Opg Power Ventures Share Discussion Threads

[eddie1980] 25/7/2016 13:44

A couple of significant differences between OPG's current, and these supposed fire sale assets are:

location - OPG's were meant to have been strategically located where it wanted to sell to private industrial users, and close to ports etc for imported coal.

Design - OPG's are meant to be able to use local or imported coal to be able to avoid any shortage/price fluctuations if one source a problem.

Others differences may also be location distinction - one problem fuel producers have is some states basically can't afford to pay for the leccy being pumped into the system - big problem cashflow wise.

Funny the article on demand vs supply. I had also read in some areas, lack of demand for what was being produced.

[jjhbev] 25/7/2016 11:34

Hi Ballychan

Here are links to a couple of articles that may be of interest :-

The first is an article about Lanco which dates back to Aug last year & summarises the mess Lanco got into with its overleveraged growth attempts.

hxxp://www.livemint.com/Companies/3MJwTroXN1TQEvQyKPesNL/The-lessons-of-Lanco-Infratech.html

The second is an article from The Economic Times which includes a very interesting paragraph on debt restructuring by means of deep discount bonds (which, if yielding, 9.75%pa don't seem deep discount enough to me!)



Lanco is a real basket case and the performance in power is scarily bad. Look on their website for the last two quarterly figures and you will see the following (you will also see the most extensive set of accountants qualifications I have ever seen!!! - although I never looked at Quindell when it was disintegrating ;-)) There seem to be huge operational issues on the power side including issues with PPAs and so on - Revenue in the Dec 15 Qtr was 1450 Crore Rupess whereas it was only 1339 in the March 16 Qtr.

If this does go ahead lets sincerely hope it is done well. I thought we were just about to enter a nice boring period with increasing output, Solar development, positive cash flow leading to debt paydown & divis. Instead we have this!

If ever a deal could be described as transformational it would be this. Whether that is a good or bad thing we will have to wait and see.

[ballychan] 25/7/2016 09:36

I just went through the weblinks and pulled out the costs OPG will face;Immediate payment 150 crore (£17m)Fund to finish projects 1500crore (£169m)Take on debt 5,200 crore (£580m)So total £766m to gain 2,973 MW. This works out to be £258k debt per 1MW power.Curently opg has £240m debt with 750mw output, which is £320k debt per 1MW. From these very very basic figures, we can see why the banks are favourable with OPG.

[source] 23/7/2016 23:11

No wonder this had been slipping. At an outlay of between £250 to £300m for distressed assets that aren't even finished yet and are in dispute with their state distribution companies looks ugly and so looks a huge gamble. Existing shareholders look like they'll be massively diluted with this huge ramp up in debt/equity. OPG needs to answer the concerns pretty sharpish.Also the following is particularly worrying just at the wrong time too!:-Regards,Source. ................................."....Analysts say in the past year, power supply in South India has surpassed the demand, which has hit power producers. In a recent open access arrangement, Indian Railways had signed a long-term deal to buy 2,000 Mw of power at Rs 4.90 a unit, as compared to an earlier power purchase deal from Andhra Pradesh power utilities at Rs 6.60 a unit. The seemingly perennial power deficit region has suddenly become a power surplus one.Industry sources say 2,000 Mw of power is ready to flow for as low as Rs 4.25 a unit but there are no buyers. In the past, Tamil Nadu and undivided Andhra Pradesh had purchased power even at Rs 20 a unit to meet their peak demand. Those days are unlikely to return anytime soon to help raise valuations, say industry observers...."

[mozy123] 23/7/2016 22:59

Perhaps OPG can cherry pick some assets in the hope of paying very little for them in order to give the current owners some much needed cash and breathing room?

[chalky] 23/7/2016 16:55

If a new company is formed between the banks and opg, this could be a total separate entity to opg power and not make any difference to ongoing opg power projects

[the original goldbug] 23/7/2016 16:24

All very interesting but I'm sceptical.

Why would OPG be messing around with a tiny solar project if the Lanco deal was brewing in the background?

How does OPG finance this, my sense is that our friend Mr Gupta does not have a spare £300m floating around!?

Even if there is an equity dilution done at say 50p, at first glance given the crazy balance sheet of Lancor, the deal does not look earnings enhancing at an Enterprise Value to installed MW basis comparison. Clearly we have few details to work with here, but as the £300m looks like a remedial payment to the banks, it would suggest that the whole things post this 'slither' (relatively speaking) of new equity would still leave Lanco dangerously levered. It is also extremely relevant as to the type of contracts Lanco has in place to sell its electricity.

You would think OPG are going to have to respond to this speculation, or maybe this is why the earnings are delayed and we'll get, hopefully, a convincing explanation as to the benefits of this deal the week after next.

When I met Mr Gupta 4 years ago he was emphatic that the company had to grow but he has too much vested interest to do anything rash and he never struck me as the sort of man who was wreckless in any way.

