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POWERING INDIA
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
T: +44 (0)1624 681200
www.opgpower.com
OPG Power Ventures Plc
Annual Report & Accounts
2019
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 Auditor’s 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
43 Notes to the Consolidated
Financial Statements
74 Corporate Directory
75 Definitions and Glossary
Printed sustainably in the UK by Pureprint,
a CarbonNeutral® company with FSC ®
chain of custody and an ISO 14001-certified
environmental management system recycling
over 99% of all dry waste.
Designed and produced by fourthquarter
Strategic Report
Corporate Governance
Financial Statements
HIGHLIGHTS
REVENUES
(£m)
ADJUSTED EBITDA
(£m)
PROFIT BEFORE TAX
(£m) before impairments and tax
FY15
FY16
FY17
FY18
FY19
100.0
128.4
136.2
140.1
140.6
FY15
FY16
FY17
33.4
50.7
52.1
FY15
FY16
FY17
21.7
28.6
31.8
FY18
24.7
FY18
6.2
FY19
35.3
FY19
16.8
EPS
(£ pence)
NET DEBT / ADJUSTED EBITDA
(£m)
FY15
4.91
FY16
FY17
5.29
8.43
(24.68)
FY18
FY15
FY16
FY17
FY18
7.6
5.0
5.9
3.8
FY19
3.81
FY19
2.2
Profit after tax was £14.0m compared with a loss of £100.9m in FY18
Total generation (including deemed) of 2.7 billion units, down 2% from FY18
Revenue up 0.4% to £140.6m from £140.1m in FY18
Adjusted EBITDA of £35.3m (25.1% margin) compared with £24.7m
(17.6% margin) in FY18**
Full year scrip dividend of 0.6p per share (FY18: scrip dividend of
1p per share)
Term loans principal debt repayment £20.6m (5.3 pence per share)
Borrowings reduced with gross debt of £80.4m*, compared with £93.5m
at 31 March 2018
* Gross Debt of £80.4m consists of long-term loan of £69.9m and working capital of £10.5m
** Excluding one-off impairment provision of £7.3m in FY18
Power Ventures Plc
Annual Report & Accounts 2019
01
Strategic Report
Corporate Governance
Financial Statements
EXECUTIVE CHAIRMAN’S STATEMENT
“The outlook for the Indian economy in general
and the power sector in particular continues
to be buoyant. OPG’s business in FY19 performed
well both operationally and financially. We are
maintaining our strategy to build value for
shareholders by repaying borrowings. In the
year under review we added 5.3p per share to
equity holders from deleveraging and are
recommending a full year scrip dividend of
0.6p per share.
By maintaining our focus on the profitable
operation of our high quality assets, we expect
to continue to reduce debt and pay dividends
in order to maximise shareholder value.”
Strong operational
performance and robust
profitability
Profit from continuing operations was £15.0m
(FY18: loss of £0.9m) and net profit after tax
was £14.0m, in comparison with a loss of
£100.9m incurred in FY18 as a result of the
deconsolidation of the Gujarat plant last year.
This is the first year we are presenting full year
results based on the performance of the
Chennai plant following the deconsolidation of
the Gujarat SPV last year. Our strong operational
performance and robust profitability in FY19
is in line with expectations and demonstrates
that focusing on the existing operations and
deleveraging remains the right strategy. We
will continue to use the strong cash generation
of our existing operations to repay our debt
and we aim to be debt free by the end of
calendar 2023.
The Chennai plants’ generation, including
‘deemed’ generation, during FY19 was 2.7 billion
units, 2% lower than during FY18, with average
Plant Load Factor (‘PLF’) at 75% (FY18: 77%).
This slight decrease in generation was primarily
due to Unit IV (180 MW) being shut down from
early December 2018 to early March 2019
whilst turbine repairs were undertaken, following
an unplanned shutdown. During FY19 we
achieved a 10% increase in sales tariffs and
the average realised tariff for our industrial and
commercial customers was Rs5.41 (FY18:
Rs4.92). Since the year end, most of our users
in Chennai have renewed their contracts.
After the period end, in May 2019, the
Company secured a hedge against the volatility
of coal price movements and has entered into
a fixed price coal purchase agreement for
one million tonnes (representing approximately
60% of the Group’s annual coal requirements).
The delivery of coal under the purchase
agreement started in June 2019 and will end in
March 2020. This means that OPG expects
greater visibility of FY20 financial performance.
This was the first year of operations of the
Group’s Karnataka solar projects (62 MW)
situated north of Bengaluru. All plants are
operational and have met all critical operating
metrics. A Capacity Utilisation Factor of
17% was achieved in FY19 for these solar
projects which is well within industry standard.
However, given the long-term returns from
solar projects and the level of capital
investment required, the Board has decided
to focus on the core thermal power plants
business and announces its intention to
dispose of the Karnataka solar projects.
Continued deleveraging
In FY19, the Group’s revenue was £140.6m
(FY18: £140.1m) and adjusted EBITDA was
£35.3m (FY18: £24.7m). Average adjusted
EBITDA for the last five years was £39.2m.
Total borrowings during FY19 were reduced
from £93.5m to £80.4m, comprising term
loans of £69.9m and working capital loans
of £10.5m.
02
Power Ventures Plc
Annual Report & Accounts 2019
Strategic Report
Corporate Governance
Financial Statements
The Company achieved a major milestone with
respect to Unit 1 of the Chennai plant (77 MW
out of 414 MW) when its term loans were fully
repaid in December 2018. Based on the term
loans’ repayments schedule, all Chennai plants
are expected to be debt free in calendar 2023.
Interest on term loans and principal repayments
paid at Chennai in FY19 amounted in aggregate
to £29.6m, including £20.6m of principal
repayments, representing 5.3 pence per share
added in value to shareholders’ equity. This
trend will continue over the next three years. In
FY20 we expect to repay £17.3m of term loans
thereby increasing shareholders equity value by
another 4.5 pence per share.
Indian economy
India has achieved steady and robust
macroeconomic growth in past few years
and continues to ascend in the rankings of
the world’s economies. India’s gross domestic
product is expected to reach US$6 trillion
by 2027 and India is forecast to be the third
largest consumer economy in the world,
with consumption predicted to triple to US$4
trillion by 2025, reflecting accelerating shifts in
consumer behaviour and expenditure patterns.
thermal power plants across the country to
be effective in a phased manner up to 2022.
The Company is well placed to comply with
the new standards by incurring required
capital expenditures in a staged manner over
the next three years. Implementation of the
emission reduction programme will also require
shutdowns for each of the four units over
FY20 and FY21 and therefore the Company
expects plant load factors at Chennai to be
around 70-75%. The Company is evaluating
various technologies with a view to be fully
compliant with the revised emission norms by
the stipulated timeline.
Dividend
The shutdown of Unit 4 for three months
impacted FY19 cash flows and considering
the additional capital expenditure and lower
expected PLF with respect to implementation
of the emission reduction programme, the
Board has decided to conserve cash for these
proposed obligations and has declared a full
year scrip dividend of 0.6p per share (FY18:
scrip dividend of 1p per share), subject to
approval by shareholders at the Company’s
Annual General Meeting.
India’s GDP grew by 6.8% in FY19 and is
projected to grow at an average of 7% per year
over the 2019-2023 period.
Outlook
The Company will remain focused in FY20 on
delivering robust operational performance. We
will continue to repay term loans in accordance
with the repayment schedule. With the Group
paying up to 13% interest on its bank debt,
the Board believes that maintaining focus on
improvement in operations and deleveraging
will provide the best returns to shareholders.
On behalf of the Board, I thank the shareholders,
lenders, customers, our loyal and hardworking
employees, vendors, Government and regulatory
authorities for their continuous support. We are
confident that the Group is now well positioned
to deliver value to shareholders and take
advantage of market opportunities as they arise.
Arvind Gupta
Executive Chairman
31 July 2019
Power sector
Rapid infrastructure development in key sectors
such as power remain an important priority for
the newly elected Government of India.
With electricity production of 1,249.3 billion
units in FY19, India is the third largest producer
and consumer of power in the world and the
Government’s goal is to meet the anticipated
growth in demand by doubling the current
capacity to provide 24x7 electricity to all users.
India is planning to derive 40% of its energy
output from non-fossil fuel sources by 2030,
which will mean raising renewable energy
installed capacity from 57 GW to 175 GW
by 2022.
Under the Paris Agreement, India has made
three commitments. India’s greenhouse gas
emission intensity of GDP will be reduced by
33-35% below 2005 levels by 2030. 60% of
India’s power capacity at that time would be still
based on fossil fuel sources and India will create
an additional ‘carbon sink’ of 2.5 to 3 billion
tonnes of CO2 equivalent through additional
forest and tree cover by 2030. We fully endorse
this initiative and will procure best in class
equipment to comply with emissions standards
applied to our power plants.
Emission norms
The Indian Government has notified revised
compliance standards for emission norms of
Power Ventures Plc
Annual Report & Accounts 2019
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
AREAS OF
OPERATION
KARNATAKA
62 MW
TAMIL NADU
414 MW
03
Strategic Report
Corporate Governance
Financial Statements
FINANCIAL REVIEW
“The Company achieved a major milestone
with respect to Unit 1 of Chennai plant
(77 MW out of 414 MW) as the term loans
were fully repaid in December 2018.
Based on the term loans repayments
schedule the Chennai plant is expected
to be debt free in calendar 2023.”
Revenue
The Group’s revenue has increased by £0.5m,
reflecting a 0.4% growth year-on-year as a
result of an increase in tariff during FY19, partly
offset by a decrease in generation. Average
tariff realised during FY19 increased to Rs5.56
per kWh, as a result of tariff increases during
the year for captive customers. Generation
exported to customers and billed for revenue,
including ‘deemed’ generation, decreased
by 2% to 2.7 billion units during FY19 in
comparison with FY18 generation. This slight
decrease in generation was primarily due to
Unit IV (180 MW) being shut down from early
December 2018 to early March 2019 whilst
turbine repairs were undertaken.
Production and output levels from the Group’s
operating power plant in Chennai compared
to the prior year were as follows:
Particulars FY19 FY18
Total generation, incl. ‘deemed’
generation (million units) 2,705 2,770
PLF (%)1 75 77
Average tariff (INR/unit)2 5.56 5.21
1 Chennai Unit 3: ‘Deemed’ PLF (%) has been included
2 Average tariff includes effect of ‘deemed’ offtake tariff
for Chennai Unit 3. Average FY19 tariff excluding
effect of ‘deemed’ offtake was Rs5.41 (FY18: Rs4.92).
Gross profit
Gross profit (‘GP’) in FY19 was 34.8% of
revenue (FY18: 28.5%). The increase in GP is
primarily on account of an increase in tariff
during FY19 in comparison with FY18.
The cost of revenue represents fuel costs.
The table below shows the price and blend
of Indian and Indonesian coal consumed in
FY19 and FY18.
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
FY19 3,634 4,598 1,024 1,130 8:92
FY18 3,467 4,593 963 1,114 6:94
Change % 4.8 0.11
04
Power Ventures Plc
Annual Report & Accounts 2019
Strategic Report
Corporate Governance
Financial Statements
The following is a commentary on the Group’s financial performance for the year.
Income statement
Restated*/**
2019 % OF 2018 % OF
YEAR ENDED 31 MARCH £m REVENUE £m REVENUE
Revenue 140.6 140.1
Cost of revenue (excluding depreciation) (91.7) (100.2)
Gross profit 48.9 34.8 39.9 28.5
Other income 2.6 2.0
Distribution, general and administrative expenses (excluding depreciation) (16.2) (17.2)
Adjusted EBITDA*** 35.3 25.1 24.7 17.6
Depreciation and amortisation (6.1) (6.5)
Net finance costs* (12.4) (12.0)
Profit from continuing operations before tax and impairments 16.8 11.9 6.2 4.4
Impairment provision for loss on assets under construction – (4.0)
Profit before tax from continuing operations 16.8 11.9 2.2 1.6
Taxation (1.8) (3.1)
Profit/(loss) after tax from continuing operations 15.0 10.7 (0.9) (0.7)
Loss from discontinued operations, incl. non-controlling interest** (1.0) (100.0)
Profit/(loss) for the year 14.0 (100.9)
* Net foreign exchange loss was reclassified from General and Administrative expenses to finance costs in FY18
** Impairment provision for loss of investment in Padma Shipping JV and Group’s share in losses of Padma’s operations losses were reclassified to Loss from discontinued operations in FY18
*** Excluding one-off impairment provision of £4.0m in FY18
Adjusted EBITDA
Adjusted earnings before interest, taxation,
depreciation and amortisation (‘Adjusted
EBITDA’) is a measure of a business’ cash
generation from operations before depreciation,
interest and exceptional and non-standard or
non-operational changes. Adjusted EBITDA is
useful to analyse and compare profitability
among periods and companies, as it eliminates
the effects of financing and capital expenditures.
Adjusted EBITDA was £35.3m in FY19 an
increase from £24.7m in FY18 and Adjusted
EBITDA margin was higher at 25.1% in FY19
against 17.7% in FY18 on account of an
increase in GP margin.
Profit from continuing operations before tax
was £16.8m compared with a profit from
continuing operations before tax and
impairment of £6.2m in FY18 (after impairment
in FY18 it was a profit before tax of £2.2m).
Profit before tax reconciliation
(‘PBT’) (£m) FY19
PBT 2018-19 16.8
PBT 2017-18 2.2
Increase in PBT 14.6
Increase in GP 9.0
Increase in other income 0.6
Decrease in distribution, general and administrative expenses, expected credit loss 0.9
Increase in net finance costs (0.4)
Decrease in depreciation and amortisation 0.5
Impairment provision for loss on asset under construction* 4.0
Increase in PBT 14.6
*£4m being impairment of obsolete assets under construction, as a one-off transaction in FY18.
Power Ventures Plc
Annual Report & Accounts 2019
Taxation
The Company’s operating subsidiaries are
under a tax holiday period but are subject
to Minimum Alternate Tax (‘MAT’) on their
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 £1.8m
comprised of current tax expense of £0.9m
and deferred tax expense of £0.9m.
Profit after tax from
continuing operations
Profit after tax from continuing operations has
increased by £15.9m from loss of £0.9m in
FY18 to profit of £15.0m in FY19.
Assets held for sale and
loss from discontinued
operations
62 MW Karnataka solar project
In FY18 four Karnataka solar projects (62 MW)
were commissioned. The Group has a 31%
equity interest in these projects. During FY19,
the Company obtained a right to buy additional
30% equity interest in solar companies
following achievement of the conditions
precedent under the terms of the agreement.
This right, in combination with other rights,
provided substantive potential voting rights
05
Strategic Report
Corporate Governance
Financial Statements
FINANCIAL REVIEW
CONTINUED
and investments in the underlying solar
companies were reclassified from associates to
subsidiaries. Given the long-term returns from
solar projects and the level of capital investment
required, the Board has decided to focus on
the core thermal power plants business and
announces its intention to dispose of the
Karnataka solar projects. The Company initiated
the process of disposal of the solar companies
in the year, which met all conditions of IFRS 5 for
classification of solar business as Assets held for
sale at 31 March 2019. Accordingly, Assets of
£49,579,232 and Liabilities of £35,267,786 were
classified as Assets and Liabilities held for sale in
the Consolidated Statement of Financial Position
as at 31 March 2019 and their profit from
operations of £20,708 was included in loss from
discontinued operations in the Consolidated
Statement of Comprehensive Income.
Impairment provision of investments
in Joint Venture (‘JV’) Padma Shipping
In 2014 the Company entered into a JV
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 JV company Padma Shipping Ltd,
Hong Kong (Padma).
During FY18, the JV partner due to a change in
their group strategy requested for the JV to be
terminated and as the vessels were still under
construction OPG agreed with this proposal.
During FY19 one of the vessels was sold by
the shipping yard and during FY20 the second
vessel has been sold. The Padma JV will be
terminated and dissolved following the sale of
the second vessel which is expected to finalise
during 2019.
OPG has invested approximately £3,484,178
in equity and £1,727,418 to date as an advance
to Padma and the J V has been reported using
the equity method as per the requirements of
IFRS 11. The Company recognised an
impairment provision in FY19 financial
statements of £1,000,000 (FY18: £3,247,668)
against its investment to date, including its
advance to Padma, on account of the
impending dissolution of the JV. The carrying
value of OPG’s investment in the Padma JV of
£918,432 was classified as Assets held for sale
in the Consolidated Statement of Financial
Position as at 31 March 2019.
Earning per share (EPS)
The Company’s total reported EPS increased
to 3.81 pence from a loss of (24.68) pence
earnings on account of an increase in
PAT due to a higher loss from discontinued
operations in FY18 and higher profitability
in FY19.
Dividend
The Board declared FY19 full year scrip
dividend of 0.6p per share (FY18: scrip
dividend at 1 pence per share).
The Company has issued 31,601,503 (2018:
4,799,742) shares during FY19 with respect
to scrip dividend at par value of £0.000147
(2018: £0.000147) per share amounting to
£4,646 (2018: £706). The difference between
fair value of shares issued above par value of
£3,558,442 (2018: £1,248,331) with respect to
scrip dividend was credited to share premium.
Foreign exchange gain on translation
The British Pound-to-Indian Rupee exchange
rate has moved lower to a closing rate on
31 March 2019 of £1= INR 90.28 as against
£1= INR 90.81 on 31 March 2018 thereby
resulting in exchange gain of £1.2m on
translating foreign operations.
Statement of
financial position
Property, plant and equipment
The decrease in net book value of our property,
plant and equipment of £3.2m principally relates
to depreciation offset by additions and foreign
exchange impact on account of translation
during the year.
