigned on 29 May 2018) – –
Jeremy Beeton – –
V Narayan Swami (resigned on 8 November 2017) n/a 10,300
Total 184,014,604 178,966,769
1 Beneficial interest in these shareholdings vests with Arvind Gupta and family.
There were no changes to Directors’ interests between 31 March 2018 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 2018 other than their service
contracts, details of which are given on page 31.
Directors’ remuneration for the period 31 March 2017 to 31 March 2018.
Salary, annual bonus and benefits
Salary/fees Annual bonus Total FY18 Total FY17
£ £ £ £
Executive Chairman
Arvind Gupta (paid in INR equivalent) 750,000* –* 750,000 1,110,000
Executive Director
Dmitri Tsvetkov 240,000 50,000*** 290,000
V Narayan Swami (paid in INR equivalent)
(until 8 November 2017) 224,824**** – 224,824 109,689
Non-executive Directors
Jeremy Warner Allen 22,500 – 22,500 –
Martin Gatto (until 8 November 2017) 33,750 – 33,750 45,000
Michael Grasby 45,000 – 45,000 45,000
Ravi Gupta (until 29 May 2018) 22,500** – 45,000 45,000
Jeremy Beeton 45,000 – 45,000 22,500
Total 1,383,574 50,000 1,433,574 1,405,069
No consideration was paid or received by third parties for making available the services of any Executive or Non-Executive Director.
* Arvind Gupta's INR equivalent of FY18 salary: INR 64.1m (FY17: INR 64.1m). Arvind Gupta waived his FY18 bonus therefore INR equivalent of FY18 bonus: nil (FY17: INR 31.5m)
** Ravi Gupta forgave half of his annual remuneration
*** Dmitri Tsvetkov’s bonus provision made, not paid.
**** Salary, bonus and final settlement: INR equivalent of FY18 salary INR 4.8m (FY17 salary: INR 7.2m), FY18 bonus: nil (FY17: INR 2.4m paid in FY18) and final
settlement of INR 14.4m, incl. FY16 bonus (FY17: nil)
32
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
Directors’ share options
Movements during the period Options outstanding
Option Options as at Forfeited/ Latest
Option granted price £ 1 April 2017 Granted Cancelled Exercised 31 March 2018 exercise date
Gita Investments Limited
(Arvind Gupta) 16 July 2009 0.60 21,524,234 Nil Nil Nil 21,524,234 15 Jul 2019
Martin Gatto 16 July 2009 0.60 1,000,000 Nil 1,000,000 Nil Nil 15 Jul 2019
Ravi Gupta 22 December 2015 0.60 250,000 Nil Nil Nil 250,000 21 Dec 2025
V Narayan Swami 22 December 2015 0.60 250,000 Nil 250,000 Nil Nil 21 Dec 2025
Michael Grasby 22 December 2015 0.60 250,000 Nil Nil Nil 250,000 21 Dec 2025
All share options have vested.
At 31 March 2018, the closing mid-market price of the Company’s shares was 18.12 pence. During the year under review, the Company’s
closing mid-market share price ranged between a low of 16.5 pence and a high of 49.75 pence.
This report has been approved by the Board of Directors of the Company.
Jeremy Beeton
Chairman, Remuneration Committee
22 September 2018
Power Ventures Plc
Annual Report & Accounts 2018
33
Strategic Report
Corporate Governance
Financial Statements
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.
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 Isle of Man governing the
preparation and dissemination of the financial statements may differ
from legislation in other jurisdictions.
On behalf of the Board by:
Philip Scales
Company Secretary
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
22 September 2018
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.
34
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF OPG POWER VENTURES PLC
Opinion
We have audited the Consolidated Financial Statements of OPG
Power Venture plc (“the Company”) and its subsidiaries (“the Group”)
for the year ended 31 March 2018, 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 notes to the Consolidated
Financial Statements, including a summary of significant accounting
policies. The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards as adopted by the European Union.
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s affairs as at
31 March 2018 and of its loss for the year then ended; and
• have been properly prepared in accordance with International
Financial Reporting Standards as adopted by the European
Union; and
• have been prepared in accordance with the Isle of Man
Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the Auditor’s
responsibilities for the audit of the financial statements section of
our report. We are independent of the Group in accordance with the
ethical requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in
relation to which the ISAs (UK) require us to report to you where:
• the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any
identified material uncertainties that may cast significant doubt about
the Company’s or the Group’s ability to continue to adopt the going
concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
we identified, including those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as
a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Key audit matter
How we addressed
the key audit matter
in the audit
Accounting for the sale of a subsidiary
The Group had disposed of a 5% shareholding in Bhadreshwar Vidyut Private Limited (“BVP”, formerly known
as Gujarat Private Limited) to BEE Electric Limited with an effective date of 31 March 2018 and has
deconsolidated its share of the net assets and liabilities in BVP (refer to note 7 of the financial statements).
IFRSs require an investor to determine if he controls an investee or exercises significant influence and this
assessment requires judgement.
Management determined that whilst the Group retains a 46% shareholding it has lost control and significant
influence as of 31 March 2018 and has deconsolidated the subsidiary.
Management has determined that the fair value of the remaining 46% shareholding in BVP at the year end
date was £40,000.
We reviewed the legal documentation to ascertain that the conditions precedent under the share sale
agreement had been met and that through the sale of the 5% shareholding control was lost.
We consulted legal experts to establish that voting rights related to the remaining 46% shareholding had been
transferred to BEE Electric with legal effect of 31 March 2018 and that hence the power to participate in the
financial and operating decision of BVP had been lost.
We assessed whether BEE Electric is a related party of the Group and have not identified any common
shareholders or Directors between the entities.
We reviewed the key assumptions and inputs to the valuation, in particular the expected future cash flows and
the applied discount rate. We consulted with our internal valuation experts and challenged management’s
assumptions in determining a value of £40,000 for the remaining interest in BVP.
Power Ventures Plc
Annual Report & Accounts 2018
35
Strategic Report
Corporate Governance
Financial Statements
INDEPENDENT AUDITORS’ REPORT
CONTINUED
Key audit matter
Going concern
As at 31 March 2018 the Group had £2.2m in cash and net current assets of £1.3m. The Directors and
management have prepared a cash flow forecast to September 2019, 12 months from the date this report
has been approved (refer to note 5a of the financial statements).
The Group experiences sensitivity in its cash flow forecasts due to the exposure to settle guarantees provided
to the lenders of BVP and the potential increase in USD denominated coal prices and a decrease in the value
of the Indian Rupee.
Management and the Directors believe that the Group will trade in line with the forecasts which have taken into
consideration the sensitivities described above.
Given the key judgements applied by the Directors and management in preparing the cash flow forecast and
the inherent sensitivities, we assessed going concern as a significant risk.
How we addressed the
key audit matter
We agreed the opening cash position used in the cash flow forecast to the position as at 31 August 2018.
We challenged the key estimates applied to EBITDA forecasts through to historical past performance, actual
results to date for the 2019 financial year and commodity price forecasts.
We assessed management’s judgement with regards to key sensitivities and reviewed documentation which
supports management’s conclusion that it is unlikely that a guarantee provided to the lenders of BVP will be
called upon.
We sensitised the cash flows to evaluate the minimum funding requirements.
We reviewed the disclosures regarding going concern in the notes to the financial statements to ensure these
are reasonable based on the work performed above.
Our application of materiality
FY2018
Group materiality £1,400,000
Basis for determining materiality 1% of revenue from
continuing operations
Group performance materiality £700,000
Basis for performance materiality 50% of Group materiality
We apply the concept of materiality both in planning and performing
our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including
omissions, could influence the economic decisions of reasonable
users that are taken on the basis of the financial statements.
Importantly, misstatements below these levels will not necessarily
be evaluated as immaterial as we also take account of the nature
of identified misstatements, and the particular circumstances of
their occurrence, when evaluating their effect on the financial
statements as a whole.
We have determined a revenue based measure is appropriate as the
Group’s profits have been fluctuating and the result of the year has
been heavily impacted by the disposal of BVP.
We agreed with the Audit Committee that we would report to the
Committee all individual audit differences identified during the course
of our audit in excess of £20,000.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the
Group and its environment, including the Group’s system of internal
control, and assessing the risks of material misstatement in the
financial statements at the Group level.
BDO UK audited all the material components of the Group, which
consist of OPG Power Ventures Plc, OPG Power Generation Limited,
Bhadreshwar Vidyut Private Limited (formerly known as OPG Power
Gujarat Private Limited) and GITA Power and Infrastructure Private
Limited, with the assistance of local staff from the BDO network
member firm in India, working under the direction and supervision
of the Group audit team. The material components were audited to
a component performance materiality of £0.5m.
