Hemas Holdings PLC (Hemas) raising money for its renewable energy power projects through an initial public offering (IPO) of its subsidiary, Hemas Power Ltd (HPL), comes at a time when the demand for electricity could be expected to increase by approxiately 9% annually in the post-war Sri Lanka, according to industry analysts.
“Post-war development of the country could to a large degree increase the demand for power,” Waruna Singappuli, Head of Research NDB Stockbrokers said, adding that the IPO has arrived at a time when the stock market is performing exceedingly well with the investor attention focussed on the equity market due to lucrative prospects in a war-free Sri Lanka.
He said that the demand for electricity in Sri Lanka has been increasing at a rate of 6% per year over the past five years. “However the increase in installed capacity has been approximately 3% a year during the same period. The inability to meet the national requirement for power resulted in frequent interruptions to power supply in the past,” he said, adding that per capita consumption of electricity is one of the lowest in the region.
HPL is issuing 31.3 million new ordinary shares through an offer for subscription (which is 25% of the total shares of the company) with the company being listed on the main board of the Colombo Stock Exchange (CSE), the company said last week. It said that the Rs 280 million from the IPO is expected to be used for construction of Magal Ganga small hydro power plant while the balance will be utilised to acquire and develop more power projects.
Magal Ganga is a project which comes under Okanda Power Grid (Pvt) Ltd and was acquired by HPL in January 2008.
The project is expected to be commissioned by mid 2011 and will be fed by the river Magal Ganga in Kegalle district. Hemas officials said the project will be designed on the run-of-the-river principle.
Mr.Singappuli said that this IPO is advantageous to Hemas due to the financial strength of the company with a low level of gearing and also the low operational costs in the small-hydro power projects which results in high profit margins.
The current capacity of the company is 102 MW and supplied approximately 7% of the total electricity consumed last year. Hemas’ power sector operations reported a turnover of Rs.786 for the June quarter, a drop of 43.9 % from last year. |
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