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KSK Energy Ventures Ltd.

BSE: 532997 Sector: Infrastructure
NSE: KSK ISIN Code: INE143H01015
BSE 14:10 | 23 Oct 0.47 0.05
(11.90%)
OPEN

0.40

HIGH

0.47

LOW

0.40

NSE 14:03 | 23 Oct 0.45 0
(0.00%)
OPEN

0.45

HIGH

0.50

LOW

0.40

OPEN 0.40
PREVIOUS CLOSE 0.42
VOLUME 723636
52-Week high 2.31
52-Week low 0.40
P/E 0.51
Mkt Cap.(Rs cr) 20
Buy Price 0.45
Buy Qty 52329.00
Sell Price 0.47
Sell Qty 22896.00
OPEN 0.40
CLOSE 0.42
VOLUME 723636
52-Week high 2.31
52-Week low 0.40
P/E 0.51
Mkt Cap.(Rs cr) 20
Buy Price 0.45
Buy Qty 52329.00
Sell Price 0.47
Sell Qty 22896.00

KSK Energy Ventures Ltd. (KSK) - Chairman Speech

Company chairman speech

Dear Shareholders

I am pleased to update you on the overall performance of your Company for the year2016-17. The year continued to be a difficult year for the entire power sector in India asa whole and management have continued to maintain their efforts to address variouschallenges in the operating power projects especially continued constraints in enforcingrights on fuel PPA and other project aspects against Government counterparties at KSKMahanadi Sai Wardha and VS Lignite power projects.

The capacity addition in the last three years wherein India's total power capacity hasincreased from 243 GW in March 2014 to 320 GW in March 2017 reflects the last decade ofeffort in augmenting power generation wherein conventional or coal based power capacity(which is the mainstay of the country's overall power capacity) has increased from 214 GWin Mar 2014 to 270 GW in March 2017. This growth in conventional power generation alongwith a contrasting fall in Plant Load Factors (PLFs) of Independent Power Producers (IPPs)from 83.9% to 55.7% between 2010 and 2017 reflect the inherent challenges and contrasts inthe policy paradigms of new power generation capacities that have resulted in prolongedperiod of challenges and uncertainty across the Indian power sector. While renewableenergy is experiencing the enhanced thrust balancing the same with base load round theclock power from conventional power sources would be the reality for the future andtherefore improved thermal capacity PLFs are imminent in the near future.

Therefore the current metamorphosis at the Indian power sector carries both anopportunity and threat. If handled appropriately through reconsidered business approachand collaborations long term economic value could be preserved as well as realised and ifnot properly handled the same could lead to challenges to private power generationdistressed projects adding to the growing bad loan portfolios of project lenders. Thecompany is therefore in pursuit of a reconsidered business approach and is in discussionwith a number of potential strategic and financial investors to preserve long term valueof the power projects under the company and undertake necessary collaborations thereto.This would entail dilution of equity holdings by the company in such projects.

Operational Performance

During the period under review operating power assets generated 9402 GWh with anaverage portfolio plant load factor of 52% marginally less than the 10000 GWh mark thatwas expected to be crossed during the year.The initial 1200 MW units (under operation) ofKSK Mahanadi a large single location green field private power plant generated 6731 GWhduring the year. Further the construction progress of the remaining units of KSK Mahanadiis continuing with third 600 MW due to be commissioned over the next few months followedby the fourth 600 MW unit thereafter. Progress on the last 1200 MW (2x 600 MW units) iscontingent upon equity funding as well as addressing fuel supply and power purchaseagreement issues.

The 540 MW Sai Wardha generated 1395 GWh reflecting the continued challenging localoperating environment the fuel and the offtake constraints. A significant achievementduring the period at Sai Wardha was the final ruling by the CompetitionAppellateTribunal(COMPAT) in December 2016 and the process to execute proceedings for the recovery of theclaim under the law are currently underway. Also the Company awaits the judgements atHon'ble Supreme Court dealing with final appeals on both fuel and offtake which are veryvital to address the project's requirements in the long run.

VS Lignite the 135 MW Lignite based power plant generated 474 GWh as against the 792GWh during FY 2016 reflecting the challenges experienced in the transition from CaptivePower Plant (CPP) to Independent Power Plant (IPP) imposed under a local mandate by theGovernment. While efforts to secure necessary long term PPAs from the local grid continuediscussions are underway with project lenders as to address the project's requirements inthe interim period.

The other operational power plants of the group viz. 58 MW Sai Regency 43 MWSitapuram and 10 MW Sai Maithili continue to do reasonably well while Sai Lilagarcontinues its effort to address fuel and offtake challenges.

Financial Performance

During the year under review the consolidated revenue of the group has decreased byRs. 3929 million as a result of decreased output levels at Sai Wardha and VS Lignite. Theoperating profit has also decreased by Rs. 3149 million. Certainty towards enhancedoperating and financial performance gained momentum recently with the announcement of thenew coal linkage policy "SHAKTI" (Scheme for Harnessing and Al locating Koyala(Coa l) T ransparently in India) by Government of India in May 2017. Decrease in operatingprofit coupled with higher finance cost and depreciation resulted in loss before tax of '8288 million.

Outlook

As regards level of equity interest in the various power projects under the Companythe group continues to explore for solutions to the problems faced by the operationalassets and addressing the on-ground situations in a sustainable manner. Resultantly theCompany is in discussion with the project lenders at each of these project companies tofind appropriate solutions for meeting debt servicing obligations on sustainable basisincluding appropriate equity collaboration as may be appropriate at each of such projectcompanies.

Over the years the Group's interest in underlying business has been supported both byequity raised as well as leverage. A secondary sale of project interests and refinancingopportunities on more favourable terms to provide the necessary liquidity to retire partof the existing high cost debt is being considered for ongoing business operations.

With the underlying asset quality associated performance and opportunities KSK iswell positioned to be one of the more stable valuable and sustained players in the IndianPower Generation arena.

Your Board is confident in the outlook for KSK and we thank you for your continuedsupport of the Company.

Appreciation

The Company has come thus far because of the people who have believed and supported thesame. I wish to take this opportunity to convey my appreciation to my fellow Directors fortheir support diligence and valuable guidance.

Last but not least my sincere appreciation goes to the management team and employeesfor their unrelenting commitment and dedication to the Group.

We look to all our stakeholders to lend us their continuous support as we leverage onall opportunities and overcome challenging times to ensure a strong and sustainable futurefor all.

Sd/-

T.L. SANKAR

Chairman