Other information
The Directors are responsible for the other information. The other
information comprises the information included in the annual
report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance
conclusion thereon.
36
Power Ventures Plc
Annual Report & Accounts 2018
Use of our report
This report is made solely to the Company’s Directors, as a body, in
accordance with our engagement letter dated 30 April 2018 Our audit
work has been undertaken so that we might state to the Company’s
Directors 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 Directors as a body, for our audit work,
for this report, or for the opinions we have formed.
BDO LLP
London
23 September 2018
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
Strategic Report
Corporate Governance
Financial Statements
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the
Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view
and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for
assessing the Group’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located at the Financial Reporting Council’s website at:
https://www.frc.org.uk/auditorsresponsibilities
This description forms part of our auditor’s report.
Power Ventures Plc
Annual Report & Accounts 2018
37
Strategic Report
Corporate Governance
Financial Statements
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 31 MARCH 2018
As at As at
(All amounts in £, unless otherwise stated) Notes 31 March 2018 31 March 2017
Assets
Non-current assets
Intangible assets 14 64,170 223,224
Property, plant and equipment 15 207,271,135 479,904,726
Investments accounted for using the equity method 16 11,219,378 1,342,395
Other long-term assets 17 3,000,333 2,665,892
Restricted cash 20 4,966,140 3,825,733
226,521,156 487,961,970
Current assets
Inventories 19 9,716,280 16,853,761
Trade and other receivables 18 33,695,545 84,271,986
Other short-term assets 17 9,414,971 12,686,018
Current tax assets (net) 2,890,933 826,398
Restricted cash 20 20,318,985 14,009,027
Cash and cash equivalents 20 2,185,570 13,086,123
78,222,284 141,733,313
Total assets 304,743,440 629,695,283
Equity and liabilities
Equity
Share capital 21 52,378 51,672
Share premium 21 125,567,473 124,319,142
Other components of equity 1,193,995 22,065,498
Retained earnings 11,461,826 101,491,205
Equity attributable to owners of the Company 138,275,672 247,927,517
Non-controlling interests 854,752 (11,239,914)
Total equity 139,130,424 236,687,603
Liabilities
Non-current liabilities
Borrowings 23 69,636,532 284,415,451
Trade and other payables 24 17,547,733 283,754
Deferred tax liabilities (net) 13 1,457,209 1,007,851
88,641,474 285,707,056
Current liabilities
Borrowings 23 23,829,415 36,576,466
Trade and other payables 24 52,331,422 70,706,795
Other liabilities 810,705 17,363
76,971,542 107,300,624
Total liabilities 165,613,016 393,007,680
Total equity and liabilities 304,743,440 629,695,283
The notes are an integral part of these Consolidated Financial Statements.
The financial statements were authorised for issue by the Board of Directors on 22 September 2018 and were signed on its behalf by
Arvind Gupta Executive Chairman Dmitri Tsvetkov Chief Financial Officer
38
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
Year ended
31 March 2017
Year ended “Restated” (Refer
(All amounts in £, unless otherwise stated) Notes 31 March 2018 Notes 5(a), 9(a))
Revenue 140,115,336 136,164,683
Cost of revenue 9 (100,195,277) (67,738,591)
Gross profit 39,920,059 68,426,092
Other income 10 1,979,024 148,429
Distribution cost (10,293,699) (9,088,937)
General and administrative expenses (7,559,711) (7,377,218)
Depreciation (6,526,177) (6,556,582)
Operating profit before impairments 17,519,496 45,551,784
Impairment provision for loss on investments and assets under construction 7(b) (7,280,793) –
Operating profit 10,238,703 45,551,784
Share of loss from equity accounted investments 16 (35,296) (352)
Finance costs 11 (12,931,972) (14,987,980)
Finance income 12 1,623,500 1,138,565
(Loss)/profit before tax (1,105,065) 31,702,017
Tax (expense)/income 13 (3,072,731) 4,794,779
(Loss)/profit for the year from continued operations (4,177,796) 36,496,796
Loss from discontinued operations, including Non-Controlling Interest 7(a) (96,700,467) (13,420,892)
(Loss)/profit for the year (100,878,263) 23,075,904
(Loss)/profit for the year attributable to:
Owners of the Company (87,141,023) 29,614,506
Non-controlling interests (13,737,240) (6,538,602)
(100,878,263) 23,075,904
(Loss)/earnings per share from continued operations
Basic earnings per share (in Pence) 26 (1.18) 9.45
Diluted earnings per share (in Pence) (1.18) 9.41
Loss per share from discontinued operations
Basic earnings per share (in Pence) 26 (24.13) (1.95)
Diluted earnings per share (in Pence) (24.13) (1.94)
(Loss)/earnings per share
– Basic (in pence) 26 (24.68) 8.43
– Diluted (in pence) (24.68) 8.39
Other comprehensive (loss)/income
Items that will be reclassified subsequently to profit or loss
Available for sale financial assets
– Reclassification to profit or loss (73,351) (38,557)
– Current year gains – 73,351
Exchange differences on translating foreign operations (20,871,345) 34,890,638
Items that will be not reclassified subsequently to profit or loss
Exchange differences on translating foreign operations (555,331) (1,166,597)
Total other comprehensive (loss)/income (21,500,027) 33,758,835
Total comprehensive (loss)/income (122,378,290) 56,834,739
Total comprehensive (loss)/income attributable to:
Owners of the Company (108,085,719) 64,539,938
Non-controlling interest (14,292,571) (7,705,199)
(122,378,290) 56,834,739
The notes are an integral part of these Consolidated Financial Statements.
The financial statements were authorised for issue by the Board of Directors on 22 September 2018 and were signed on its behalf by
Arvind Gupta Executive Chairman Dmitri Tsvetkov Chief Financial Officer
Power Ventures Plc
Annual Report & Accounts 2018
39
Strategic Report
Corporate Governance
Financial Statements
CONSOLIDATED STATEMENTS
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
Foreign Total
currency attributable Non-
(All amounts in £, Issued capital Ordinary Share Other translation Retained to owners controlling Total
unless otherwise stated) (No. of shares) shares premium reserves reserve earnings of parent interests equity
At 1 April 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 3,106,158 3,811,042 (3,811,040) 2
Dividends # 4,160 1 2,618 – – (913,910) (911,291) – (911,291)
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
Adjustments on account
of deconsolidation
subsidiary (Note 7(a)) – – – – – – – 26,353,147 26,353,147
Impact of change in shareholding
structure during the year – – – – (18,312) (15,779) (34,090) 34,090 –
Dividends # (Note 21) 4,799,742 706 1,248,331 – 91,505 (2,872,577) (1,532,036) – (1,532,036)
Transaction with owners 4,799,742 706 1,248,331 – 73,193 (2,888,356) (1,566,126) 26,387,237 24,821,111
Loss for the year – – – – – (87,141,023) (87,141,023) (13,737,240) (100,878,263)
Other comprehensive income – – – (73,351) (20,871,345) – (20,944,696) (555,331) (21,500,027)
Total comprehensive income – – – (73,351) (20,871,345) (87,141,023) (108,085,719) (14,292,571) (122,378,290)
At 31 March 2018 356,308,697 52,378 125,567,473 6,650,305 (5,456,310) 11,461,826 138,275,672 854,752 139,130,424
# During the year, in addition to the cash dividend the Company has paid a scrip dividend of 4,799,742 shares (2017: 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 22 September 2018 and were signed on its behalf by
Arvind Gupta Executive Chairman Dmitri Tsvetkov Chief Financial Officer
40
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
Year ended
31 March 2017
Year ended “Restated” (Refer
(All amounts in £, unless otherwise stated) Notes 31 March 2018 Notes 5(a), 9(a))
Cash flows from operating activities
(Loss)/profit before income tax (97,805,532) 18,281,125
Adjustments for:
– Loss from discontinued operations, net 7(a) 96,700,467 13,420,892
– Unrealised foreign exchange loss (64,747) 54,616
– Financial costs 12,931,972 14,987,980
– Financial income (1,623,500) (1,138,565)
– Share based compensation costs – 87,907
– Depreciation and amortisation 6,526,177 6,556,582
– Impairment provision for loss on investments and assets under construction 7(b) 7,280,793 –
– Loss/(gain) on sale of shares in AFS investments (159,998) –
– Share of net loss from associates 35,296 352
Changes in working capital
Trade and other receivables 4,928,335 21,784,640
Inventories 1,943,460 (5,311,412)
Other assets (668,761) (4,734,018)
Trade and other payables 26,381,201 (7,835,609)
Other liabilities 807,855 (164,463)
Cash generated from continuing operations 57,213,018 55,990,027
Taxes paid (823,728) (3,910,745)
Cash provided by (used for) operating activities of continuing operations 56,389,290 52,079,282
Cash provided by (used for) operating activities of discontinued operations 24,239,702 4,008,164
Net cash from operating activities 80,628,992 56,087,446
Cash flows from investing activities
Purchase of property, plant and equipment (including capital advances) (1,090,689) (3,094,608)
Interest received 1,547,138 974,644
Dividend received – 163,920
Movement in restricted cash (16,103,811) (4,482,838)
Sale of investments 2,676,801 88,415,450
Purchase of investments (14,972,747) (93,646,865)
Advances in associates (1,985,863) –
Cash provided by (used for) investing activities of continuing operations (29,929,171) (11,670,297)
Cash provided by (used for) investing activities of discontinued operations 442,963 (3,495,149)
Net cash used in investing activities (29,486,208) (15,165,446)
Cash flows from financing activities
Proceeds from borrowings (net of costs) 4,099,459 5,575,721
Repayment of borrowings (25,070,007) (27,080,680)
Dividend paid (1,623,539) (911,293)
Interest paid (12,931,972) (14,987,980)
Cash provided by (used for) financing activities of continuing operations (35,526,059) (37,404,232)
Cash provided by (used for) financing activities of discontinued operations (25,127,046) (140,741)
Net cash from financing activities (60,653,105) (37,544,973)
Net (decrease)/increase in cash and cash equivalents from continuing operations (9,065,940) 3,004,753
Net (decrease)/increase in cash and cash equivalents from discontinued operations (444,381) 372,274
Net (decrease)/increase in cash and cash equivalents (9,510,321) 3,377,027
Cash and cash equivalents at the beginning of the year 13,086,123 7,153,455
Exchange differences on cash and cash equivalents (843,405) 3,303,636
Cash and cash equivalents from the deconsolidation of discontinued operations (546,827) (747,995)
Cash and cash equivalents at the end of the year 2,185,570 13,086,123
The notes are an integral part of these Consolidated Financial Statements.