Other non-current assets
Other non-current assets (excluding property,
plant and equipment and intangible assets)
have decreased by £18.2m primarily due
to reclassification of investments in solar
companies and Padma Shipping to assets
held for sale in current assets and a decrease
in the non-current portion of restricted cash.
Current assets
Current assets have increased by £61.5m from
£78.2m to £139.7m year-on-year primarily as
a result of the following:
• Increase in assets held for sale by £50.5m
• Increase in trade receivables by £15.5m
• Increase in cash and bank balances
(including restricted cash) by £2.6m
• Decrease in other short-term assets
by £3.1m
• Decrease in inventory holdings by £2.6m
• Decrease in net current tax assets
by £1.6m
Liabilities
Current liabilities have increased by £32.7m
from £77.0m to £109.7m year-on-year
primarily due to the classification of liabilities
of the solar subsidiaries of £35.3m as liabilities
held for sale.
Non-current liabilities have decreased by
£7.9m from £88.6m to £80.7m year-on-year
primarily on account of repayment of
borrowings offset by an increase in trade and
other payables.
Gross debt, gearing and finance costs
As of 31 March 2019, total borrowings were
£80.4m (31 March 2018: £93.5m). The gearing
ratio, net borrowings (i.e. total borrowings
minus cash)/(equity plus borrowings), was 34%
(31 March 2018: 40%). Gearing ratio is a useful
measure of financial risk of the Company.
Total borrowings (current and non-current
portions) decreased by £13.1m due to the
repayment of term loans of £20.6m offset
by the increase in working capital loans and
the foreign exchange impact of appreciation of
INR against GBP.
The Company achieved a major milestone with
respect to Unit 1 of the Chennai plant (77 MW
out of 414 MW) as the term loans were fully
repaid in December 2018. Based on the term
loans repayments schedule the Chennai plant
is expected to be debt free in calendar 2023.
Finance costs have increased by £1.0m from
£13.6m in FY18 to £14.6m in FY19 primarily
due to the impact of the increase in foreign
exchange losses offset by the reduction in
interest expense following scheduled
repayments of term loans.
06
Power Ventures Plc
Annual Report & Accounts 2019
KEY PERFORMANCE
INDICATORS
FINANCIAL
ADJUSTED EBITDA
(£m)
FY15
FY16
FY17
33.4
50.7
52.1
FY18
24.7
FY19
35.3
EPS
(£ pence)
FY15
4.91
FY16
FY17
5.29
8.43
(24.68)
FY18
FY19
3.81
NON-FINANCIAL
PLANT LOAD FACTOR
(%) (Group)
FY15
FY16
FY17
FY18
FY19
91
70
76
77
75
GEARING
(%)
FY15
FY16
FY17
FY18
FY19
40
34
59
57
57
TOTAL RECORDABLE
INJURY RATE (Chennai)
0.40
0.28
FY15
FY16
FY17
0.00
FY18
0.09
FY19
0.00
Strategic Report
Corporate Governance
Financial Statements
Finance income increased from £1.6m in
FY18 to £2.2m in FY19 and therefore net
finance costs in FY19 amounted to £12.4m
(FY18: £12m).
The restricted cash balance totalling £23.5m
at 31 March 2019 (31 March 2018: £25.3m)
is comprised of financial deposits that have
been pledged as security against borrowings
and Letters of Credit.
Cash flow
Cash flow from continuing operations before
and after changes in working capital was
£35.7m (FY18: £24.8) and £28.1m (FY18:
£57m) respectively. Net cash flow from
operating activities has decreased from
£57.0m in FY18 to £28.1m in FY19,
a decrease of £28.9m, primarily due to
changes in working capital exceeding the
impact of the increase in gross profit.
Movements (£m) FY19 FY18
Operating cash flows from
continuing operations before
changes in working capital 35.7 24.8
Tax paid (0.6) (0.8)
Change in working capital
assets and liabilities (7.0) 33.0
Net cash generated by
operating activities from
continuing operations 28.1 57.0
Purchase of property,
plant and equipment
(net of disposals) (1.5) (1.1)
Investments sold/(purchased),
incl. in solar projects, shipping JV,
market securities, and
interest received 1.2 (28.8)
Net cash from/(used in)
continuing investing activities (0.3) (29.9)
Finance costs paid, incl.
foreign exchange losses (14.8) (13.6)
Dividend paid – (1.6)
Total cash change from
continuing operations before
net borrowings 13.0 11.9
Dmitri Tsvetkov
Chief Financial Officer
31 July 2019
Power Ventures Plc
Annual Report & Accounts 2019
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.
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 that 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 location and
we haven’t faced any interruptions on account
of coal since commissioning each unit. In
addition, the plants are designed to limit the
consumption of water as they are built with
air cooled condenser technology rather than
being water cooled with the result that OPG’s
plants use around 99% less water than
a typical water cooled thermal power plant
that is commonly installed around India and
globally. This is a key feature as our units
operate in a region that is naturally water
scarce. As a result of these features, our
station availability has remained consistently
around 75-80%. This is important as
availability is the basis of our reward on the
74 MW Long-Term Variable Tariff (‘LTVT’)
which is discussed further below.
Our load factors take account of plant
availability as reduced by external factors like
normal seasonal demand adjustments to their
offtake under the LTVT (though the customer
still pays us as discussed further below),
enforced system back downs and one-off
disruptions to demand such as due to adverse
weather conditions.
Total generation at our 414 MW Chennai
plant in FY19, including ‘deemed’ offtake,
was 2.7 billion units which is 2% lower than
last year primarily due to Unit IV (180MW)
being shutdown from early December 2018
to early March 2019 whilst turbine repairs were
undertaken. The Chennai Plant Load Factor
(‘PLF’), including ‘deemed’ offtake, in FY19
was 75% versus a national average for thermal
plants of 61%. In FY 20, the Company expects
load factors at Chennai to be around 70-75%
which is lower than in FY19 primarily as a
result of planned shutdowns to implement
an emission reduction programme.
Auxiliary consumption levels are also a key
measure of plant efficiency, and are typically
between 7.5-8.5% for our Chennai units.
Sales contracts
During FY19, the Company continued supplying
directly to industrial customers under short-term
and multi-year contracts in Chennai. The tenure
of sales contracts entered into with industrial
customers at Chennai was between 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. 74 MW of
Chennai capacity has remained available
for supply on the LTV T to the Tamil Nadu
state government.
A 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 FY20, the Chennai plant expects to
continue with its diversified sales mix,
contracting the majority of its generation from
334 MW to captive customers and the balance
of 74 MW (net) to TANGEDCO under the
15 year Power Purchase Agreement (‘PPA’).
The Chennai plant realised an average tariff
of Rs5.41 in FY19 (FY18: Rs4.92) and a
‘deemed’ offtake charge of Rs1.50 per unit for
‘deemed’ generation. The difference between
tariff and cost of coal on a per unit basis (‘the
Clean Dark Spread’) was Rs1.82 at Chennai
for FY19 (FY18: Rs1.47) which we believe
continues to be amongst the best in the sector,
notwithstanding the highly elevated prices of
coal in the first half of FY19 (as reported earlier)
as well as measures taken by management to
mitigate high coal price volatility.
08
Power Ventures Plc
Annual Report & Accounts 2019
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Corporate Governance
Financial Statements
For FY20, at Chennai, the Company expects
the average tariff to be around Rs5.60 as
opposed to Rs5.41 in FY19, largely due to
full year benefit from the increase in tariff
negotiated with all the captive customers in
October 2018, which is expected to continue
to be realised in FY20. Further, average
realised tariffs on multi-year contracts would
benefit from any increase in regulated tariffs
by the State Government.
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 in FY19 and as such
the Company benefited as prices started falling
during the end of the year.
The average coal price was Rs4,517 per tonne
in FY19 which is slightly lower than the average
price for FY18 of Rs4,527 per tonne, despite
the international coal prices being at their all
time high for the first half of FY19. Following
the coal price spike in the first nine months
of calendar 2018, coal prices have since
weakened, predominantly as a result of policy
actions undertaken in China. Independent
forecasts predict for international coal prices to
reduce further in FY20 and beyond.
In FY20, the Company contracted a fixed
price coal purchase contract for procurement
of 1m tonnes of coal in FY20, which represents
approximately 60% of our annual requirement.
The delivery of coal under this contract will
take place from June 2019 to March 2020.
This creates a hedge against further volatility in
the coal price due to seasonal fluctuations and
any major policy decisions of China.
The Company also executed a small quantity
of financial swaps in FY19 in order to hedge
our coal cost. The impact of this remains
nominal as these trades reflect a very small
percentage of our annual consumption. The
liquidity in the swaps market had remained low
in FY19, but has increased in FY20 and this
trend is expected to continue. With this trend
the Company expects to be able to continue
to further hedge our cost by undertaking
larger positions on the financial coal markets.
However, the impact of this on our coal cost
is expected to remain nominal in FY20, till the
market develops to a robust size.
Consensus expectations continue to be for
international coal prices to recede in 2019 (as
they have done so consistently for the last two
months) and in 2020 with longer-term consensus
expectations for that trend to continue whilst
coal supply is expected to stay robust.
Power Ventures Plc
Annual Report & Accounts 2019
The Company will continue to actively review
its procurement and hedging practices to
establish ways in which to mitigate the volatility
of the coal price and will report any material
developments in this regard.
Safety and environmental
compliance
The Company made good progress with its
safety programme, recording no fatalities and
a industry standard Total Recordable Incident
Report (‘TRIR’) in FY19 for Chennai.
The Company continues to minimise its
consumption of water through air cooling and
we operate with a philosophy of continual
improvement with regard to any effluent.
India is a signatory to the Paris Climate
Agreement and to comply with that, all thermal
power plants across the country have to meet
revised stack emission standards in a staged
manner by 2022. However, since 226 GW
thermal capacity in the country has to undergo
the changes, it is likely that standards will be
re-notified. The Company is evaluating various
technologies with a view to be fully compliant
to the revised emission norms by the
stipulated timeline.
Solar projects
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 Rs5.00 across
the four sites. In FY18, the entire 62 MW of
solar plant has been commissioned. The plants
got fully ramped up in the course of FY19 and
achieved an annual average PLF of 17%.
All the four plants are now operating at their
maximum optimal PLFs and are expected to
achieve an annual average PLF of around 20%
in FY20. Currently the projects are being paid
a tariff of Rs4.36 per kWh but following
favourable interim court orders we expect that
Karnataka Discoms will be paying us the tariffs
specified in the PPA, i.e. average tariff of
Rs5.00 across the four sites.
Avantika Gupta
Chief Operating Officer
31 July 2019
AVERAGE TARIFF
REALISATION
(INR/kWh)
FY15
FY16
FY17
FY18
FY19
5.71
5.58
5.46
5.21
5.41
COST OF GENERATION
PER UNIT
(INR/kWh)
FY15
FY16
FY17
FY18
FY19
3.09
267
2.52
3.43
3.59
GENERATION (million kWh)*
FY15
FY16
FY17
FY18
FY19
1,816
3,163
2,346
2,493
2,471
PLANT LOAD FACTOR
(%) (Group)
FY15
FY16
FY17
FY18
FY19
91
70
76
77
75
PLANT LOAD FACTOR (%)(1)
All India (Coal & Lignite
based Plants)
FY15
FY16
FY17
FY18
FY19
64
62
60
61
61
* Note: FY17 to FY19 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
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Strategic Report
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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
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Power Ventures Plc
Annual Report & Accounts 2019
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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
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.
Maximising
performance
of existing
power plants
Reducing
cost of
capital and
paying
dividends
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.
As of 31 March 2019, total borrowings were £80.4m.
The gearing ratio (total borrowings minus cash)/(equity
plus borrowings) was 34% (31 March 2018: 40%). Total
borrowings (current and non-current portions) decreased
by £13.1m due to repayment of term loans, partially offset
by an increase in working capital loans through operations
of the Chennai plant. The Company achieved a major
milestone this year as the term loans with respect to
Unit 1 of the Chennai plant (77 MW out of 414 MW) were
fully repaid in December 2018. Based on term loans
repayments schedule the Chennai plant will be debt free
by the end of 2023.
Power Ventures Plc
Annual Report & Accounts 2019
1 1
Strategic Report
Corporate Governance
Financial Statements
MARKET REVIEW
Overview of the Indian Economy: Power is one of the most essential
components of infrastructure crucial for economic growth and welfare
of a nation like India. To sustain the rapid economic growth that India
has seen over the last few years, power sector will continue to play
a pivotal role. India is the third largest producer and consumer of
electricity in the world behind China and US with a production of
1,249 billion units during FY 2018-19.
Key macroeconomic
indicators
Gross Domestic Product (‘GDP’)
India’s GDP increased from around Rs92 trillion
in fiscal 2013 to about Rs141 trillion in fiscal
2019, which represented a compound annual
growth rate (‘CAGR’) of approximately 7.3%.
India’s GDP growth rate of 6.8% in fiscal 2019
was significantly in excess of the world average
of 3.0% in 2018. The Indian economy was
negatively impacted during the last two fiscal
years. As per a Finance Ministry report
declining growth of private consumption, weak
increase in fixed investment and muted exports
are some reasons for the slowdown. Also
feebler agricultural and manufacturing growth,
have resulted in a lower estimated real GDP
growth rate of 6.8% in fiscal 2019.
Current Account Deficit (‘CAD’)
After reaching 4.8% of the GDP during fiscal
2013, India’s CAD has declined progressively,
reaching 0.6% 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. During the last two
fiscal years, CAD is widening mainly due to
net terms of trade erosion caused by firming
international commodity prices especially of
crude oil, gold and coal.
Inflation
FICCI’s economic outlook survey says that
Inflation is expected to remain moderate and
the Wholesale Price Index (‘WPI’) based inflation
rate is projected at 3.1% in 2019-20, with a
minimum and maximum range of 2.1% and 4%,
respectively. While, the Consumer Price Index
(‘CPI’) based inflation has a median forecast of
4% for 2019-20, with a minimum and maximum
range of 3.5% and 4.1%, respectively.
India’s GDP increased
from around Rs92
trillion in fiscal 2013 to
about Rs141 trillion in
fiscal 2019, which
represented a
compound annual
growth rate (‘CAGR’)
of approximately 7.3%.
12
Power Ventures Plc
Annual Report & Accounts 2019
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Financial Statements
Gross Domestic Product (GDP)
(tn)
160
140
120
100
80
60
40
20
0
114
8.0%
123
8.2%
105
7.4%
141
132
7.2%
6.8%
98
6.4%
92
5.5%
2.5%
2.7%
2.8%
2.9%
2.6%
3.2%
3.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
FY 13/
CY 12
FY 14/
CY 13
FY 15/
CY 14
FY 16/
CY 15
FY 17/
CY 16
FY 18/
CY 17
FY 19E/
CY 18
India’s GDP growth (in tn)
India’s GDP growth (%)
World GDP growth (%)
Source: Central Statistics Office (‘CSO’), World Bank Data Indicators
CAD as a % of GDP
(kWh)
4.8
4.3
6
5
4
3
2
1
0
1.7
1.3
1.1
0.6
2.1
1.8
FY12
FY13
FY14
FY15
FY16
FY17
FY18
FY19E
Source: RBI
Power Ventures Plc
Annual Report & Accounts 2019
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Strategic Report
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Financial Statements
MARKET REVIEW
CONTINUED
Outlook for the Indian economy
India has emerged as the fastest growing
major economy in the world and is expected
to be one of the top three economic powers
of the world over the next 10-15 years, backed
by its strong democracy and partnerships.
As per the International Monetary Fund (‘IMF’)
the Indian economy is now expected to
expand 7% in the year ending 31 March 2020.
Economic growth is expected to accelerate to
7.2% in the following year, which is 30 basis
point (bps) lower than the previous estimate for
both the years due to a weaker than expected
outlook for domestic demand. CRISIL
Research report comments that, with a weak
global environment, India will have to lean on
domestic factors for growth and consequent to
the government pursuing a fiscal consolidation
path, the pickup in growth is expected to be
gradual. In May 2019, RBI cut policy rates for
the third consecutive time by 25 bps and
changed its stance to accommodative from
neutral, signalling that more rate cuts were in
store to revive growth and support faltering
consumer demand.
Government of India’s
recent initiatives
The Government of India (‘GoI’) has undertaken
a number of initiatives aimed at reviving
private consumption, lowering the quantity of
non-performing assets (‘NPAs’) of banks, and
improving the investment climate to support
domestic economic growth. Some of the key
initiatives include:
and Other Subsidies, Benefits and Services)
Act, 2016 to distribute subsidies, rural wages
and pensions through an electronic platform,
and the Central Goods and Services Tax Act,
2017 to reduce the cascading effect of taxes;
same period. Growth of energy produced from
fiscal 2010 to 2019 is 5.5%. While India
continues to remain a power deficit country,
the deficit is reducing and in fiscal 2019, the
energy deficit declined to 0.6%.
• preparation of significant capacity augmentation
plans in the power transmission and
distribution infrastructure in order to improve
electricity access;
• improvement of the labour market through
various programmes such as “Skilling India”
and “Make in India”; and
• development of the financial markets through
initiatives such as the Jan Dhan Yojana,
encouragement of higher FDI in insurance
and a better monetary policy framework.
Overview of the Indian
power sector
India is the third largest producer and third
largest consumer of electricity in the world after
China and the United States, with the installed
power capacity reaching 358.9 GW as of June
2019. The country also has the fifth largest
installed capacity in the world.
Despite being among the top three power
producers and consumers in the world, the
per-capita electricity consumption in India
was only 1,112 kWh in 2017. This was
significantly lower than the world average
and the lowest among the BRICS (‘Brazil,
Russia, India, China and South Africa’) nations.
