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EPF, ETF lose hundreds of millions by investing in loss-making Laugfs Gas
Privately-held Laugfs Gas, which is haemorrhaging red ink and taking heat from domestic cooking gas users and opposition politicians, has also caused multi-million rupee losses for the two main social security nets of Sri Lankan workers battered by unbearable living costs.
Financial statements show that Laugfs Gas, whose 2020/2021 annual report is titled ‘Igniting Hope’ in big, bold letters, has state shareholders including the Employees Provident Fund, the Employees Trust Fund Board, the Bank of Ceylon, and some well known private investors.
Shareholdings of some public institutions in Laugfs Gas, have sharply declined in value by hundreds of millions of rupees. Their latest value is yet to be known.
Laugfs Gas has piled up multi-billion rupee bank debts.
The EPF has a 17.28% interest in Laugfs Gas as a shareholder with voting rights, while the ETF has a 0.06% interest. The State-owned Bank of Ceylon has a 6.8% interest as a non-voting shareholder.
An EPF statement shows that the fund’s equity holding with voting rights in Laugfs Gas has a market value of Rs 1.29 billion as of June 30 this year. The purchase cost was Rs 1.89 billion.
The EPF’s non-voting rights shares are worth Rs 254.38 million as of June, while the purchase cost was Rs 459.43 million.
The ETF, notorious for wasteful investments over the years, and now headed by Sriyan de Silva Wijeyeratne, also a board member of Hemas Holdings, has invested in Laugfs Gas and Laugfs Power as well.
The fund’s annual report for 2019, (no financial reports beyond that available on its website) shows that ETF’s holdings costing Rs 815.34 million, had a market value of Rs 806.33 million as of December 31, 2019. Its holdings in Laugfs Power of Rs 815.34 million had a market value of Rs 230.38 million.
The ETFs bread and butter is government securities and books income largely from interest on fixed income securities.
The Finance Ministry Annual report for 2020 shows that the ETF had 2.5 million “active member accounts’’. Contributions from employers fell by 3% to Rs. 26.7 billion in 2020, from Rs. 27.5 billion in 2019.
Founded in 2001 by Group Chairman, W.K.H. Wegapitiya, and listed in 2010, Laugfs Gas also has a cobweb of more than a dozen related companies, including supermarkets and Chinese restaurant Jade in Nugegoda and Maharagama. Anantaya Passekudah and Anantaya Wadduwa are also related companies.
Mr. Wegapitiya holds 0.46% voting shares of Laugfs as of June 30.
In the latest annual report, Mr. Wegapitiya, proudly proclaims: “This year the team at Laugfs has demonstrated their creativity, agility and ability as they adapted to compete in a new norm with a positive attitude that makes this team bigger than the sum of the parts.”
A superficial marketing spiel in the report leads off saying: “Hope is being able to see that there is light despite the darkness….
“As Laugfs Gas, we have become a ray of hope and a source of trust for millions of Sri Lankans who regard us as a pioneer in the power and energy sector. Our astute vision driven by innovative thinking has allowed us to empower our communities even during uncertain times, igniting their hopes for a better tomorrow.
“Even as our resilience was put to test the past year, our tribe emerged stronger, backed by the confidence of our sustainable business model.’’
Yet, in the annual filing, Laugfs Gas notes that current liabilities increased by 14% to Rs. 23.82 billion as trade payables and short-term borrowings ballooned. Total interest-bearing debt increased to Rs. 31.56 billion.
In the year, the proportion of short-term debt increased to 43% of group debt.
The auditor also raises a flag saying, the group reported total interest-bearing borrowings of Rs. 31.56 billion, of which Rs.16.94 billion is current liabilities and the balance amount of Rs. 14.61 billion is non-current liabilities.
Known for its yellow gas canisters, Laugfs Gas claims a 27% market share for domestic gas in Sri Lanka.
Among the top 20 shareholders in Laugfs Gas, is the Hatton National Bank/Almas Organisation (PVT) of Imtiaz Buhardeen with a 1.38% interest. Hatton National Bank/Carlines Holdings, also of Imtiaz Buhardeen, hold 0.74% voting shares of Laugfs Gas.
Civil engineering company Access Engineering, led by founder Sumal Perera, holds 0.04%.
The EPF is also an investor in Access Engineering, holding shares worth Rs 468.95 million.
Laugfs Holdings is the biggest shareholder of Laugfs Gas with a 74.02% stake.
The consolidated loss in the quarter to June 30, increased by 401% to Rs 901.71 million, while Laugfs Gas loss more than doubled to Rs 658.81 million. Revenue climbed by 3% from the year before quarter to Rs 3.06 billion, a quarterly filing to the Colombo Stock Exchange shows.
The energy business has booked a loss of Rs 539.43 million. The loss in transport and logistics is Rs 11.24 million. The trading business loss is Rs 262.70 million.
These results are not audited.
Finance costs increased by 28% on year to Rs 333.87 million.
Liabilities were at Rs 45.15 billion and assets were Rs 45.15 billion.
Among the current liabilities, or those that need to be settled in a year, are interest bearing loans and borrowings of Rs 13.22 billion. Non-current liabilities include interest bearing loans and borrowings of Rs 6.06 billion. These add up to Rs 19.28 billion.
In the cash flow statement, Laugfs Gas reported cash of Rs 43.62 million, sharply down from Rs 260.54 million at the start of the quarter.