Power Ventures Plc
Annual Report & Accounts 2018
41
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
(ALL AMOUNTS ARE IN £, UNLESS OTHERWISE STATED)
1. Nature of operations
OPG Power Ventures Plc (‘the Company’ or ‘OPGPV’), and its subsidiaries (collectively referred to as ‘the Group’) are primarily engaged in the
development, owning, operation and maintenance of private sector power projects in India. The electricity generated from the Group’s plants is
sold principally to public sector undertakings and heavy industrial companies in India or in the short term market. The business objective of the
Group is to focus on the power generation business within India and thereby provide reliable, cost effective power to the industrial consumers
and other users under the ‘open access’ provisions mandated by the Government of India.
2. Statement of compliance
The Consolidated Financial Statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS)
and their interpretations as adopted by the European Union (EU) and the provisions of the Isle of Man, Companies Act 2006 applicable to
companies reporting under IFRS.
3. General information
OPG Power Ventures Plc, a limited liability corporation, is the Group’s ultimate parent Company and is incorporated and domiciled in the Isle of
Man. The address of the Company’s registered Office, which is also the principal place of business, is IOMA House, Hope Street, Douglas, Isle
of Man IM1 1JA. The Company’s equity shares are listed on the Alternative Investment Market (AIM) of the London Stock Exchange.
The Consolidated Financial statements for the year ended 31 March 2018 were approved and authorised for issue by the Board of Directors
on 22 September 2018.
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’ 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. 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 18) and investments in
debt-type assets currently classified as AFS and HTM (see note 16), 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.
We have assessed the potential impact of adopting the new expected credit loss model and don’t believe this to be material.
IFRS 9 is effective for annual reporting periods beginning on or after 1 January 2018.
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’, and several
revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in
many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations,
variable pricing, customer refund rights, supplier repurchase options, and other common complexities.
42
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
4. Recent accounting pronouncements continued
IFRS 15 is effective for annual reporting periods beginning on or after 1 January 2018. Management does not expect any significant impact
of IFRS 15.
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’. Management does not expect any significant impact of IFRS 16.
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 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.
Results of operations of Bhadreshwar Vidyut Private Limited (herein referred to as BVP and formerly known as OPGS Power Gujarat Private
Limited) were reclassified to discontinued operations (note 7(a)).
Depreciation was reclassified from Cost of Revenue and General and Administrative expenses to a separate line in the Consolidated Statement
of Comprehensive Income.
As at 31 March 2018 the Group had £2.2m in cash and net current assets of £1.3m. The Directors and management have prepared a cash
flow forecast to September 2019, 12 months from the date this report has been approved.
The Group experiences sensitivity in its cash flow forecasts due to the exposure to settle a guarantee provided to the lenders of BVP and the
potential increase in USD denominated coal prices and a decrease in the value of the Indian Rupee.
During these periods the Group is exposed to the risk that a guarantee provided to the lenders of BVP of £7.2m is called upon. Based on
recent loan repayments made by BVP the exposure risk has reduced to £5.8m. As BVP has been awarded captive status for the years FY16,
FY17 and FY18 the DISCOMS will be refunding the Cross Subsidy Charges to the Captive customers of BVP and in return these customers
will be settling their debts with BVP and hence it is unlikely that the guarantee will be called upon.
If against our expectation the guarantee is called upon then the Directors and management are confident that the Group can raise additional
funds. The Directors and management are confident that the Group will be trading in line with its forecast and that any exposure to a fluctuation
in coal prices or the exchange rate INR/USD has been taken into consideration and therefore prepared the financial statements on a going
concern basis.
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 2018. 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.
Power Ventures Plc
Annual Report & Accounts 2018
43
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
5. Summary of significant accounting policies continued
Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the
consolidated statement of comprehensive income and within equity in the consolidated statement of financial position, separately from parent
shareholders’ equity. Acquisitions of additional stake or dilution of stake from/ to non-controlling interests/ other venturer in the Group where
there is no loss of control are accounted for as an equity transaction, whereby, the difference between the consideration paid or received and
the book value of the share of the net assets is recognised in ‘other reserve’ within statement of changes in equity.
c) Investments in associates and joint ventures
Investments in associates and joint ventures are accounted for using the equity method. The carrying amount of the investment in associates
and joint ventures is increased or decreased to recognise the Group’s share of the profit or loss and other comprehensive income of the
associate and joint venture, adjusted where necessary to ensure consistency with the accounting policies of the Group.
Unrealised gains and losses on transactions between the Group and its associates and joint ventures are eliminated to the extent of the
Group’s interest in those entities. Where unrealised losses are eliminated, the underlying asset is also tested for impairment.
d) List of subsidiaries, joint ventures, and associates
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 2018 March 2017 March 2018 March 2017
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 72.72 77.07 99.91 99.90
Bhadreshwar Vidyut Private
Limited (‘BVP’) (*) GPIPL India (*) 51.00 (*) 51
Samriddhi Solar Power Private Limited OPGPG India 72.72 77.07 99.90 99.90
Samriddhi Surya Vidyut Private Limited OPGPG India 72.72 77.07 99.90 99.90
OPG Surya Vidyut Private Limited OPGPG India 72.72 77.07 99.90 99.90
Powergen Resources Pte Ltd OPGPV Singapore 98.64 98.85 100.00 99.90
(*) During the current financial year end, GPIL sold 5% of its shareholding in BVP (formerly known as OPGS Power Gujarat Private Limited), and thereby reducing its
stake to 46% as a result of which the Group lost control over BVP. In addition, the Group also does not have any significant influence in BVP (note 7(a) Loss from
discontinued operations and impairment provision), therefore, the investment in BVP was classified as available for sale and BVP financial statements were consequently
deconsolidated as on 31st March 2018. During the previous financial year, BVP 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
was accounted as an equity transaction, and accordingly no gain or loss was recognised in consolidated income statement.
ii) Joint ventures (note 7 (b))
Joint venture Venturer incorporation March 2018 March 2017 March 2018 March 2017
Country of
% Voting Right % Economic interest
Padma Shipping Limited (“PSL”) OPGPV/OPGPG Hong Kong 50 50 50 50
44
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
5. Summary of significant accounting policies continued
iii) Associates
The Group has invested in the following entities which are in the business of solar projects in India.
Associates Investor incorporation March 2018 March 2017 March 2018 March 2017
Country of
% Voting Right % Economic interest
Avanti Solar Energy Private Limited OPGPG India 31 31 31 31
Mayfair Renewable Energy Private Limited OPGPG India 31 31 31 31
Avanti Renewable Energy Private Limited OPGPG India 31 31 31 31
Brics Renewable Energy Private Limited OPGPG India 31 31 31 31
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 2018: 90.81 (2017: 80.82) and the average rate for the year ended 31 March 2018: 85.40 (2017: 87.52)
f) Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow to the Group, and
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable in accordance with the
relevant agreements, net of discounts, rebates and other applicable taxes and duties.