This indicates the strong growth potential of
the Indian power sector.
Historically, power demand growth has largely
followed GDP growth (see the chart below).
Indian GDP is expected to be among the top
three economies in the world and year-on-year
growth estimated to be at c.7%.
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.
• passage of key laws including the Insolvency
and Bankruptcy Code, 2016 which aims to
support expeditious resolution of bankruptcies,
the Aadhaar (Targeted Delivery of Financial
Demand for energy grew at a CAGR of
approximately 4.87% over the period from
fiscal 2010 to 2019, while energy availability
grew even faster at a CAGR of 6.06% over the
Factors influencing power d
demand
GDP
growth
Gradual improvement
in discom financials,
strengthening of
distribution network &
100% intensive rural
electrification
nsformation
Tran
c
capacity
xpansion
ex
Large-scale
infrastructure
development –
Smart cities,
Dedicated Freight
D
Corridor etc.
Electric vehicles,
railway
electrification
and metro
expansion
Government push
to industries /
manufacturing under
‘Make in India’
campaign
Energy effici
iency
T&D loss reduc
ction
Captive and o
RES genera
ff-grid
ation
Length of the arrow denotes
the extent of impact
D
r
i
v
e
r
s
R
R
e
s
t
r
a
n
t
s
i
Power Ventures Plc
Annual Report & Accounts 2019
s
r
e
v
i
r
D
i
s
s
t
n
a
r
t
s
e
R
Source: CRISIL Research
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Strategic Report
Corporate Governance
Financial Statements
India’s per-capita power consumption was less than half of the
world’s average in 2017: World Average Electricity Consumption
for 2017 is 3,126 per capita
(tn)
12,994
6,603
7,035
5,130
3,924
2,620
1,112
2,016
India
9,771
China
8,921
1 1 ,298
42,491
48,196
62,461
Brazil
Russian
Federation
United
Kingdom
Germany
USA
GDP Per Capita in $ in 2018
Per capita power consumption (kWh)
Source: World Bank
Growth in per capita power consumption
in India against per capita GDP
(kWh)
1,400
1,200
1,000
800
600
400
200
0
129,901
140,000
118,263
107,341
89,716
98,405
80,518
71,609
64,732
819
884
914
957
1,010
1,075
1,122
1,149
FY 2011
FY 2012
FY 2013
FY 2014
FY 2015
FY 2016
FY 2017
FY 2018
120,000
100,000
80,000
60,000
40,000
20,000
0
Per capita power consumption (kWh)
GDP per capita (Rs)
Source: CEA & Ministry of Statistics
Power Ventures Plc
Annual Report & Accounts 2019
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Strategic Report
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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 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 create
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 the
financial year FY19.
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.
The plant has a dedicated Steering Committee
which report to the HSE Committee and is
entrusted with the day to day responsibility
on Health, Safety and Environment at the site.
The responsibilities of the Steering Committee
include adhering to the HSE compliance,
planning training 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
Our continued and concerted efforts towards
health and safety 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 the highest
commitment from OPG’s 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.
The responsibility of safety lies with OPG for
all OPG employees and contractors. Annual
health check-ups have revealed no
occupational health issues amongst the
workforce which is checked by a certified
doctor from the Indian Government’s
Inspectorate of Factories.
Health and systems
Our approach is to implement systematic
change. The Chennai plant is certified with
ISO 14000 and OHSAS 18001 (‘Occupational
Health and Safety Management System’).
This system helps in identifying hazard risk
and minimising or eliminating that risk.
We adhere to national laws on Occupational
Health and Safety related legislations. We have
implemented policies strictly in accordance
with the legislation in letter and spirit.
Carbon monoxide in the coal handling plant is
measured and monitored twice per month; lux
0.0TRIR
In FY19 for the Chennai Plant,
we had a Total Recordable
Incident Report (‘TRIR’) of
0.0 and zero fatalities.
16
Power Ventures Plc
Annual Report & Accounts 2019
Strategic Report
Corporate Governance
Financial Statements
(‘SI unit of illuminance’) monitoring during day
and night and Suspended Particulate Matter
and Noise monitoring are carried out regularly.
We have two dedicated air quality monitoring
stations at the plant to continuously monitor
the quality of the ambient air, particularly the
Sox, Nox and particulate matter levels.
Periodic health check-ups are carried out for
the employees and contractors including CBS,
Urine Routine, Pulmonary Function Test,
Audiogram, Eye Check-up and Chest X-Ray.
Training and supervision
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
Promoting a safety culture
In an Indian context, creating a safety culture
is essential to ensure personnel don’t
underestimate the safety issues. Apart from
the governance on safety, setting up systems,
providing training, it is important to promote
a safety culture through a mix of educating,
disciplining and incentivising practices.
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 equipment. There is no consumption
of POPs (‘Persistent Organic Pollutants’) in
any of our operations.
For example:
Incentivising reporting of near misses
National Safety Week celebrations
Visitor safety guidelines on
visitor passes
Emergency response and reporting
An onsite well equipped medical facility
with a doctor and two nurses is available
in case of any emergency
Incident reporting format is specified and
it is presented in the 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 an excellent safety record
in certain areas in plants such as boiler
ESP, Turbine and Generator, Transformer,
ACC, Switch Yard and DM Plant
II. Emissions
Technology used at OPG plants is compliant to
meet the present national emission standards.
India is a signatory to the Paris Climate
Agreement and to comply with that, all thermal
power plants across the country have to meet
revised stack emission standards in a staged
manner by 2022. However, since 226 GW
thermal capacity in the country has to undergo
the changes, it is likely that standards will be
renotified. The Company is evaluating various
technologies with a view to be fully compliant
to the revised emission norms by the
stipulated timeline.
Our stack emission monitoring analyser is
continuous and has been linked to the State
Pollution Control Board servers to relay real-time
emissions data. A LED display board has been
fixed at our main gate to displays the real-time
emission levels. We also have 2 dedicated
stations within our site to do continuous
monitoring of ambient air quality parameters
including Sox, Nox and SPM. This monitors that
the air in the area surrounding the plant is within
norms and there is no negative impact of the
stack emissions in the ambient air.
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.
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.
To control dust emissions, we have installed
Electrostatic Precipitators before the stack
that work at 99.9% efficiency. The efficient
Electrostatic Precipitators help in controlling
emissions well within the prescribed limits.
Even in coal unloading areas, various dust
suppression systems are in place. In coal
crushing area, dust filters are installed to avoid
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 OPG’s
management.
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SUSTAINABILITY REPORT
CONTINUED
dust generation. During the year to further
control dust emission from coal movement and
unloading, we have erected wind screens and
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.
In line with this Paris Climate Agreement, the
Indian Government charges a coal cess of INR
400 a tonne which is contributing towards
decarbonizing India’s economy through this
taxation as the corpus funds green ideas and
green projects. The total cess paid during
FY19 was approximately Rs 0.7 bn.
III. Measuring and improving
environmental performance
Some of the important indicators that we
measure are auxiliary power consumption,
water quality and quantity, waste generated
and recycled and emissions (Sox, Nox, SPM,
GHG, CO), ambient air quality parameters
(Sox, Nox, SPM). 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.
IV. Energy
OPG generates power for other consumers
that 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 FY19 is 7.78%.
We continuously strive to optimise the energy
consumption of our internal facilities through
energy management systems.
V. Energy efficiency and conservation
OPG recognises the significance of Energy
Conservation for a better tomorrow. Some of
the important energy saving steps we have
taken at our plant are optimising the Flyash
system, Conveyor running hours and ACC fans
running performance. In-house, we developed
an online monitoring system and optimised
HP Heater performance. Terminal parameters
are continuously monitored for heat rate
improvement. During the year we undertook a
compressor system audit and reduced the
compressor utilisation by half. As part of
energy saving measures, we are doing BFP
stage reduction and switching to a LED lighting
system which has both environmental and
economic benefits.
VI. 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. 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 Sewage
Treatment Plant (‘STP’) and the treated water
from STP is used for nurturing the green belt.
There is no effluent that is released from the
premises and OPG plants qualify as zero
discharge plants.
Quality of water at various entry and exit points
in the system show that the pH is well within
the prescribed limit.
The plant processes were set up in a way that
water could be recovered and sent back to
the source. One of the major uses of water at
any thermal plant is for cooling through water
cooled condensers which is the norm for most
power stations. However, at OPG, we save
huge quantities of water due to the air cooled
condensers which are employed to reduce
water usage. These effectively reduce the
water footprint per unit generated by 99% in
comparison to conventional water cooled
condensers. Air cooled condensers having
99.5% recovery of condensate along with air
cooled heat exchange equipment effectively
deliver huge water savings. To reduce the
discharge of water from the system some
other initiatives are the reverse osmosis unit for
effluent treatment plant and sedimentation
tank for backwashed water.
VII. 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
This year we will be constructing a further
rain water storage pit in order to further
recharge the water table
VIII. Disposal of waste
Irresponsible disposal of hazardous waste is
one of the most potentially dangerous acts
that can impact ecology and mankind
immensely. We are very proud to say that we
have absolutely no waste that is hazardous
and is disposed of against Basel Convention.
All hazardous waste, which in a thermal
power plant is only small quantities of oil
soaked cotton waster, batteries etc., that
we generated have been disposed safely
to the government authorised vendors.
99.9%
To control dust emissions, we have
installed Electrostatic Precipitators
that work at 99.9% efficiency.
7,000
This year alone as part of a plantation
drive we have planted 7,000 saplings
both within the plant premises and in
neighbouring villages.
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IX. 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 areas.
We annually plant 2,000 trees at each of the
sites. And we have a three year plan to
continue such annual plantations. This year
alone as part of a plantation drive we have
planted 7,000 saplings both within the plant
premises and in neighbouring villages.
Community support – OPG outreach
As a corporate with a motto of ‘responsible
operations’, we engage with communities
around our area of operations. Our goal is
to impact the lives of the people around our
operations in a positive way. The basis of
the engagement with the communities is
understanding their needs. As we carried out
the exercise of need assessment in 2012-13,
we are continuing our interaction with them
and all the support is continued as per the
needs of the communities.
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
with the communities are transparency,
accountability and gender inclusiveness.
I. Education
Through our long lasting association with the
schools near our plant, we distributed school
uniforms, shoes, bags and stationery to 1,080
children. We are continuing to fund salaries of
11 teachers in Government Schools adjacent
to our plant, three girl child sponsorships, and
86 college/school fee funding has been
provided to needy students.
We have also additionally sponsored school and
college fees of children of our contract employees
who have shown academic excellence.
we are establishing one new bore well in each
of the five nearest villages to increase the
availability of water in these communities.
Additionally, we intend in the next three to five
years to maintain and develop surrounding
forest land in order to enhance the ecosystem,
limit deforestation and consequently replenish
the ground water levels.
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 centre and
we continue to assist the centre by providing
monthly maintenance charges such as rent,
electricity, repair work etc.
We have conducted local recruitment drives
in the nearby villages and have employed
educated graduates for technical positions
in the plant.
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. Contribution for community places
Many of the community relationships get
strengthened around places of worship.
Based on the needs of the communities,
we have supported construction of a church
in the neighbouring villages. Similarly, we
have supported many temple initiatives in
the villages around our operations based
on the needs of the locals.
II. Health
We are continuing our health initiative in nearby
villages, where we already renovated and
upgraded the dispensaries. The number of
patients treated every day in these dispensaries
is around 50. We continued to provide the
doctor’s salary, medicines, staff salary, supply
of materials and nursing staff salary along with
petrol reimbursement of the staff.
We have improved sanitation facilities by
constructing toilets in the nearby villages.
During FY20 we have adopted a goal of
making our campus and the surrounding five
villages hepatitis free and as such we will be
conducting health camps in a staged manner
in all the villages to do detection and treatment
of all people infected with hepatitis B and C.
Additionally, at the camps we will inoculate all
the people to ensure that they do not contract
hepatitis in the future. Our aim is that in FY20
we will test, inoculate and treat 4,500 people.
III. Local environment
Some of the initiatives that were taken in the
current year are:
Green initiative within our premises where
we planted more saplings to increase
the green cover in the area
Mechanical road sweeping of the coal
transportation route
Sprinkling water for dust suppression
During FY20, due to the acute water shortage
in and around Chennai we are supplying
drinking water tankers for one month in one of
the neighbouring villages as a short-term relief
measure. In order to provide a more long-term
sustainable solution to the water shortage,
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.
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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
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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
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.
The 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.
The Group monitors and reviews changes
in the regulatory environment and its
commitments under licences previously
granted
It continually ensures compliance with the
conditions contained within individual
licences and is mindful of the importance of
complying with national and local legislation
and standards
The Group maintains an open and proactive
relationship with the Indian government and
its various agencies
The Group is consulting with industry and
legal experts as required and, if necessary, is
prepared to defend its position in the courts
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.
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.
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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 Dmitri 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
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Ms. Avantika Gupta
Chief Operating Officer
P Michael (Mike) Grasby
Independent
Non-executive Director
Jeremy Beeton
Independent
Non-executive Director
Background and experience
Background and experience
Background and experience
Ms. Avantika Gupta completed her LLB,
Bachelor of Law from University College
London in 2008. After completing her
degree she was admitted as a Barrister-
at-law, Gray’s Inn, England & Wales in
2009. She joined the Company in 2010
and served in the capacity of a legal
manager, coordinating the litigation cases
and commercial arbitration of OPG. She
was also responsible for the development
and commissioning of the 300 MW power
project in Gujarat. She has been serving
as the Legal Advisor to the Board and at
present is the Chief Operating Officer of
OPG Power Generation Pvt Ltd, Chennai.
Mr P Michael Grasby is a Chartered
Engineer, Fellow of the Institution of
Engineering and Technology and Fellow
of the Institution of Mechanical Engineers
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 Nomination
Committees; he retired from the Drax
Board in April 2011. He was also formerly
a Director of Strategic Dimension
Technical, a London-based executive
recruitment company.
Mr. J Beeton 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 John Laing and
an independent Non-executive Director
of WYG plc. Additionally, Mr. Beeton 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
2012 New Year Honours and holds an
honorary Doctorate of Engineering from
Napier University.
Member
Audit, Nomination, Remuneration
Committee
Member
Audit, Nomination, Remuneration
Committee
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CORPORATE GOVERNANCE REPORT
FINANCIAL YEAR ENDED 31 MARCH 2019
Introduction
The Board is committed to good corporate governance practices. From 28 September 2018, AIM quoted
companies are required to adopt and comply or explain non-compliance with a recognised corporate
governance code. Although it is not mandatory to adopt the governance framework contained in the UK
Corporate Governance Code published by the Financial Reporting Council (the ‘Code’), the Company
remains committed to adopting the 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 years ended 31 March 2017
and 2018 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.
It is the Board’s view that the Group is complying with the Corporate
Governance Code apart from 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.
In connection with Code provision A.4.2 above, in 2019 the
Board introduced a process of annual self-evaluation of its
performance and completed its first self-evaluation. It is still to
institute a process of periodic evaluation of its principal
committees and the individual Directors.
1. Division of responsibilities (A.2.1)
Operation of the Board
Mr Arvind Gupta, Company’s Executive Chairman is responsible
for the overall business, strategic decisions and heads the
Executive Committee.
On 27 November 2018, Ms Avantika Gupta, Chief Operating
Officer, was appointed to the Board. She is responsible for the
day-to-day running of the operations. Jeremy Warner Allen joined
the Board as Deputy Chairman on 8 November 2017.
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.
Board of Directors
The Board comprises the following individuals:
Executive
1. Arvind Gupta (Executive Chairman);
2. Dmitri Tsvetkov (Chief Financial Officer); and
3. Avantika Gupta (Chief Operating Officer)
(joined on 27 November 2018).
Non-executive
1. Jeremy Warner Allen (Deputy Chairman);
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.
2. Michael Grasby;
3. Jeremy Beeton; and
4. Ravi Gupta (resigned on 29 May 2018).
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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 Mr Grasby to be
independent in both character and judgement notwithstanding his
length of service. Mr Allen and Mr Beeton are 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 four times during the year under
review. In addition to that the Board had a strategy meeting of the
Board and seven monthly conference calls.
The Executive Committee (‘ExCo’) comprises the three 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 are 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.
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.
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. However, this year all Directors are up 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 Adviser. 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, in 2019 the Board performed self-evaluation of its
performance and is to institute regular evaluation of its principal
Committees and the individual Directors.
Power Ventures Plc
Annual Report & Accounts 2019
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Strategic Report
Corporate Governance
Financial Statements
CORPORATE GOVERNANCE REPORT
CONTINUED
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 4 2 2 NA NA NA NA
Avantika Gupta 4 2 2 1 NA NA NA NA
Jeremy Warner Allen 4 4 2 2 NA NA NA NA
Michael Grasby 4 4 2 2 2 2 1 1
Jeremy Beeton 4 4 2 2 2 2 1 1
Number of meetings held
during the year 4 2 2 1
In the event that Directors are unable to attend a meeting, their
comments on the business to be considered at the meeting are
discussed in advance with the Executive Chairman so that their
contribution can be included in the wider Board discussions.
Board Committees
Audit Committee
The members of the Audit Committee are Jeremy Warner Allen,
Michael Grasby and Jeremy Beeton (Ravi Gupta was a member of the
Audit Committee until his resignation in May 2018). Jeremy Warner
Allen is considered to have continuing, relevant financial experience.
The Executive Chairman, Chief Financial Officer and Chief Operating
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
2018; and
• the unaudited results for the half-year FY19 to 30 September 2018.
The Audit Committee considered relevant significant issues in
relation to the financial statements taking into account business
developments during the year and risks and matters raised in the
external auditors’ FY18 final and FY19 planning reports to the Audit
Committee. These issues were addressed as part of preparation of
the FY19 financial statements.