[source] 23/7/2016 08:39

Hope OPG drive a strong bargain given the circumstances. The following was interesting and hope OPG are not overextending themselves unnecessarily given Lanco's situation (dire). I don't want OPG in the same fate or to be diluted in OPG's Rush here!"Banks are getting tough with loan defaulters as they try and clean up their own books, leaving some companies with no choice but to sell assets. According to strategic debt restructuring (SDR) norms issued by the Reserve Bank of India (RBI) in June 2015, banks can convert part of a defaulting company's debt into majority equity and assume operational control.Lanco Infratech, which has engineering, procurement and construction (EPC), power, solar energy, coal mining and infrastructure businesses, had a debt of about Rs.39,000 crore as on December 2015."Regards,Source.

[eddie1980] 23/7/2016 04:03

Haha, I agree this conglomerate looks a basket case. But in respect to power there is nothing wrong with debt to support long term infastructure assets.

For sheer size this deal looks interesting, but how is OPG going to finance the equity element? Fund raising for all or just Gupta or private placement. If they get it though, looks like OPG takes on considerable debt so there lenders must be happy at debt ratios.

Interesting times....

[ballychan] 22/7/2016 20:48

Eddie, Lanco is a perfect example of a company taking on too much debt"The corporate debt restructuring, involving about Rs 41,000 crore of debt across the group, is seen as one of the biggest such exercises in India."That's £4.6 billion debt!

[ballychan] 22/7/2016 20:04

Effectively they're output has gone up 5 fold. Their current 750mw + 51% of Lancos which is 2,937mw, so total for OPG is 3,687 MW!

[ballychan] 22/7/2016 19:57

I believe there are 5 plants totalling 5760mw. This has a enterprise value of 5300 crore (£595m). OPG will own 51% so valued at £300m!

[chalky] 22/7/2016 19:50

just been reading various articles,what i can gather that if it goes through opg will have a 51% holding in a newly formed company of 6 coal fired power stations with output of nearly 6000 mw, taken from indian news articles with a payment for the holding and finalised some time in september

[igoe104] 22/7/2016 18:50

More details on it here.

[marvelman] 22/7/2016 18:40

Well spotted Igoe....very interesting indeed.

[igoe104] 22/7/2016 18:37

Interesting News.



London-listed OPG Power Ventures Plc is in advanced talks with Lanco Power to buy out its Anpara, Amarkantak, Vidarbha and Babandh units, sources have told CNBC-TV18.

The units have a cumulative power capacity of 5,760 megawatt.

It is learnt that OPG, which currently has power plants in Gujarat and Tamil Nadu, will infuse Rs 150 crore into Lanco's power business while the units' Rs 5,200 crore debt will be transferred to the power vertical.

Following the deal, Lanco promoter Madhusudhan Rao's equity stake will fall below 25 percent, from 70.5 percent.

Banks, however, have sought more comfort from OPG Power in personal and corporate guarantees. Lanco has a conslidated debt of over Rs 41,000 crore with ICICI, IDBI, Bank of India, Bank of Baroda and Punjab National Bank being major lenders.

CNBC-TV18 is awaiting responses from Lanco Group and OPG Power Ventures on its queries with respect to its developments.

[the original goldbug] 22/7/2016 16:58

I'm sorry Eddie but I just don't think you are taking a reasonable position to say that they should have raised more money 18-24 months ago. The fact of the matter is that they have been hampered by both a small cap and emerging market bear and so consequently the share price was never able to trade above £1-1.2, which would have been the desired range for a financing to take place.

If push came to shove, in excess of the approximately £65m that the company will build over the next 24 in surplus cash post dividend payouts, they could also refinance the early Chennai projects to internally fund an equity slice of nearly £100m if needed.

I hope however they take a more measured approach. Patience is needed for an investment like this. None of those phases me however as to repeat I will enjoy a running yield of 8%, while group equity will continue to compound at plus 10%.

[marvelman] 22/7/2016 15:06

If anyone has made a profit on this share EVER then they have been very lucky but cleverness would not have come into it.

[ballychan] 22/7/2016 14:54

Haha don't publish your trades after the event - do it at the time or not at all.I've been averaging down - still waiting to buy more.

[azalea] 22/7/2016 14:40

ballychan
When has there ever been a better time to buy? I added at 55p this week. I take it, you and your 'us buyers' never sold or traded at a profit, when you could have?

[ballychan] 22/7/2016 14:32

Azalea the stocks at a near 3 yr low - only people burnt so far are us buyers!Your ramping comments when the stock goes blue is a bit excessive tbh

[azalea] 22/7/2016 14:11

The beginning of big sellers getting their fingers singed this pm will continue into next week with their fingers getting burned.

[ballychan] 22/7/2016 13:55

Eddie it would be great to build and build but with their debt gearing around 53% (text book high) taking on more debt in the last few years would have scared most investors and all would jump ship.They've managed their debt, and were realistic. Most aim companies aren't and disappear. MMs are delaying to publish the big buy trades, we'll see them tonight. Let's see if the seller re-starts dumping, they should be done by now!

[tipster29] 22/7/2016 13:37

Bottom of curve now?..... Maybe the seller has finished