Sale of electricity
Revenue from the sale of electricity is recognised when earned on the basis of contractual arrangement with the customers and reflects the
value of units supplied including an estimated value of units supplied to the customers between the date of their last meter reading and the
reporting date.
Interest and dividend
Revenue from interest is recognised as interest accrued (using the effective interest rate method). Revenue from dividends is recognised when
the right to receive the payment is established.
g) Operating expenses
Operating expenses are recognised in the statement of profit or loss upon utilisation of the service or as incurred.
h) Taxes
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other comprehensive income or
directly in equity.
Current income tax assets and/or liabilities comprise those obligations to, or claims from, taxation authorities relating to the current or prior
reporting periods, that are unpaid at the reporting date. Current tax is payable on taxable profit, which differs from profit or loss in the
financial statements.
Power Ventures Plc
Annual Report & Accounts 2018
45
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
5. Summary of significant accounting policies continued
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 de-recognised 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 de-recognised when it is extinguished, discharged, cancelled or expires.
Financial assets are classified into the following categories upon initial recognition:
i.
ii.
loans and receivables
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.
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’.
46
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
5. Summary of significant accounting policies continued
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.
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.
Power Ventures Plc
Annual Report & Accounts 2018
47
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
5. Summary of significant accounting policies continued
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 cash-generating
unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to
determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount
of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the profit or loss.
q) Assets held for sale and discontinued operations
Non-current assets and any corresponding liabilities held for sale and any directly attributable liabilities are recognised separately from other
assets and liabilities in the balance sheet in the line items “Assets held for sale” and “Liabilities associated with assets held for sale” if they can
be disposed of in their current condition and if there is sufficient probability of their disposal actually taking place. Discontinued operations are
components of an entity that are either held for sale or have already been sold and can be clearly distinguished from other corporate
operations, both operationally and for financial reporting purposes. Additionally, the component classified as a discontinued operation must
represent a major business line or a specific geographic business segment of the Group. Non-current assets that are held for sale either
individually or collectively as part of a disposal group, or that belong to a discontinued operation, are no longer depreciated. They are instead
accounted for at the lower of the carrying amount and the fair value less any remaining costs to sell. If this value is less than the carrying
amount, an impairment loss is recognised. The income and losses resulting from the measurement of components held for sale as well as the
gains and losses arising from the disposal of discontinued operations, are reported separately on the face of the income statement under
income/loss from discontinued operations, net, as is the income from the ordinary operating activities of these divisions. Prior-year income
statement figures are adjusted accordingly. However, there is no reclassification of prior-year balance sheet line items attributable to
discontinued operations.
r) 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 3 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.
s) 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 based on weighted average price. Net realisable value is the estimated selling price in the ordinary course of business, less
estimated selling expenses.
t) 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 earnings per share the net profit or loss for the period attributable to equity share holders and
the weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity share.
48
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
5. Summary of significant accounting policies continued
u) 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.
v) Share based payments
The Group operates equity-settled share-based remuneration plans for its employees. None of the Group’s plans feature any options for a
cash settlement.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are
rewarded using share-based payments, the fair values of employees’ services is determined indirectly by reference to the fair value of the equity
instruments granted. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example
profitability and sales growth targets and performance conditions).
All share-based remuneration is ultimately recognised as an expense in profit or loss with a corresponding credit to ‘Other Reserves’.
If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are
expected to become exercisable. Estimates are subsequently revised if there is any indication that the number of share options expected to
vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to
any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares
issued are allocated to share capital with any excess being recorded as share premium.
w) 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.
Power Ventures Plc
Annual Report & Accounts 2018
49
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
5. Summary of significant accounting policies continued
x) 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 judgments, 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 judgment 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 judgment 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 judgments,
estimates and assumptions made by the management and will seldom equal the estimated results.
a) Judgments
The following are significant management judgments in applying the accounting policies of the Group that have the most significant effect on
the financial statements.
Assessing control of subsidiaries, associates, joint ventures
During the year the Group has sold a 5% per cent equity stake in its special purpose vehicle BVP to Bee Electric, an Indian company. This
transaction reduced the Group’s equity interest in BVP to 46%. A voting agreement was signed with Bee Electric whereby OPG shall exercise
all its rights of voting at the general meetings of BVP in accordance with the directions of Bee Electric. Sale of the 5% stake and execution of
voting agreement resulted in the Company losing control and significant influence over BVP and in accordance with International Financial
Reporting Standards BVP was deconsolidated as of 31 March 2018 and the Group’s remaining 46% in BVP was accounted for as an
investment at fair value as at 31 March 2018.
Recognition of revenue and receivables
The operating entities of the Group has entered into power purchase agreements with transmission companies incorporated by the Indian state
government (TANGEDCO) to sell the electricity generated. The Group has exposure to credit risk from accounts receivable balances on sale of
electricity. 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. Consequent to
delay in payments by TANGEDCO the Group has in accordance with power purchase agreements invoiced for surcharge on delayed payments.
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.
Trade receivables
The Group ascertains the expected credit losses (ECL) for all receivables and adequate impairment provision are made.
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.
50
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
6. Significant accounting judgments, estimates and assumptions continued
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 29).
iii.
Impairment tests: In assessing impairment, management estimates the recoverable amount of each asset or cash-generating units based
on expected future cash flows and use an interest rate for discounting them. Estimation uncertainty relates to assumptions about future
operating results including fuel prices, foreign currency exchange rates etc. 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.
7. Loss from discontinued operations and impairment provisions
a) Loss from discontinued operations of BVP
During the year the Group has sold a 5% per cent equity stake in its special purpose vehicle BVP to a local firm, Bee Electric Power Private
Limited (“Bee Electric”), that has already assisted BVP in resolving several issues raised by the DISCOMS and will continue to assist BVP in its
dealings with DISCOMS, captive consumers and regulators. The 5% equity interest in BVP will provide long-term incentives for Bee Electric and
will better align its interests with those of BVP. The Group retains the ability to buyback the 5% shareholding at fair value in the future. This
transaction reduced the Group’s equity interest in BVP to 46%. The Group does not expect any cash flow or dividends from BVP. Sales proceeds
from selling a 5% equity interest in BVP is approximately GBP 4,535 which represents tax book value. Also a voting agreement was signed with
Bee Electric whereby OPG shall exercise all its rights of voting at the general meetings of BVP in accordance with the directions of Bee Electric.
Sale of the 5% stake and execution of voting agreement resulted in the Company losing control and significant influence over BVP and in
accordance with International Financial Reporting Standards BVP was deconsolidated as of 31 March 2018 and the Group’s remaining 46% in
BVP was accounted for as an investment at fair value as at 31 March 2018. Fair Valuation of retained investments in BVP is on basis of recent
transaction. Starting from 2018-19, the results of operations of BVP will not be consolidated in OPG Group’s Consolidated Financial Statements.
The Board has decided to conduct a review of strategic options at Gujarat. The Board’s strategic review will occur alongside but separately to the
development of a lender-assisted Resolution Plan (“RP”) as per the Reserve Bank of India (“RBI”) circular dated 12 February 2018 setting out a
revised framework to reschedule the terms of BVP’s term loans. These were described in the Company’s statement of 13th March 2018. The
circumstances leading to the requirement to develop an RP were due to the accumulated impact of delayed recognition of captive power status
and the withholding of the CSS. The RP plan was developed and presented to the banks but it has not been approved and implemented at the
date of signing of these financial statements.