Remuneration Committee
The Remuneration Committee currently consists of Jeremy Beeton,
Jeremy Warner Allen and Michael Grasby (Ravi Gupta was a member
of the Remuneration Committee until his resignation in May 2018).
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. The Nomination Committee regularly
reviews the composition of the Board to ensure that the Board has an
appropriate and diverse mix of skills experience, independence and
knowledge of the Group. We recognise the benefits of gender diversity
and in the current year we have appointed our first female Executive
Director, Ms Avantika Gupta, COO, to the Board.
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Financial Statements
Accountability and audit
Risk management and internal control
The Board has overall responsibility for the Group’s system of internal
control, which includes risk management. The Board has delegated
the responsibility for reviewing the effectiveness of its internal control
systems to the Audit Committee. The Audit Committee reviews these
systems, policies and processes for tendering, authorisation of
expenditure, fraud and the internal audit plan.
The system of internal control is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives and can
only provide reasonable and not absolute assurance against material
misstatement or loss.
The Board has instructed the ExCo to be a leading part of its process
to identify, evaluate and manage the significant risks the Group faces,
which is in accordance with the current guidance on internal control.
The Audit Committee will assist the Board in discharging its review
responsibilities. The Board has carried out a robust assessment of
the principal risks faced by the Group, including those that would
threaten its business model, future performance, solvency and
liquidity. A summary of the key risks facing the Group and mitigating
actions is described on pages 20 and 21.
Assurance
BDO LLP was appointed as auditor for the Group for the financial
year ended 31 March 2018 following a tender process. The Audit
Committee reviewed the effectiveness of the external auditor and
BDO LLP was reappointed in for the financial year ended 31 March
2019. The Audit Committee’s assessment was based on inputs
obtained in the course of monitoring the integrity of the financial
statements and the significant financial reporting issues and
judgements underlying the financial statements, and on its direct
interactions with the external auditors. The Audit Committee’s
principal interactions with the auditors were its discussions of the
audit work performed on areas of higher audit risk and the basis for
the auditors’ conclusions on those areas. These interactions were
supplemented by others that enabled them, for example, to gauge
the depth of the auditors’ understanding of the company’s business.
The Audit Committee’s review focused on the level of experience
and expertise of the audit team, their objectivity and professional
scepticism, and their preparedness to challenge management in a
knowledgeable, informed and constructive manner. The Committee’s
review also took account of feedback from management on the
effectiveness of the audit process.
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.
Having considered the effectiveness and independence of the
external auditor as described above, the Audit Committee agreed to
recommend to the Board that a resolution to reappoint BDO LLP as
the Group’s external auditor should be put to shareholders at the
AGM in November 2019.
Visibility statement
A statement on the Directors’ position regarding the Company as
going concern is contained in the Directors’ Report on page 28.
As part of annual strategy session, the directors have assessed the
prospects of the Group over a period significantly longer than the
12 months required by the going concern. In this assessment, the
Board has considered the principal risks faced by the Group, relevant
financial forecasts and the availability of adequate funding. The Board
conducted this assessment over a period to the end of calendar year
2023, primarily because this is a remaining period of repayment of
term loans. Based on its review, the Board is satisfied the viability of
the Group would be preserved and have a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the four-year period of their assessment.
Shareholder relations and the Annual General Meeting
The Board is committed to maintaining an ongoing dialogue with its
shareholders. The Directors are keen to build a mutual understanding
of objectives with its principal shareholders. To this end, the Executive
Chairman and 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 encourage 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 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.
Power Ventures Plc
Annual Report & Accounts 2019
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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 2019.
Principal activity
OPG Power Ventures Plc (‘the Company’ or ‘OPGPV’ or ‘OPG’) 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 2019 are set out in
the Consolidated Statement of Comprehensive Income. The Group
profit for the year after tax was £14.8m (2018 loss after tax: £100.9m).
A review of the Group’s activities is set out in the Executive
Chairman’s statement.
Directors’ liability insurance and indemnities
The Company maintains liability insurance for the Directors and
officers of OPG.
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.
Neither the Group’s liability insurance nor indemnities provide 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 2019 was
£57,024 comprising 387,910,200 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.
Going concern
The Board will be recommending a scrip dividend for the year ended
31 March 2019 in amount of 0.6 pence per share. A scrip dividend for
the year ended 31 March 2018 in amount of 1 pence per share was
paid for the year ended 31 March 2019.
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
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.
Dmitri Tsvetkov Chief Financial Officer, Executive Director
Avantika Gupta Chief Operating Officer, Executive Director
(joined on 27 November 2018)
Jeremy Warner Allen Deputy Chairman, Non-executive Director
and Audit Committee Chairman
Michael Grasby Non-executive Director
Jeremy Beeton Non-executive Director, Remuneration and
Nomination Committee Chairman
Ravi Gupta Non-executive Director
(resigned on 29 May 2018)
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 over a period of at least 12 months form the
date of approval of the financial statements. Accordingly, the Board
considers it appropriate to adopt the going concern basis of
accounting in preparing the financial statements.
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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 31 July 2019
and signed on its behalf by:
Philip Scales
Company Secretary
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
31 July 2019
Details of substantial shareholdings are set out on the Company’s
website at www.opgpower.com. The Company has been notified,
in accordance with the Disclosure and Transparency Rules of the
Financial Conduct Authority, of the following interests (whether
directly or indirectly held) in 3% or more of the Company’s total
voting rights at 31 March 2019:
Percentage of
voting rights
and issued Number of
share capital ordinary shares
Gita Investments Limited
and related parties1 52.1% 202,124,978
M&G Investment Management Limited 13.0% 50,385,996
River and Mercantile Asset
Management LLP 4.8% 18,778,970
Premier Asset Management Limited 3.8% 14,917,798
British Steel Pension Scheme 3.6% 13,771,951
1 Beneficial interest in these shareholdings vests with Arvind Gupta and his family.
Registered agent
The registered agent of the Company at 31 March 2019 was FIM
Capital Limited which 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 has expressed its willingness to continue in office as
auditors and a resolution proposing its re-appointment will be
proposed at the forthcoming AGM.
Power Ventures Plc
Annual Report & Accounts 2019
29
Strategic Report
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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 2019. 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) Regulations (2008) (the ‘Regulations’).
Remuneration Committee
The members of the Remuneration Committee are Jeremy Beeton,
Jeremy Warner Allen and Michael Grasby (Ravi Gupta was a member
of the Remuneration Committee until May 2018) 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 principal responsibilities of the Committee include:
• assessing and setting compensation levels for Directors and senior
managers;
• reviewing the ongoing appropriateness and relevance of the
remuneration policy at regular intervals to ensure that members of
the executive team are provided with incentives that encourage
enhanced performance;
• reviewing the design of share incentive plans for the approval of
the Board or shareholders, as appropriate; and
• ensuring that contractual terms on termination are such that failure
is not rewarded and that the duty to mitigate losses is fully
recognised in the drafting of Directors’ service agreements and
letters of appointment.
In fulfilling these duties, the Committee shall be cognisant of
remuneration trends across the Group and within the sector in which
the Group operates.
The Executive Directors and external advisers may be invited to
attend meetings of the Remuneration Committee but do not take part
in the decision making.
Attendance at meetings of the Remuneration Committee by individual
members is detailed in the Corporate Governance Report on page 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 retention of key management and the alignment of management
incentives with the creation of shareholder value are key objectives
of this policy.
The Group therefore sets out to provide competitive remuneration
for all its management and employees appropriate to the business
environment in the market in which it operates and in recognition
of their contribution to Group performance. To achieve this, the
remuneration package is based upon the following principles:
• total rewards should be set to provide a fair and attractive
remuneration package;
• appropriate elements of the remuneration package should be
designed to reinforce the link between performance and
contribution to the Group’s success and reward; and
• Executive Directors’ incentives should be aligned with the
interests of shareholders.
The remuneration strategy is designed to be in line with the Group’s
fundamental values of fairness, competitiveness and equity, and also
to support the Group’s corporate strategy. The Group seeks
increasingly to align the interests of shareholders with those of
Directors and senior employees by giving the latter opportunities and
encouragement to build up a shareholding interest in the Company.
Long-term incentives
The Remuneration Committee believes that it is appropriate to
operate share incentive schemes to encourage Executive Directors
and senior employees to meet the Group’s long-term strategic and
financial objectives set by the Board.
Stock option plan
Arvind Gupta and Michael Grasby have received awards under the
stock option plan approved by the Board on 16 July 2009 (see table
below). Options granted must be exercised within 10 years of the
date of grant and vesting depends on achievement of the following
performance conditions:
1. the power plant at Kutch in the state of Gujarat must have been
in commercial operation for three months; and
2. the closing share price must be at least £1 for three consecutive
business days.
Long Term Incentive Plan (‘LTIP’)
In April 2019, the Remuneration Committee of the Board of Directors
has approved the introduction of an LTIP, which was subsequently
revised in July 2019, for a performance-related award of 14 million
new ordinary shares (representing approximately 3.6% of the
Company’s issued share capital) in order to incentivise further the
executives and senior management to deliver its planned strategy.
The LTIP Shares will be awarded as Nominal Cost Share and will vest
in three tranches subject to continued service with OPG until vesting
and meeting the following share price performance targets, plant load
factor and term loan repayments of the Chennai thermal plant.
• 20% of the LTIP Shares shall vest upon meeting the target share
price of 25.16p before the first anniversary for the first tranche,
i.e. 24 April 2020, achievement of PLF during the period April 2019
to March 2020 of at least 70% at the Chennai thermal plant and
repayment of all scheduled term loans;
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Corporate Governance
Financial Statements
• 40% of the LTIP Shares shall vest upon meeting the target share
price of 30.07p before the second anniversary for the second
tranche, i.e. 24 April 2021, achievement of PLF during the period
April 2020 to March 2021 of at least 70% at the Chennai thermal
plant and repayment of all scheduled term loans;
• 40% of the LTIP Shares shall vest upon meeting the target share
price of 35.00p before the third anniversary for the third tranche,
i.e. 24 April 2022, achievement of PLF of at least 70% at the
Chennai thermal plant during the period April 2021 to March 2022
and repayment of all scheduled term loans.
The share price performance metric will be deemed achieved if the
average share price over a fifteen day period exceeds the applicable
target price. In the event that the share price or other performance
targets do not meet the applicable target, the number of vesting
shares would be reduced pro-rata, for that particular year. However,
no LTIP Shares will vest if actual performance is less than 80 per cent
of any of the performance targets in any particular year. The terms
of the LTIP provide that the Company may elect to pay a cash award
of an equivalent value of the vesting LTIP Shares.
None of the LTIP Shares, once vested, can be sold until the third
anniversary of the award, unless required to meet personal taxation
obligations in relation to the LTIP award.
FY19. In light of the lower FY19 cash dividend, Arvind Gupta,
Executive Chairman, voluntarily waived his FY19 bonus £250,000
(50% of base salary) (FY18: waived bonus) and Dmitri Tsvetkov, CFO,
and Avantika Gupta, COO, voluntarily agreed to reduce the bonus
from 30% to 20% of base salary. Therefore Dmitri Tsvetkov was
awarded a bonus of £48,000 (FY18: £50,000) and Avantika Gupta
was awarded a bonus of £24,000 (FY18: n/a). These bonuses have
been provided in the accounts for FY19.
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 Dmitri Tsvetkov and Ms Avantika Gupta (from 27 Nov 2018)
are entitled to medical, insurance and other allowances and
received £57,938 (FY18: £4,702), £19,095 (FY18: £9,200) and
£521 (FY18: Nil) respectively.
Annual bonus
The Remuneration Committee considered bonuses for Executive
Directors who were entitled to performance bonuses with respect to
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 500,000
Dmitri Tsvetkov Chief Financial Officer 26 June 2017 3 months’ prior written notice on either side 240,000
Avantika Gupta Chief Operating Officer 27 November 2018 12 months’ prior written notice on either side 120,000
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 3 months’ prior written notice on either side 50,000
Michael Grasby 6 May 2008 3 months’ prior written notice on either side 45,000
Martin Gatto (resigned in November 2017) 6 May 2008 3 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 3 months’ prior written notice on either side 45,000
Power Ventures Plc
Annual Report & Accounts 2019
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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 2019 31 March 2018
Gita Investments Limited1 199,884,417 183,600,557
Michael Grasby 11,233 10,318
Jeremy Warner Allen 1,088,691 303,729
Dmitri Tsvetkov 1,090,637 100,000
Jeremy Beeton 50,000 –
Avantika Gupta (joined on 27 November 2018) – n/a
Total 202,124,978 184,014,604
1 Beneficial interest in these shareholdings vests with Arvind Gupta and family.
There were no changes to Directors’ interests between 31 March 2019 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 2019 other than their service
contracts, details of which are given on page 31.
Directors’ remuneration for the period 31 March 2018 to 31 March 2019
Salary, annual bonus and benefits
Salary/fees Annual bonus Total FY19 Total FY18
£ £ £ £
Executive Chairman
Arvind Gupta (paid in INR equivalent) 500,000* –* 500,000 750,000
Executive Director
Dmitri Tsvetkov 240,000 48,000*** 288,000 290,000
Avantika Gupta (paid in INR equivalent)
(joined on 27 November 2018) 40,691**** 24,000**** 64,691 n/a
V Narayan Swami (paid in INR equivalent)
(until 8 November 2017) n/a n/a n/a 224,824
Non-executive Directors
Jeremy Warner Allen 50,000 – 50,000 22,500
Martin Gatto (until 8 November 2017) n/a n/a n/a 33,750
Michael Grasby 45,000 – 45,000 45,000
Ravi Gupta (until 29 May 2018) n/a n/a n/a **22,500
Jeremy Beeton 45,000 – 45,000 45,000
Total 920,691 72,000 992,691 1,433,574
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 FY19 salary: INR45.8m (FY18: INR64.1m). In FY19 Arvind Gupta voluntarily agreed to reduce his base salary to £500,000
and to waive his FY19 bonus (FY18: waived bonus).
** Ravi Gupta waived half of his FY18 annual remuneration.
*** FY19 bonus provisions made, not paid.
**** Avantika Gupta’s INR equivalent of FY19 salary: INR11m prorated from 27 November 2019 which is the date of her Board appointment.
FY19 bonus provisions made, not paid.
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Financial Statements
Directors’ share options
Movements during the period Options outstanding
Option Options as at Forfeited/ Latest
Option granted price £ 1 April 2018 Granted Cancelled Exercised 31 March 2019 exercise date
Gita Investments Limited
(Arvind Gupta) 16 July 2009 0.60 21,524,234 Nil Nil Nil 21,524,234 15 Jul 2019
Ravi Gupta 16 July 2009 0.60 250,000 Nil 250,000 Nil Nil
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 2019, the closing mid-market price of the Company’s shares was 21.75 pence. During the year under review, the Company’s
closing mid-market share price ranged between a low of 10.3 pence and a high of 27.25 pence.
This report has been approved by the Board of Directors of the Company.
Jeremy Beeton
Chairman, Remuneration Committee
31 July 2019
Power Ventures Plc
Annual Report & Accounts 2019
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Corporate Governance
Financial Statements
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
Directors’ responsibilities
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the Group financial statements.
The Directors are required to prepare financial statements for the
Group in accordance with International Financial Reporting Standards
(‘IFRS’) as adopted for use in the European Union and have also
elected to prepare financial statements for the Company in
accordance with IFRS as adopted for use in the European Union.
Company law requires the Directors to prepare such financial
statements in accordance with IFRS and the Companies Act 2006.
International Accounting Standard 1 requires that financial statements
present fairly for each financial year the Group’s and Company’s
financial position, financial performance and cash flows. This requires
the fair presentation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria
for assets, liabilities, income and expenses set out in the International
Accounting Standards Board’s ‘Framework for the Preparation and
Presentation of Financial Statements’. In virtually all circumstances,
a fair presentation will be achieved by compliance with all applicable
International Financial Reporting Standards. In preparing these
financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial
statements; and
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that the
financial statements comply with the requirements of the Companies
Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Responsibility statement of the Directors in respect
of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken
as a whole; and
• the strategic report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face.
We consider the annual report and accounts, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Group’s position and performance,
business model and strategy.
Website publication
The Directors are responsible for ensuring the annual report and the
financial statements are made available on a website. Financial
statements are published on the company's website in accordance
with legislation in the Isle of Man governing the preparation and
dissemination of financial statements, which may vary from legislation
in other jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
On behalf of the Board by:
Philip Scales
Company Secretary
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
31 July 2019
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INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF OPG POWER VENTURES PLC
Opinion
We have audited the financial statements of OPG Power Ventures Plc
(‘the Parent Company’) and its subsidiaries (‘the Group’) for the year
ended 31 March 2019, 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 (‘IFRSs’) 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 2019 and of its profit for the year then ended; and
• have been properly prepared in accordance with IFRS as adopted
by the European Union.
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 principal risks, going concern
and viability statement
We have nothing to report in respect of the following information in the
annual report, in relation to which the ISAs (UK) require us to report to
you whether we have anything material to add or draw attention to:
• the disclosures in the annual report that describe the principal risks
and explain how they are being managed or mitigated;
• the Directors’ confirmation in the annual report that they have
carried out a robust assessment of the principal risks facing the
Group, including those that would threaten its business model,
future performance, solvency or liquidity;
• the Directors’ statement in the financial statements about whether
the Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the financial statements and the
Directors’ identification of any material uncertainties to the Group’s
ability to continue to do so over a period of at least 12 months from
the date of approval of the financial statements;
• whether the Directors’ statement relating to going concern made in
accordance with the UK Corporate Governance Code is materially
inconsistent with our knowledge obtained in the audit; or
• the Directors’ explanation in the annual report as to how they have
assessed the prospects of the Group, over what period they have
done so and why they consider that period to be appropriate, and
their statement as to whether they have a reasonable expectation
that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any
necessary qualifications or assumptions.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, 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)
that 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
Carrying value of thermal power station and solar assets
The Group’s thermal power station and solar assets represent its most significant assets and total £250m as
at 31 March 2019, including Held for Sale (‘HFS’) solar assets of £46m.
