Opg Power Ventures Share Discussion Threads

[oldboffy1] 01/3/2017 09:13

Big Jim5.

Your understanding of why the Company has taken this step accords with mine. The awful performance of the share price IMHO is much more to do with poor communications than by the actual/future profitability. I thought that the January RNS was downbeat and affected sentiment. In 2015 they had floods in Chennai and in 2016 a cyclone. Yet for all these things output was relatively stable and OPG continues to go forward. My only concern is that the patience of the institutions (and PI's) much be getting stretched.

[big jim5] 01/3/2017 08:46

Or to put it another way.....

They will spend £67m less on capital repayments in respect of debt secured on the Gujarat plant over the next 5 years. At current prices this could buy back almost 40% of their share capital

(theoretical argument I know, - they're not going to do that, but it illustrates a point about the current valuation).

One key point that hasn't been mentioned, is that the interest rate remains the same. This is a big vote of confidence from the banks, they have extended the loan without increasing the interest rate (or the spread over whatever base rate they use, this is a variable rate loan). Also illustrates that these are long lived life assets, bank happy to accept repayments out to 2036.

[big jim5] 01/3/2017 08:33

Jozo - The £179m is the capital outstanding, and does not include interest. They will repay £14m of capital (being 8% of the balance) between 2017 and 2021.

By spreading the repayments further towards the back end of the loan period, they free up near capital in the shorter term that can be used for re-investment which would otherwise have been used to repay the capital balance.

One the one hand this will increase interest charges. On the other, the additional cash freed up can be used to boost revenues and operating profit. Whether bottom line net earnings are higher or lower depends on whether they earn a greater return on the investments made with the freed up cash, than they pay in interest.

[jozo] 01/3/2017 07:51

Ballychan, I would be very pleased if I have this wrong.
Maybe I am misreading/misunderstanding the outstanding project debt stated below as the outstanding capital still to be repaid.
I would be happy if somebody with better understanding of accounting terminology could confirm one way or the other as to whether project debt is the total amount to be repaid (including interest and capital repayments) or refers only to the outstanding capital amount.
If I have this wrong maybe somebody could give me an idea of the exact figure of outstanding debt that has been renegotiated. The figure of 14.01m over next 4 yrs (below) seems very low if that is essentially only covering the interest payments, when interest rates are to remain at current variable levels.

From TU

The Company has negotiated a new, extended debt repayment schedule with its lenders for its INR 1.5 billion (GBP179.2 million) project debt at Gujarat to better match operating cash flows. The total remaining duration of the facility will be extended from 9 to 19.5 years with the final repayment due in 2036 and the following is a summary of the new repayment schedule:

Period Previous
repayment New repayment
schedule schedule


Period Previous
repayment New repayment
schedule schedule
------------- ------------ ---- -------------- ----
GBP million % GBP million %
------------- ------------ ---- -------------- ----
FY17 - FY
21 80.64 45 14.01 8
------------- ------------ ---- -------------- ----

FY22 - FY26 89.60 50 58.35 33
------------- ------------ ---- -------------- ----

FY27 - FY36 8.96 5 106.84 59
------------- ------------ ---- -------------- ----

Total 179.20 100 179.20 100
------------- ------------ ---- -------------- ----

Note: GBP1 = INR 83.5
Accordingly, the total principal amounts to be repaid between FY17 and FY21 are being reduced by GBP67 million.
The debt is to remain at an unchanged variable rate of interest and on the existing security.


jozo

[smithless] 28/2/2017 22:42

Debtors are state backed, so maybe late, but not bad. As for loan extension, I think it is wise and as the business model becomes more stable, will re-finance on better terms. The business is now trading at a discount to net tangible assets. I think it looks cheap

[ballychan] 28/2/2017 22:18

Jozo, how did you calculate interest payments to be £58-70m, over 4 years?

[jozo] 28/2/2017 20:56

Source - I believe they would have mentioned debt received if it had. Implied in the wording as always with opg that it hasn't been received.

Also I have some concerns regarding this debt renegotiation. While the company is saving on the principal payments which admittedly help the with short term costs the biggest winners are the banks by a long way - some nice interest payments of between 58m - 70m over next 4 years - no wonder they agreed to the new arrangement!

A lot of money to pay out without any tangible benefits to shareholders - the capital sum being reduced by a minuscule 14m while banks line their pockets.

The big question niggling me is - Did they really need to renegotiate this debt?
Maybe there's a serious shortfall in anticipated cash flow now that full operational output is being established. Would they have been in difficulties if they hadn't renegotiated the debt?

Not such a good deal after all IMO.

Jozo

[source] 28/2/2017 18:57

No mention of whether the significant late payment by their large customer(s) has come in or not. Regards,Source.

[smithless] 28/2/2017 16:26

Jozo - not a holder, but on my watch list. It states in line with market consensus, which if correct, it looks cheap IMHO. I think, overall the update looks positive. Ok it has had a few wobbles, as nothing ever goes exactly to plan, but from a P/E, PEG basis it does looks very cheap. I assume Mr A Gupta, with his 51% will eventually sell out to some investment fund looking for reoccurring income

[qs99] 28/2/2017 15:42

ta. if story is so good, they are not doing a very good "sell side" on this IMO!