The loss from discontinued operations of BVP consists of:
£
i Operating loss of BVP for current year 27,990,427
ii Loss on deconsolidation of BVP 22,330,728
iii Impairment provision for investments in debentures of BVP 11,060,890
iv Impairment provision for trade receivables and trade advances to BVP 21,969,479
v Impairment provision for financial securities pledged with lenders of BVP 13,348,943
Total loss from discontinued operations of BVP 96,700,467
Loss on deconsolidation of BVP:
£
Consideration received 4,535
Fair value of retained non-controlling investment in BVP 40,453
Total (A) 44,988
Total assets 256,056,615
Total liabilities 260,034,046
Net liabilities at date of loss of control (B) (3,977,431)
Non-controlling interest on date of loss of control (C) 26,353,147
Net loss on disposal affecting the Group (A-B-C) (22,330,728)
Power Ventures Plc
Annual Report & Accounts 2018
51
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
7. Loss from discontinued operations and impairment provisions continued
Income statement of BVP
Year ended Year ended
31 March 2018 31 March 2017
Revenue 91,536,946 68,833,732
Cost of revenue (69,294,346) (47,361,949)
Gross profit 22,242,600 21,471,783
Other income 393,243 749,122
Distribution cost (14,805,606) (4,604,207)
General and administrative expenses (1,848,316) (3,064,388)
Depreciation (6,143,974) (5,379,781)
Operating profit (162,053) 9,172,529
Finance costs (28,343,101) (23,829,929)
Finance income 514,727 439,137
Loss before tax (27,990,427) (14,218,263)
Tax income/(expense) – 797,371
Loss after tax (27,990,427) (13,420,892)
b) Impairment provision for loss on investments and assets under construction – £7,280,793:
(i) Impairment provision of investments in joint venture Padma Shipping Limited – £3,247,668
In 2014 the Company 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 Arrangement, the Company and Noble agreed to jointly purchase and operate
two 64,000 MT cargo vessels through a Joint venture company Padma Shipping Ltd, Hong Kong (‘Padma’).
During the year, the Joint Venture partner due to a change in their Group strategy requested for the Joint Venture to be terminated. As the
vessels were still under construction and yet to be delivered during 2018, we agreed and the process for the same will be initiated in FY19.
OPG has invested approximately £3,484,178 in equity and £1,727,418 to date as advance and accordingly the joint venture has been reported
using equity method as per the requirements of IFRS 11. The Company provided corporate guarantee for 50% of equity portion of the cost of
construction of the vessels remaining balance in amount of £2,006,035 (equivalent of $2,800,000) which was recognised in these financial
statements as part of GBP 3,247,668 million provision as the shipping yard requested payment subsequent to the year end. The Company
recognised an impairment provision in these financial statements of £3,247,668 against its investment to date on account of the impending
dissolution of the JV.
(ii) Impairment of assets under construction – £4,033,125
During the year the Company impaired an amount of £4,033,125 relating to obsolete assets under construction, as a one off transaction.
The plant and machinery under construction of proposed 12 MW power project to be set up on a 120 acre brownfield site in the industrial
heartland of Karnataka state at Bellary, has been impaired as the Group does not expect any economic benefits out of same. The plant and
machinery were purchased along with the land and is of no use hence needs to be scrapped.
8. 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 £18,894,360 (2017: £18,489,011).
52
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
9. Costs of inventories and employee benefit expenses included in the
consolidated statements of comprehensive income
a) Cost of fuel
Restated (1)
31 March 2018 31 March 2017
Included in cost of revenue:
Cost of fuel consumed 95,465,961 64,455,177
Other direct costs 4,729,316 3,283,414
Total 100,195,277 67,738,591
(1) Till previous year 2017 depreciation of £6,556,582 was included in cost of revenue £6,063,132 and General and Administrative expenses £493,450. From current
year total depreciation £6,526,177 is reclassified to a separate line in the Consolidated Statement of Comprehensive Income.
b) Employee benefit expenses forming part of general and administrative expenses are as follows:
31 March 2018 31 March 2017
Salaries and wages 3,221,663 2,792,417
Employee benefit costs * 702,020 373,725
Employee stock option – 87,907
Total 3,923,683 3,254,049
* includes £23,994 (2017: 34,590) being expenses towards gratuity which is a defined benefit plan (note 5(w)).
c) Auditor’s remuneration for audit services amounting to £90,000 (2017: £90,000) is included in general and
administrative expenses.
d) Foreign exchange movements (realised and unrealised) included in the general and administrative expenses
is as follows:
31 March 2018 31 March 2017
Foreign exchange realised – gain/(loss) 624,196 (115,033)
Foreign exchange unrealised – gain/(loss) 64,747 (54,616)
Total 688,943 (169,649)
10. Other income and expenses
Other income
31 March 2018 31 March 2017
Sale of coal 162,394 65,968
Sale of fly ash 53,198 18,160
Power trading commission and other services 558,657 –
Sale of Solar power plant system to associates (Net of cost) (note 25) 44,505 –
Others 1,160,270 64,301
Total 1,979,024 148,429
Power Ventures Plc
Annual Report & Accounts 2018
53
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
11. Finance costs
Finance costs are comprised of:
31 March 2018 31 March 2017
Interest expenses on borrowings 12,237,962 12,482,371
Other finance costs 694,010 2,505,609
Total 12,931,972 14,987,980
12. Finance income
Finance income is comprised of:
31 March 2018 31 March 2017
Interest income on bank deposits 1,519,407 689,782
Profit on disposal of financial instruments* 104,093 448,783
Total 1,623,500 1,138,565
* Financial instruments represent the mutual funds held during the year.
13. 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 2018 and 2017 is as follows:
31 March 2018 31 March 2017
Accounting (loss)/profit before taxes (1,105,065) 31,702,017
Enacted tax rates 34.61% 34.61%
Tax (benefit)/expense on (loss)/profit at enacted tax rate (382,441) 10,971,434
Exempt Income due to tax holiday (4,921,430) (2,843,959)
Foreign tax rate differential (616,602) –
Deferred tax assets on losses not recognised 7,709,658 –
Non-taxable items (1,447,546) –
MAT credit entitlement 2,731,117 (12,919,177)
Others (25) (3,077)
Actual tax for the period 3,072,731 (4,794,779)
31 March 2018 31 March 2017
Current tax 341,614 (3,321,205)
Deferred tax 2,731,117 (5,576,609)
Less: reclassified to loss from discontinuing operations – 4,103,035
Tax reported in the statement of comprehensive income 3,072,731 (4,794,779)
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 2017: 21.34%).
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.
54
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
13. Tax expenses continued
Deferred income tax for the Group at 31 March 2018 and 2017 relates to the following:
31 March 2018 31 March 2017
Deferred income tax assets
MAT credit entitlement 11,396,590 15,691,186
11,396,590 15,691,186
Deferred income tax liabilities
Property, plant and equipment 12,853,798 16,684,770
Mark to market on available-for-sale financial assets – 14,267
12,853,798 16,699,037
Deferred income tax liabilities, net 1,457,209 1,007,851
Movement in temporary differences during the year
Recognised
Recognised in other
As at in income comprehensive Translation Impact of As at
Particulars 1 April 2017 statement income adjustment deconsolidation 31 March 2018
Property, plant and equipment (16,684,770) (1,844) – 3,832,816 – (12,853,798)
MAT credit entitlement 15,691,186 (2,731,117) – (1,563,479) – 11,396,590
Mark to market gain/(loss) on
available for sale financial assets (14,267) – 14,267 – – –
Deferred income tax asset/(liabilities), net (1,007,851) (2,732,961) 14,267 2,269,337 – (1,457,209)
Recognised
Recognised in other
As at in income comprehensive Translation Impact of As at
Particulars 1 April 2016 statement income adjustment deconsolidation 31 March 2017
Property, plant and equipment (9,287,307) (5,576,609) – (1,820,854) – (16,684,770)
Lease transactions – – – – – –
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)
Deferred income tax asset/(liabilities), net (9,310,429) 8,913,355 8,855 (619,632) – (1,007,851)
In assessing the recoverability of deferred income tax assets, management considers whether it is more likely than not that some portion or
all of the deferred income tax assets will be realised. The ultimate realisation of deferred income tax assets is dependent upon the generation
of future taxable income during the periods in which the temporary differences become deductible. The amount of the deferred income tax
assets considered realisable, however, could be reduced in the near term if estimates of future taxable income during the carry forward
period are reduced.
Shareholders resident outside the Isle of Man will not suffer any income tax in the Isle of Man on any income distributions to them. Further,
dividends are not taxable in India in the hands of the recipient. However, the Group will be subject to a “dividend distribution tax” currently at the
rate of 15% (plus applicable surcharge and education cess) on the total amount distributed as dividend.
As at 31 March 2018 and 2017, 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.