Management is required to assess whether they consider there are any indications that the Group’s assets
may be impaired as at 31 March 2019. In addition they are also required to carry out an impairment
assessment of the £46m solar assets before these are classified as held for sale in line with IFRS 5
Non-current Assets Held For Sale and Discontinued Operations. These assessments are undertaken in line
with IAS 36 Impairment of Assets.
The future viability and recoverability of the power and solar assets are underpinned by the results achieved to
date and the prediction of future value based on the future cash inflows generated from the assets.
Management determined that the low market capitalisation is an indicator of impairment. Management
therefore performed impairment assessments on each cash-generating unit comprising the thermal power
station and the solar power plants.
As detailed in Note 6, the assessment of the recoverable amount of the thermal power and solar assets
required significant judgement and estimates by management.
The carrying value of the thermal power and solar assets represented a significant risk for our audit given the
significant judgement and estimates required regarding future operating results, coal prices and discount rates.
Power Ventures Plc
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INDEPENDENT AUDITOR’S REPORT
CONTINUED
How we addressed
the key audit matter
in the audit
We reviewed management’s assessment of indicators of impairment and evaluated management’s impairment
models for the thermal power assets and HFS solar assets against historical performance and our understanding
of the operations. We critically challenged the key estimates and assumptions used by management.
Our testing included comparison of the tariffs used in the models to underlying contracts, recalculation of
discount rates and critical review of the forecast production and cost profiles against empirical performance
and forward coal price data.
We used our valuations expert to assist us in evaluating the appropriateness of the discount rates.
We undertook a tour of the power plant and held discussions with the operational management over the
operational performance of the plant to ensure the plant was performing as expected and that no operational
issues are expected.
We sensitised the models for reasonable movements in key judgement areas to ascertain whether there
remained a reasonable expectation that there would remain adequate headroom in excess of the carrying values.
Based on the procedures above, we found the Group’s assessment that its impairment models support the
carrying value of the thermal power and solar assets to be appropriate.
Our application of 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.
FY2019 FY2018
Group materiality £850,000 £1,400,000
Basis for determining materiality 5% of the 1% of revenue
Group’s profit from continuing
before tax operations
Group performance materiality £640,000 £600,000
Basis for performance materiality 75% of Group 50% of Group
materiality materiality
We have determined a profit-based measure is appropriate as the
Group is generating stable profits. The use of profit before tax is also
in line with other similar companies in the market and falls in line with
FRC guidance.
The three significant components were audited to a level of materiality
ranging from £0.85m to £0.35m (2018: £1.3m to £1.0m). Such
materialities were used to determine the financial statement areas that
are included within the scope of our audit and the extent of sample
sizes tested during the audit.
The non-significant components were audited using a materiality of
£0.68m (2018: £1.0m).
We determined the Group performance materiality to be 75% of the
Group materiality due to the low value of brought forward adjustments
from the prior year, only one primary operating location and low value
of historical adjustments.
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 £17,000 (2018: £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.
In approaching the audit, we considered how the Group is organised
and managed. We completed a full scope audit on the Group’s
financial information and the three components we deemed
significant. BDO India completed the component audits for the two
significant components located in India with BDO UK reviewing all
audit work. BDO UK completed the audit of the Group’s parent
company. The Group audit team also visited the finance operations in
India to undertake review procedures and discuss the key audit
issues. The five non-significant components were subject to analytical
review procedures undertaken by BDO India and reviewed by the
Group audit team.
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.
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Financial Statements
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 on the Financial Reporting Council’s website at:
https://www.frc.org.uk/auditorsresponsibilities
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a
body, in accordance with our engagement letter dated 20 May 2019.
Our audit work has been undertaken so that we might state to the
Parent Company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the Parent Company and the Parent Company’s
members as a body for our audit work, for this report, or for the
opinions we have formed.
BDO LLP
London
31 July 2019
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
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.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of
the other information where we conclude that those items meet the
following conditions:
• fair, balanced and understandable – the statement given by the
Directors that they consider the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company’s performance, business model and strategies, is
materially inconsistent with our knowledge obtained in the audit; or
• Audit Committee reporting – the section describing the work of
the audit committee does not appropriately address matters
communicated by us to the Audit Committee; and
• Directors’ statement of compliance with the UK Corporate
Governance Code – the parts of the Directors’ statement relating to
the Group’s compliance with the UK Corporate Governance Code
containing provisions that would for a company subject to the
Listing Rules of the Financial Conduct Authority, be specified for
review by the auditor in accordance with Listing Rule 9.8.10R(2)
do not properly disclose a departure from a relevant provision of
the UK Corporate Governance Code.
Responsibilities of Directors
As explained more fully in the statement of Directors’ responsibilities
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 to cease operations, or have no
realistic alternative but to do so.
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Financial Statements
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 31 MARCH 2019
As at As at
(All amounts in £, unless otherwise stated) Notes 31 March 2019 31 March 2018
Assets
Non-current assets
Intangible assets 14 23,603 64,170
Property, plant and equipment 15 204,102,891 207,271,135
Investments accounted for using the equity method 16 – 11,219,378
Other long-term assets 17 518,553 3,000,333
Restricted cash 20 517,271 4,966,140
205,162,318 226,521,156
Current assets
Inventories 19 7,151,366 9,716,280
Trade and other receivables 18 49,198,105 33,695,545
Other short-term assets 17 6,329,354 9,414,971
Current tax assets (net) 1,337,316 2,890,933
Restricted cash 20 23,030,599 20,318,985
Cash and cash equivalents 20 2,118,960 2,185,570
Assets held for sale 7(a)(b) 50,497,664 –
139,663,364 78,222,284
Total assets 344,825,682 304,743,440
Equity and liabilities
Equity
Share capital 21 57,024 52,378
Share premium 21 129,125,915 125,567,473
Other components of equity 2,401,287 1,193,995
Retained earnings 21,916,422 11,461,826
Equity attributable to owners of the Company 153,500,648 138,275,672
Non-controlling interests 882,759 854,752
Total equity 154,383,407 139,130,424
Liabilities
Non-current liabilities
Borrowings 23 51,495,208 69,636,532
Trade and other payables 24 14,235,485 4,994,049
Provision for pledged deposits 20(b) 12,627,381 12,553,684
Deferred tax liabilities (net) 13 2,380,115 1,457,209
80,738,189 88,641,474
Current liabilities
Borrowings 23 28,869,722 23,829,415
Trade and other payables 24 45,474,814 52,331,422
Other liabilities 91,764 810,705
Liabilities classified as held for sale 7(b) 35,267,786 –
109,704,086 76,971,542
Total liabilities 190,442,275 165,613,016
Total equity and liabilities 344,825,682 304,743,440
The Notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 31 July 2019 and were signed on its behalf by:
Arvind Gupta, Executive Chairman
Dmitri Tsvetkov, Chief Financial Officer
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CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2019
Year ended
31 March 2018
Year ended “Restated” (Refer
(All amount in £, unless otherwise stated) Notes 31 March 2019 Notes 5(a), 9(d))
Revenue 8 140,632,328 140,115,336
Cost of revenue 9 (91,753,763) (100,195,277)
Gross profit 48,878,565 39,920,059
Other income 10 2,645,332 1,979,024
Distribution cost (8,476,933) (10,293,699)
General and administrative expenses (6,955,960) (6,599,652)
Expected credit loss on trade receivables 29 (790,437) (271,116)
Depreciation and amortisation (6,064,374) (6,526,177)
Operating profit before impairments 29,236,193 18,208,439
Impairment provision for loss on assets under construction 7(d) – (4,033,125)
Operating profit 29,236,193 14,175,314
Finance costs 11 (14,586,917) (13,620,915)
Finance income 12 2,207,480 1,623,500
Profit before tax 16,856,756 2,177,899
Tax expense 13 (1,819,387) (3,072,731)
Profit/(loss) for the year from continued operations 15,037,369 (894,832)
Loss from discontinued operations, including non-controlling interest 7(a)(b)(c) (989,493) (99,983,431)
Profit/(loss) for the year 14,047,876 (100,878,263)
Profit/(loss) for the year attributable to:
Owners of the Company 14,020,364 (87,141,023)
Non-controlling interests 27,512 (13,737,240)
14,047,876 (100,878,263)
Earnings/(loss) per share from continued operations
Basic earnings per share (in pence) 26 4.09 (0.25)
Diluted earnings per share (in pence) 4.09 (0.25)
Loss per share from discontinued operations
Basic loss per share (in pence) 26 (0.23) (25.06)
Diluted loss per share (in pence) (0.23) (25.06)
Earnings/(loss) per share
– Basic (in pence) 26 3.81 (24.68)
– Diluted (in pence) 3.81 (24.68)
Other comprehensive income/(loss)
Items that will be reclassified subsequently to profit or loss
Financial assets measured at FVPL
– Reclassification to profit or loss – (73,351)
Exchange differences on translating foreign operations 1,207,292 (20,871,345)
Items that will not be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations 961 (555,331)
Total other comprehensive income/(loss) 1,208,253 (21,500,027)
Total comprehensive income/(loss) 15,256,129 (122,378,290)
Total comprehensive income/(loss) attributable to:
Owners of the Company 15,227,656 (108,085,719)
Non-controlling interests 28,473 (14,292,571)
15,256,129 (122,378,290)
The Notes are an integral part of these consolidated financial statements.
The financial statements were authorised for issue by the Board of Directors on 31 July 2019 and were signed on its behalf by:
Arvind Gupta, Executive Chairman Dmitri Tsvetkov, Chief Financial Officer
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CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2019
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 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) (15,778) (34,090) 34,090 –
Dividends 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 (2,888,355) (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
At 1 April 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
Additions on consolidation
of new subsidiary – – – – – (2,680) (2,680) (466) (3,146)
Dividends (Note 21) 31,601,503 4,646 3,558,442 – – (3,563,088) – – –
Transaction with owners 31,601,503 4,646 3,558,442 – – (3,565,768) (2,680) (466) (3,146)
Profit for the year – – – – – 14,020,364 14,020,364 27,512 14,047,876
Other comprehensive income – – – – 1,207,292 – 1,207,292 961 1,208,253
Total comprehensive income – – – – 1,207,292 14,020,364 15,227,656 28,473 15,256,129
At 31 March 2019 387,910,200 57,024 129,125,915 6,650,305 (4,249,018) 21,916,422 153,500,648 882,759 154,383,407
During the year, in addition to the cash dividend the Company has paid a scrip dividend of 31,601,503 shares (2017: 4,799,742 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 31 July 2019 and were signed on its behalf by:
Arvind Gupta, Executive Chairman
Dmitri Tsvetkov, Chief Financial Officer
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CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2019
Year ended
31 March 2018
Year ended “Restated” (Refer
(All amounts in £, unless otherwise stated) Notes 31 March 2019 Notes 5(a), 9(d))
Cash flows from operating activities
Profit/(loss) before income tax 15,867,263 (97,805,532)
Adjustments for:
Loss from discontinued operations, net 7(a) 989,493 99,983,431
Unrealised foreign exchange gain (416,338) (64,747)
Financial costs 14,586,917 13,620,915
Financial income (2,207,480) (1,623,500)
Depreciation and amortisation 6,064,374 6,526,177
Impairment provision for loss on assets under construction 7(d) – 4,033,125
Expected credit loss on Trade receivables 790,437 271,116
(Gain) on sale of shares in AFS investments – (159,998)
Changes in working capital
Trade and other receivables (16,021,881) 4,657,219
Inventories 2,564,914 1,943,460
Other assets 4,752,087 (668,761)
Trade and other payables 2,384,828 26,316,454
Other liabilities (669,762) 807,855
Cash generated from continuing operations 28,684,851 57,837,214
Taxes paid (584,390) (823,728)
Cash provided by (used for) operating activities of continuing operations 28,100,461 57,013,486
Cash provided by (used for) operating activities of discontinued operations (8,256,479) 24,239,702
Net cash provided by (used for) operating activities 19,843,983 81,253,188
Cash flows from investing activities
Purchase of property, plant and equipment (including capital advances) (1,515,742) (1,090,689)
Interest received 2,207,480 1,547,138
Movement in restricted cash (1,737,255) (16,103,811)
Sale of investments 785,222 2,676,801
Purchase of investments – (14,972,747)
Advances to associates – (1,985,863)
Cash from/(used in) investing activities of continuing operations (260,295) (29,929,171)
Cash from/(used in) investing activities of discontinued operations (4,346,681) 442,963
Net cash from/(used in) investing activities (4,606,976) (29,486,208)
Cash flows from financing activities
Proceeds from borrowings (net of costs) 7,535,858 4,099,459
Repayment of borrowings (20,636,875) (25,070,007)
Dividend paid – (1,623,539)
Finance costs paid (Notes 9 and 11) (14,835,536) (13,556,168)
Cash used in financing activities of continuing operations (27,936,553) (36,150,255)
Cash used in financing activities of discontinued operations 12,717,446 (25,127,046)
Net cash used in financing activities (15,219,107) (61,277,301)
Net decrease in cash and cash equivalents from continuing operations (96,387) (9,065,940)
Net decrease in cash and cash equivalents from discontinued operations 114,286 (444,381)
Net decrease in cash and cash equivalents 17,899 (9,510,321)
Cash and cash equivalents at the beginning of the year 2,185,570 13,086,123
Cash and cash equivalents – solar business 231,953 –
Exchange differences on cash and cash equivalents 29,769 (843,405)
Cash and cash equivalents of the discontinued operations (346,231) (546,827)
Cash and cash equivalents at the end of the year 2,118,960 2,185,570
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CONSOLIDATED STATEMENT OF CASH FLOWS
CONTINUED
Disclosure of changes in financing liabilities:
Analysis of changes in net debt
(All amounts in £, unless otherwise stated) 1 April 2018 Cash flows Other changes 31 March 2019
Working capital loan 3,426,622 7,535,858 (528,587) 10,433,893
Secured loan due within one year 20,402,793 (1,966,964) – 18,435,829
Borrowings grouped under current liabilities 23,829,415 5,568,894 (528,587) 28,869,722
Secured loan due after one year 69,636,532 (18,669,911) 528,587 51,495,208
Borrowings grouped under non-current liabilities 69,636,532 (18,669,911) 528,587 51,495,208
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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 (‘IFRSs’)
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 2019 were approved and authorised for issue by the Board of Directors
on 31 July 2019.
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 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. Management does not expect any significant
impact of IFRS 16 on Group’s consolidated financial statements.
b) Changes in accounting standards
i) IFRS 15 “Revenue from Contracts with Customers”
This standard replaces IAS 11 “Construction contracts”, IAS 18 “Revenue”, IFRIC 18 “Transfers of Assets from Customers” and several other
revenue related interpretations previously adopted by the Group. The core principle of IFRS 15 is that an entity recognises revenue that reflects
the expected consideration for goods or services provided to a customer under contract, over the performance obligations they are being
provided. The standard has introduced a five-step model as the framework for applying that core principle.
The Group has applied the “Modified Retrospective” transition approach. Under this method, the standard can be applied either to all contracts
at the date of initial application or only to contracts that are not completed at this date. The Company elected to apply the standard to all
contracts as at 1 April 2018. However, the application of IFRS 15 does not have any impact on the recognition and measurement of revenue
and related items.
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CONTINUED
4. Recent accounting pronouncements continued
ii) IFRS 9 “Financial Instruments”
IFRS 9 “Financial Instruments” (2014) replaces the previous regulations of IAS 39 on financial instruments. The standard contains amended
regulations on measurement categories for financial assets and includes some smaller changes in relation to the measurement of financial
liabilities. It also contains regulations on impairments, which are based on expected losses for the first time. The new regulations on hedge
accounting should improve the presentation of risk management activities in the consolidated financial statements. In line with the transitional
regulations of IFRS 9, the prior-year carrying amounts are not adjusted.
IFRS 9 includes new rules for classifying financial instruments, which basically envisage four valuation categories:
• debt instruments measured at amortised cost;
• debt instruments measured at fair value through other comprehensive income, the changes in value of which are recognised with an effect
on income (recycling) upon disposal;
• equity instruments measured at fair value through other comprehensive income, the changes in value of which remain in equity and are not
recognised in profit or loss (no recycling) upon disposal; and
• financial instruments measured at fair value through profit or loss.
In addition to the new regulations regarding the statement of financial assets, IFRS 9 includes minor amendments to the statement of financial
liabilities. These amendments have no impact on the Group’s consolidated financial statements.
Furthermore, IFRS 9 introduces new regulations for hedge accounting, which aim to improve the presentation of risk management activities in
consolidated financial statements. For this purpose, IFRS 9 extends the scope of underlying transactions qualifying for hedge accounting and
introduces a new approach for assessing effectiveness, among other things. Overall, the new regulations regarding hedge accounting do not
have any material effects on the Group’s consolidated financial statements.
5. Summary of significant accounting policies
a) Basis of preparation
The consolidated financial statements of the Group have been prepared on a historical cost basis, except for financial assets and liabilities at
fair value through profit or loss and financial assets measured at FVPL.
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.
Net foreign exchange loss is attributable to foreign currency variations on import of coal financed under letter of credit for power plant operation
and was reclassified from General and Administrative expenses to finance costs in the Consolidated Statement of Comprehensive Income
(Note 9(d)), as all letter of credit related charges and interest are included in finance cost.
