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Orient Green Power Company Ltd.

BSE: 533263 Sector: Infrastructure
NSE: GREENPOWER ISIN Code: INE999K01014
BSE 00:00 | 22 Feb 3.05 0.25
(8.93%)
OPEN

2.88

HIGH

3.07

LOW

2.80

NSE 00:00 | 22 Feb 3.05 0.20
(7.02%)
OPEN

2.85

HIGH

3.05

LOW

2.85

OPEN 2.88
PREVIOUS CLOSE 2.80
VOLUME 89723
52-Week high 12.22
52-Week low 2.70
P/E
Mkt Cap.(Rs cr) 229
Buy Price 2.92
Buy Qty 1500.00
Sell Price 3.05
Sell Qty 1275.00
OPEN 2.88
CLOSE 2.80
VOLUME 89723
52-Week high 12.22
52-Week low 2.70
P/E
Mkt Cap.(Rs cr) 229
Buy Price 2.92
Buy Qty 1500.00
Sell Price 3.05
Sell Qty 1275.00

Orient Green Power Company Ltd. (GREENPOWER) - Chairman Speech

Company chairman speech

Dear Shareholders

It is with great pleasure that I welcome you all to the Eleventh Annual General Meetingof the Company (Orient Green Power Company Ltd)

The Indian Power sector has undergone progressive transformation in recent times markedby substantial growth in capacity addition introduction of power trading enhancedTransmission & Distribution (T & D) system resulting in reduced power loss andtheft. India's electricity production in 2017 grew by 34% over seven years resulting inthe country emerging as the third largest electricity producer in the world overtakingRussia and Japan. The Government has set a target of 175 GW for renewable energy by 2022which is expected to meet 35% of the India's total requirement of 490 GW. Some of the keydemand drivers for Renewable Energy include the Government's push to supplementconventional vehicles with Electric Vehicles (EV) in the near future which is destined tohave a larger implication on energy and allied sector.

India's installable wind energy potential has been estimated by the National Instituteof Wind Energy to be 302 GW with towers of a height of 100 meters. India is the fourthlargest wind market globally with an installed capacity of 34.0 GW. Wind constitutes thelargest share of the Country's overall Renewable Energy pie with a share of 49%. Thestupendous success witnessed by this Sector is to a large extent driven by theGovernment's supportive and growth oriented policies.

Your Company is one of the leading wind energy generating Companies and its wind assetscurrently aggregates to 425 MW. The Company's wind assets are located across some of thecountry's best wind sites. Your Company's revenue has grown steadily over the last 5 yearsaided largely by its improving asset base and attractive tariff rates. In addition to theimpressive revenue growth the operating Profitability of the Company has also seen asharp improvement over this period. Growing share of newer assets coupled with persistentefforts towards improving operational efficiencies have been the primary reasons fordriving the Profitability. The performance would have been even better had it not been forthe operation of external factors ranging from frequent grid back downs deterioratingfinancial performance of the State Electricity Board and the muted performance under RECmechanism. However the situation has improved Significantly in the recent past owing topersistent actions on the part of TANGEDCO and the Company.

Renewable Energy Certificate (REC) is a market-based instrument promoting renewableenergy. The mechanism aims to enable obligated entities to meet their requirements ofgenerating a percentage of power from renewable sources. Over the years REC trading hadbeen very subdued at 1.4% to 22% levels due to lack of enforcement of the RPO obligations.However the financial year 2017-18 was a good year for REC trading despite the abruptstart wherein trading in RECs discontinued for a couple of months following CERC's orderto lower REC prices. Trading resumed in the month of July last following Hon'ble SupremeCourt's decision on an appeal of Indian Wind Power Associations (IWPA) to allow thetrading of renewable energy certificates (RECs) . The Order was restricted to non-solarRECs to comply with the earlier prices. Volumes picked up sharply following the Court'sorder on the back of a strong demand from the buyers following a strict enforcement ofobligations by state regulators. The financial year 2017-18 was the first year after 2012wherein the total demand in the market for RECs exceeded the supply. The Company generatedrevenues of Rs.116 Crores under the REC Mechanism during the financial year as againstRs.38 Crores in the past year. The Company has liquidated it entire REC inventory duringthe financial year by selling 662640 certificates in 2017-18 as against 201366certificates in the previous year.

Your Company has been working diligently towards reviving the business operations andrestoring Profitability. The Company has undertaken a number of strategic initiativestowards addressing the legacy issues and putting in place necessary measures towardsensuring a steady trajectory of growth and Profitability. One of the key reasons impactingthe overall Profitability of the business has been the subdued performance of the biomassbusiness. We had already drawn your notice to this. The Biomass business has contributedlargely to the losses of the Company over the last three years. Further against a highoperating margin for Wind business the Biomass business has been consistently running ata negative margin.

Against this backdrop and after contemplating number of alternative measures towardsreviving the business the Board decided to divest off the loss making business by selling8 biomass units to one of its Promoter Companies M/s. Janati Bio Power Pvt Ltd. (Janati)The transaction resulted in OGPL receiving an equity consideration of Rs.80 Crores whileRs.193 Crores of debt has been take over by Janati. The transfer of debt against assetsand proceeds from the sale resulted in moving out of biomass related debt of Rs.330Crores. Overall reduction in the debt of this magnitude should result in the strengtheningof the financial position of the Company and accelerate a value creation for Shareholders.Further the Company is also moving towards completing the sale of the remaining biomassunits and expects to complete it shortly.

Your Company is also undertaking a number of measures in the area of cost reductionsuch as restructuring a part of its high cost debt negotiating with the bankers towardslowering the interest rate and extending the tenure of the loans. Owing to such actionsthe Company has been successful in lowering the interest cost from Rs.286 Crores inFinancial year 2015 to Rs.235 Crores in the financial year 2018. The Company is in activediscussions with banks for refinancing debts to the tune of Rs1000 Crores to a singledigit interest rate (from current average cost of debt of 13%). All such measures areexpected to Significantly improve in the near future the bottom line and cash flow andliquidity profile of the Company.

The financial year 2017-18 witnessed the Company's best ever annual performance. Theimproved performance in effect partly captures the management's recent efforts towardsreviving the business. Revenue from continued business operations amounted to Rs.394Crores as against Rs.384 Crores generated during the financial year 2016-17 higher by 3%.The business to a large extent benefited by improved grid infrastructure especially inTamil Nadu wherein grid availability stood in excess of 90% during the year. EBITDA forthe year stood at Rs.302 Crores as against Rs.292 Crores reported during last year againhigher by 3%. Higher revenue generation coupled with better operating efficienciesresulted in a steady margin for the business. The Company is well positioned to deliver aconsistent growth going forward on the back of its recent strategic initiatives andimproving macros. Having addressed its legacy issues the Company is confident of meetingits true potential and capitalizing on the sector's growth opportunities.

On behalf of the Board of Directors of the Company I acknowledge the supportreceived from the shareholders employees Government and banks in putting the Companyinto the track of sustainable growth

N. Rangachary

Chairman