Power Ventures Plc
Annual Report & Accounts 2018
55
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
14. Intangible assets
Acquired
software licences
£
Cost
At 1 April 2016 772,127
Additions 27,298
Exchange adjustments 138,577
At 31 March 2017 938,002
Additions 26,304
Exchange adjustments (103,189)
Adjustments on account of deconsolidation of a subsidiary (13,468)
At 31 March 2018 847,648
Accumulated depreciation and impairment
At 1 April 2016 407,623
Charge for the year 215,462
Exchange adjustments 91,693
At 31 March 2017 714,778
Charge for the year 162,653
Exchange adjustments (88,322)
Adjustments on account of deconsolidation of a subsidiary (5,631)
At 31 March 2018 783,478
Net book value
At 31 March 2018 64,170
At 31 March 2017 223,224
56
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
15. 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 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)
Transfers on capitalisation – – – – – –
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
Additions (495,514) 9,725,079 53,476 3,813 – 9,286,854
Deletions – – (4,610) – – (4,610)
Transfers on capitalisation 58,937 – – – (2,998,381) (2,939,444)
Exchange adjustments (1,692,549) (53,062,680) (106,946) (303,001) (951,735) (56,116,911)
Adjustments on account of
deconsolidation of a subsidiary (8,742,160) (217,803,207) (302,502) (115,679.00) – (226,963,548)
At 31 March 2018 4,744,093 221,066,874 614,925 2,394,639 4,530,760 233,351,291
Accumulated depreciation and impairment
At 1 April 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
Charge for the year* 21,566 11,953,076 69,209 463,647 – 12,507,498
Exchange adjustments (17,066) (3,802,766) (95,031) (119,348) – (4,034,211)
Adjustments on account of
deconsolidation of a subsidiary (115,723) (12,067,207) (280,475) (113,950) – (12,577,355)
At 31 March 2018 32,174 24,456,188 526,100 1,065,694 – 26,080,156
Net book value
At 31 March 2018 4,711,919 196,610,686 88,825 1,328,945 4,530,760 207,271,135
At 31 March 2017 15,471,982 453,834,597 138,500 1,978,771 8,480,876 479,904,726
* Depreciation charge for the year above includes £6,143,974 (2017: £5,379,781) pertaining to deconsolidated subsidiary BVP (note 7 (a))
The net book value of land and buildings block comprises of:
31 March 2018 31 March 2017
Freehold land 4,292,608 15,341,763
Buildings 419,311 130,219
4,711,919 15,471,982
Property, plant and equipment with a carrying amount of £198,699,226 (2017: £477,787,455) is subject to security restrictions (refer note 23).
Power Ventures Plc
Annual Report & Accounts 2018
57
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
16. Investments accounted for using the equity method
The carrying amount of investments accounted for using the equity method is as follows:
31 March 2018 31 March 2017
Investments in joint venture 3,484,178 1,339,635
Investments in associates 11,037,659 3,112
Share of loss from equity accounted investments (35,296) (352)
Impairment provision for investments in joint venture (note 7(b)) (3,247,668) –
Elimination of intra-group margin (19,495) –
Investments accounted for using the equity method 11,219,378 1,342,395
The Group’s share of profit/(loss) from equity accounted investments is as follows:
31 March 2018 31 March 2017
Investment in joint venture (34,638) –
Investments in associates (658) (352)
(35,296) (352)
a) Investment in joint venture (note 5(d) and note 7(b))
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 2018 31 March 2017
Non-current assets 11,344,541 5,802,605
Current assets (a) 55,502 317,646
Total assets 11,400,043 6,120,251
Current liabilities (b) 4,500,962 3,440,982
Total liabilities 4,500,962 3,440,982
Net assets 6,899,081 2,679,269
(a) Includes cash and cash equivalents 60,301 10,540
(b) Includes financial liabilities (excluding trade and other payables and provisions) 4,495,297 3,440,982
A reconciliation of the above summarised financial information to the carrying amount of the investment in PSL is set out below:
31 March 2018 31 March 2017
Total net assets of PSL 6,899,081 2,679,269
Proportion of ownership interests held by the Group 50% 50%
Carrying amount of the investment in PSL 3,449,540 1,339,635
b) Investment in associates (note 5(d))
Summarised aggregated financial information of the Group’s share in the associates:
31 March 2018 31 March 2017
Loss from continuing operations (658) (352)
Other comprehensive income – –
Total comprehensive income (658) (352)
Aggregate carrying amount of the Group’s interests in these associates 11,017,506 2,760
58
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
17. Other assets
31 March 2018 31 March 2017
A. Short-term
Capital advances 278,857 1,724,432
Available for sale financial assets 65,706 2,757,272
Bank deposits – 2,903,273
Advances and other receivables 9,070,408 5,301,041
Total 9,414,971 12,686,018
B. Long-term
Advances to related parties (Refer note 25 and note 7(b)) 1,727,418 1,575,484
Investment in Debentures 785,222 –
Lease deposits 477,959 –
Bank deposits – 681,746
Other advances 9,734 408,662
Total 3,000,333 2,665,892
Available-for-sale financial assets are comprised of:
Fair value of retained investment in former subsidiary BVP (note 7 (a)). Fair Valuation of retained investments in BVP is on basis of the recent
transaction.
Quoted short-term mutual fund units
The fair value of the mutual fund instruments are determined by reference to published data. These mutual fund investments are redeemable
on demand.
Advances and other receivables (current)
Advances to suppliers include trade advance paid to BVP, amounts paid as advance to vendors for supply of fuel. Impairment provision is
made for trade advances to BVP aggregating to £20,660,649 translated at closing FX exchange rate. 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.
18. Trade and other receivables
31 March 2018 31 March 2017
Current
Trade receivables 33,644,282 80,546,225
Unbilled revenues – 3,716,051
Other receivables 51,263 9,710
33,695,545 84,271,986
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 £24,594,934 (2017: £38,571,535) has been pledged as security for borrowings. As at 31 March
2018, trade receivables of £271,116 (2017: £1,177,967) were collectively impaired and provided for. Trade receivables that are neither past
due nor impaired represents billings for the month of March. The Group has been supplying power to Tamilnadu Generation and Distribution
Corporation Limited (TANGEDCO) as per terms of relevant power purchase agreements. The Group are due a sum of £12,926,948 from
TANGEDCO for the surcharge on delayed payments made by TANGEDCO towards power supplies. A receivable has not been recognised
at this point due to the uncertainty of its collectability.
Power Ventures Plc
Annual Report & Accounts 2018
59
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
18. Trade and other receivables
The age analysis of the (overdue) trade receivables is as follows:
Year Total nor impaired Within 90 days 90 to 180 days Over 180 days
Neither past due
Past due but not impaired
2018 33,644,282 25,619,510 5,048,431 696,534 7,279,807
2017 80,546,225 19,867,879 11,203,698 7,499,958 41,974,690
The movement in the provision for trade receivables is as follows:
Adjustment on
Provision for account of
Year Opening balance the year deconsolidation Closing balance
2018 1,177,967 271,116 (1,177,967) 271,116
2017 – 1,177,967 – 1,177,967
The creation of provision for impaired receivables of £271,116 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.
Recognition of revenue and collectability of receivables
The captive consumers of BVP (a subsidiary until 31 March 2018) have withheld from the sales invoices an amount of approximately
£40,577,928 towards Cross Subsidy Surcharge (CSS) levied by GUVNL through their DISCOMs for the financial years 2015-2016, 2016-2017
and 2017-2018 challenging the grounds of fulfilment of required shareholding criteria by BVP to qualify as a captive power generating unit as per
Rule 3 of the Electricity Rules, 2005. In December 2017 BVP received confirmation from the relevant Gujarat authorities as to the plant’s Group
Captive status for 2017-2018 and in February 2018 the Gujarat DISCOMs stopped withholding CSS from BVP’s sales invoices to its customers.
In June 2018 BVP received confirmation from the relevant Gujarat authorities as to the plant’s Group Captive status for 2016-2017 and for
2015-2016 in July 2018. DISCOMs have stopped levying cross-subsidies and have now released approximately £13,977,563 of 2017-18 CSS
receivables to the captive consumers and approximately £9,009,207 of dues were already recovered from the captive consumers by BVP.
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.
19. Inventories
31 March 2018 31 March 2017
Coal and fuel 8,382,022 14,947,860
Stores and spares 1,334,258 1,905,901
Total 9,716,280 16,853,761
The entire amount of above inventories has been pledged as security for borrowings (refer to note 23)
60
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
20. Cash and cash equivalents and Restricted cash
a) Cash and short term deposits comprise of the following:
31 March 2018 31 March 2017
Cash at banks and on hand 2,185,570 13,049,622
Short-term deposits – 36,501
Total 2,185,570 13,086,123
Short-term deposits are placed for varying periods, depending on the immediate cash requirements of the Group. They are recoverable
on demand.
b) Restricted cash
Restricted cash represents deposits maturing between three to twelve months amounting to £20,318,985 (2017: £14,009,027) and maturing
after twelve months amounting to £4,966,140 (2017: £3,825,733) which have been pledged by the Group in order to secure borrowing limits
with banks. The Group has made impairment provision for £12,553,684 translated at closing FX exchange rate for bank deposits pledged in
favour of lenders of BVP (note 7(a) and note 24).