During FY19, results of operations of joint venture Padma Shipping Limited were reclassified to discontinued operations and accordingly the
comparatives for FY18 were restated to discontinued operations (£3,282,306) from Impairment provision for loss on investments and assets
under construction (£3,247,668) and from share of loss from equity accounted investments (£34,638) (Note 7(a)). During FY2018, 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(c)).
During FY19, the Company obtained a right to exercise an option to buy additional 30% equity interest in solar companies. This right,
in combination with other rights, provided substantive potential voting rights and investments in solar companies were reclassified from
associates to subsidiaries. During FY19, results of operations of associates Avanti Solar Energy Private Limited, Mayfair Renewable Energy
Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited were reclassified to discontinued
operations. After evaluation of all options, the Company decided that the most efficient way to maximise shareholders’ value from solar
operations is to dispose of solar companies and it initiated a process of disposition of solar companies which met all conditions of IFRS 5 for
classification of solar business as Assets held for sale at 31 March 2019 (Note 7(b)).
Going Concern
As at 31 March 2019 the Group had £2.1m in cash and net current assets of £30.0m. The Directors and management have prepared a cash
flow forecast to July 2020, 12 months from the date this report has been approved.
The Group experiences sensitivity in its cash flow forecasts due to the exposure to potential increase in USD denominated coal prices and a
decrease in the value of the Indian Rupee. 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.
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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 2019. All subsidiaries have a reporting date of 31 March.
A subsidiary is defined as an entity controlled by the Company. The parent controls a subsidiary if it is exposed, or has rights, to variable returns
from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are fully
consolidated from the date of acquisition, being the date on which effective control is acquired by the Group, and continue to be consolidated
until the date that such control ceases.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions
between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also
tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies adopted by the Group.
Non-controlling interest represents the portion of profit or loss and net assets that is not held by the Group and is presented separately in the
Consolidated statement of comprehensive income and within equity in the Consolidated statement of financial position, separately from parent
shareholders’ equity. Acquisitions of additional stake or dilution of stake from/to non-controlling interests/other venturer in the Group where
there is no loss of control are accounted for as an equity transaction, whereby the difference between the consideration paid to or received from
and the book value of the share of the net assets is recognised in ‘other reserves’ 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 2019 March 2018 March 2019 March 2018
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 73.49 72.72 99.91 99.91
Bhadreshwar Vidyut Private Limited (‘BVP’) * GPIPL India (*) (*) (*) (*)
Samriddhi Solar Power Private Limited OPGPG India 73.49 72.72 99.90 99.90
Samriddhi Surya Vidyut Private Limited OPGPG India 73.49 72.72 99.90 99.90
OPG Surya Vidyut Private Limited OPGPG India 73.49 72.72 99.90 99.90
Powergen Resources Pte Ltd OPGPV Singapore 98.67 98.64 100.00 100.00
Avanti Solar Energy Private Limited ** OPGPG India 31 Associate 31% 31 Associate 31%
Mayfair Renewable Energy Private Limited ** OPGPG India 31 Associate 31% 31 Associate 31%
Avanti Renewable Energy Private Limited ** OPGPG India 31 Associate 31% 31 Associate 31%
Brics Renewable Energy Private Limited ** OPGPG India 31 Associate 31% 31 Associate 31%
* During the previous 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(c) Loss from discontinued
operations and impairment provision), therefore the investment in BVP was classified as financial instruments measured at fair value through profit or loss and BVP
financial statements were consequently deconsolidated as on 31 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 the consolidated income statement.
** During FY19, the Group obtained a right to exercise an option to buy additional equity interest in solar companies. This right, in combination with other rights, provided
substantive potential voting rights and investments in solar companies were reclassified from associates to subsidiaries.
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CONTINUED
5. Summary of significant accounting policies continued
ii) Financial assets measured at FVPL (Assets held for sale) – Joint ventures (Note 7(a))
Joint venture Venturer incorporation March 2019 March 2018 March 2019 March 2018
Country of
% Voting right % Economic interest
Padma Shipping Limited (‘PSL’) OPGPV/OPGPG Hong Kong 50 50 50 50
e) Foreign currency translation
The functional currency of the Company is the Great Britain Pound Sterling (‘GBP’). 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 GBP. 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 GBP 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 GBP are the closing rate as at 31 March
2019: 90.28 (2018: 90.81) and the average rate for the year ended 31 March 2019: 91.60 (2018: 85.40).
f) Revenue recognition
The Group’s accounting policies for Revenue have changed during the year, following adoption of IFRS 15 (Note 4(b)(i)), however, the
application of IFRS 15 does not have any impact on the recognition and measurement of revenue and related items. Revenue from contracts
with customers is recognised to the extent that it reflects the expected consideration for goods or services provided to the customer under
contract, over the performance obligations they are being provided. For each separable performance obligation identified, the Group
determines whether it is satisfied at a “point in time” or “over time” based upon an evaluation of the receipt and consumption of benefits, control
of assets and enforceable payment rights associated with that obligation. If the criteria required for “over time” recognition are not met, the
performance obligation is deemed to be satisfied at a “point in time”. Revenue principally arises as a result of the Group’s activities in electricity
generation and distribution. Supply of power and billing satisfies performance obligations. The supply of power is invoiced in arrears on a
monthly basis and generally the payment terms within the Group are 30 days.
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 and reflecting the applicable customer tariff after deductions or discounts.
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.
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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
IFRS 9 “Financial Instruments” (2014) replaces the previous regulations of IAS 39 on financial instruments. The standard contains amended
regulations on measurement categories for financial assets and includes some smaller changes in relation to the measurement of financial
liabilities. It also contains regulations on impairments, which are based on expected losses for the first time. The new regulations on hedge
accounting should improve the presentation of risk management activities in the consolidated financial statements. In line with the transitional
regulations of IFRS 9, the prior-year carrying amounts are not adjusted. The application of the new classification and valuation regulations and
the recognition of the associated effects of the changeover occur through the adjustment of the carrying amounts of the financial assets and
liabilities as well as retained earnings as of 1 April 2018.
IFRS 9 includes new rules for classifying financial instruments, which basically envisage four valuation categories:
• debt instruments measured at amortised cost;
• debt instruments measured at fair value through other comprehensive income, the changes in value of which are recognised with an effect
on income (recycling) upon disposal;
• equity instruments measured at fair value through other comprehensive income, the changes in value of which remain in equity and are not
recognised in profit or loss (no recycling) upon disposal; and
• financial instruments measured at fair value through profit or loss.
IFRS 9 also contains new regulations on the impairment of financial assets, which stipulate that such be based on expected losses.
j) Financial liabilities
The Group’s financial liabilities include borrowings and trade and other payables. Financial liabilities are measured subsequently at amortised
cost using the effective interest method. All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in
profit or loss are included within ‘finance costs’ or ‘finance income’.
k) Fair value of financial instruments
The fair value of financial instruments that are actively traded in organised financial markets is determined by reference to quoted market prices
at the close of business on the Statement of financial position date. For financial instruments where there is no active market, fair value is
determined using valuation techniques. Such techniques may include using recent arm’s length market transactions; reference to the current
fair value of another instrument that is substantially the same; discounted cash flow analysis or other valuation models.
l) Property, plant and equipment
Property, plant and equipment are stated at historical cost, less accumulated depreciation and any impairment in value. Historical cost includes
expenditure that is directly attributable to property plant and equipment such as employee costs, 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.
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5. Summary of significant accounting policies continued
Land is not depreciated. Depreciation on all other assets is computed on a 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 four 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.
o) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, that necessarily take a substantial period
of time to get ready for their intended use or sale, are added to the cost of those assets. Interest income earned on the temporary investment
of specific borrowing pending its expenditure on qualifying assets is deducted from the costs of these assets.
Gains and losses on extinguishment of liability, including those arising from substantial modification from terms of loans are not treated as
borrowing costs and are charged to profit or loss.
All other borrowing costs including transaction costs are recognised in the statement of profit or loss in the period in which they are incurred,
the amount being determined using the effective interest rate method.
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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) Non-current 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 an 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 shareholders and the
weighted average number of shares outstanding during the period are adjusted for the effects of all dilutive potential equity share.
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5. Summary of significant accounting policies continued
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 value 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.
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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 the 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.
y) Segment reporting
The Group is primarily involved in the business of power generation. Considering the nature of the Group’s business, as well as based on
reviews by the chief operating decision maker to make decisions about resource allocation and performance measurement, there are only two
reportable segments in accordance with the requirements of IFRS 8.
6. Significant accounting judgements, estimates and assumptions
The preparation of financial statements in conformity with IFRS requires management to make certain critical accounting estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period.
The principal accounting policies adopted by the Group in the consolidated financial statements are as set out above. The application of
a number of these policies requires the Group to use a variety of estimation techniques and apply judgement to best reflect the substance
of underlying transactions.
The Group has determined that a number of its accounting policies can be considered significant, in terms of management judgement that has
been required to determine the various assumptions underpinning their application in the consolidated financial statements presented which,
under different conditions, could lead to material differences in these statements. The actual results may differ from the judgements, estimates
and assumptions made by management and will seldom equal the estimated results.
a) Judgements
The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on
the financial statements.
Assessing control of subsidiaries, associates, joint ventures
During FY19, the Company obtained a right to exercise an option to buy additional 30% equity interest in the solar companies. This right, in
combination with other rights, provided substantive potential voting rights and the investments in the solar companies were reclassified from
associates to subsidiaries. Subsequently, the results of operations of associates Avanti Solar Energy Private Limited, Mayfair Renewable Energy
Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable Energy Private Limited were reclassified to discontinued
operations.
Non-current assets held for sale and discontinued operations
The Group exercises judgement in whether assets are held for sale. After evaluation of all options, the Company decided that the most efficient
way to maximise shareholders’ value from solar operations is to dispose of the solar companies and it initiated the process of disposition of the
solar companies. Under IFRS 5, such a transaction meets the ‘Asset held for sale’ when the transaction is considered sufficiently probable and
other relevant criteria are met. Management considers that all the conditions under IFRS 5 for classification of the solar business as held for sale
have been met as at 31 March 2019 and expects the interest in the solar companies to be sold within the next 12 months.
The investment in the joint venture Padma Shipping Limited and associated advance has been presented as an asset held for sale following the
process of sale of the second vessel as mentioned in Note 7(a). During FY18 the Group has sold a 5% 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 India in accordance with the
directions of Bee Electric. Sale of the 5% stake and execution of the 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.
Recoverability of deferred tax assets: The recognition of deferred tax assets requires assessment of future taxable profit (see Note 5(h)).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
6. Significant accounting judgements, estimates and assumptions continued
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.
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. At the end of each
reporting period a review of the allowance for impairment of trade receivables is performed. Trade receivables do not contain a significant
financing element, and therefore expected credit losses are measured using the simplified approach permitted by IFRS 9, which requires
lifetime expected credit losses to be recognised on initial recognition. A provision matrix is utilised to estimate the lifetime expected credit
losses based on the age, status and risk of each class of receivable, which is periodically updated to include changes to both
forward-looking and historical inputs.
Assets held for sale – Financial assets measured at FVPL
Valuation of investment in joint venture Padma Shipping is based on estimates and subject to uncertainties (Note 7(a)).
Financial assets measured at FVPL
Management applies valuation techniques to determine the fair value of financial assets measured at FVPL where active market quotes are
not available. This requires management to develop estimates and assumptions based on market inputs, using observable data that market
participants would use in pricing the asset. Where such data is not observable, management uses its best estimate. Estimated fair values
of the asset may vary from the actual prices that would be achieved in an arm’s length transaction at the reporting date.
Other financial liabilities
Borrowings held by the Group are measured at amortised cost (Note 5(j) and Note 29).
ii.
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; and
iii. Useful life of depreciable assets: Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based
on the expected utility of the assets.
7. Non-current assets held for sale and discontinued operation
Non-current assets held for sale and discontinued operation consists of:
Assets held for sale Liabilities classified as held for sale Loss from discontinued operations
At 31 At 31 At 31 At 31
March 2019 March 2018 March 2019 March 2018 For FY 19 For FY 18
i Investments in Joint Venture (7(a)) 918,432 – – – 1,010,200 3,282,306
ii Solar subsidiaries (7(b)) 49,579,232 – 35,267,786 – (20,708) 658
iii BVP (7(c)) – – – – – 96,700,467
Total 50,497,664 – 35,267,786 – 989,493 99,983,431
a) Investment in Joint Venture Padma Shipping Limited – classified as held for sale
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 agreement, 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 FY18, the Joint Venture partner due to a change in their group strategy requested for the Joint Venture to be terminated and as the vessels
were still under construction OPG agreed with this proposal. During FY19 one of the vessels was sold by the shipping yard and during FY19 the
second vessel was in the process of being sold. The Padma Joint Venture will be terminated and dissolved following the sale of the second vessel.
As at 31 March 2019, the investment was therefore reclassified to assets held for sale. The second vessel was sold post year end.
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7. Non-current assets held for sale and discontinued operation continued
OPG has invested approximately £3,484,178 in equity and £1,727,418 to date as advance (Note 17) and accordingly the Joint Venture has
been reported using the equity method as per the requirements of IFRS 11. The Company provided a corporate guarantee for 50% of the
equity portion of the cost of construction of the vessels remaining balance in the amount of £2,006,035 (equivalent of $2,800,000) which was
recognised in these financial statements as part of the prior year provision of £3,247,668 as the shipping yard requested payment. Following
the sale of the first vessel the corporate guarantee of $2,800,000 was effectively released. During the year the Company recognised an
impairment provision of £1,000,000 against its advance of £1,727,418 (Note 17) on account of the impending dissolution of the Joint Venture
and £10,200 share of loss. The carrying value of OPG’s investment in the Padma Joint Venture including the advance provided of £918,432
was classified as Assets held for sale in the Consolidated Statement of Financial Position as at 31 March 2019 and the results of Padma’s
operations were included in Loss from discontinued operations in the Consolidated Statement of Comprehensive Income.
b) Assets held for sale and discontinued operations of solar subsidiaries
During FY19, the Company obtained a right to exercise an option to buy an additional 30% equity interest in the solar companies following the
achievement of the conditions precedent. This right, in combination with other rights, provided substantive potential voting rights and the
investments in the solar companies were reclassified from associates to subsidiaries in the year. During FY19, the results of the operations of
Avanti Solar Energy Private Limited, Mayfair Renewable Energy Private Limited, Avanti Renewable Energy Private Limited and Brics Renewable
Energy Private Limited were therefore consolidated. After evaluation of all the options, the Company decided that the most efficient way to
maximise shareholders’ value from the solar operations is to dispose of the solar companies and the process of disposition of the solar
companies was initiated. Management expects the interest in the solar companies to be sold within the next 12 months.
Accordingly, the assets and liabilities relating to Avanti Solar Energy Private Limited, Mayfair Renewable Energy Private Limited, Avanti Renewable
Energy Private Limited and Brics Renewable Energy Private Limited have been presented as held for sale. There was no gain or loss associated
with the reclassification.
Non-current assets held for sale and discontinued operations
As at As at
(a) Assets of disposal group classified as held for sale 31 March 2019 31 March 2018
Property, plant and equipment 46,442,294 –
Trade and other receivables 578,721 –
Other short-term assets 499,527 –
Restricted cash 1,712,450 –
Cash and cash equivalents 346,240 –
Investment in Joint Venture classified as held for sale 918,432 –
Total 50,497,664 –
As at As at
(b) Liabilities of disposal group classified as held for sale 31 March 2019 31 March 2018
Non-current liabilities
Borrowings 17,194,745 –
Trade and other payables 7,710,956 –
Deferred tax liability 1,666,495 –
Current liabilities
Trade and other payables 3,958,192 –
Other liabilities 4,737,398
Total 35,267,786 –
(c) Analysis of the results of discontinued operations is as follows: For FY 19 For FY 18
Revenue 5,007,509 –
Operating profit before impairments 4,321,229 –
Finance cost (2,294,669) –
Current tax (363,372) –
Deferred tax (1,642,480) –
Share of loss from associates – (658)
Gain/(loss) after tax of discontinued operations attributable to owners of the Company 20,708 (658)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
7. Non-current assets held for sale and discontinued operation continued
c) Loss from discontinued operations of BVP
During the previous year, the Group sold a 5% equity stake in its special purpose vehicle BVP to a local firm, Bee Electric Power Private Limited
(‘Bee Electric’), that 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 buy back 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 the 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 and 31 March 2019. Fair valuation of retained investments in BVP
of £40,453 is on the basis of the recent transaction. Starting from FY18-19, the results of operations of BVP are not consolidated in OPG
Group’s consolidated financial statements.
The FY18 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)
Income statement of BVP
Year ended
31 March 2018
Revenue 91,536,946
Cost of revenue (69,294,346)
Gross profit 22,242,600
Other income 393,243
Distribution cost (14,805,606)
General and administrative expenses (1,848,316)
Depreciation (6,143,974)
Operating profit (162,053)
Finance costs (28,343,101)
Finance income 514,727
Loss before tax (27,990,427)
Tax income/(expense) –
Loss after tax (27,990,427)
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7. Non-current assets held for sale and discontinued operation continued
d) FY18 impairment of assets under construction of £4,033,125
During the previous 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 did not expect any economic benefits out of same. The plant
and machinery were purchased along with the land and is of no use, hence was 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 are two operating segments, thermal power and solar power, following the reclassification of the interest in the
solar companies as subsidiaries as detailed in Note 7(b). The solar power business was classified as held for sale subsequently. There are no
geographical segments as all revenues arise from India.
Revenue on account of sale of power to one customer exceeding 10% of total sales revenue amounts to £24,117,088 (2018: £18,894,360).
