More and more public listed firms are gearing to launch mini hydro power projects due to their high income generating capacity, analysts said.
“They are seen as cash cows in the post-war the Sri Lankan economy and the price formula that they enter with the Ceylon Electricity Board (CEB) is beneficial to the seller,” Deshan Pushparajah, Assistant Manager Capital Alliance told the Business Times.
He said that many plantations, especially upcountry plantations are trying this model. “The competition in the power industry is minimal as the CEB acts as the guaranteed buyer of power generated by Independent Power Producers. Therefore it is a relatively low risk industry,” he noted.
In March the Distilleries Company announced that associate Madulsima Plantations’ Kirkoswald Estate in Bogowanthalawa will house a 4000 kilo watt capacity, Rs 750 million hydro power plant through Distilleries’ subsidiary Bogo Power.
Last September Hemas Power said that the company is developing a diversified portfolio of power projects consisting of both thermal and small-hydro based plants.
The company initially consisted of the Heladhanavi thermal power plant (under Heladhanavi Limited). Currently the company is shifting towards the small-hydro power sector with two more power projects, namely Giddawa (under Giddawa Hydro Power Pvt Ltd) and Magal Ganga Small Hydro Power Plant (under Okanda Power Grid Pvt Ltd).
Analysts say that the main risk involved with hydro power projects is the shortage in rainfall which could reduce the generation of electricity. In addition cost and time over-runs in project implementation and technical issues related to power plants could reduce profitability.
The demand for electricity in Sri Lanka has been increasing at a rate of 6% per annum over the past five years and industry analysts say that the hydro power firms’ impressive profit performance is underpinned by lower debt levels, better tariff
rates and heightened power generation. |
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