21. 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 issued 4,799,742 shares during the year with respect to scrip dividend at par value of £0.000147 (2017: £0.000147) per
share amounting to £706. The difference between fair value of shares issued above par value of £1,248,331 with respect to scrip dividend was
credited to share premium.
As at 31 March 2018, the Company has an authorised and issued share capital of 356,308,697 equity shares (2017: 351,508,955) at par value
of £0.000147 (2017: £0.000147) per share amounting to £52,378 (2017: £51,672) in total.
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.
Power Ventures Plc
Annual Report & Accounts 2018
61
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
22. 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 £nil (2017: £87,907) 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 2018 31 March 2017
At 1 April 23,274,234 23,524,234
Forfeited (1,250,000) (250,000)
At 31 March 22,024,234 23,274,234
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
23. Borrowings
The borrowings comprise of the following:
Interest rate (range %) Final maturity 31 March 2018 31 March 2017
Borrowings at amortised cost 10.35-10.99 September 2023 93,465,947 320,991,917
Total 93,465,947 320,991,917
Total debt of £93,465,947 (2017: £320,991,917) is secured as follows:
• The term loans of £90,039,325 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.
• 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. All the loans are personally guaranteed by a Director. In addition a Director
personally guaranteed £28,470,433 of BVP’s loan and £10,885,365 of loans of an associate.
• 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 2018, the Group has met all the relevant covenants.
The fair value of borrowings at 31 March 2018 was £93,465,947 (2017: £320,991,917). The fair values have been calculated by discounting
cash flows at prevailing interest rates.
62
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
23. Borrowings continued
The borrowings are reconciled to the statement of financial position as follows:
31 March 2018 31 March 2017
Current liabilities
Amounts falling due within one year 23,829,415 36,576,466
Non-current liabilities
Amounts falling due after 1 year but not more than 5 years 69,636,532 104,970,101
Amounts falling due in more than five years – 179,445,350
Total non-current 69,636,532 284,415,451
Total 93,465,947 320,991,917
24. Trade and other payables
31 March 2018 31 March 2017
Current
Trade payables 52,015,069 52,526,424
Creditors for capital goods 162,261 8,547,998
Bank overdraft – 5,609,229
Other payables 154,092 4,023,144
Total 52,331,422 70,706,795
Non-current
Provision for fair valuation of securities provided to lenders of BVP (note 7(a) and 20) (1) 12,553,684 –
Security deposit from customers 4,813,303 54,321
Other payables 180,746 229,433
Total 17,547,733 283,754
(1) translated at closing FX exchange rate.
With the exception of security deposits from customers 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.
25. Related party transactions of key management personnel
Name of the party Nature of relationship
Arvind Gupta Executive Chairman
Dmitri Tsvetkov (from November 2017) Chief Financial Officer
Jeremy Warner Allen (from November 2017) Deputy Chairman
V Narayan Swami (until November 2017) Finance Director
Martin Gatto (until November 2017) Director
Mike Grasby Director
Ravi Gupta (resigned in May 2018) Director
Jeremy Beeton (from November 2016) Director
Power Ventures Plc
Annual Report & Accounts 2018
63
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
25. Related party transactions of key management personnel continued
Related parties with whom the Group had transactions during the period
Name of the party Nature of relationship
Chennai Ferrous Industries Ltd 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
Summary of transactions with related parties
Name of the party 31 March 2018 31 March 2017
Padma Shipping Limited
a) Investment 2,077,588 746,268
b) Advances 627,205 –
Chennai Ferrous Industries Ltd
a) Purchase of coal – 10,322
Avanti Solar Energy Private Limited
a) Investment 3,336,637 124,422
b) Sale of Solar power plant system 4,586,802 –
c) Advance 56,225 –
Mayfair Renewable Energy Private Limited
a) Investment 3,595,419 124,422
b) Sale of Solar power plant system 4,024,349 –
c) Advance 87,154 –
Avanti Renewable Energy Private Limited
a) Investment 3,369,673 124,422
b) Sale of Solar power plant system 4,822,458 –
c) Advance 56,284 –
Brics Renewable Energy Private Limited
a) Investment 324,854 37,810
b) Sale of Solar power plant system 1,188,788 –
c) Advance 5,628 –
Avantika Gupta
a) Remuneration 112,412 68,556
64
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
25. Related party transactions of key management personnel continued
Summary of balance with related parties
Name of the party Nature of balance 31 March 2018 31 March 2017
Padma Shipping Limited Investment 3,484,178 1,339,635
Padma Shipping Limited Advances 1,727,418 1,167,169
Chennai Ferrous Industries Ltd Trade Payable – 10,322
Avanti Solar Energy Private Limited Investment 3,461,059 124,422
Avanti Solar Energy Private Limited Trade receivable 583,750 –
Avanti Solar Energy Private Limited Advance 56,225 –
Mayfair Renewable Energy Private Limited Investment 3,719,841 124,422
Mayfair Renewable Energy Private Limited Trade payable (236,467) –
Mayfair Renewable Energy Private Limited Advance 87,154 –
Avanti Renewable Energy Private Limited Investment 3,494,095 124,422
Avanti Renewable Energy Private Limited Trade receivable 185,569 –
Avanti Renewable Energy Private Limited Advance 56,284 –
Brics Renewable Energy Private Limited Investment 362,664 37,810
Brics Renewable Energy Private Limited Trade receivable 1,238,446 –
Brics Renewable Energy Private Limited Advance 5,628 –
Arvind Gupta Land Lease Deposit 477,959 537,039
Outstanding balances at the year-end are unsecured. There have been no guarantees provided or received for any related party receivables or
payables, except for £2,006,035 (equivalent of $2,800,000) corporate guarantee for 50% of equity portion of the cost of construction of the
vessels being built by Padma Shipping Limited. For the year ended 31 March 2018, the Group has not recorded any impairment of receivables
relating to amounts owed by related parties £nil (2017: £nil). However, the Group has made impairment provision for investments in joint venture
£3,247,668 (2017: £nil) (note 7(b)). 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.
Executive Chairman Mr. Arvind Gupta personally guaranteed £10,885,365 of loans of an associate.
26. 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 2018 or 2017).
The Company has issued options over ordinary shares which could potentially dilute basic loss per share in the future. There is no difference
between basic loss per share and diluted loss per share as the potential ordinary shares are anti-dilutive.
The weighted average number of shares for the purposes of diluted earnings per share can be reconciled to the weighted average number of
ordinary shares used in the calculation of basic earnings per share (for the Group and the Company) as follows:
Particulars 31 March 2018 31 March 2017
Weighted average number of shares used in basic earnings per share 353,108,869 351,505,142
Shares deemed to be issued for no consideration in respect of share based payments – 1,264,567
Weighted average number of shares used in diluted earnings per share 353,108,869 352,769,708
Power Ventures Plc
Annual Report & Accounts 2018
65
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
27. Directors remuneration
Name of Directors 31 March 2018 31 March 2017
Arvind Gupta 750,000 1,110,000
Dmitri Tsvetkov 290,000 –
Jeremy Warner Allen 22,500 –
V Narayan Swami 224,824 109,689
Martin Gatto 33,750 45,000
Mike Grasby 45,000 45,000
MC Gupta – 27,880
Ravi Gupta 22,500 45,000
Jeremy Beeton 45,000 22,500
Total 1,433,574 1,405,069
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.
28. Commitments and contingencies
Operating lease commitments
The Group leases office premises under operating leases. The leases typically run for a period up to 5 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 2018 31 March 2017
Not later than one year 44,771 43,226
Later than one year and not later than five years 117,898 157,056
Later than five years – –
Total 162,669 200,282
During the year ended 31 March 2018, £43,226 (2017: £41,204) was recognised as an expense in the statement of comprehensive income
in respect of operating leases.
Capital commitments
During the year ended 31 March 2019, in respect of its interest in joint ventures the Group is committed to incur capital expenditure of
$2,800,000 i.e. approximately £2,000,000 (2017: £18,630,157) of their share of interest (note 5(d)(ii)).
Contingent liabilities
Disputed income tax demand £549,789.
Guarantees and letter of credit
The Group has provided bank guarantees and letters of credit (LC) to customers and vendors in the normal course of business. The LC
provided as at 31 March 2018: £44,901,443 (2017: £40,497,741) and Bank Guarantee (BG) as at 31 March 2018: £10,168,184 (2017:
£23,425,291). LC are supporting accounts payables already recognised in statement of financial position. BG are treated as contingent
liabilities until such time it becomes probable that the Company will be required to make a payment under the guarantee.
66
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
29. 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 2018 and 31 March 2017. 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 2018, 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 2018 and 31 March 2017, 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 2018 would decrease or increase by
£934,659 (2017: £2,865,102).