Segmental information disclosure
Continuing operations Discontinued operations
Thermal Solar
Segment revenue FY19 FY18 FY19 FY18
Sales 140,632,328 140,115,336 5,007,509 –
Total 140,632,328 140,115,336 5,007,509 –
Depreciation (6,064,374) (6,526,177) – –
Impairment – (4,033,125) – –
Profit/(loss) from operation 29,323,147 14,175,314 4,009,485 (658)
Finance income 2,207,480 1,623,500 311,744 –
Finance cost (14,419,198) (13,620,915) (2,294,669) –
Tax expenses (1,819,387) (3,072,731) (2,005,852) –
Profit/(loss) for the year 15,292,042 (894,832) 20,708 (658)
Assets 294,328,018 304,743,440 49,579,232 –
Liabilities 155,174,489 165,613,016 35,267,786 –
9. Costs of inventories and employee benefit expenses included in the
consolidated statements of comprehensive income
a) Cost of revenue
31 March 2019 31 March 2018
Included in cost of revenue:
Cost of fuel consumed 88,754,095 95,465,961
Other direct costs 2,999,668 4,729,316
Total 91,753,763 100,195,277
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
9. Costs of inventories and employee benefit expenses included in the
consolidated statements of comprehensive income continued
b) Employee benefit expenses forming part of general and administrative expenses are as follows:
31 March 2019 31 March 2018
Salaries and wages 3,302,162 3,221,663
Employee benefit costs* 251,520 702,020
Employee stock option – –
Total 3,553,682 3,923,683
* Includes £Nil (2018: 23,994) being expenses towards gratuity which is a defined benefit plan (Note 5(w)).
c) Auditor’s remuneration for audit services amounting to £80,000 (2018: £90,000) is included in general and
administrative expenses.
d) Foreign exchange movements (realised and unrealised) included in the finance costs are as follows:
31 March 2019 31 March 2018
Foreign exchange realised – loss 3,543,163 624,196
Foreign exchange unrealised – (gain)/loss (416,338) 64,747
Total 3,126,825 688,943
Net foreign exchange loss is attributable to foreign currency variations on import of coal financed under letters of credit for power plant
operation and was reclassified from general and administrative expenses to finance costs in the Consolidated Statement of Comprehensive
Income (Note 5(a)), as all letters of credit related charges and interest are included in finance cost.
10. Other income and expenses
Other income
31 March 2019 31 March 2018
Sale of coal 887,815 162,394
Sale of fly ash 48,910 53,198
Power trading commission and other services 1,217,369 558,657
Sale of solar power plant system to associates (net of cost) (Note 25) – 44,505
Others 491,238 1,160,270
Total 2,645,332 1,979,024
11. Finance costs
Finance costs are comprised of:
31 March 2019 31 March 2018
Interest expenses on borrowings 10,210,464 12,237,962
Net foreign exchange loss (Note 9) 3,126,825 688,943
Other finance costs 1,249,628 694,010
Total 14,586,917 13,620,915
Other finance costs include charges and costs related to LCs for import of coal and other charges levied by bank on transactions.
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12. Finance income
Finance income is comprised of:
31 March 2019 31 March 2018
Interest income on bank deposits and advances 2,192,555 1,519,407
Profit on disposal of financial instruments* 14,925 104,093
Total 2,207,480 1,623,500
* Financial instruments represent the mutual funds held during the year.
13. Tax expense
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 2019 and 2018 is as follows:
31 March 2019 31 March 2018
Accounting profit/(loss) before taxes 16,856,756 (1,105,065)
Enacted tax rates 34.94% 34.61%
Tax expense/(benefit) on profit/(loss) at enacted tax rate 5,890,425 (382,441)
Exempt income due to tax holiday (685,895) (4,921,430)
Foreign tax rate differential 303,096 (616,602)
Unused tax losses brought forward and carried forward (1,216,052) 7,709,658
Non-taxable items (2,281,621) (1,447,546)
MAT credit entitlement (190,567) 2,731,117
Others – (25)
Actual tax for the period 1,819,387 3,072,731
31 March 2019 31 March 2018
Current tax 1,281,584 341,614
Deferred tax 2,543,655 2,731,117
Less: reclassified to loss from discontinuing operations (2,005,852) –
Tax reported in the statement of comprehensive income 1,819,387 3,072,731
The Company is subject to Isle of Man corporate tax at the standard rate of 0%. As such, the Company’s tax liability is zero. Additionally, 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. There has been revision in rate of cess applicable on corporate
income tax in India as applicable for the year. Further, a substantial portion of the profits of the Group’s India operations are exempt from Indian
income taxes being profits attributable to generation of power in India. Under the tax holiday the taxpayer can utilise an exemption from income
taxes for a period of any 10 consecutive years out of a total of 15 consecutive years from the date of commencement of the operations.
However, the entities in India are still liable for Minimum Alternate Tax (‘MAT’) which is calculated on the book profits of the respective entities
currently at a rate of 21.55% (31 March 2018: 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
13. Tax expense continued
Deferred income tax for the Group at 31 March 2019 and 2018 relates to the following:
31 March 2019 31 March 2018
Deferred income tax assets
Unused tax losses brought forward and carried forward 1,216,052 –
MAT credit entitlement 11,565,427 11,396,590
12,781,479 11,396,590
Deferred income tax liabilities
Property, plant and equipment 15,161,594 12,853,798
15,161,594 12,853,798
Deferred income tax liabilities, net 2,380,115 1,457,209
Movement in temporary differences during the year
Deferred tax Classified as
As at asset/(liability) (asset)/liability Translation As at
Particulars 1 April 2018 for the year held for sale adjustment 31 March 2019
Property, plant and equipment (12,853,799) (4,754,829) 2,447,034 – (15,161,594)
Unused tax losses brought forward and carried forward – 2,020,606 (804,554) – 1,216,052
MAT credit entitlement 11,396,590 190,567 – (21,730) 11,565,427
Mark to market gain/(loss) on financial assets
measured at FVPL – – – – –
Deferred income tax (liabilities)/assets, net (1,457,209) (2,543,656) 1,642,480 (21,730) (2,380,115)
Deferred tax Classified as
As at asset/(liability) (asset)/liability Translation As at
Particulars 1 April 2017 for the year held for sale adjustment 31 March 2018
Property, plant and equipment (16,684,770) (1,844) – 3,832,816 (12,853,799)
MAT credit entitlement 15,691,186 (2,731,117) – (1,563,479) 11,396,590
Mark to market (loss)/gain on financial instruments
measured at FVPL (14,267) 14267 – – –
Deferred income tax (liabilities)/assets, net (1,007,851) (2,718,694) – 2,269,337 (1,457,209)
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% to be grossed up (plus applicable surcharge and education cess) on the total amount distributed as dividend.
There is no unrecognised deferred tax assets and liabilities. As at 31 March 2019 and 2018, 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.
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14. Intangible assets
Acquired
software licences
Cost
At 1 April 2017 938,002
Additions 26,304
Exchange adjustments (103,190)
Adjustments on account of deconsolidation of a subsidiary (13,468)
At 31 March 2018 847,648
Additions –
Exchange adjustments 4,976
At 31 March 2019 852,624
Accumulated depreciation and impairment
At 1 April 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
Charge for the year 40,354
Exchange adjustments 5,190
At 31 March 2019 829,021
Net book value
At 31 March 2019 23,603
At 31 March 2018 64,170
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
15. Property, plant and equipment
The property, plant and equipment comprises of:
Land & Power Other plant Solar Assets under
buildings stations & equipment Vehicles assets construction Total
Cost
At 1 April 2017 15,615,379 482,207,682 970,897 2,814,116 – 8,480,876 510,088,950
Additions – 9,725,079 53,476 3,813 – – 9,782,368
Deletions (495,514) – – (4,610) – – (500,124)
Impairment of assets
under construction – – – – – (4,033,125) (4,033,125)
Exchange adjustments (1,633,612) (53,062,680) (106,946) (303,001) – 83,009 (55,023,230)
Adjustments on account of
deconsolidation of a subsidiary (8,742,160) (217,803,207) (302,502) (115,679) – – (226,963,548)
At 31 March 2018 4,744,093 221,066,874 614,925 2,394,639 – 4,530,760 233,351,291
At 1 April 2018 4,744,093 221,066,874 614,925 2,394,639 – 4,530,760 233,351,291
Additions 236,830 316,648 1,154,749 8,751 – 18,803 1,735,781
Additions – Solar assets (Note 7(b)) – – – – 46,635,849 – 46,635,849
Deletions – (11,054) – – – – (11,054)
Solar assets classified as
Asset held for sale (Note 7(b)) – – – – (46,635,849) – (46,635,849)
Transfers on capitalisation – 290,658 – – – (290,658) –
Exchange adjustments 26,978 1,297,928 3,595 14,023 – 26,959 1,369,483
At 31 March 2019 5,007,901 222,961,054 1,773,269 2,417,413 – 4,285,864 236,445,501
Accumulated depreciation and impairment
At 1 April 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
At 1 April 2018 32,174 24,456,188 526,100 1,065,694 – – 26,080,156
Charge for the year * 12,363 5,494,384 103,316 413,957 6,024,020
Additions – Solar assets (Note 7(b)) – – – – 4,417 – 4,417
Exchange adjustments 493 221,076 4,595 12,270 – – 238,434
Solar assets classified as
Asset held for sale (Note 7(b)) – – – – (4,417) – (4,417)
At 31 March 2019 45,030 30,171,648 634,011 1,491,921 – – 32,342,610
Net book value
At 31 March 2019 4,962,871 192,789,406 1,139,258 925,492 – 4,285,864 204,102,891
At 31 March 2018 4,711,919 196,610,686 88,825 1,328,945 – 4,530,760 207,271,135
* Depreciation charge for the year includes Nil (2018: £6,143,974) pertaining to deconsolidated subsidiary BVP (Note 7 (c)).
The net book value of land and buildings block comprises of:
31 March 2019 31 March 2018
Freehold land 4,514,642 4,292,608
Buildings 448,229 419,311
4,962,871 4,711,919
Property, plant and equipment with a carrying amount of £197,184,156 (2018: £198,699,226) is subject to security restrictions (refer Note 23).
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16. Investments accounted for using the equity method
The carrying amount of investments accounted for using the equity method is as follows:
31 March 2019 31 March 2018
Investments in joint venture 3,448,882 3,484,178
Investments in associates (Note 7(b)) – 11,037,659
Share of (loss) from equity accounted investments – (35,296)
Impairment provision for investments in joint venture (Note 7(a)) (3,247,668) (3,247,668)
Elimination of intra-group margin – (19,495)
Balance value of Investments in joint venture classified as Assets held for sale (201,214) –
Investments accounted for using the equity method – 11,219,378
The Group’s share of loss from equity accounted investments is as follows:
31 March 2019 31 March 2018
Investment in joint venture – (34,638)
Investments in associates – (658)
– (35,296)
a) Investment in joint venture (Note 5(d) and Note 7(a))
The investment in Padma Shipping Limited (‘PSL’) is accounted for using the equity method in accordance with IAS 28. The financial statements
of PSL are as of 31 December 2018 which is the financial year followed by PSL. As no additional information was available as such the
31 December 2018 figures have been used below. At the end of the year the investment in PSL net of impairment provision is classified as
Asset held for sale. Summarised financial information for PSL is set out below:
31 March 2019 31 March 2018
Non-current assets 11,631,930 11,344,541
Current assets (a) 29,970 55,502
Total assets 11,661,900 11,400,043
Current liabilities (b) 4,784,535 4,500,962
Total liabilities 4,784,535 4,500,962
Net assets 6,877,365 6,899,081
(a) Includes cash and cash equivalents
(b) Includes financial liabilities
31 March 2019 31 March 2018
Total net assets of PSL 6,877,365 6,899,081
Proportion of ownership interests held by the Group 50% 50%
Group’s share of the investment in PSL 3,438,683 3,449,540
b) Investment in associates (Note 5(d) Note 7(b))
Summarised aggregated financial information of the Group’s share in the associates
31 March 2019 31 March 2018
(Loss) from continuing operations – (658)
Other comprehensive income – –
Total comprehensive loss – (658)
Aggregate carrying amount of the Group’s interests in these associates – 11,017,506
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
17. Other assets
31 March 2019 31 March 2018
A. Short-term
Capital advances 280,494 278,857
Equity instruments measured at fair value through P&L 40,453 65,706
Advances and other receivables 6,008,407 9,070,408
Total 6,329,354 9,414,971
B. Long-term
Advances to related parties 727,418 1,727,418
Classified as asset held for sale (Note 7(a)) (727,418) –
Investment in debentures – 785,222
Lease deposits 502,869 477,959
Bank deposits – –
Other advances 15,684 9,734
Total 518,553 3,000,333
Equity instruments measured at fair value through P&L are comprised of:
Fair value of retained investment in former subsidiary BVP £40,453 (Note 7(c)). Fair valuation of retained investments in BVP is on the basis of
the last transaction.
Quoted short-term mutual fund units
The fair value of the mutual fund instruments is determined by reference to published data. These mutual fund investments are redeemable
on demand.
Advances and other receivables (current)
Advances to suppliers include trade advance paid to vendors for supply of goods and services. During FY18, impairment provision was made
for trade advances to BVP aggregating to £20,660,649. 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 year.
18. Trade and other receivables
31 March 2019 31 March 2018
Current
Trade receivables 49,079,582 33,644,282
Other receivables 118,523 51,263
49,198,105 33,695,545
The Group’s trade receivables are classified at amortised cost unless stated otherwise and are measured after allowances for future expected
credit losses, see “Credit risk analysis” in Note 29 “Financial risk management objectives and policies” for more information on credit risk. The
carrying amounts of trade and other receivables, which are measured at amortised cost, approximate their fair value and are predominantly
non-interest bearing.
19. Inventories
31 March 2019 31 March 2018
Coal and fuel 6,038,267 8,382,022
Stores and spares 1,113,099 1,334,258
Total 7,151,366 9,716,280
The entire amount of the above inventories has been pledged as security for borrowings (refer to Note 23)
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20. Cash and cash equivalents and restricted cash
a) Cash and short-term deposits comprise of the following:
31 March 2019 31 March 2018
Cash at banks and on hand 2,118,960 2,185,570
Total 2,118,960 2,185,570
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 3 and 12 months amounting to £23,030,599 (2018: £20,318,985) and maturing after
12 months amounting to £517,271 (2018: £4,966,140) which have been pledged by the Group in order to secure borrowing limits with banks.
Restricted cash of £23,030,599 includes banks deposits of £12,627,381 (2018: £12,553,684), translated at closing FX rate, pledged during the
previous year in favour of lenders of BVP (Note 7(c) and Note 24). In FY18, the Group has made full provision for fair valuation of deposits
pledged to lenders of BVP.
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 31,601,503 (2018: 4,799,742) shares during the year with respect to scrip dividend at par value of £0.000147
(2018: £0.000147) per share amounting to £4,646 (2018: £706). The difference between the fair value of shares issued above par value of
£3,558,442 (2018: £1,248,331) with respect to scrip dividend was credited to share premium.
As at 31 March 2019, the Company has an authorised and issued share capital of 387,910,200 (2018: 356,308,697) equity shares at par
value of £0.000147 (2018: £0.000147) per share amounting to £57,024 (2018: £52,378) in total.
Reserves
Share premium represents the amount received by the Group over and above the par value of shares issued. Any transaction costs associated
with the issuing of shares are deducted from share 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 reserves represents the difference between the consideration paid and the adjustment to net assets on change of controlling interest,
without change in control, other reserves also includes any costs related with share options granted and gain/losses on remeasurement of
financial assets measured at fair value through other comprehensive income.
Retained earnings include all current and prior period results as disclosed in the consolidated statement of comprehensive income less
dividend distribution.
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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% of the Group’s share capital.
Once granted, the share options must be exercised within 10 years of the date of grant otherwise the options would lapse.
The vesting conditions are as follows:
• the 300 MW power plant of Kutch in the state of Gujarat must have been in commercial operation for three months; and
• 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 (2018: £Nil) was
recognised in the profit or loss with a corresponding credit to other reserves.
Movements in the number of share options outstanding are as follows:
31 March 2019 31 March 2018
At 1 April 22,024,234 23,274,234
Forfeited/cancelled (250,000) (1,250,000)
At 31 March 21,774,234 22,024,234
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 comprises the following:
Interest rate (range %) Final maturity 31 March 2019 31 March 2018
Borrowings at amortised cost 10.35-11.40 September 2023 80,364,930 93,465,947
Total 80,364,930 93,465,947
The term loans of £69.9m and working capital loans of £10.5m taken by the Group are fully secured by the property, plant and assets under
construction and other current assets of subsidiaries which have availed such loans. All loans are personally guaranteed by Executive
Chairman, Mr Arvind Gupta.
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. As of 31 March 2019, the Group has met all the relevant covenants.
The fair value of borrowings at 31 March 2019 was £80,364,930 (2018: £93,465,947). The fair values have been calculated by discounting
cash flows at prevailing interest rates.
The borrowings are reconciled to the statement of financial position as follows:
31 March 2019 31 March 2018
Current liabilities
Amounts falling due within one year 28,869,722 23,829,415
Non-current liabilities
Amounts falling due after 1 year but not more than 5 years 51,495,208 69,636,532
Total 80,364,930 93,465,947
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24. Trade and other payables
31 March 2019 31 March 2018
Current
Trade payables 45,300,370 52,015,069
Creditors for capital goods 174,444 162,261
Other payables – 154,092
Total 45,474,814 52,331,422
Non-current
Security deposit from customers 14,085,854 4,813,303
Other payables 149,631 180,746
Total 14,235,485 4,994,049
Trade payables include credit availed from banks under letters of credit for payments in USD to suppliers for coal purchased by the Group.
