Hemas Power launches IPO to
expand renewable energy projects

By Nizla Naizer

Hemas Power Limited announced the launch of their Initial Public Offering (IPO), aimed at generating a maximum of over Rs. 600 million in funds yesterday.

Hemas Holdings Chairman Husein Esufally (third from left) at the launch of the Hemas Power IPO yesterday. Hemas Power Director Malik Ranasinghe, Hemas Power Managing Director Kishan Nanayakkara, NDB Investment Bank CEO Vajira Kulatilaka, Chief Operating Officer Darshan Perera and Hemas Power Director Sanjiva Senanayake look on Pic by Rukshan Abeywansa

The issue which is the first corporate IPO in post war Sri Lanka, is aimed at raising funds for Hemas Power’s ventures into renewable energy generation. The IPO consists of 31,300,000 Ordinary Shares issued through an Offer for Subscription, and the company will be listed on the Main Board of the Colombo Stock Exchange.
The Offer will be 25% of the share capital and the Share Offer Price will be determined via a book building process. The Book Build Price Range is Rs. 17, Rs. 18, Rs. 19 and Rs. 20 which officials at NDB Investment Bank assured were obtained after conservative calculations.
The Share issue is expected to raise between Rs. 532 million and Rs. 626 million. Approximately Rs. 280 million of the proceeds raised through the issue would be utilised as the equity contribution to develop the Magal Ganga small hydropower project which has an estimated total cost of Rs. 430 million. The remaining portion of the funds raised through the issue would be utilised for investments in other viable power generation projects including greenfield projects in hydro, wind or biomass or acquisition of currently operational projects.
Applications from the public were accepted from September 7, while the official opening date for the IPO is September 17 and the latest closing date for applications is October 17. Secondary market trading is expected to take place during mid October.
“We are confident that the future will see real growth in the Renewable Energy sector,” Hemas Holdings Chairman Husein Esufally explained. “And with the healthy and positive signs of the Sri Lankan economy, we are confident that the IPO will be over subscribed on the opening day.”
Officials at the Managing Bank, NDBIB explained that the pricing of the issue has been conservative. “The growth of the company with new power projects have not been factored into the calculation of these prices,” NDB Investment Bank Chief Executive Officer Vajira Kulatilaka said, “If we had calculated the prices with an optimistic view it would be as much as Rs. 30 per share.”
“Hemas Power has the advantage of being a low geared company with steady cash flows and with the current post war boost to the Sri Lankan economy energy is going to play a vital role,” Kulatilaka continued.
Hemas Power was established in 2003 when the company decided to venture into the burgeoning power generation industry. Hemas Holdings carried out the company’s IPO in September that year to generate funds to establish Hemas Power and the company which is gazetted as a Venture Capital Company, continues to enjoy taxes at 20% for interest income.
Hemas Power Managing Director Kishan Nanayakkara explained that the company currently has investments in a 100 MW thermal power plant Heladhanavi in Puttalam which is a joint venture with Lakdhanavi Limited and two Small Hydropower Projects including the 2 MW SHP Small Hydro Plant in Giddawa, Teldeniya and the 1.18 MW Magal Ganga Small HydroPlant which has the capacity to reach 2.4MW. “Heladhanavi currently has the lowest cost per unit among the Independent Power Producers at Rs. 16 80,” he explained. “With Power Purchase Agreements with the CEB till 2014 along with Fuel Purchase Agreements with the CPC, Operations and Maintenance Agreements with Laknadhiva Limited and Implementation Agreements with the Sri Lanka Government, the company has minimized the risk of operations.”
Hemas Power earned revenue of Rs. 4.86 billion for the year ending March 31, 2008 with Net Profits of Rs. 222 million. However, this was a drop from Rs. 289 million in 2007 which Nanayakkara attributed to rising Operational and Maintenance costs and Working Capital financing costs.