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 2018 As at 31 March 2017
Currency Financial assets Financial liabilities Financial assets Financial liabilities
United States Dollar (USD) 3,711,568 62,663,286 3,000,000 19,852,758
Power Ventures Plc
Annual Report & Accounts 2018
67
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
29. 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 revaluation of the Group’s foreign currency
financial instruments:
As at 31 March 2018 As at 31 March 2017
Effect of 10% Effect of 10%
strengthening in strengthening in
Closing rate USD against INR – Closing Rate USD against INR –
Currency (INR/USD) Translated to GBP (INR/USD) Translated to GBP
United States Dollar (USD) 65.07 3,840,174 64.75 1,226,728
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 £33,761,251
(2017: £87,029,258).
The Group has exposure to credit risk from accounts receivable balances on sale of electricity. The operating entities of the Group have entered
into power purchase agreements with transmission companies incorporated by the Indian state government (TANGEDCO) to sell the electricity
generated therefore the Group is committed 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 18 are not impaired for each of the reporting
dates under review and are of good credit quality.
Liquidity risk analysis
The Group’s main source of liquidity is its operating businesses. The treasury department uses regular forecasts of operational cash flow, investment
and trading collateral requirements to ensure that sufficient liquid cash balances are available to service ongoing business requirements. The Group
manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due
in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a
rolling 90 day projection. Long-term liquidity needs for a 90 day and a 30 day lookout period are identified monthly.
The Group maintains cash and marketable securities to meet its liquidity requirements for up to 60 day periods. Funding for long-term liquidity
needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
The following is an analysis of the Group contractual undiscounted cash flows payable under financial liabilities at 31 March 2018 and
31 March 2017:
Current Non-Current
As at March 2018 Within 12 months 1-5 years Later than 5 years Total
Borrowings 23,829,415 69,636,532 – 93,465,947
Interest on borrowings 10,532,258 25,372,157 – 35,904,415
Trade and other payables 52,331,422 17,547,733 – 69,879,155
Other current liabilities 810,705 – – 810,705
Total 87,503,800 112,556,442 – 200,060,222
68
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
29. Financial risk management objectives and policies continued
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
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 2018 and 2017.
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 2018 31 March 2017
Total equity 139,130,424 236,687,603
Less: Cash and cash equivalents (2,185,570) (13,086,123)
Capital 136,944,854 223,601,480
Total equity 139,130,424 236,687,603
Add: Borrowings (including buyer’s credit) 93,465,947 320,991,917
Overall financing 232,596,371 557,679,520
Capital to overall financing ratio 0.59 0.40
Power Ventures Plc
Annual Report & Accounts 2018
69
Strategic Report
Corporate Governance
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
30. Summary of financial assets and liabilities by category and their fair values
Carrying amount Fair value
March 2018 March 2017 March 2018 March 2017
Financial assets
Loans and receivables
– Cash and cash equivalents 1 2,185,570 13,086,123 2,185,570 13,086,123
– Restricted cash 1 25,285,125 17,834,760 25,285,125 17,834,760
– Current trade receivables 1 33,695,545 84,271,986 33,695,545 84,271,986
Available-for-sale instruments 3 65,706 2,757,272 65,706 2,757,272
61,231,946 117,950,141 61,231,946 117,950,141
Financial liabilities
Term loans 93,465,947 320,991,917 93,465,947 320,991,917
Current trade and other payables 1 52,331,422 70,706,795 52,331,422 70,706,795
Non-current trade and other payables 2 17,547,733 283,754 17,547,733 283,754
163,345,102 391,982,466 163,345,102 391,982,466
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 Valuation of retained investments
in BVP is on basis of recent transaction.
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 Level1 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).
70
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
30. Summary of financial assets and liabilities by category and their fair values continued
2018 Level 1 Level 2 Level 3 Total
Available-for-sale financial assets
Unquoted securities – – 40,453 40,453
Quoted securities 25,253 – – 25,253
Total 25,253 – 40,453 65,706
2017 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 periods.
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 (CFO).
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.
31. Post – reporting date events
No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation.
Power Ventures Plc
Annual Report & Accounts 2018
71
Strategic Report
Corporate Governance
Financial Statements
CORPORATE DIRECTORY
Legal advisers
Dougherty Quinn
The Chambers
5 Mount Pleasant
Douglas
Isle of Man
IM1 2PU
Registrars
Link Market Services (Isle of Man) Limited
Clinch’s House
Lord Street
Douglas
Isle of Man
IM99 1RZ
Nominated Adviser and Broker
Cenkos Securities Plc
6–7– 8 Tokenhouse Yard
London
EC2R 7AS
Financial PR
Tavistock Communications
1 Cornhill
London
EC3V 3ND
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
BDO LLP
55 Baker Street
London
W1U 7EU
72
Power Ventures Plc
Annual Report & Accounts 2018
Strategic Report
Corporate Governance
Financial Statements
DEFINITIONS AND GLOSSARY
Act: Isle of Man Companies Act 2006
AGM: Annual General Meeting
Board: Board of Directors of OPG Power Ventures Plc
Great Britain Pound Sterling or £/pence: Pounds sterling
or pence, the lawful currency of the UK
Group Captive: Group Captive power plant as defined
under Electricity Act 2003, India
bps: Basis points
Group or OPG: the Company and its subsidiaries
BRICS: Brazil, Russia, India, China and South Africa
GW: Gigawatt is 1,000 megawatts
CAGR: Compound Average Growth Rate
IAS: International Accounting Standards
CEA: Central Electricity Authority
CO: Carbon Monoxide
Company or OPG or parent: OPG Power Ventures Plc
Discom: Distribution Company (of the State Electricity Utility)
IEA: International Energy Agency
IFRS: International Financial Reporting Standards
Indian Companies Act: the Companies Act, 1956 and
amendments thereto
kWh: Kilowatt hour is one unit of electricity
EBITDA: Earnings before interest, tax, depreciation
and amortisation
LOI: Letter of Intent
EHS: Environment, Health and Safety
LSE: London Stock Exchange plc
Electricity Act: Indian Electricity Act 2003 as amended
LTOA: Long Term Open Access
EPS: Earnings per share
ESOP: Employee Stock Options
FDI: Foreign Direct Investment
LTVT: Long Term Variable Tariff
MoU: Memorandum of Understanding
mt: Million tonnes
FY: Financial year commencing from 1 April to 31 March
MW: Megawatt is 1,000 kilowatts
GCPP: Group Captive Power Plant
MWh: Megawatt hour
GDP: Gross Domestic Product
GHG: Green House Gas
NITI Aayog: National Institution for Transforming India
Nox: Nitrogen Oxides
Government or GOI: Government of India
O&M: Operating and Management
PLF: Plant Load Factor
PPA: Power Purchase Agreement
PSA: Power Supply Agreement
Power Ventures Plc
Annual Report & Accounts 2018
73
Strategic Report
Corporate Governance
Financial Statements
DEFINITIONS AND GLOSSARY
CONTINUED
ROE: Return on Equity
Rupees/INR or Rs: Indian Rupee, the lawful currency of India
SEB: State Electricity Board
SEBI: Securities 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
UK/United Kingdom: United Kingdom of Great Britain and
Northern Ireland
US$/USD or $: US Dollars, the lawful currency of the US
74
Power Ventures Plc
Annual Report & Accounts 2018
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.
STAY IN TOUCH WITH US ONLINE
Corporate website
opgpower.com
Online annual report
www.opgpower.com/investors
CONTENTS
Strategic Report
01 Highlights
Corporate Governance
Financial Statements
22 Board of Directors
35 Independent Auditors’ report
02 Executive Chairman’s statement
24 Corporate Governance Report
04 Financial review
28 Directors’ Report
07 Key Performance Indicators
30 Directors’ Remuneration Report
08 COO Operational review
34 Statement of Directors’
10 Business model
11 Group objectives and strategies
responsibilities
12 Market review
16 Sustainability report
20 Principal risks
38 Consolidated Statement
of Financial Position
39 Consolidated Statement
of Comprehensive Income
40 Consolidated Statement
of Changes in Equity
41 Consolidated Statement
of Cash Flows
42 Notes to the Consolidated
Financial Statements
72 Corporate Directory
73 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
O
P
G
P
o
w
e
r
V
e
n
t
u
r
e
s
P
l
c
A
n
n
u
a
l
R
e
p
o
r
t
2
0
1
8
FOCUSING
ON ASSET
MAXIMISATION
PREPARING FOR
THE FUTURE &
DELEVERAGING
OPG Power Ventures Plc
Annual Report & Accounts
2018
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
T: +44 (0)1624 681200
www.opgpower.com