Other trade payables are normally settled on 45 days terms credit. The arrangements are interest bearing and are payable within one year. With
the exception of security deposits from customers and certain other trade payables, all amounts are short term. 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
Key management personnel
Name of the party Nature of relationship
Arvind Gupta Executive Chairman
Avantika Gupta (from November 2018) Chief Operating Officer & Director
Dmitri Tsvetkov Chief Financial Officer & Director
Jeremy Warner Allen Deputy Chairman
Mike Grasby Director
Ravi Gupta (resigned in May 2018) Director
Jeremy Beeton Director
Related parties with whom the Group had transactions during the period
Name of the party Nature of relationship
Padma Shipping Limited The company has joint control of the entity
Avanti Solar Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
(subsidiary from FY 19 Note 7(b))
Mayfair Renewable Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
(subsidiary from FY 19 Note 7(b))
Avanti Renewable Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
(subsidiary from FY 19 Note 7(b))
Brics Renewable Energy Private Limited Entity in which Key Management personnel has Control/Significant Influence
(subsidiary from FY 19 Note 7(b))
Avantika Gupta Relative of Key Management Personnel (became Director on 27 November 2018)
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
25. Related party transactions continued
Summary of transactions with related parties
Name of the party 31 March 2019 31 March 2018
Padma Shipping Limited (Note 7 (a))
a) Investment – 2,077,588
b) Advances – 627,205
Avanti Solar Energy Private Limited (Note 7 (b))
a) Investment – 3,336,637
b) Sale of Solar power plant system – 4,586,802
c) Advance – 56,225
d) Interest income – –
Mayfair Renewable Energy Private Limited (Note 7 (b))
a) Investment – 3,595,419
b) Sale of Solar power plant system – 4,024,349
c) Advance – 87,154
d) Interest income – –
Avanti Renewable Energy Private Limited (Note 7 (b))
a) Investment – 3,369,673
b) Sale of Solar power plant system – 4,822,458
c) Advance – 56,284
d) Interest income – –
Brics Renewable Energy Private Limited (Note 7 (b))
a) Investment – 324,854
b) Sale of Solar power plant system – 1,188,788
c) Advance – 5,628
d) Interest income – –
Avantika Gupta
a) Remuneration (up to 27 November 2018) 79,084 112,412
Summary of balance with related parties
Name of the party Nature of balance 31 March 2019 31 March 2018
Padma Shipping Limited Investment 3,438,682 3,485,837
Padma Shipping Limited Advances 1,727,418 1,727,418
Padma Shipping Limited Impairment provision (4,247,668) (3,247,668)
Avanti Solar Energy Private Limited Investment – 3,461,059
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
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
Avanti Renewable Energy Private Limited Trade payable – 185,569
Avanti Renewable Energy Private Limited Advance – 56,284
Brics Renewable Energy Private Limited Investment – 362,664
Brics Renewable Energy Private Limited Trade payable – 1,238,446
Brics Renewable Energy Private Limited Advance – 5,628
Arvind Gupta Land Lease Deposit 502,869 477,959
Outstanding balances at the year-end are unsecured. Related party transactions are on an arms length basis. There have been no guarantees
provided or received for any related party receivables or payables except for corporate guarantees issued to lenders of its subsidiaries classified
as Assets held for sale of £32,132,255 (2018: £31,944,720). For the year ended 31 March 2019, the Group has not recorded any impairment
of receivables relating to amounts owed by related parties £Nil (2018: £Nil). However, the Group has made impairment provision for investments
in joint venture of £1,000,000 (2018: £3,247,668) (Note 7(a)). 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.
All loans are personally guaranteed by Executive Chairman, Mr Arvind Gupta. In addition to this, Executive Chairman Mr Arvind Gupta
personally guaranteed £10,360,066 (2018: £10,885,365) of loans of a subsidiary which is classified as Assets held for sale.
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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 2019 or 2018).
The company has issued options over ordinary shares which could potentially dilute basic earnings per share in the future. There is no
difference between basic earnings per share and diluted earnings 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 2019 31 March 2018
Weighted average number of shares used in basic earnings per share 367,650,606 353,108,869
Shares deemed to be issued for no consideration in respect of share based payments – –
Weighted average number of shares used in diluted earnings per share 367,650,606 353,108,869
27. Directors’ remuneration
31 March 2019 31 March 2018
Arvind Gupta 500,000 750,000
Avantika Gupta (became Director on 27 November 2018) 64,691 –
Dmitri Tsvetkov 288,000 290,000
Jeremy Warner Allen 50,000 22,500
V Narayan Swami – 224,824
Martin Gatto – 33,750
Mike Grasby 45,000 45,000
Ravi Gupta – 22,500
Jeremy Beeton 45,000 45,000
Total 992,691 1,433,574
The above remuneration is in the nature of short-term employee benefits. As the future liability for gratuity and compensated absences is
provided on an 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 five 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 2019 31 March 2018
Not later than 1 year 46,095 44,771
Later than 1 year and not later than 5 years 64,254 117,898
Total 110,349 162,669
During the year ended 31 March 2019, £41,301 (2018: £43,226) 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 $Nil
(2018: $2,800,000) i.e. approximately £Nil (2018: £2,000,000) of its share of interest (Note 5(d)(ii)).
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
28. Commitments and contingencies
Contingent liabilities
Disputed income tax demand £1,056,154 (2018: £549,789).
Future cash flows in respect of the above matters are determinable only on receipt of judgements/decisions pending at various forums/authorities.
Guarantees and letter of credit
The Group has provided bank guarantees (‘BGs’) and letter of credits (‘LCs’) to customers and vendors in the normal course of business.
The LCs provided as at 31 March 2019: £32,373,664 (2018: £44,901,443) and BGs as at 31 March 2019: £6,457,430 (2018: £10,168,184).
LCs are supporting accounts payables already recognised in the statement of financial position. There have been no guarantees provided or
received for any related party receivables or payables except for corporate guarantees issued to lenders of its subsidiaries classified as Assets
held for sale of £32,132,255 (2018: £31,944,720). BGs are treated as contingent liabilities until such time it becomes probable that the
Company will be required to make a payment under the guarantee.
29. Financial risk management objectives and policies
The Group’s principal financial liabilities comprise 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 holds investments designated financial
assets measured at FVPL 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, and financial assets measured at FVPL.
The sensitivity analyses in the following sections relate to the position as at 31 March 2019 and 31 March 2018.
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 2019, 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 2019 and 31 March 2018, 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 2019 would decrease or increase by
£803,649 (2018: £934,659).
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 GBP. 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.
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29. Financial risk management objectives and policies continued
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 2019 As at 31 March 2018
Currency Financial assets Financial liabilities Financial assets Financial liabilities
United States Dollar (‘USD’) 8,242,631 39,040,874 3,711,568 62,663,286
Set out below is the impact of a 10% change in the US Dollar on profit arising as a result of the revaluation of the Group’s foreign currency
financial instruments:
As at 31 March 2019 As at 31 March 2018
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’) 69.32 2,681,169 65.07 3,840,174
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 £49,388,558
(2018: £33,761,251) and corporate guarantees issued to lenders of its subsidiaries classified as Assets held for sale of £32,132,255
(2018: £31,944,720).
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 reputable 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.
To measure expected credit losses, trade and other receivables have been grouped together based on shared credit risk characteristics and the
days past due. The Group determined that some trade receivables were credit impaired as these were long past their due date and there was
an uncertainty about the recovery of such receivables. The expected loss rates are based on an ageing analysis performed on the receivables
as well as historical loss rates. The historical loss rates are adjusted to reflect current and forward looking information that would impact the
ability of the customer to pay. Trade and other receivables are written off when there is no reasonable expectation of recovery. Indicators that
there is no reasonable expectation of recovery include amongst others, the failure of the debtor to engage in a repayment plan, the debtor is
not operating any more and a failure to make contractual payments for a period of greater than 180 days.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
29. Financial risk management objectives and policies continued
Days past due
Within More than More than More than
31 March 2019 credit period 30 days 60 days 180 days Total
Expected loss rate 0% 0% 0% 19.07%
Gross carrying amount – trade receivables
– TANGEDCO 4,616,792 2,120,998 6,657,543 2,633,639 16,028,972
Gross carrying amount – trade receivables
– Others 22,093,386 2,169,134 7,034,955 2,933,211 34,230,686
Loss allowance – – – 1,061,553 1,061,553
Days past due
Within More than More than More than
31 March 2018 credit period 30 days 60 days 180 days Total
Expected loss rate 0% 0% 0% 2.89%
Gross carrying amount – trade receivables
– TANGEDCO 2,198,815 2,779,985 1,576,236 4,667,336 11,222,372
Gross carrying amount – trade receivables
– Others 11,373,774 944,101 5,703,860 4,722,554 22,744,289
Loss allowance – – – 271,116 271,116
The closing loss allowances for trade receivables as at 31 March 2019 reconcile to the opening loss allowances as follows:
31 March 2019 31 March 2018
Opening loss allowance as at 1 April (271,116) (1,177,967)
Increase in loss allowance recognised in profit or (loss) during the year
for new receivables recognised (790,437) (271,116)
Receivables written off during the year as uncollectable – –
Adjustment on account of deconsolidation – 1,177,967
Total (1,061,553) (271,116)
The Group’s management believes that all the financial assets, except as mentioned above, are not impaired for each of the reporting dates
under review and are of good credit quality.
Liquidity risk analysis
The Group’s main source of liquidity is its operating businesses. The treasury department uses regular forecasts of operational cash flow,
investment and trading collateral requirements to ensure that sufficient liquid cash balances are available to service on-going business
requirements. The Group manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term financial
liabilities as well as cash outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and
week-to-week basis, as well as on the basis of a rolling 90 day projection. Long-term liquidity needs for a 90 day and a 30 day lookout
period are identified monthly.
The Group maintains cash and marketable securities to meet its liquidity requirements for up to 60 day periods. Funding for long-term liquidity
needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets.
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29. Financial risk management objectives and policies continued
The following is an analysis of the Group contractual undiscounted cash flows payable under financial liabilities at 31 March 2019 and
31 March 2018:
Current Non-current
As at 31 March 2019 within 12 months 1-5 years later than 5 years Total
Borrowings 28,869,722 51,495,208 – 80,364,930
Interest on borrowings 8,507,484 17,059,422 – 25,566,906
Trade and other payables 45,474,814 14,235,485 – 59,710,299
Provision for pledged deposits – 12,627,381 – 12,627,381
Liabilities held for sale 33,601,291 – – 33,601,291
Other current liabilities 91,764 – – 91,764
Total 116,545,075 95,417,496 – 211,962,571
Current Non-current
As at 31 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 87,503,800 112,556,422 – 200,060,222
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:
• to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value;
• to 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 ended 31 March 2019 and 31 March 2018.
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 the Group or entities, whether
statutory or otherwise.
The capital for the reporting periods under review is summarised as follows:
31 March 2019 31 March 2018
Total equity 154,383,407 139,130,424
Less: Cash and cash equivalents (2,118,960) (2,185,570)
Capital 152,264,447 136,944,854
Total equity 154,383,407 139,130,424
Add: Borrowings (including buyer’s credit) 80,364,930 93,465,947
Overall financing 234,748,337 232,596,371
Capital to overall financing ratio 0.65 0.59
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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 2019 March 2018 March 2019 March 2018
Financial assets
Debt instruments measured at
amortised cost
– Cash and cash equivalents 1 2,118,960 2,185,570 2,118,960 2,185,570
– Restricted cash 1 23,547,870 25,285,125 23,547,870 25,285,125
– Current trade receivables 1 49,198,105 33,695,545 49,198,105 33,695,545
– Other long-term assets 518,553 3,000,333 518,553 3,000,333
– Other short-term assets 6,288,901 9,349,265 6,288,901 9,349,265
– Assets held for sale 3,136,938 – 3,136,938 –
Financial instruments measured at
fair value through profit or loss
– Other short-term assets – (Note 7(c)) 40,453 65,706 40,453 65,706
Investments in associates measured
at cost (Note 7(b)) – 11,219,378 – 11,219,378
84,849,780 84,800,922 84,849,780 84,800,922
Financial liabilities
Term loans 80,364,930 93,465,947 80,364,930 93,465,947
Current trade and other payables 1 45,474,814 52,331,422 45,474,814 52,331,422
Provision for pledged deposits 12,627,381 12,553,684 12,627,381 12,553,684
Liabilities held for sale 35,267,786 – 35,267,786 –
Non-current trade and other payables 2 14,235,485 4,994,049 14,235,485 4,994,049
187,970,396 163,345,102 187,970,396 163,345,102
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 financial assets measured at FVPL held for trading purposes are derived from quoted market prices in active markets. Fair value
of financial assets measured at FVPL of unquoted equity instruments are derived from valuation performed at the year end. Fair valuation of
retained investments in PS and BVP is on the basis of the last 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 Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
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Financial Statements
30. Summary of financial assets and liabilities by category and their fair values continued
Financial instruments measured at fair value through profit or loss
2019 Level 1 Level 2 Level 3 Total
Unquoted securities – – 40,453 40,453
Quoted securities – – – –
Total – – 40,453 40,453
2018 Level 1 Level 2 Level 3 Total
Unquoted securities – – 40,453 40,453
Quoted securities 25,253 – – 25,253
Total 25,253 – 40,453 65,706
There were no transfers between Levels 1 and 2 in the period.
The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values. Valuation
techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based
information. The finance team reports directly to the Chief Financial Officer.
Valuation processes and fair value changes are discussed by the Board of Directors at least every year, in line with the Group’s reporting dates.
31. Post-reporting date events
No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation.
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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
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Financial Statements
DEFINITIONS AND GLOSSARY
ACC: Air-Cooled Condenser
FVPL: Fair Value through Profit or Loss
Act: Isle of Man Companies Act 2006
FY: Financial year commencing from 1 April to 31 March
Adjusted EBITDA: a measure of business cash generation from
operations before depreciation, interest and exceptional and
non-standard or non-operational charges.
GCPP: Group Captive Power Plant
GDP: Gross Domestic Product
AGM: Annual General Meeting
Board: Board of Directors of OPG Power Ventures Plc
bps: Basis points
BRICS: Brazil, Russia, India, China and South Africa
CAD: Current Account Deficit
CAGR: Compound Average Growth Rate
CEA: Central Electricity Authority
CO: Carbon Monoxide
Company or OPG or parent: OPG Power Ventures Plc
CPI: Consumer Price Index
CRISL: Credit Rating Information and Services Limited
Discom: Distribution Company (of the State Electricity Utility)
DM Plant: Demineralization Plant
EBITDA: Earnings before interest, tax, depreciation
and amortisation
ECL: Expected Credit Loss
EHS: Environment, Health and Safety
Electricity Act: Indian Electricity Act 2003 as amended
EPS: Earnings per share
ESOP: Employee Stock Options
ESP: Electrostatic Precipitator
EVs: Electric Vehicles
ExCo: Executive Committee
FDI: Foreign Direct Investment
FICCI: Federation of Indian Chambers of Commerce and Industry
Gearing ratio: Net borrowings (i.e. total borrowings minus cash)/
(equity plus borrowings)
GHG: Green House Gas
Government or GoI: Government of India
Great Britain Pound Sterling or £/pence: Pounds sterling
or pence, the lawful currency of the UK
Group Captive: Group Captive power plant as defined
under Electricity Act 2003, India
Group or OPG: the Company and its subsidiaries
GW: Gigawatt is 1,000 megawatts
HSE: Health, Safety and Environment
IAS: International Accounting Standards
IEA: International Energy Agency
IFRS: International Financial Reporting Standards
IMF: International Monetary Fund
Indian Companies Act: the Companies Act, 1956 and
amendments thereto
JV: Joint Venture
kWh: Kilowatt hour is one unit of electricity
LOI: Letter of Intent
LSE: London Stock Exchange plc
LTIP: Long Term Incentive Plan
LTOA: Long Term Open Access
LTVT: Long Term Variable Tariff
MoU: Memorandum of Understanding
mt: Million tonnes
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DEFINITIONS AND GLOSSARY
CONTINUED
MW: Megawatt is 1,000 kilowatts
MWh: Megawatt hour
Net borrowings: Total borrowings minus unrestricted cash
TANGEDCO: Tamil Nadu Generation and Distribution
Corporation Limited
The Code: the UK Corporate Governance code, issued by the
Financial Reporting Council
NITI Aayog: National Institution for Transforming India
TRIR: Total Recordable Incident Report
UDAY: Ujwal DISCOM Assurance Yojana, the financial turnaround and
revival package for DISCOMs initiated by the Government of India.
UK/United Kingdom: United Kingdom of Great Britain and
Northern Ireland
US$/USD or $: US Dollars, the lawful currency of the US
WPI: Wholesale Price Index
Nox: Nitrogen Oxides
NPAs: Non-Performing Assets
O&M: Operating and Management
OHS: Occupational Health and Safety
PAT: Profit After Tax
PLF: Plant Load Factor
POPs: Persistent Organic Pollutants
PPA: Power Purchase Agreement
PSA: Power Supply Agreement
RBI: Reserve Bank of India
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 Particulate Matter
SPV: Special Purpose Vehicle
State: State of India
STP: Sewage Treatment Plant
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Power Ventures Plc
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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 Auditor’s 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
43 Notes to the Consolidated
Financial Statements
74 Corporate Directory
75 Definitions and Glossary
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POWERING INDIA
OPG Power Ventures Plc
IOMA House
Hope Street
Douglas
Isle of Man
IM1 1AP
T: +44 (0)1624 681200
www.opgpower.com
OPG Power Ventures Plc
Annual Report & Accounts
2019