20th Aug 2008 07:00
Greenko Group plc
("Greenko or "the Company")
Update on AMR / Rithwik Hydro projects ("Hydro Projects")
The Directors of the Company wish to update shareholders on the two Hydro Projects which are under construction on the river Netravathi in the Karnataka province of India. As described in the Admission Document issued in October 2007, these two 24.5MW projects were due to commence generating electricity in mid 2008.
On 12 and 13 August the river Netravathi experienced flash floods, resulting from continuous rains in the region, which were the heaviest in the region in the last two decades. As a result, the area surrounding the river has broken its banks and there have been a number of fatalities. While no fatalities occurred at Greenko's Hydro Projects, the Power house was flooded which will result in a delay to the commencement of electricity generation. Preliminary findings indicate that the delay will be approximately 12 weeks.
Following the flooding, management accessed the site at the earliest possible opportunity and has since been assessing the impact. Prompt action was taken to retrieve key components (turbines, generators, transformers) however it is anticipated that a number of implementing tools, electrical panels and gears will be lost or damaged as they are currently submerged. All damage to equipment is covered under insurance and the replacement or repair of the equipment is not expected to create additional delay.
The delay in commencing generation of power will not affect the viability of the Hydro Projects and profits for the year ending 31 March 2010 and beyond, nevertheless it will have an impact on profits for the year ending 31 March 2009. A detailed assessment of water damage and the delay to the commencement of electricity production will only be possible once pumping out is complete. However, as previously announced on 30 June 2008, longer term profitability is expected to be strong especially with the revision of the tariff at Rithwik to Rs 6 from Rs 2.8 per kWh.
Further updates on the progress of the Hydro Project will be made as soon as further information is available.
Enquiries:
Greenko Group plc
Mahesh Kolli +44 (0)7767 692729
Anil Chalamalasetty +91 (0)98 49643333
Arden Partners plc
Christopher Hardie +44 (0)20 7398 1630
Adrian Trimmings
Cardew Group
Rupert Pittman +44 (0)20 7930 0777
Jamie Milton
Catherine Maitland
NOTES TO EDITORS
Background
Greenko intends to become a leading owner and operator of clean energy projects in India. The business was developed over an 18 month period prior to incorporation by Anil Chalamalasetty and Mahesh Kolli who incorporated the business at the time of its initial fundraising in January 2006. Greenko currently has 90.5 MW contracted capacity of clean energy assets including six biomass and two hydro plants and 102 MW of concessions under development including three biomass and three hydro plants. The Company is focused on developing a portfolio of biomass, hydro-electric and wind assets within India and intends to increase the installed capacity it operates through a combination of purchasing both existing assets and projects under construction, as well as the winning of concessions to develop new greenfield assets.
The Indian renewable energy sector is a relatively young and fragmented market. The new projects are likely to take the form of the acquisition of existing assets under construction and the building of new plants on greenfield sites. Greenko intends to be a consolidator within this sector. The Directors believe that operational and financial benefits will flow from this strategy.
The Group's income is generated from receipts for power sold to state electricity boards and from sale of high margin carbon credits or Certified Emission Reduction units ("CERs") generated from the Group's registered clean energy projects. In the future, the Directors believe that new opportunities, such as the direct sale of electricity to large scale users and sales of CERs in the voluntary market, will broaden the income streams of the Group as well as enhance profitability.
The Indian economy
India has a population of approximately 1.1 billion people, which is currently growing at 1.5 per cent. per annum, making it one of the largest populations in the world. The average age of the population is 24, providing a growing, well educated workforce. The Indian economy has benefited from low inflation and recent liberalisation has encouraged strong international investment which has helped to promote strong economic growth particularly in the past five years. The growth in industrial production and GDP per capita has resulted in a strong increase in demand for electricity. This has led to a shortfall in supply of supply, resulting in both brown-outs (where the voltage level drops below the normal minimum level specified for the system, therefore particularly damaging to electric motors) and black-outs. In addition, the 2001 Indian Census reported that 44 per cent. of households did not have access to electricity. Due to population growth since 2001 and the existing electricity infrastructure, the Directors believe this may have increased perhaps to as much as 60 per cent. or over 600 million people.
Related Shares:
GKO.L