[big jim5] 28/2/2017 15:39

Cenkos and Macquarie are house brokers

[qs99] 28/2/2017 14:46

Are Cantors house broker? DYOR etc but often leads to bias views IMO....however, OPS being market down heavily doesn't bode well although given RNS this am, I would have thought equity providers were happy....obviously not, let's see if management can one day hit targets and just deliver in line for a change ! gla

[spud] 28/2/2017 14:15

OPG Power Ventures Plc. 130.7% Potential Upside Indicated by Cantor Fitzgerald
Posted by: Amilia Stone 28th February 2017

OPG Power Ventures Plc. using EPIC/TICKER code LON:OPG had its stock rating noted as ‘Reiterates217; with the recommendation being set at ‘BUY’ today by analysts at Cantor Fitzgerald. OPG Power Ventures Plc. are listed in the Utilities sector within AIM. Cantor Fitzgerald have set a target price of 124 GBX on its stock. This would indicate that the analyst believes there is a potential upside of 130.7% from the opening price of 53.75 GBX.

spud

[jozo] 28/2/2017 12:06

No mention of meeting market eps expectations. Lack of guidance = Disguised profit warning?? - will have to see which way analysts change their figures next few weeks. Re-jigging debt might possibly be able to rescue situation?Just goes to show how far opg have missed their own and market expectations as the they attempt to achieve max power output from their operations. The debt payments were always going to be relatively comfortable if they had achieved as intended - clearly not any more.Trading statement hardly setting the market on fire!Some possible reasons1. Disappointing tariffs for Gujarat 2. lower load levels than anticipated 3. bad debts of how much (????) from state4. coal secured for remainder 2017 at what price? (At recent peak price!) no wonder they needed to re-finance the debt.Will continue to watch closely as any broker upgrades/downgrades appear - less debt costs for near term possibly saves their bacon regarding meeting market expectations. Will see.Jozo

[azalea] 28/2/2017 10:53

I Don not believe that freight costs for shipping coal in OPG owned freighter is going to be undercut by a competitor, especially as shipments will be tailor made to to suit OPG requirements.

[andycapp1] 28/2/2017 10:43

As always Flowerhead your searing insights into OPG's valuation are immensely thought provoking. My view remains; the results were tolerable but the fact the shares have not moved is reflective of institutional mistrust of management. The fact they have flouted conventions, missed endless targets and are steadfastly refusing to buy back their own equity is symptomatic of a management team not respecting the minorities. Because of that the shares will not re-rate.

[chalky] 28/2/2017 10:04

from the interim results,financial costs came in at approx 19 million ,does the debt repayment change reduce the payment and increase cash flow and also increase net profit per annum which in turn push the p/e ratio back on track as per previous profit forcasts.

[big jim5] 28/2/2017 08:25

Decent update, and plenty of room for improvement in load factors for FY March 2018 over those seen in the current year, which should help earnings move ahead.

Re a few of the posts above, the debt re-profiling will not on the face of it make any difference to the dividend, which is set based on accounting earnings rather than cash flow. It may help at the margin if the directors feel that the additional cash-flow gives them room to increase the stated payout ratio, or ramp it up a little quicker. Policy is 15% now, rising to 33% (I believe - please correct me if wrong).

Secondly, with freight rates being on the floor, the ownership of freight capacity will make little difference to earnings, and could even be a modest negative.

[azalea] 28/2/2017 08:11

With all 5 coal fired plants in operation, the combination of softening coal prices and the use of its wholly own 64k ton freighter in use to import coal, the cost savings should prove significant.

[this_is_me] 28/2/2017 08:01

Everything going to plan and a very sensible debt repayment plan.

[spud] 28/2/2017 07:47

Happy with that. Let's see if any Institutions start to nibble. spud

[ballychan] 28/2/2017 07:45

Solar is progressing well - 200MW in the pipeline versus their target of 300MW.Excellent news on the debt repayment - £67m reduction over the next 5 years.The resulting cash flows can be used for investment and will improve the dividend payout.

[qs99] 28/2/2017 07:36

well IMO that debt repayment re-scheduling is very material with balloon repayment now back ended. DYOR but not a bad update let's see what market thinks...

[aim_trader] 24/2/2017 11:16

OPG Power Strategy Director Ajay Paliwal will be presenting to investors at the upcoming Proactive One2One Forum taking place on the evening of 9th March. For details and registration, please click here:

[jozo] 22/2/2017 20:03

Andycapp1,It's hard not to agree with you. It certainly explains while II's will not touch this share with a barge pole and hence the pitiful share price. A fair reflection. Those that were burnt after the last institutional fundraising at 93p will certainly never cough up again - though I'm sure they are probably long gone (no doubt at much higher price than today)I'm also not really interested in having a go at other bb users but Azalea, are you for real? Does one really need to be a long suffering, loss making investor in opg to earn the right to be a critic?Your continuous ramped up bilge spouted out about this company as it has clearly failed to live up to expectations is quite unbelievable. You saw fit to liquidate most of your holding after the last results - even you don't believe your own nonsense. And here you are again! One can only guess that you've taken another bite of the (rotten?) Apple!Personally I used to really believe in this company (having first invested just after they floated and had a lowest purchase price of 27p). With obvious justification I feel that opg have failed to live up to mine and many other people's expectations - that is not sour grapes but fact which is reflected in the woeful share price.Strangely enough I still follow the company with interest - as an investor I have been luckily to make some decent money trading this share over a long period. I am struggling to see how investor interest will return in the near term and this may provide a good trading entry point. Jozo